Question 1

The three tax statuses are:

Accepted Answer

A) Ordinary asset,capital asset,§ 1251 asset. 
B) Capital asset,ordinary asset,§ 1231 asset. 
C) § 1251 asset,investment asset,ordinary asset. 
D) Investment asset,§ 1231 asset,ordinary asset. 
E) None of the above. 
A) Ordinary asset,capital asset,§ 1251 asset. 
B) Capital asset,ordinary asset,§ 1231 asset. 
C) § 1251 asset,investment asset,ordinary asset. 
D) Investment asset,§ 1231 asset,ordinary asset. 
E) None of the above. B

Question 2

Kari owns depreciable residential rental real estate which has accumulated depreciation (all from straight-line)of $45,000.If Kari sold the property,she would have a $33,000 gain.The initial characterization of the gain would be:

Accepted Answer

A) Section 1245 gain. 
B) Section 1231 gain. 
C) Section 1250 gain. 
D) Section 1239 gain. 
E) None of the above. 
A) Section 1245 gain. 
B) Section 1231 gain. 
C) Section 1250 gain. 
D) Section 1239 gain. 
E) None of the above. B

Question 3

The holding period of property given up in a like-kind exchange includes the holding period of the asset received if the property that has been exchanged is a capital asset.

Accepted Answer

A) True 
 B)False  False

Question 4

Section 1239 (relating to the sale of certain property between related taxpayers)does not apply unless the property:

Accepted Answer

A) Was depreciated by the transferor. 
B) Is depreciable in the hands of the transferee. 
C) Is a capital asset. 
D) Is real property. 
E) None of the above. 
A) Was depreciated by the transferor. 
B) Is depreciable in the hands of the transferee. 
C) Is a capital asset. 
D) Is real property. 
E) None of the above.

Question 5

Harold is a mechanical engineer and,while unemployed,invents a switching device for computer networks.He patents the device,but does not reduce it to practice.Harold has a zero tax basis for the patent.In consideration of $300,000 plus a $1 royalty per device sold,Harold assigns the patent to a computer manufacturing company.Harold assigned all substantial rights in the patent.Which of the following is correct?

Accepted Answer

A) Harold automatically has long-term capital gain from the lump sum payment,but not from the royalty payments. 
B) Harold automatically has long-term capital gain from the royalty payments,but not from the lump sum payment. 
C) Harold automatically has long-term capital gain from both the lump sum payment and the royalty payments. 
D) Harold does not have automatic long-term capital gain from either the lump sum payment or the royalty payments. 
E) None of the above. 
A) Harold automatically has long-term capital gain from the lump sum payment,but not from the royalty payments. 
B) Harold automatically has long-term capital gain from the royalty payments,but not from the lump sum payment. 
C) Harold automatically has long-term capital gain from both the lump sum payment and the royalty payments. 
D) Harold does not have automatic long-term capital gain from either the lump sum payment or the royalty payments. 
E) None of the above.

Question 6

The chart below describes the § 1231 assets sold by the Burgundy Company (a sole proprietorship)this year.Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year.Assume there is a § 1231 lookback loss of $4,000.

Accepted Answer

The stamping machine ($21,736),tractor (

Question 7

What characteristics must the seller of a patent have in order to be classified as a holder?

Accepted Answer

The holder of a patent must be

Question 8

Nonrecaptured § 1231 losses from the seven prior tax years may cause current year net § 1231 gain to be treated as ordinary income.

Accepted Answer

A) True 
 B)False

Question 9

Harry inherited a residence from his mother when she died.The mother had a tax basis of $566,000 for the residence when she died and the residence was worth $433,000 at the date of her death.Which of the statements below is correct?

Accepted Answer

A) Harry's holding period for the residence includes his mother's holding period for the residence. 
B) Harry's holding period for the residence does not include his mother's holding period for the residence. 
C) Harry's holding period for the residence is automatically long term. 
D) b and c 
E) None of the above. 
A) Harry's holding period for the residence includes his mother's holding period for the residence. 
B) Harry's holding period for the residence does not include his mother's holding period for the residence. 
C) Harry's holding period for the residence is automatically long term. 
D) b and c 
E) None of the above.

Question 10

Short-term capital losses are netted against long-term capital gains and long-term capital losses are netted against short-term capital gains.

Accepted Answer

A) True 
 B)False

Question 11

In the "General Procedure for § 1231 Computation: Step 2.§ 1231 Netting," if the gains exceed the losses,the net gain is offset by the "lookback" nonrecaptured § 1231 losses.

Accepted Answer

A) True 
 B)False

Question 12

The § 1245 depreciation recapture potential does not reduce the amount of the charitable contribution deduction under § 170.

Accepted Answer

A) True 
 B)False

Question 13

Short-term capital gain is eligible for a special tax rate only when it exceeds long-term capital gain.

Accepted Answer

A) True 
 B)False

Question 14

The following assets in Jack's business were sold in 2010:   The office equipment had a zero adjusted basis and was purchased for $8,000.The automobile was purchased for $2,000 and sold for $1,200.The ABC stock was purchased for $1,800 and sold for $3,200.In 2010 (the year of sale),Jack should report what amount of net capital gain and net ordinary income?

