Question 1

Sumner sold equipment that it uses in its business for $30,000. Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 of depreciation expense. Assuming that this is Sumner's only disposition during the year, what is the amount and character of Sumner's gain or loss?

Accepted Answer

A) $10,000 §1231 loss. 
B) $10,000 §1245 loss. 
C) $50,000 ordinary loss. 
D) $10,000 capital loss. 
E) None of the choices are correct.

Question 2

Peroni Corporation sold a parcel of land valued at $300,000. Its basis in the land was $250,000. For the land, Peroni received $150,000 in cash in the current year and a note providing Peroni with $150,000 in the subsequent year. What is Peroni's recognized gain in the current and subsequent year, respectively?

Accepted Answer

A) $0, $50,000. 
B) $10,000, $40,000. 
C) $25,000, $25,000. 
D) $50,000, $0. 
E) None of the choices are correct.

Question 3

Which of the following gains does not result solely in an ordinary gain or loss?

Accepted Answer

A) Sale of equipment held for less than a year. 
B) Sale of inventory. 
C) Sale of equipment where the gain realized exceeds the accumulated depreciation. 
D) Sale of equipment where the accumulated depreciation exceeds the gain realized. 
E) None of the choices are correct.

Question 4

Gainesville LLC sold the following business assets during the current year: (1)machinery, $20,000 cost basis, $4,000 depreciation, $22,000 proceeds; (2)automobile, $15,000 cost basis, $12,000 depreciation, $7,000 proceeds; (3)equipment, $15,000 cost basis, $10,000 depreciation, $4,000 proceeds; (4)computer equipment, $35,000 cost basis, $16,000 depreciation, $15,000 proceeds; (5)Winchester had unrecaptured §1231 losses of $5,000 in the prior five years. What is the amount and character of Winchester's gains and losses before the 1231 netting process?

Accepted Answer

The answer of Gainesville LLC sold the following business assets...

Question 5

Sadie sold 10 shares of stock to her brother, George, for $500 16 months ago. Sadie had purchased the stock for $600 two years earlier. If George sells the stock for $700, what are the amount and character of his recognized gain or loss in the current year?

Accepted Answer

A) $0. 
B) $100 short-term capital gain. 
C) $100 long-term capital gain. 
D) $200 short-term capital gain. 
E) None of the choices are correct.

Question 6

Alexandra sold equipment that she uses in her business for $100,000. Alexandra bought the equipment two years ago for $90,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Alexandra's gain or loss?

Accepted Answer

The answer of Alexandra sold equipment that she uses in...

Question 7

Each of the following is true except for:

Accepted Answer

A) a direct involuntary conversion occurs when property taken under eminent domain is replaced with other property. 
B) qualified replacement property rules are more restrictive than the like-kind property rules. 
C) an indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used to purchase qualified replacement property. 
D) losses realized in involuntary conversions are deferred. 
E) all of the choices are true.

Question 8

Jessie sold a piece of land held for investment for $251,800. Jessie bought the land two years ago for $177,900. What is the amount and character of Jessie's gain?

Accepted Answer

The answer of Jessie sold a piece of land held...

Question 9

In a deferred like-kind exchange, the like-kind property to be received must be identified within 45 days and acquired within 180 days from the initial exchange.

Accepted Answer

A) True 
 B)False

Question 10

Ordinary gains and losses are obtained on the sale of investments.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not true regarding installment sales?

Accepted Answer

A) Only gains are eligible for installment sale reporting. 
B) Depreciation recapture is deferred in an installment sale. 
C) The gross profit percentage is needed to determine the annual gain recognized. 
D) Stock sales are ineligible for installment sale treatment. 
E) None of the choices are correct.

Question 12

Which one of the following is not considered boot in a like-kind exchange?

Accepted Answer

A) Cash. 
B) Other property. 
C) Mortgage given. 
D) Mortgage received. 
E) All of the choices can be considered as boot.

Question 13

Which of the following is not true regarding §1239?

Accepted Answer

A) It only applies to related taxpayers. 
B) It only applies to gains on sales of depreciable property. 
C) It only applies to gains on sales of nonresidential real property. 
D) It does not apply to losses. 
E) None of the choices are correct.

Question 14

Brad sold a rental house that he owned for $247,500. Brad bought the rental house five years ago for $227,500 and has claimed $48,750 of depreciation expense. What is the amount and character of Brad's gain or loss?

