Question 1

Rental use depreciable machinery held more than 12 months is an example of a § 1231 asset.

Accepted Answer

A) True 
 B)False

Question 2

Original issue discount is amortized over the life of the bond.

Accepted Answer

A) True 
 B)False

Question 3

When a patent is transferred,the most common forms of payment received by the transferor are a lump sum or periodic payment.

Accepted Answer

A) True 
 B)False

Question 4

Virgil was leasing an apartment from Mauve,Inc.Mauve paid Virgil $1,000 to cancel his lease and move out so that Mauve could demolish the building.As a result:

Accepted Answer

A) Virgil has a $1,000 capital gain. 
B) Virgil has a $1,000 capital loss. 
C) Mauve has a $1,000 capital loss. 
D) Mauve has a $1,000 capital gain. 
E) None of the above. 
A) Virgil has a $1,000 capital gain. 
B) Virgil has a $1,000 capital loss. 
C) Mauve has a $1,000 capital loss. 
D) Mauve has a $1,000 capital gain. 
E) None of the above.

Question 5

In 2010,Satesh has $4,000 short-term capital loss,$14,000 0%/15% long-term capital gain,and $7,000 qualified dividend income.Satesh is single and has other taxable income of $15,000.Which of the following statements is correct?

Accepted Answer

A) No more than $14,000 of Satesh's taxable income is taxed at 0%. 
B) No more than $7,000 of Satesh's taxable income is taxed at 0%. 
C) No more than $17,000 of Satesh's taxable income is taxed at 0%. 
D) None of Satesh's taxable income is taxed at 0%. 
E) All of Satesh's taxable income is taxed at 0%. 
A) No more than $14,000 of Satesh's taxable income is taxed at 0%. 
B) No more than $7,000 of Satesh's taxable income is taxed at 0%. 
C) No more than $17,000 of Satesh's taxable income is taxed at 0%. 
D) None of Satesh's taxable income is taxed at 0%. 
E) All of Satesh's taxable income is taxed at 0%.

Question 6

Which of the following events could result in § 1250 depreciation recapture?

Accepted Answer

A) Sale at a loss of a depreciable business building held more than one year. 
B) Sale at a gain of a business building held more than a year on which straight-line depreciation was taken. 
C) Sale at a gain of a depreciable business building held for 9 months. 
D) Sale at a gain of depreciable equipment held more than a year on which straight-line depreciation was taken. 
E) None of the above. 
A) Sale at a loss of a depreciable business building held more than one year. 
B) Sale at a gain of a business building held more than a year on which straight-line depreciation was taken. 
C) Sale at a gain of a depreciable business building held for 9 months. 
D) Sale at a gain of depreciable equipment held more than a year on which straight-line depreciation was taken. 
E) None of the above.

Question 7

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

Accepted Answer

A) True 
 B)False

Question 8

On January 18,2009,Martha purchased 200 shares of Blue Corporation stock for $2,000.On November 11,2010,she sold short 200 shares of Blue Corporation stock which she borrowed from her broker for $2,300.On February 10,2011,Martha closed the short sale by delivering the 200 shares of Blue Corporation stock which she had acquired in 2009.On that date,Blue Corporation stock had a market price of $4 per share.What is Martha's recognized gain or loss and its character in 2010? In 2011?

Accepted Answer

Since Martha owned substantially identic

Question 9

A security that is a capital asset becomes worthless.The loss is deemed to have occurred on the first day of the tax year that the security becomes worthless.

Accepted Answer

A) True 
 B)False

Question 10

If there is a net § 1231 loss,it is treated as a short-term capital loss.

Accepted Answer

A) True 
 B)False

Question 11

An individual taxpayer received a valuable painting from his uncle,a famous painter.The painter created the painting.After the taxpayer held the painting for two years,he sold it for a $400,000 gain.The gain is a long-term capital gain.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following would not be included in the netting of § 1231 gains and losses?

Accepted Answer

A) Personal use property net casualty gain. 
B) Section 1231 loss. 
C) Section 1231 gain. 
D) All of the above. 
E) b.and c. 
A) Personal use property net casualty gain. 
B) Section 1231 loss. 
C) Section 1231 gain. 
D) All of the above. 
E) b.and c.

Question 13

Franchising may involve one business obtaining a license to use a mode of operation belonging to another business.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is correct?

