Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Accepted Answer

A)   $7,500 §1231 loss.
B)   $5,000 §1231 loss.
C)   $7,500 ordinary gain.
D)   $7,500 capital gain.
E)   None of these.F) C) and D)
G) B) and C)

Question 3

Silver sold machinery to Gold, a related entity, which it used in its business for $55,000. Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense. What is the amount and character of Silver's gain?

Accepted Answer

$20,000 of...

Question 4

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Accepted Answer

A)   §1239.
B)   §1244.
C)   §1245.
D)   §291.
E)   None of these.F) C) and D)
G) A) and E)

Question 5

Brad sold a rental house that he owned for $250,000. Brad bought the rental house five years ago for $225,000 and has claimed $50,000 of depreciation expense. What is the amount and character of Brad's gain or loss?

Accepted Answer

A)   $25,000 ordinary and $50,000 unrecaptured §1250 gain.
B)   $25,000 §1231 gain and $50,000 unrecaptured §1250 gain.
C)   $75,000 ordinary gain.
D)   $75,000 capital gain.
E)   None of these.F) A) and C)
G) A) and E)

Question 6

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

Question 7

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 8

Sandra sold some equipment for $10,000 in cash, $1,000 of office products, the buyer assumption of her $1,500 loan, and incurred selling expenses of $500. What is the Sandra's amount realized in the transaction?

Accepted Answer

The answer of Sandra sold some equipment for $10,000 in...

Question 9

Which of the following is not true regarding §1239?

Accepted Answer

A)   It only applies to related taxpayers.
B)   It only applies to gains on sales of depreciable property.
C)   It only applies to gains on sales of non-residential real property.
D)   It does not apply to losses.
E)   None of these.F) A) and B)
G) A) and C)

Question 10

Each of the following is true except for:

Accepted Answer

A)   A direct involuntary conversion occurs when property taken under imminent domain is replaced with other property.
B)   Qualified replacement property rules are more restrictive than the like-kind property rules.
C)   An indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used to purchase qualified replacement property.
D)   Losses realized in involuntary conversions are deferred.
E)   All of these are true.F) A) and B)
G) A) and C)

Question 11

Odintz traded machinery for machinery. Odintz originally purchased its machine for $150,000 and the adjusted basis was $90,000 at the time of the exchange. The machinery received was purchased for $200,000, had an adjusted basis of $155,000 at the time of the exchange, and was subject to a mortgage of $50,000 that was paid off before the transfer. What is Odintz's adjusted basis in the new machinery after the exchange?

Accepted Answer

The answer of Odintz traded machinery for machinery. Odintz originally...

Question 12

Brandon, an individual, began business four years ago and has sold §1231 assets with $5,000 of losses within the last 5 years. 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 Land 40,000020,000 Building 90,00020,000(5,000) \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 { Land } & 40,000 & 0 & 20,000 \\hline 	ext { Building } & 90,000 & 20,000 & ( 5,000 )  \\hline\end{array} Asset  Machinery  Land  Building ​ Original Cost $30,00040,00090,000​ Accumulated  Depreciation ​$7,000020,000​ Gain/Loss $10,00020,000(5,000) ​​  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)   $25,000 ordinary income, $8,750 tax liability.
B)   $25,000 §1231 gain and $3,750 tax liability.
C)   $13,000 §1231 gain, $12,000 ordinary income, and $6,150 tax liability.
D)   $12,000 §1231 gain, $13,000 ordinary income, and $6,350 tax liability.
E)   None of these. F) B) and E)
G) C) and D)

Question 13

Which of the following is not a §1245 asset if held for more than one year?

Accepted Answer

A)   Machinery.
B)   Automobile.
C)   Building purchased in 1985 for which accelerated depreciation was elected.
D)   Land.
E)   None of these.F) None of the above
G) B) and C)

Question 14

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) C) and D)
G) A) and C)

Question 15

What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?