Accepted Answer

A) $1,700 LTCG. 
B) $600 LTCG and $300 ordinary gain. 
C) $1,400 LTCG and $300 ordinary gain. 
D) $2,500 LTCG and $800 ordinary loss. 
E) None of the above. 
A) $1,700 LTCG. 
B) $600 LTCG and $300 ordinary gain. 
C) $1,400 LTCG and $300 ordinary gain. 
D) $2,500 LTCG and $800 ordinary loss. 
E) None of the above.

Question 15

A retail building used in the business of a sole proprietor is sold on March 10,2010,for $322,000.The building was acquired in 2000 for $400,000 and straight-line depreciation of $104,000 had been taken on the building.What is the maximum unrecaptured § 1250 gain from the disposition of this building?

Accepted Answer

A) $400,000. 
B) $322,000. 
C) $104,000. 
D) $26,000. 
E) None of the above. 
A) $400,000. 
B) $322,000. 
C) $104,000. 
D) $26,000. 
E) None of the above.

Question 16

Describe the circumstances in which the maximum unrecaptured § 1250 gain (25% gain)does not become part of the Schedule D netting process for an individual taxpayer?

Accepted Answer

Unrecaptured § 1250 gain (25% gain)is so

Question 17

A business taxpayer trades in a used fully depreciated machine on a replacement machine.Because the machine traded in was worth more than the replacement machine,the taxpayer received cash in the transaction.Assume the used machine originally cost $100,000,was worth $32,000 when it was traded in,and the replacement machine was worth $20,000.Consequently,the taxpayer received $12,000 cash in the transaction.Is there recognized gain in this transaction and,if so,what type of gain?

Accepted Answer

Since "boot" was received in this like-k

Question 18

Verway,Inc. ,has a 2010 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2009.For 2010,Verway's net § 1231 gain is treated as:

Accepted Answer

A) $55,000 ordinary loss. 
B) $55,000 ordinary gain. 
C) $55,000 capital loss. 
D) $55,000 capital gain. 
E) None of the above. 
A) $55,000 ordinary loss. 
B) $55,000 ordinary gain. 
C) $55,000 capital loss. 
D) $55,000 capital gain. 
E) None of the above.

Question 19

As a general rule,the sale or exchange of an option to buy or sell property results in capital gain or loss if the property subject to the option is (or would be)a capital asset in the hands of the option holder.

Accepted Answer

A) True 
 B)False

Question 20

The 2009 "Qualified Dividends and Capital Gain Worksheet" is used:

Accepted Answer

A) To calculate the tax using the alternative tax method on 0%/15% net capital gain and qualified dividends. 
B) To calculate the tax using the alternative tax method on 0%/15% net capital gain,but not on qualified dividends. 
C) To calculate the tax using the alternative tax method on 0%/15% capital gain,25% capital gain,and 28% capital gain,but not on qualified dividends. 
D) To calculate the tax using the alternative tax method on 0%/15% capital gain,25% capital gain,28% capital gain,and qualified dividends. 
E) None of the above. 
A) To calculate the tax using the alternative tax method on 0%/15% net capital gain and qualified dividends. 
B) To calculate the tax using the alternative tax method on 0%/15% net capital gain,but not on qualified dividends. 
C) To calculate the tax using the alternative tax method on 0%/15% capital gain,25% capital gain,and 28% capital gain,but not on qualified dividends. 
D) To calculate the tax using the alternative tax method on 0%/15% capital gain,25% capital gain,28% capital gain,and qualified dividends. 
E) None of the above.

Exam 14: Property Transactions: Capital Gains and Losses,1231,and Recapure Provisions

The three tax statuses are:

Kari owns depreciable residential rental real estate which has accumulated depreciation (all from straight-line)of $45,000.If Kari sold the property,she would have a $33,000 gain.The initial characterization of the gain would be:

The holding period of property given up in a like-kind exchange includes the holding period of the asset received if the property that has been exchanged is a capital asset.

Section 1239 (relating to the sale of certain property between related taxpayers)does not apply unless the property:

The chart below describes the § 1231 assets sold by the Burgundy Company (a sole proprietorship)this year.Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year.Assume there is a § 1231 lookback loss of $4,000.

What characteristics must the seller of a patent have in order to be classified as a holder?

Nonrecaptured § 1231 losses from the seven prior tax years may cause current year net § 1231 gain to be treated as ordinary income.

Harry inherited a residence from his mother when she died.The mother had a tax basis of $566,000 for the residence when she died and the residence was worth $433,000 at the date of her death.Which of the statements below is correct?

Short-term capital losses are netted against long-term capital gains and long-term capital losses are netted against short-term capital gains.

In the "General Procedure for § 1231 Computation: Step 2.§ 1231 Netting," if the gains exceed the losses,the net gain is offset by the "lookback" nonrecaptured § 1231 losses.

The § 1245 depreciation recapture potential does not reduce the amount of the charitable contribution deduction under § 170.

Short-term capital gain is eligible for a special tax rate only when it exceeds long-term capital gain.

Describe the circumstances in which the maximum unrecaptured § 1250 gain (25% gain)does not become part of the Schedule D netting process for an individual taxpayer?

Verway,Inc. ,has a 2010 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2009.For 2010,Verway's net § 1231 gain is treated as:

As a general rule,the sale or exchange of an option to buy or sell property results in capital gain or loss if the property subject to the option is (or would be)a capital asset in the hands of the option holder.

The 2009 "Qualified Dividends and Capital Gain Worksheet" is used:

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation,cost Recovery,amortization,and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Part 1--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Part 2--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

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