Accepted Answer

A) When depreciable property is gifted to another individual taxpayer,the depreciation recapture potential is extinguished. 
B) When depreciable property is inherited by a taxpayer,the depreciation recapture potential is extinguished. 
C) When corporate depreciable property is distributed as a dividend,the depreciation recapture potential is generally not recognized. 
D) When depreciable property is contributed to charity,the depreciation recapture potential has no effect on the amount of the charitable contribution deduction. 
E) All of the above are correct. 
A) When depreciable property is gifted to another individual taxpayer,the depreciation recapture potential is extinguished. 
B) When depreciable property is inherited by a taxpayer,the depreciation recapture potential is extinguished. 
C) When corporate depreciable property is distributed as a dividend,the depreciation recapture potential is generally not recognized. 
D) When depreciable property is contributed to charity,the depreciation recapture potential has no effect on the amount of the charitable contribution deduction. 
E) All of the above are correct.

Question 15

On July 1,2010,Brandon purchased an option to buy 1,000 shares of General,Inc.at $30 per share.He purchased the option for $2,000.It was to remain in effect for five months.The market experienced a decline during the latter part of the year,so Brandon decided to let the option lapse as of December 1,2010.On his 2010 tax return,what should Brandon report?

Accepted Answer

A) A $2,000 long-term capital loss. 
B) A $2,000 short-term capital loss. 
C) A $2,000 § 1231 loss. 
D) A $2,000 ordinary loss. 
E) None of the above. 
A) A $2,000 long-term capital loss. 
B) A $2,000 short-term capital loss. 
C) A $2,000 § 1231 loss. 
D) A $2,000 ordinary loss. 
E) None of the above.

Question 16

Kenneth acquires $100,000 face value corporate bonds for $86,000 when the bonds are issued.He holds the bonds as an investment for two years and then sells them for $98,000.What tax issues does Kenneth have with respect to these bonds?

Accepted Answer

The bonds have original issue discount o

Question 17

Section 1231 property generally includes certain purchased intangible assets (such as patents and goodwill)that are eligible for amortization and held for more than one year.

Accepted Answer

A) True 
 B)False

Question 18

Section 1245 generally recaptures as ordinary income the portion of the gain that is equal to the sale price minus the original cost.

Accepted Answer

A) True 
 B)False

Question 19

Section 1245 depreciation recapture potential carries over from the deceased taxpayer to the beneficiary taxpayer.

Accepted Answer

A) True 
 B)False

Question 20

Section 1231 property generally does not include notes receivable arising in the ordinary course of business.

Accepted Answer

A) True 
 B)False

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

Rental use depreciable machinery held more than 12 months is an example of a § 1231 asset.

Original issue discount is amortized over the life of the bond.

When a patent is transferred,the most common forms of payment received by the transferor are a lump sum or periodic payment.

Virgil was leasing an apartment from Mauve,Inc.Mauve paid Virgil $1,000 to cancel his lease and move out so that Mauve could demolish the building.As a result:

In 2010,Satesh has $4,000 short-term capital loss,$14,000 0%/15% long-term capital gain,and $7,000 qualified dividend income.Satesh is single and has other taxable income of $15,000.Which of the following statements is correct?

Which of the following events could result in § 1250 depreciation recapture?

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

A security that is a capital asset becomes worthless.The loss is deemed to have occurred on the first day of the tax year that the security becomes worthless.

If there is a net § 1231 loss,it is treated as a short-term capital loss.

An individual taxpayer received a valuable painting from his uncle,a famous painter.The painter created the painting.After the taxpayer held the painting for two years,he sold it for a $400,000 gain.The gain is a long-term capital gain.

Which of the following would not be included in the netting of § 1231 gains and losses?

Franchising may involve one business obtaining a license to use a mode of operation belonging to another business.

Which of the following statements is correct?

Kenneth acquires $100,000 face value corporate bonds for $86,000 when the bonds are issued.He holds the bonds as an investment for two years and then sells them for $98,000.What tax issues does Kenneth have with respect to these bonds?

Section 1231 property generally includes certain purchased intangible assets (such as patents and goodwill)that are eligible for amortization and held for more than one year.

Section 1245 generally recaptures as ordinary income the portion of the gain that is equal to the sale price minus the original cost.

Section 1245 depreciation recapture potential carries over from the deceased taxpayer to the beneficiary taxpayer.

Section 1231 property generally does not include notes receivable arising in the ordinary course of business.

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

Filters