Question 1

Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?

Accepted Answer

A)  Depreciable office furniture held more than one year and sold for more than its original cost.
B)  Amortizable goodwill held more than one year and disposed of for less than its adjusted basis.
C)  Land held more than one year and sold for more than was paid for it.
D)  A note receivable held more than one year and sold for less than was paid for it.
E)  None of the above.F) B) and E)
G) C) and E)

Question 2

Lynne owns depreciable residential rental real estate which has accumulated depreciation (all from straight-line)  of $65,000.If Lynne sold the property,she would have a $53,000 gain.The initial characterization of the gain would be:

Accepted Answer

A)  Section 1245 gain.
B)  Section 1231 gain.
C)  Section 1250 gain.
D)  Section 1239 gain.
E)  None of the above.F) A) and E)
G) None of the above

Question 3

Section 1239 (relating to the sale of certain property between related taxpayers)  does not apply unless the property:

Accepted Answer

A)  Was depreciated by the transferor.
B)  Is depreciable in the hands of the transferee.
C)  Is a capital asset.
D)  Is real property.
E)  None of the above.F) A) and D)
G) B) and D)

Question 4

Orange Company had machinery destroyed by a fire on December 23,2015.The machinery had been acquired on April 1,2013,for $49,000 and its adjusted basis was $14,200.The machinery was completely destroyed and Orange received $30,000 of insurance proceeds for the machine and did not replace it.This was Orange's only casualty or theft event for the year.As a result of this event,Orange has:

Accepted Answer

A)  $4,200 ordinary loss.
B)  $15,800 § 1245 recapture gain.
C)  $14,200 § 1245 recapture gain.
D)  $30,000 § 1231 gain.
E)  None of the above.F) D) and E)
G) A) and C)

Question 5

Vertical,Inc. ,has a 2015 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2014.For 2015,Vertical's net § 1231 gain is treated as:

Accepted Answer

A)  $45,000 long-term capital gain and $22,000 ordinary loss.
B)  $67,000 ordinary gain.
C)  $45,000 long-term capital gain and $22,000 ordinary gain.
D)  $67,000 capital gain.
E)  None of the above.F) C) and D)
G) A) and B)

Question 6

Copper Corporation sold machinery for $47,000 on December 31,2015.The machinery had been purchased on January 2,2012,for $60,000 and had an adjusted basis of $41,000 at the date of the sale.For 2015,what should Copper Corporation report?

Accepted Answer

A)  Ordinary income of $6,000.
B)  A § 1231 gain of $3,000 and $3,000 of ordinary income.
C)  A § 1231 gain of $6,000.
D)  A § 1231 gain of $6,000 and $3,000 of ordinary income.
E)  None of the above.F) D) and E)
G) A) and E)

Question 7

An individual had the following gains and losses during 2015 on property held for the long-term holding period: sale of Orange common stock ($8,000 gain) ;sale of real property used in the taxpayer's business ($1,800 loss) ;destruction of real property used in the taxpayer's business by fire ($1,000 loss) .Which of the following statements is correct?

Accepted Answer

A)  The fire loss would reduce the real property sale loss.
B)  The fire loss would reduce the stock sale gain.
C)  The sale of real property loss would be netted against the stock sale gain.
D)  The sale of real property is a § 1231 loss.
E)  None of the above.F) A) and C)
G) B) and D)

Question 8

Assume a building is subject to § 1250 depreciation recapture because § 168(k)  was used to depreciate it.The building is destroyed in a hurricane and this is the taxpayer's only casualty or theft for the year.In which of the following situations could there be a § 1250 depreciation recapture gain?

Accepted Answer

A)  There is a loss because the insurance recovery is less than the adjusted basis.
B)  There is a gain because the insurance recovery exceeds the adjusted basis.
C)  Because of the length of time the building has been held,there is no remaining additional depreciation.
D)  There is no insurance recovery and the adjusted basis of the building is greater than zero.
E)  None of the above.F) D) and E)
G) None of the above

Question 9

A retail building used in the business of a sole proprietor is sold on March 10,2015,for $342,000.The building was acquired in 2005 for $400,000 and straight-line depreciation of $104,000 had been taken on the building.What is the maximum unrecaptured § 1250 gain from the disposition of this building?

