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Exam 11: Property Dispositions

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Question 21

Multiple Choice

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Which of the following is true regarding disallowed losses between related taxpayers?

A) The tax laws essentially treat related parties as the same taxpayer.
B) The holding period of the seller carries over to the buyer.
C) The related person always receives a carryover basis.
D) The seller's realized loss is deferred until the buyer sells the assets.
E) None of the choices are correct.

F) A) and D)
G) C) and D)

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Question 22

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Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

A) True
B) False

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Question 23

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Which of the following is not used in the calculation of the amount realized:

The §1231 look-back rule recharacterizes §1231 gains if §1231 losses have created ordinary losses in the last five years.

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?

An asset's tax-adjusted basis is usually greater than its book-adjusted basis.

Losses on sales between related parties are realized but not recognized.

Residential real property is not like-kind with nonresidential real property.

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?

§1250 recaptures the excess of accelerated depreciation over straight-line depreciation on real property placed in service before 1987 as ordinary income.

Odintz traded land for land. Odintz originally purchased its land for $150,000. The land received was purchased for $200,000 and was subject to a mortgage of $50,000 that was paid off before the transfer. The fair market value of the new land is $240,000. What is Odintz's adjusted basis in the new land after the exchange?

Accounts receivable and inventory are examples of ordinary assets.

A simultaneous exchange must take place for a transaction to qualify as a like-kind exchange.

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

Mary exchanged an office building used in her business for some land. Mary originally purchased the building for $45,000, and it had an adjusted basis of $20,000 at the time of the exchange. The land had a fair market value of $40,000. Mary also gave $4,000 to the seller in the transaction. What is Mary's adjusted basis in the land after the exchange?

Redoubt LLC exchanged an office building used in its business for a rental house. Redoubt originally purchased the building for $80,000, and it had an adjusted basis of $53,000 at the time of the exchange. The rental house had a fair market value of $62,000. Redoubt also received $7,000 of cash in the transaction. What is Redoubt's gain or loss recognized on the exchange? What is Redoubt's basis in the rental house?

Kristi had a business building destroyed in an earthquake. The old building was purchased for $250,000, and $80,000 of depreciation deductions had been taken. Her insurance proceeds were $550,000. Although the replacement property was much larger and nicer than her old building, Kristi's new property qualified as replacement property. She acquired the new property 13 months after the earthquake for $620,000. What is the amount of Kristi's realized gain and recognized gain and the basis in her new property?

All tax gains and losses are ultimately characterized as either ordinary or capital.

For corporations, §291 recaptures 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.

Sunshine LLC sold furniture for $75,000. Sunshine bought the furniture for $90,000 several years ago and has claimed $25,000 of depreciation expense on the machine. What is the amount and character of Sunshine's gain or loss?