Question 1

The following assets in Jack's business were sold in 2013:  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 2013 (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.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

The chart below describes the § 1231 assets sold by the Tan 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 $14,000.

Accepted Answer

The answer of The chart below describes the § 1231...

Question 4

A retail building used in the business of a sole proprietor is sold on March 10,2013,for $342,000.The building was acquired in 2003 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.

Question 5

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

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 loss 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

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:

Accepted Answer

A) No gain or loss. 
B) Sold a long-term capital asset. 
C) Sold a short-term capital asset. 
D) An ordinary gain. 
E) None of the above.

Question 8

Martha is single with one dependent and files as head of household.She had 2013 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?

Accepted Answer

The answer of Martha is single with one dependent and...

Question 9

Section 1231 applies to the sale or exchange of business properties,but not to personal use activity casualties.

Accepted Answer

A) True 
 B)False

Question 10

Gold Company signs a 13-year franchise agreement with Silver.Silver retained significant powers,rights,and a continuing interest.Gold Company (the franchisee)makes noncontingent payments of $18,000 per year for the first four years of the franchise.Gold Company also pays a contingent fee of 2% of gross sales every month.Which of the following statements is correct?

Accepted Answer

A) Gold Company may deduct the $18,000 per year noncontingent payments in full as they are made. 
B) Gold Company may deduct the monthly contingent fee as it is paid. 
C) Gold Company may deduct both the noncontingent annual fee and the contingent monthly fees as they are paid. 
D) Gold Company may not deduct either the noncontingent annual fee or the contingent monthly fees as they are paid. 
E) None of the above.

Question 11

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.

Accepted Answer

A) True 
 B)False

Question 12

Cason is filing as single and has 2013 taxable income of $36,000 which includes $34,000 of 0%/15%/20% net long-term capital gain.What is his tax on taxable income using the alternative tax method?

Accepted Answer

A) $0. 
B) $200. 
C) $4,954. 
D) $300. 
E) None of the above.

Question 13

The possible holding periods for capital assets include:

Accepted Answer

A) Short-term = held 14 months or less. 
B) Long-term = greater than six months. 
C) Long-term = greater than 12 months. 
D) Short-term = greater than 12 months. 
E) None of the above.

Question 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

A lease cancellation payment received by a lessee is generally treated as an exchange because the lease extinguished is usually a capital asset.

Accepted Answer

A) True 
 B)False

Question 17

In 2013,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?

Accepted Answer

A) Mark has a $5,000 capital loss deduction. 
B) Mark has a $3,000 capital loss deduction. 
C) Mark has a $13,000 net capital gain. 
D) Mark has a $5,000 net capital gain. 
E) Mark has a $18,000 net capital loss.

Question 18

Recognized gains and losses from disposition of a capital asset may occur as a result of a:

Accepted Answer

A) Sale. 
B) Exchange. 
C) Casualty. 
D) Condemnation. 
E) All of the above.

Question 19

The tax law requires that capital gains and losses be separated from other types of gains and losses because an alternative tax calculation may be used when taxable income includes net long-term capital gain.

Accepted Answer

A) True 
 B)False

Question 20

Why is it generally better to have a net § 1231 gain year followed by a net § 1231 loss year rather than a net § 1231 loss year followed by a net § 1231 gain year?

Accepted Answer

The answer of Why is it generally better to have...

Exam 8: Property Transactions: Capital Gains and Losses, section 1231, and Recapture Provisions

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

The chart below describes the § 1231 assets sold by the Tan 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 $14,000.

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.

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

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:

Martha is single with one dependent and files as head of household.She had 2013 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?

Section 1231 applies to the sale or exchange of business properties,but not to personal use activity casualties.

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.

Cason is filing as single and has 2013 taxable income of $36,000 which includes $34,000 of 0%/15%/20% net long-term capital gain.What is his tax on taxable income using the alternative tax method?

The possible holding periods for capital assets include:

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

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

A lease cancellation payment received by a lessee is generally treated as an exchange because the lease extinguished is usually a capital asset.

In 2013,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?

Recognized gains and losses from disposition of a capital asset may occur as a result of a:

The tax law requires that capital gains and losses be separated from other types of gains and losses because an alternative tax calculation may be used when taxable income includes net long-term capital gain.

Why is it generally better to have a net § 1231 gain year followed by a net § 1231 loss year rather than a net § 1231 loss year followed by a net § 1231 gain year?