Accepted Answer

A)  $400,000
B)  $322,000
C)  $104,000
D)  $26,000
E)  None of the aboveF) A) and D)
G) A) and C)

Question 10

Verway,Inc. ,has a 2015 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2014.For 2015,Verway's net § 1231 gain is treated as:

Accepted Answer

A)  $55,000 ordinary loss.
B)  $55,000 ordinary gain.
C)  $55,000 capital loss.
D)  $55,000 capital gain.
E)  None of the above.F) A) and B)
G) A) and D)

Question 11

The following assets in Jack's business were sold in 2015: Asset Holding Period Gain/(Loss)  Office Equipment 6 years $1,100 Automobile 8 months ($ 800)  ABC Stock (capital asset)  2 years $1,400 ​ The office equipment had a zero adjusted basis and was purchased for $8,000.The automobile was purchased for $2,000 and sold for $1,200.The ABC stock was purchased for $1,800 and sold for $3,200.In 2015 (the year of sale) ,Jack should report what amount of net capital gain and net ordinary income?

Accepted Answer

A)  $1,700 LTCG.
B)  $600 LTCG and $300 ordinary gain.
C)  $1,400 LTCG and $300 ordinary gain.
D)  $2,500 LTCG and $800 ordinary loss.
E)  None of the above.F) All of the above
G) C) and D)

Question 12

Spencer has an investment in two parcels of vacant land.Parcel 1 is a capital asset and parcel 2 is a § 1231 asset.Spencer already has short-term capital loss for the year he would like to offset with capital gain.Spencer has § 1231 lookback loss that exceeds the gain from the disposition of either land parcel.Spencer only wants to sell one land parcel and each of them would yield the same amount of gain.The gain that would be recognized exceeds the short-term capital loss Spencer already has.Which of the statements below is correct?

Accepted Answer

A)  Spencer will have a net capital loss no matter which land parcel he sells.
B)  Spencer will have a net capital loss if he sells parcel 2.
C)  Spencer will have a net capital loss if he sells parcel 1.
D)  Spencer will have a net capital gain if he sells either parcel 1 or parcel 2.
E)  None of the above.F) B) and E)
G) C) and D)

Question 13

Blue Company sold machinery for $45,000 on December 23,2015.The machinery had been acquired on April 1,2013,for $69,000 and its adjusted basis was $34,200.The § 1231 gain,§ 1245 recapture gain,and § 1231 loss from this transaction are:

Accepted Answer

A)  $0 § 1231 gain,$10,800 § 1245 recapture gain,$0 § 1231 loss.
B)  $0 § 1231 gain,$0 § 1245 recapture gain,$14,800 § 1231 loss.
C)  $0 § 1231 gain,$34,200 § 1245 recapture gain,$0 § 1231 loss.
D)  $0 § 1231 gain,$10,800 § 1245 recapture gain,$34,200 § 1231 loss.
E)  None of the above.F) None of the above
G) D) and E)

Question 14

Which of the following statements is correct?

Accepted Answer

A)  When depreciable property is gifted to another individual taxpayer,the depreciation recapture potential is extinguished.
B)  When depreciable property is inherited by a taxpayer,the depreciation recapture potential is extinguished.
C)  When corporate depreciable property is distributed as a dividend,the depreciation recapture potential is generally not recognized.
D)  When depreciable property is contributed to charity,the depreciation recapture potential has no effect on the amount of the charitable contribution deduction.
E)  All of the above are correct.F) A) and C)
G) All of the above

Question 15

An individual has a $40,000 § 1245 gain,a $35,000 § 1231 gain,a $33,000 § 1231 loss,a $3,000 § 1231 lookback loss,and a $15,000 long-term capital gain.The net long-term capital gain is:

Accepted Answer

A)  $30,000.
B)  $40,000.
C)  $17,000.
D)  $15,000.
E)  None of the above.F) A) and C)
G) B) and E)

Question 16

Which of the following is correct?

Accepted Answer

A)  Improperly classifying a § 1231 loss as a capital loss might affect adjusted gross income.
B)  Improperly classifying a capital loss as a § 1231 loss might affect adjusted gross income.
C)  Misclassifying a § 1231 gain as a short-term capital gain might affect adjusted gross income.
D)  Misclassifying a short-term capital gain as a § 1231 gain might affect adjusted gross income.
E)  All of the above.F) C) and D)
G) D) and E)

Question 17

Which of the following would extinguish the § 1245 recapture potential?

Accepted Answer

A)  An exchange of depreciable business equipment for like-kind business equipment with gain realized,but not recognized.
B)  A nontaxable incorporation under § 351.
C)  A nontaxable contribution to a partnership under § 721.
D)  A nontaxable reorganization.
E)  None of the above.F) D) and E)
G) B) and D)

Question 18

An individual has the following recognized gains and losses from disposition of § 1231 assets (all the assets were vacant land) : $15,000 gain,$10,000 loss,$25,000 gain,and $2,000 loss.The individual has a $5,500 § 1231 lookback loss.The individual also has a $16,000 net short-term capital loss from the disposition of stock.Which of the following statements is correct?