Accepted Answer

A)   To facilitate finding replacement property.
B)   To help acquire the replacement property.
C)   To prevent the seller from receiving cash (boot)  that will taint the transaction.
D)   To certify the taxpayer's Form 8824.
E)   All of these.F) C) and D)
G) B) and E)

Question 16

An asset's tax adjusted basis is usually greater than its book adjusted basis.

Accepted Answer

A) True 
 B)False

Question 17

Explain whether the sale of a machine used in a trade or business that is sold at a loss generates an ordinary or capital loss?

Accepted Answer

The sale of a machin...

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Sumner sold equipment that it uses in its business for $30,000. Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 of depreciation expense. Assuming that this is Sumner's only disposition during the year, what is the amount and character of Sumner's gain or loss?

Accepted Answer

A)   $10,000 §1231 loss.
B)   $10,000 §1245 loss.
C)   $50,000 ordinary loss.
D)   $10,000 capital loss.
E)   None of these.F) A) and B)
G) A) and E)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 10: Property Dispositions

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

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

Correct Answer
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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 not a §1245 asset if held for more than one year?

Correct Answer
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Silver sold machinery to Gold, a related entity, which it used in its business for $55,000. Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense. What is the amount and character of Silver's gain?

Correct Answer
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$20,000 of...
View Answer

Brad sold a rental house that he owned for $250,000. Brad bought the rental house five years ago for $225,000 and has claimed $50,000 of depreciation expense. What is the amount and character of Brad's gain or loss?

Correct Answer
verified

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

Correct Answer
verified

What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?

Correct Answer
verified

Sumner sold equipment that it uses in its business for $30,000. Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 of depreciation expense. Assuming that this is Sumner's only disposition during the year, what is the amount and character of Sumner's gain or loss?

Correct Answer
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Which of the following is not true regarding §1239?

Correct Answer
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Each of the following is true except for:

Correct Answer
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Sandra sold some equipment for $10,000 in cash, $1,000 of office products, the buyer assumption of her $1,500 loan, and incurred selling expenses of $500. What is the Sandra's amount realized in the transaction?

Correct Answer
verified

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

Correct Answer
verified

An asset's tax adjusted basis is usually greater than its book adjusted basis.

Correct Answer
verified

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Correct Answer
verified

Explain whether the sale of a machine used in a trade or business that is sold at a loss generates an ordinary or capital loss?

Correct Answer
verified
The sale of a machin...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified

Exam 10: Property Dispositions

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 not a §1245 asset if held for more than one year?

Correct AnswerverifiedShow Answer

Silver sold machinery to Gold, a related entity, which it used in its business for $55,000. Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense. What is the amount and character of Silver's gain?

Correct Answerverified$20,000 of...View AnswerShow Answer

Brad sold a rental house that he owned for $250,000. Brad bought the rental house five years ago for $225,000 and has claimed $50,000 of depreciation expense. What is the amount and character of Brad's gain or loss?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?

Correct AnswerverifiedShow Answer

Sumner sold equipment that it uses in its business for $30,000. Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 of depreciation expense. Assuming that this is Sumner's only disposition during the year, what is the amount and character of Sumner's gain or loss?

Correct AnswerverifiedShow Answer

Which of the following is not true regarding §1239?

Correct AnswerverifiedShow Answer

Each of the following is true except for:

Correct AnswerverifiedShow Answer

Sandra sold some equipment for $10,000 in cash, $1,000 of office products, the buyer assumption of her $1,500 loan, and incurred selling expenses of $500. What is the Sandra's amount realized in the transaction?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An asset's tax adjusted basis is usually greater than its book adjusted basis.

Correct AnswerverifiedShow Answer

Butte sold a machine to a machine dealer for $50,000. Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine. What is the amount and character of Butte's gain or loss?

Correct AnswerverifiedShow Answer

Explain whether the sale of a machine used in a trade or business that is sold at a loss generates an ordinary or capital loss?

Correct AnswerverifiedThe sale of a machin...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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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$20,000 of...
View Answer

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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Correct Answer
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Correct Answer
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The sale of a machin...
View Answer

Correct Answer
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Correct Answer
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