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Exam 11: Property Dispositions

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Question 31

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Sandra sold some equipment for $10,000 in cash, $1,000 of office products, the buyer's assumption of her $1,500 loan, and incurred selling expenses of $500. What is Sandra's amount realized in the transaction?

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$12,000.
The amount realized is everythi...

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Question 32

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Which of the following is not a §1245 asset if held for more than one year?

A) Machinery.
B) Automobile.
C) Business cell phone.
D) Land.
E) None of the choices are correct.

F) D) and E)
G) B) and D)

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Question 33

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What is the character of land used in an active trade or business for two years?

Only accelerated depreciation is recaptured for §1245 assets.

After application of the look-back rule, net §1231 gains become capital while net §1231 losses become ordinary.

Alpha sold machinery that it used in its business to Beta, a related entity, for $40,000. Beta used the machinery in its business. Alpha bought the machinery a few years ago for $50,000 and has claimed $30,000 of depreciation expense. What is the amount and character of Alpha's gain?

A taxpayer that receives boot in a like-kind exchange resulting in a gain recognizes as gain the lesser of the fair market value of the boot received or the gain realized.

The general rule regarding the exchanged basis in the new property received in a like-kind exchange is:

When do unrecaptured §1250 gains apply?

Which of the following results in an ordinary gain or loss?

Brandon, an individual, began business four years ago and has sold §1231 assets with $5,000 of losses within the last five years. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets: Assuming Brandon's marginal ordinary income tax rate is 32 percent, what effect do the gains and losses have on Brandon's tax liability? Use dividends and capital gains tax rates for reference.

Manassas purchased a computer several years ago for $2,200. On November 10^th of the current year, the computer was worth $800. If $1,000 of depreciation deductions had been taken, what is Manassas's tax-adjusted basis for the computer?

Suzanne, an individual, began business four years ago and has never sold a §1231 asset. Suzanne owned each of the assets for several years. In the current year, Suzanne sold the following business assets: Assuming Suzanne's marginal ordinary income tax rate is 32 percent, what is the character of the gains and losses and what affect do they have on Suzanne's tax liability?

§1239 recharacterizes 50 percent of the gain on sales to a related party as ordinary income.

An installment sale is any sale where at least a portion of the sale proceeds is received in a subsequent taxable year.

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

Misha traded computer equipment used in her business to a computer dealer for some new computer equipment. Misha originally purchased the computer equipment for $15,000, and it had an adjusted basis of $11,000 at the time of the exchange. The computer equipment was worth $12,000 at the time of the exchange. Misha also received a used copier worth $2,000 in the transaction. What is Misha's realized and recognized gain/loss on the exchange?

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?

Assets held for investment and personal use assets are examples of capital assets.

Unrecaptured §1250 gains apply only to individuals.