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Exam 11: Property Dispositions

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Question 31

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The adjusted basis is the initial basis less cost recovery deductions.

A) True
B) False

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Question 32

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Bateman Corporation sold an office building that it used in its business for $800,000.Bateman bought the building 10 years ago for $600,000 and has claimed $200,000 of depreciation expense.What is the amount and character of Bateman's gain or loss?

A) $40,000 ordinary and $360,000 §1231 gain.
B) $200,000 ordinary and $200,000 §1231 gain.
C) $400,000 ordinary gain.
D) $400,000 capital gain.
E) None of the choices are correct.

F) B) and D)
G) All of the above

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Question 33

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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?

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

Reid had a business building destroyed in a fire.The old building was purchased for $375,000, and $60,000 of depreciation deductions had been taken.Although the old building had a fair market value of $425,000 at the time of the fire, his insurance proceeds were limited to $400,000.Reid found qualified replacement property that he acquired six months later for $390,000.What is the amount of Reid's realized gain and recognized gain?

Generally, the amount realized is everything of value received in a sale less selling expenses.

For a like-kind exchange, realized gain is deferred if the exchange is solely for like-kind property.

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Why does §1250 recapture generally no longer apply?

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

Accounts receivable and inventory are examples of ordinary assets.

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

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

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?

Luke sold land valued at $210,000.His original basis in the land was $180,000.For the land, Luke received $60,000 in cash in the current year and a note providing $150,000 in the subsequent year.What is Luke's recognized gain in the current and subsequent year, respectively?

Which of the following transactions results solely in §1245 gain?

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

Which of the following realized gains results in a recognized gain?

Frederique sold furniture that she uses in her business for $15,000.Frederique bought the furniture a few years ago for $40,000 and has claimed $20,000 of depreciation expense.What is the amount and character of Frederique's gain or loss?

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?