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Exam 3: Property Dispositions

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Question 41

Multiple Choice

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The sale for more than the original cost basis (before depreciation) of machinery used in a trade or business and held for more than one year results in which of the following types of gain or loss?

A) Capital and ordinary.
B) Ordinary only.
C) Capital and §1231.
D) §1245 and §1231.
E) None of the choices are correct.

F) None of the above
G) A) and B)

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Question 42

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

A) True
B) False

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Question 43

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

Which of the following is not an involuntary conversion?

Which of the following is not true regarding §1239?

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

Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the amount and character of Foreaker's gain?

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

The sale of land held for investment results in which of the following types of gain or loss?

Accounts receivable and inventory are examples of ordinary assets.

The sale at a loss of machinery that was used in a trade or business and held for more than one year results in which of the following types of loss?

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

Leesburg sold a machine for $2,200 on November 10^th of the current year. The machine was purchased for $2,600. Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale. What is Leesburg's gain or loss realized on the machine?

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

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

Bull Run sold a computer for $1,200 on November 10^th of the current year. The computer was purchased for $2,800. Bull Run had taken $1,000 of depreciation deductions. What is Bull Run's gain or loss realized on the computer?

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?

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

A loss realized for property destroyed in a hurricane is deferred under the involuntary conversion rules.

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?