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

Section 1250 depreciation recapture will apply when accelerated depreciation was used on property used outside the United States and the property is sold at a gain.

Sylvia purchased for $1,610 a $2,000 bond when it was issued two years ago.Sylvia amortized $200 of the original issue discount and then sold the bond for $1,800.Which of the following statements is correct?

Bakra was the holder of a patent on a wireless modem.During 2010,he sold all substantial rights in the patent for $345,000 in cash and a 3% royalty on the purchaser's first $10,200,000 of sales each year related to the product in which the patent is incorporated.Bakra had not reduced the patent to practice.He had a $56,000 basis for the patent.During 2010,he received $10,000 in royalties.What is the nature and amount of Bakra's gain?

Blue Company sold machinery for $45,000 on December 23,2010.The machinery had been acquired on April 1,2008,for $49,000 and its adjusted basis was $14,200.The § 1231 gain,§ 1245 recapture gain,and § 1231 loss from this transaction are:

A lease cancellation payment received by a lessee is generally not treated as an exchange because the lease extinguished is not a capital asset.

Lease cancellation payments received by a lessor are always ordinary income because they are considered to be in lieu of rental payments.

Cason is filing as single and has 2010 taxable income of $38,000 which includes $36,000 of 0%/15% net long-term capital gain.What is his tax on taxable income using the alternative tax method?

Jesse (now 37 years old)owns a collection of "action figures" that he acquired when he was a teenager.He had forgotten about them until his mother sent them to him.She had discovered them in a box in her attic while she was cleaning out her house before selling it.Jesse had originally acquired all the action figures as gifts from his parents,so he has no way to establish a basis for the action figures.Using information from the Internet,he prepares a careful inventory of the action figures that includes their name,when they were first available for sale,their current value,and other pertinent information.He then lists them for sale on the Internet.To his surprise,he quickly gets an offer of $5,000 for them and sells them.Jesse has no other gain or loss transactions for the year and is in the 28% marginal tax bracket.What issues do these facts create?

Tom has owned 20 shares of Burgundy Corporation stock for four years.He sells the stock short for a total of $800.One month later,he closes the short sale by purchasing and delivering 20 shares of Burgundy Corporation stock for a total of $600.Tom has a $200 short-term capital gain.

Vertical,Inc. ,has a 2010 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2009.For 2010,Vertical's net § 1231 gain is treated as:

Septa is the owner of vacant land that he purchased in 2005 for $400,000 and held for investment.On January 22,2009,he was paid $45,000 for a eighteen-month option on the land by Samantha.Samantha could buy the land for an additional $1,200,000 by exercising the option.Samantha had hoped to develop the land into a shopping center,but was unable to get the zoning changed to accommodate building a shopping center on the land.Consequently,Samantha did not exercise her option and the option expired on August 15,2010.What is Septa's basis,gain,and type of gain from these events?

On August 10,2010,Black,Inc.acquired an office building as a result of a like-kind exchange.Black had given up a factory building that it had owned for 18 months as part of the like-kind exchange.Which of the statements below is correct?

Yuki and Omana,married filing jointly,and both over 65 years of age,have no dependents.Their 2010 income tax facts are: What is their taxable income for 2010?

Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?

Robin Corporation has ordinary income from operations of $30,000,net long-term capital gain of $10,000,and net short-term capital loss of $15,000.What is the taxable income for 2010?

Residential real estate was purchased in 2007 for $345,000,held as rental property,and depreciated straight-line.Assume the land cost was $45,000 and the building cost was $300,000.Depreciation totaled $34,089.The building and land were sold on June 10,2010,for $683,000 total.What is the tax status of the property,the nature of the gain from the disposition,and is any of it § 1250 depreciation recapture gain or unrecaptured § 1250 gain?

Magenta,Inc.sold a forklift on February 12,2010,for $3,000 (its FMV)to its 100% shareholder,Anise.Magenta's adjusted basis for the forklift was $7,000.Anise's holding period for the forklift:

Phil's father died on January 10,2010.The father had owned stock for 20 years with a basis of $45,000 that was transferred to Phil as a gift on August 10,2009,when the stock was worth $430,000.His father paid gift tax of $31,000.This stock was worth $566,000 at the date of the father's death.Phil sold the stock for $545,000 net of commissions on February 23,2010.What is the amount and nature of Phil's gain or loss from disposition of this property?

Since the Code defines what a capital asset is not,often the courts have to help determine what is and what is not a capital asset.

"Collectibles" held long-term and sold at a gain are subject to maximum tax rate of 28%.An individual taxpayer recently sold a baseball card for $400.The card had been held for several years and $40 was originally paid for it.The card depicts a famous baseball player (who hit 73 home runs in a recent season)when he was a rookie in the major leagues.Explain why the baseball card is or is not a collectible.