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Exam 11: Property Dispositions

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Question 41

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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?

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$3,000 realized and recognized gain.
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Question 42

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Alpha sold machinery, which it used in its business, to Beta, a related entity, for $40,000. Beta used the machinery in its business. Alpha bought the machinery a few years ago for $50,000 and has claimed $30,000 of depreciation expense. What is the amount and character of Alpha's gain?

A) $20,000 ordinary income under §1239.
B) $10,000 ordinary gain and $10,000 §1231 gain.
C) $20,000 ordinary gain.
D) $20,000 capital gain.
E) None of the choices are correct.

F) B) and C)
G) A) and B)

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Question 43

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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?

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

Sadie sold 10 shares of stock to her brother, George, for $500 sixteen months ago. Sadie had purchased the stock for $600 two years earlier. If George sells the stock for $700, what is the amount and character of his recognized gain or loss in the current year?

Sarah sold 1,000 shares of stock to her brother, David, for $18,000 more than a year ago. Sarah had purchased the stock for $20,000 several years earlier. What is the amount and character of David's recognized gain or loss in the current year if he sells the stock for $15,000 and $25,000, respectively?

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

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

Brandy sold a rental house that she owned for $150,000. Brandy bought the house four years ago for $140,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Brandy's gain or loss?

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

Which of the following does not ultimately result in a capital gain or loss?

§1250 recaptures the excess of accelerated depreciation over straight-line depreciation on real property placed in service before 1987 as ordinary income.

Which of the following is true regarding depreciation recapture?

Ashburn reported a $105,000 net §1231 gain in year 6. Assuming Ashburn reported $60,000 of nonrecaptured §1231 losses during years 1-5, what amount of Ashburn's net §1231 gain for year 6, if any, is treated as ordinary income?

Gainesville LLC sold the following business assets during the current year: (1) machinery, $20,000 cost basis, $4,000 depreciation, proceeds $22,000; (2) automobile, $15,000 cost basis, $12,000 depreciation, proceeds $7,000; (3) equipment, $15,000 cost basis, $10,000 depreciation, proceeds $4,000; (4) computer equipment, $35,000 cost basis, $16,000 depreciation, proceeds $15,000; (5) Winchester had unrecaptured §1231 losses of $5,000 in the prior 5 years. What is the amount and character of Winchester's gains and losses before the 1231 netting process?

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

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

Which one of the following is not a requirement of a deferred like-kind exchange?

Manassas purchased a computer several years ago for $2,200. On November 10^th of the current year, the computer was worth $800. If $1,000 of depreciation deductions had been taken, what is Manassas' tax adjusted basis for the computer?

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?