Accepted Answer

A) $20,000 ordinary and $48,750 unrecaptured §1250 gain. 
B) $20,000 §1231 gain and $48,750 unrecaptured §1250 gain. 
C) $20,000 capital and $48,750 ordinary gain. 
D) $68,750 ordinary gain. 
E) None of the choices are correct.

Question 15

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Accepted Answer

A) $7,500 §1231 loss. 
B) $5,000 §1231 loss. 
C) $7,500 ordinary gain. 
D) $7,500 capital gain. 
E) None of the choices are correct.

Question 16

In the current year, Raven sold machinery with a fair market value of $200,000. The machinery's original basis was $194,750 and Raven's accumulated depreciation on the machinery was $43,800, so its adjusted basis to Raven was $150,950. Raven received $49,050 in the current year and a note paying Raven $75,475 a year for two years beginning next year. What is the amount and character of the gain that Raven will recognize in the current year?

Accepted Answer

The answer of In the current year, Raven sold machinery...

Question 17

Which of the following sections recaptures or recharacterizes only corporate taxpayers' gains?

Accepted Answer

A) §291. 
B) §1239. 
C) §1245. 
D) Unrecaptured §1250 gains. 
E) None of the choices are correct.

Question 18

Jessie sold a piece of land held for investment for $250,000. Jessie bought the land two years ago for $195,000. What is the amount and character of Jessie's gain?

Accepted Answer

The answer of Jessie sold a piece of land held...

Question 19

Frederique sold furniture that she uses in her business for $15,600. Frederique bought the furniture a few years ago for $39,880 and has claimed $20,120 of depreciation expense. What is the amount and character of Frederique's gain or loss?

Accepted Answer

The answer of Frederique sold furniture that she uses in...

Question 20

Winchester LLC sold the following business assets during the current year: (1)automobile, $30,000 cost basis, $12,000 depreciation, $20,000 proceeds; (2)machinery, $25,000 cost basis, $20,000 depreciation, $10,000 proceeds; (3)furniture, $15,000 cost basis, $10,000 depreciation, $4,000 proceeds; (4)computer equipment, $25,000 cost basis, $6,000 depreciation, $10,000 proceeds; (5)Winchester had unrecaptured §1231 losses of $3,000 in the prior five years. What are the amount and character of Winchester's gains and losses before the §1231 netting process? Assume all assets were held for more than one year.

Accepted Answer

A) $3,000 ordinary loss, $0 §1231 loss. 
B) $7,000 ordinary gain, $10,000 §1231 loss. 
C) $7,000 ordinary loss, $4,000 §1231 gain. 
D) $1,000 ordinary gain, $4,000 §1231 loss. 
E) None of the choices are correct.

Exam 11: Property Dispositions

Sumner sold equipment that it uses in its business for $30,000. Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 of depreciation expense. Assuming that this is Sumner's only disposition during the year, what is the amount and character of Sumner's gain or loss?

Which of the following gains does not result solely in an ordinary gain or loss?

Sadie sold 10 shares of stock to her brother, George, for $500 16 months ago. Sadie had purchased the stock for $600 two years earlier. If George sells the stock for $700, what are the amount and character of his recognized gain or loss in the current year?

Alexandra sold equipment that she uses in her business for $100,000. Alexandra bought the equipment two years ago for $90,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Alexandra's gain or loss?

Each of the following is true except for:

Jessie sold a piece of land held for investment for $251,800. Jessie bought the land two years ago for $177,900. What is the amount and character of Jessie's gain?

In a deferred like-kind exchange, the like-kind property to be received must be identified within 45 days and acquired within 180 days from the initial exchange.

Ordinary gains and losses are obtained on the sale of investments.

Which of the following is not true regarding installment sales?

Which one of the following is not considered boot in a like-kind exchange?

Which of the following is not true regarding §1239?

Brad sold a rental house that he owned for $247,500. Brad bought the rental house five years ago for $227,500 and has claimed $48,750 of depreciation expense. What is the amount and character of Brad's gain or loss?

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Which of the following sections recaptures or recharacterizes only corporate taxpayers' gains?

Jessie sold a piece of land held for investment for $250,000. Jessie bought the land two years ago for $195,000. What is the amount and character of Jessie's gain?

Frederique sold furniture that she uses in her business for $15,600. Frederique bought the furniture a few years ago for $39,880 and has claimed $20,120 of depreciation expense. What is the amount and character of Frederique's gain or loss?