Accepted Answer

A)  The taxpayer has $5,500 ordinary gain and $6,500 net long-term capital gain.
B)  The taxpayer has $12,000 net long-term capital gain.
C)  The taxpayer has $28,000 ordinary gain and $16,000 net short-term capital loss.
D)  The taxpayer has $5,500 ordinary loss and $6,500 net long-term capital gain.
E)  None of the above.F) B) and E)
G) All of the above

Question 19

Red Company had an involuntary conversion on December 23,2015.The machinery had been acquired on April 1,2013,for $49,000 and its adjusted basis was $14,200.The machinery was completely destroyed by fire and Red received $10,000 of insurance proceeds for the machine and did not replace it.This was Red's only casualty or theft event for the year.As a result of this event,Red initially has:

Accepted Answer

A)  $10,000 § 1231 loss.
B)  $10,000 § 1245 recapture gain.
C)  $4,200 casualty loss.
D)  $4,200 § 1231 loss.
E)  None of the above.F) A) and B)
G) A) and D)

Question 20

Which of the following events could result in § 1250 depreciation recapture?

Accepted Answer

A)  Sale at a loss of a depreciable business building held more than one year.
B)  Sale at a gain of a business building held more than a year on which straight-line depreciation was taken.
C)  Sale at a loss of a depreciable business building held for 9 months.
D)  Sale at a gain of depreciable equipment held more than a year on which straight-line depreciation was taken.
E)  None of the above.F) A) and B)
G) B) and C)

Exam 14: Property Transactions: Capital Gains and Losses, section 1231 and Recapture Provisions

Correct Answer
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Lynne owns depreciable residential rental real estate which has accumulated depreciation (all from straight-line) of $65,000.If Lynne sold the property,she would have a $53,000 gain.The initial characterization of the gain would be:

Correct Answer
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Correct Answer
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Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?

Correct Answer
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Verway,Inc. ,has a 2015 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2014.For 2015,Verway's net § 1231 gain is treated as:

Correct Answer
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Section 1239 (relating to the sale of certain property between related taxpayers) does not apply unless the property:

Correct Answer
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Blue Company sold machinery for $45,000 on December 23,2015.The machinery had been acquired on April 1,2013,for $69,000 and its adjusted basis was $34,200.The § 1231 gain,§ 1245 recapture gain,and § 1231 loss from this transaction are:

Correct Answer
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Copper Corporation sold machinery for $47,000 on December 31,2015.The machinery had been purchased on January 2,2012,for $60,000 and had an adjusted basis of $41,000 at the date of the sale.For 2015,what should Copper Corporation report?

Correct Answer
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Correct Answer
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An individual has a $40,000 § 1245 gain,a $35,000 § 1231 gain,a $33,000 § 1231 loss,a $3,000 § 1231 lookback loss,and a $15,000 long-term capital gain.The net long-term capital gain is:

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Which of the following is correct?

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Which of the following would extinguish the § 1245 recapture potential?

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Which of the following statements is correct?

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Which of the following events could result in § 1250 depreciation recapture?

Correct Answer
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Vertical,Inc. ,has a 2015 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2014.For 2015,Vertical's net § 1231 gain is treated as:

Correct Answer
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Exam 14: Property Transactions: Capital Gains and Losses, section 1231 and Recapture Provisions

Correct AnswerverifiedShow Answer

Lynne owns depreciable residential rental real estate which has accumulated depreciation (all from straight-line) of $65,000.If Lynne sold the property,she would have a $53,000 gain.The initial characterization of the gain would be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?

Correct AnswerverifiedShow Answer

Verway,Inc. ,has a 2015 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2014.For 2015,Verway's net § 1231 gain is treated as:

Correct AnswerverifiedShow Answer

Section 1239 (relating to the sale of certain property between related taxpayers) does not apply unless the property:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Blue Company sold machinery for $45,000 on December 23,2015.The machinery had been acquired on April 1,2013,for $69,000 and its adjusted basis was $34,200.The § 1231 gain,§ 1245 recapture gain,and § 1231 loss from this transaction are:

Correct AnswerverifiedShow Answer

Copper Corporation sold machinery for $47,000 on December 31,2015.The machinery had been purchased on January 2,2012,for $60,000 and had an adjusted basis of $41,000 at the date of the sale.For 2015,what should Copper Corporation report?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An individual has a $40,000 § 1245 gain,a $35,000 § 1231 gain,a $33,000 § 1231 loss,a $3,000 § 1231 lookback loss,and a $15,000 long-term capital gain.The net long-term capital gain is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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Which of the following is correct?

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Which of the following would extinguish the § 1245 recapture potential?

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Which of the following statements is correct?

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Which of the following events could result in § 1250 depreciation recapture?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Vertical,Inc. ,has a 2015 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2014.For 2015,Vertical's net § 1231 gain is treated as:

Correct AnswerverifiedShow Answer

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