Question 1

Which of the following may qualify as an installment sale?

Accepted Answer

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 these are truE.Assets used in a business qualify for installment sale treatment,although depreciation recapture is ineligible.F) A) and B)
G) A) and C)

Question 2

Only accelerated depreciation is recaptured for §1245 assets.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not true regarding installment sales?

Accepted Answer

A)  Only gains are eligible for installment sale reporting.
B)  Depreciation recapture is deferred in an installment sale.
C)  The gross profit percentage is needed to determine the annual gain recognized.
D)  Stock sales are ineligible for installment sale treatment.
E)  None of thesE.Depreciation recapture is not eligible for installment sale treatment and must be reported as ordinary income in the year of sale.F) A) and B)
G) All of the above

Question 4

Unrecaptured §1250 gains apply only to individuals.

Accepted Answer

A) True 
 B)False

Question 5

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.For corporations,§291 recapture is 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.The remaining gain is §1231.F) B) and E)
G) B) and D)

Question 6

Which of the following is not used in the calculation of the amount realized:

Accepted Answer

A)  Cash.
B)  Adjusted basis.
C)  Fair market value of other property received.
D)  Buyer's assumption of liabilities.
E)  All of thesE.The amount realized is everything of value received (cash,fair market value of other property,and the buyer's assumption of liabilities)  less selling costs.F) All of the above
G) C) and D)

Question 7

§1231 assets include all assets used in a trade or business.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  The like-kind property to be received must be identified within 45 days.
B)  The like-kind property to be received must be identified by the earlier of 45 days or the last day of the taxpayer's taxable year.
C)  The like-kind property to be received must be identified within 180 days.
D)  There is no deadline for the identification of replacement property.
E)  All of thesE.The replacement property must be identified within 45 days.F) B) and D)
G) None of the above A

Question 10

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.

Accepted Answer

A) True 
 B)False

Question 11

The sale of computer equipment used in a trade or business for 9 months results in the following type of gain or loss?

Accepted Answer

A)  Capital.
B)  Ordinary.
C)  §1231.
D)  §1245.
E)  None of thesE.Assets used in a trade or business and held for one year or less are ordinary assets.F) A) and E)
G) B) and C)

Question 12

Tyson had a parcel of undeveloped investment land that he wanted to trade for a warehouse to be used in his business? He found a buyer willing to pay him $450,000 for the land.He transferred the land to a third party intermediary on April 1st of the current year.On May 10th,with the help of a commercial real estate agent,Tyson identified two suitable warehouses.On August 10th he made an offer on the first building which was rejected.On August 13th an offer was accepted on the second warehouse.On September 23rd the third party intermediary transferred $500,000 ($450,000 from the original property plus $50,000 from Tyson) to the seller and conveyed title to the warehouse to Tyson.Explain whether the exchange of property qualifies as a like-kind exchange?

Accepted Answer

Yes,the exchange of property qualifies as a like-kind exchange.

Question 13

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.The tax adjusted basis is usually less than book adjusted basis because tax depreciation usually exceeds book depreciation.E) A) and B)
F) C) and D)

Question 14

In a deferred like-kind exchange the like-kind property to be received must be identified within 45 days and acquired within 180 days from the initial exchange.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true regarding depreciation recapture?

Accepted Answer

A)  Changes the character of a loss.
B)  Changes the character of a gain.
C)  Changes the amount of a gain.
D)  Only applies to ordinary assets.
E)  None of thesE.Depreciation recapture changes the character of the gain from §1231 to ordinary.F) A) and E)
G) A) and C) B

Question 16

Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

Accepted Answer

A) True 
 B)False

Question 17

Residential real property is not like-kind with non-residential real property.

Accepted Answer

A) True 
 B)False

Question 18

Mary traded furniture used in her business to a furniture dealer for some new furniture.Mary originally purchased the furniture for $45,000 and it had an adjusted basis of $20,000 at the time of the exchange.The new furniture had a fair market value of $40,000.Mary also gave $4,000 to the dealer in the transaction.What is Mary's adjusted basis in the new furniture after the exchange?

