Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which of the following sections recaptures or recharacterizes only corporate taxpayer's gains?

Accepted Answer

A)   §291.
B)   §1239.
C)   §1245.
D)   Unrecaptured §1250 gains.
E)   None of these.F) C) and D)
G) A) and D)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)   Purchase price
B)   Sales tax
C)   Shipping costs
D)   Installation costs
E)   None of theseF) A) and E)
G) C) and D)

Question 5

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

Accepted Answer

A)   The basis is equal to the fair market value of the new property.
B)   The basis is equal to the fair market value of the old property.
C)   The basis is equal to the adjusted basis of the old property.
D)   The basis is equal to the cost basis of the old property.
E)   All of these.F) All of the above
G) C) and E)

Question 6

Boot is not like-kind property involved in a like-kind exchange.

Accepted Answer

A) True 
 B)False

Question 7

The gain or loss realized is always recognized for tax purposes.

Accepted Answer

A) True 
 B)False

Question 8

In the current year, Raven sold machinery with a fair market value of $200,000. The machinery's original basis was $190,000 and Raven's accumulated depreciation on the machinery was $40,000, so its adjusted basis to Raven was $150,000. Raven received $50,000 in the current year and a note paying Raven $75,000 a year for two years beginning in next year. What is the amount and character of the gain that Raven will recognize in the current year?

Accepted Answer

$42,500 gain recognized: $40,0...

Question 9

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

Accepted Answer

A)   Sale of a machine at a gain.
B)   Sale of stock held for investment.
C)   Sale of a §1231 asset.
D)   Sale of inventory.
E)   None of these.F) C) and E)
G) A) and B)

Question 10

Andrew, an individual, began business four years ago and has never sold a §1231 asset. Andrew owned each of the assets for several years. In the current year, Andrew sold the following business assets: $$\begin{array} { | l | r | r | r | } 
\hline { \text { Asset } } & \text { Original Cost } & \begin{array} { c } 
\text { Accumulated } \
\text { Depreciation }
\end{array} & \text { Gain/Loss } \
\hline \text { Machinery } & \$ 12,000 & \$ 7,000 & \$ 6,000 \
\hline \text { Furniture } & 10,000 & 2,000 & 3,000 \
\hline \text { Building } & 90,000 & 20,000 & ( 5,000 ) \
\hline
\end{array}$$ Assuming Andrew's marginal ordinary income tax rate is 30 percent, what is the character of the gains and losses and what affect do they have on Andrew's tax liability?

Accepted Answer

$4,000 ordinary inco...

Question 11

Which of the following is true regarding the §1231 look-back rule?

Accepted Answer

A)   It only applies when a §1231 loss occurs.
B)   It only applies when a §1231 gain occurs.
C)   It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 loss in the prior five years.
D)   It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 gain in the prior five years.
E)   None of these.F) B) and E)
G) B) and D)

Question 12

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?

Accepted Answer

A)   $9,500 §1221.
B)   $9,500 §1231.
C)   $9,500 §1245.
D)   $9,500 §1250.
E)   None of these.F) A) and C)
G) A) and D)

Question 13

Arlington LLC traded machinery used in its business to a machinery dealer for some new machinery. Arlington originally purchased the machinery for $60,000 and it had an adjusted basis of $28,000 at the time of the exchange. The new machinery had a fair market value of $35,000. Arlington also received $2,000 of office equipment in the transaction. What is Arlington's gain or loss recognized on the exchange?

Accepted Answer

A)   $0.
B)   $2,000.
C)   $7,000.
D)   $9,000.
E)   None of these.F) B) and D)
G) A) and B)

Question 14

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. Misha also received a used copier worth $2,000 in the transaction. What is Misha's adjusted basis in the new equipment after the exchange?

Accepted Answer

The answer of Misha traded computer equipment used in her...

