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

Spencer has an investment in two parcels of vacant land. Parcel 1 is a capital asset and parcel 2 is a § 1231 asset. Spencer already has short-term capital loss for the year he would like to offset with capital gain. Spencer has § 1231 lookback loss that exceeds the gain from the disposition of either land parcel. Spencer only wants to sell one land parcel and each of them would yield the same amount of gain. The gain that would be recognized exceeds the short- term capital loss Spencer already has. Which of the statements below is correct?

An individual has the following recognized gains and losses from disposition of § 1231 assets (all the assets were vacant land): $15,000 gain, $10,000 loss, $25,000 gain, and $2,000 loss. The individual has a $5,500 § 1231 lookback loss. The individual also has a $16,000 net short-term capital loss from the disposition of stock. Which of the following statements is correct?

Tan, Inc., sold a forklift on April 12, 2018, for $8,000 (its FMV) to its 100% shareholder, Ashley. Tan's adjusted basis for the forklift was $12,000. Ashley's holding period for the forklift:

Personal use property casualty gains and losses are not subject to the § 1231 rules.

Verway, Inc., has a 2018 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2016. For 2018, Verway's net § 1231 gain is treated as:

Depreciation recapture under § 1245 and § 1250 is reported on Form 4797.

A business taxpayer sells depreciable business property with an adjusted basis of $40,000 for $32,000. The taxpayer held the property for more than a year. The taxpayer has an $8,000 capital loss.

The chart below describes the § 1231 assets sold by the Ecru 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.

Hilda lent $2,000 to a close personal friend to help the friend avoid overdrawing the friend's checking account. The friend was supposed to repay the $2,000 within a month. Instead, the friend declared personal bankruptcy and Hilda will never recover any of the $2,000. What are the tax implications of these events for Hilda?

Thoren has the following items for the year: $4,000 of short-term capital gain, $5,000 of 0%/15%/20% long-term capital gain, and $1,500 of 28% capital loss. Which of the following is correct?

A business taxpayer sells inventory for $80,000. The adjusted basis of the property is $58,000 at the time of the sale and the inventory had been held more than one year. The taxpayer has:

Which of the following would extinguish the § 1245 recapture potential?

Orange Company had machinery destroyed by a fire on December 23, 2018. The machinery had been acquired on April 1, 2016, for $49,000 and its adjusted basis was $14,200. The machinery was completely destroyed and Orange received $30,000 of insurance proceeds for the machine and did not replace it. This was Orange's only casualty or theft event for the year. As a result of this event, Orange has:

Which of the following events causes the purchaser of an option to add the cost of the option to the basis of the property to which the option relates?

The chart below details Sheen's 2016, 2017, and 2018 stock transactions. What is the capital loss carryover to 2018 and what is the net capital gain or loss for 2018?

Section 1245 depreciation recapture potential does not carryover from a deceased taxpayer to the beneficiary taxpayer.

Martha has both long-term and short-term 2018 capital gains and losses. The result of netting these gains and losses is a net long-term capital loss. Martha has no qualified dividend income. Also, Martha's 2018 taxable income puts her in the 24% tax bracket. Which of the following is correct?

Martha is unmarried with one dependent and files as head of household. She had 2018 taxable income of $45,000 which included $16,000 of 0%/15%/20% net long-term capital gain. What is her tax on taxable income using the alternative tax on net long-term capital gain method?

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

In 2018, Mark has $18,000 short-term capital loss, $7,000 28% gain, and $6,000 0%/15%/20% gain. Which of the statements below is correct?