Accepted Answer

A)  $20,000.
B)  $24,000.
C)  $36,000.
D)  $40,000.
E)  None of thesE.The exchange qualifies as a like-kind exchange.Since boot was given in the transaction,the fair market value of the boot given ($4,000)  is added to the adjusted basis ($20,000)  of the property given up.F) A) and E)
G) A) and D)

Question 19

§1239 recharacterizes 50 percent of the gain on sales to a related party as ordinary income.100 percent of the gain is recharacterized as ordinary income.

Accepted Answer

A) True 
 B)False

Question 20

Leesburg sold a machine for $2,200 on November 10th 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?

Accepted Answer

A)  $800 gain.
B)  $1,000 gain.
C)  $1,200 loss.
D)  $1,400 loss.
E)  None of thesE.The gain realized is the $2,200 amount realized less the $1,400 ($2,600 - $1,200)  adjusted basis.F) A) and C)
G) D) and E)

Exam 10: Property Dispositions

Which of the following may qualify as an installment sale?

Correct Answer
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Only accelerated depreciation is recaptured for §1245 assets.

Correct Answer
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Which of the following is not true regarding installment sales?

Correct Answer
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Unrecaptured §1250 gains apply only to individuals.

Correct Answer
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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
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Which of the following is not used in the calculation of the amount realized:

Correct Answer
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§1231 assets include all assets used in a trade or business.

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

Correct Answer
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How long does a taxpayer have to identify replacement property in a like-kind exchange?

Correct Answer
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A

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.

Correct Answer
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The sale of computer equipment used in a trade or business for 9 months results in the following type of gain or loss?

Correct Answer
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Correct Answer
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Yes,the exchange of property qualifies as a like-kind exchange.

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

Correct Answer
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In a deferred like-kind exchange the like-kind property to be received must be identified within 45 days and acquired within 180 days from the initial exchange.

Correct Answer
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Which of the following is true regarding depreciation recapture?

Correct Answer
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B

Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

Correct Answer
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Residential real property is not like-kind with non-residential real property.

Correct Answer
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Correct Answer
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§1239 recharacterizes 50 percent of the gain on sales to a related party as ordinary income.100 percent of the gain is recharacterized as ordinary income.

Correct Answer
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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?

Correct Answer
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Exam 10: Property Dispositions

Which of the following may qualify as an installment sale?

Correct AnswerverifiedShow Answer

Only accelerated depreciation is recaptured for §1245 assets.

Correct AnswerverifiedShow Answer

Which of the following is not true regarding installment sales?

Correct AnswerverifiedShow Answer

Unrecaptured §1250 gains apply only to individuals.

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

Which of the following is not used in the calculation of the amount realized:

Correct AnswerverifiedShow Answer

§1231 assets include all assets used in a trade or business.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA

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.

Correct AnswerverifiedShow Answer

The sale of computer equipment used in a trade or business for 9 months results in the following type of gain or loss?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedYes,the exchange of property qualifies as a like-kind exchange.

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

Correct AnswerverifiedShow Answer

In a deferred like-kind exchange the like-kind property to be received must be identified within 45 days and acquired within 180 days from the initial exchange.

Correct AnswerverifiedShow Answer

Which of the following is true regarding depreciation recapture?

Correct AnswerverifiedB

Unrecaptured §1250 gain is taxed at a maximum rate of 25 percent.

Correct AnswerverifiedShow Answer

Residential real property is not like-kind with non-residential real property.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

§1239 recharacterizes 50 percent of the gain on sales to a related party as ordinary income.100 percent of the gain is recharacterized as ordinary income.

Correct AnswerverifiedShow Answer

Leesburg sold a machine for $2,200 on November 10th 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?

Correct AnswerverifiedShow Answer

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A

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Yes,the exchange of property qualifies as a like-kind exchange.

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B

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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?

Correct Answer
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