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Exam 11: Property Dispositions

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Question 1

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

A) True
B) False

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Question 2

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Which of the following may qualify as an installment sale?

A) Sale of inventory at a gain.
B) Sale of securities.
C) Sale of asset used in a business at a gain.
D) Land sold at a loss.
E) All of the choices qualify for installment sale treatment.

F) A) and D)
G) A) and B)

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Question 3

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The §1231 look-back rule applies whether there is a net gain or loss.

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?

Each of the following is true except for:

Which of the following is not true regarding §1239?

For an installment sale, the gross profit percentage is the gain recognized divided by the gain realized.

Which of the following is not usually included in an asset's tax basis?

Which of the following is true regarding depreciation recapture?

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?

How long after the initial exchange does a taxpayer have to identify replacement property in a like-kind exchange?

The gain or loss realized on the sale of an asset is always recognized for tax purposes.

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

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?

Buzz Corporation sold an office building that it used in its business for $500,000. Buzz bought the building 10 years ago for $650,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Buzz's gain or loss?

Collins Corporation, of Camden, Maine, wants to exchange its manufacturing facility for Rockland Company's building. Both parties agree that Collins's facility is worth $200,000 and that Rockland's building is worth $175,000. Collins will not enter into the transaction unless it qualifies as a like-kind exchange. If Collins wants to avoid gain, what could the parties do to equalize the value exchanged but still allow the exchange to qualify as a like-kind exchange?

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

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

Koch traded Machine 1 for Machine 2 when the fair market value of both machines was $50,000. Koch originally purchased Machine 1 for $75,000, and Machine 1's adjusted basis was $40,000 at the time of the exchange. Machine 2's seller purchased it for $65,000 and Machine 2's adjusted basis was $55,000 at the time of the exchange. What is Koch's adjusted basis in Machine 2 after the exchange?

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.