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

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Question 31

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Betty, a single taxpayer with no dependents, has the gains and losses shown below. Before considering these transactions, Betty has $45,000 of other taxable income. What is the treatment of the gains and losses and what is Betty's taxable income? $\begin{array} { l r } \S 1245 \text { gain \#1 } & \$ 8,000 \\\S 1245 \text { gain \#2 } & 5,000 \\\text { Busines5 equipment long-term casualty loss } & ( 8,000 ) \\\text { Busines5 real property long-term casualty gain } & 12,000 \\\S 1231 \text { gain } & 13,000 \\\S 1231 \text { lookback loss } & ( 2,000 )\end{array}$

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The § 1245 recapture gains are combined ...

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Question 32

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A business machine purchased April 10, 2013, for $62,000 was fully depreciated in 2013 using § 179 immediate expensing. On August 15, 2014, the sole proprietor who owned the machine gave it to his son. On that date, the machine's fair market value was $57,000. The son did not use the machine in business or hold it as inventory and the machine was sold on November 22, 2014, for $53,000.What is the amount and nature of the gain or loss from disposition of the machine? Where is it reported in the son's tax return?

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A gift does not extinguish potential § 1...

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Question 33

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Which of the following assets held by a manufacturing business is a § 1231 asset?

A worthless security had a holding period of 6 months when it became worthless on December 10, 2014. The investor who had owned the security had a basis of $20,000 for it. Which of the following statements is correct?

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

Carol had the following transactions during 2014: a painting held for two years and sold at a gain of $85,000; 100 shares of Gray stock held six months and sold for a loss of $6,000; 50 shares of Yellow stock held 18 months and sold for a gain of $36,000. Carol also had $264,000 of taxable income from other sources than these property transactions. What is Carol's net capital gain or loss and what is her taxable income?

Tom has owned 40 shares of Orange Corporation stock for five years. He sells the stock short for a total of $1,100. One month later, he closes the short sale by purchasing and delivering 40 shares of Orange Corporation stock for a total of $600. Tom has a $500 short-term capital gain.

In 2013, Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction. In 2014, Jenny has a $18,000 0%/15%/20% long-term capital gain and no other capital gain or loss transactions. Which of the statements below is correct?

A business taxpayer sells depreciable business property with an adjusted basis of $40,000 for $32,000. The taxpayer held the property for more than a year. The taxpayer has an $8,000 capital loss.

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?

The tax law requires that capital gains and losses be separated from other types of gains and losses because an alternative tax calculation may be used when taxable income includes net long-term capital gain.

If there is a net § 1231 loss, it is treated as an ordinary loss.

All collectibles short-term gain is subject to a potential alternative tax rate of 28%.

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

Rental use depreciable machinery held more than 12 months is an example of a § 1231 asset.

On June 10, 2014, Ebon, Inc. acquired an office building as a result of a like-kind exchange. Ebon had given up a factory building that it had owned for 26 months as part of the like-kind exchange. Which of the statements below is correct?

A barn held more than one year and used in a business is destroyed in a tornado. The barn originally cost $356,000 and was fully depreciated using straight-line depreciation. The barn was insured for its $543,000 replacement cost minus a deductible of $1,000. Which of the statements below is correct concerning these facts?

To compute the holding period, start counting on the day after the property was acquired and include the day of disposition.

Blue Company sold machinery for $45,000 on December 23, 2014. The machinery had been acquired on April 1, 2012, for $69,000 and its adjusted basis was $34,200. The § 1231 gain, § 1245 recapture gain, and § 1231 loss from this transaction are:

Residential real estate was purchased in 2011 for $345,000, held as rental property, and depreciated straight-line. Assume the land cost was $45,000 and the building cost was $300,000. Depreciation totaled $34,089. The building and land were sold on June 10, 2014, for $683,000 total. What is the tax status of the property, the nature of the gain from the disposition, and is any of it § 1250 depreciation recapture gain or unrecaptured § 1250 gain?