Question 15

Brandon, an individual, began business four years ago and has never sold a §1231 asset. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets:   Asset  Original Cost  Accumulated  Depreciation  Gain/Loss  Machinery $30,000$7,000$10,000 Computers 10,0006,000(2,000)  Building 90,00020,000(2,000) \begin{array} { | l | r | r | r | } \hline { 	ext { Asset } } & 	ext { Original Cost } & \begin{array} { r } 	ext { Accumulated } \	ext { Depreciation }\end{array} & 	ext { Gain/Loss } \\hline 	ext { Machinery } & \$ 30,000 & \$ 7,000 & \$ 10,000 \\hline 	ext { Computers } & 10,000 & 6,000 & ( 2,000 )  \\hline 	ext { Building } & 90,000 & 20,000 & ( 2,000 )  \\hline\end{array} Asset  Machinery  Computers  Building ​ Original Cost $30,00010,00090,000​ Accumulated  Depreciation ​$7,0006,00020,000​ Gain/Loss $10,000(2,000) (2,000) ​​  Assuming Brandon's marginal ordinary income tax rate is 35 percent, what effect do the gains and losses have on Brandon's tax liability?

Accepted Answer

A)   $7,000 ordinary income, $1,000 §1231 loss and $2,100 tax liability.
B)   $6,000 ordinary income and $2,100 tax liability.
C)   $7,000 §1231 gain and $2,450 tax liability.
D)   $7,000 §1231 gain and $1,050 tax liability.
E)   None of these. F) A) and C)
G) A) and E)

Question 16

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten 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?

Accepted Answer

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 these.F) All of the above
G) A) and C)

Question 17

Depreciation recapture changes both the amount and character of a gain.

Accepted Answer

A) True 
 B)False

Question 18

When does unrecaptured §1250 gains apply?

Accepted Answer

A)   When the taxpayer makes the election.
B)   It applies only when non-corporate taxpayers sell depreciable real property at a gain.
C)   It applies when §1245 recapture trumps §1250 recapture.
D)   It applies only when real property purchased before 1986 is sold at a gain.
E)   None of these.F) C) and D)
G) B) and E)

Question 19

Which of the following is not true regarding an asset's adjusted basis?

Accepted Answer

A)   Tax adjusted basis is usually greater than book adjusted basis.
B)   Tax adjusted basis is usually less than book adjusted basis.
C)   Adjusted basis is cost basis less cost recovery deductions.
D)   Tax adjusted basis may change over time.E) B) and D)
F) All of the above

Question 20

Buzz Corporation sold an office building that it used in its business for $500,000. Buzz bought the building ten 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?

Accepted Answer

$10,000 or...

Exam 10: Property Dispositions

Correct Answer
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Buzz Corporation sold an office building that it used in its business for $500,000. Buzz bought the building ten 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?

Correct Answer
verified
$10,000 or...
View Answer

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

Correct Answer
verified

Which of the following is true regarding the §1231 look-back rule?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
$42,500 gain recognized: $40,0...
View Answer

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

Correct Answer
verified

Which of the following sections recaptures or recharacterizes only corporate taxpayer's gains?

Correct Answer
verified

Correct Answer
verified
$4,000 ordinary inco...
View Answer

Which of the following is not true regarding an asset's adjusted basis?

Correct Answer
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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?

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

Correct Answer
verified

Boot is not like-kind property involved in a like-kind exchange.

Correct Answer
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The general rule regarding the exchanged basis in a like-kind exchange is:

Correct Answer
verified

Depreciation recapture changes both the amount and character of a gain.

Correct Answer
verified

The gain or loss realized is always recognized for tax purposes.

Correct Answer
verified

When does unrecaptured §1250 gains apply?

Correct Answer
verified

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten 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?

Correct Answer
verified

Correct Answer
verified

Exam 10: Property Dispositions

Correct AnswerverifiedShow Answer

Buzz Corporation sold an office building that it used in its business for $500,000. Buzz bought the building ten 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?

Correct Answerverified$10,000 or...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is true regarding the §1231 look-back rule?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverified$42,500 gain recognized: $40,0...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following sections recaptures or recharacterizes only corporate taxpayer's gains?

Correct AnswerverifiedShow Answer

Correct Answerverified$4,000 ordinary inco...View AnswerShow Answer

Which of the following is not true regarding an asset's adjusted basis?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Boot is not like-kind property involved in a like-kind exchange.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Depreciation recapture changes both the amount and character of a gain.

Correct AnswerverifiedShow Answer

The gain or loss realized is always recognized for tax purposes.

Correct AnswerverifiedShow Answer

When does unrecaptured §1250 gains apply?

Correct AnswerverifiedShow Answer

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten 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?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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$10,000 or...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
$42,500 gain recognized: $40,0...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
$4,000 ordinary inco...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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