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Exam 8: Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

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Question 41

True/False

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If a capital asset is sold at a gain, the holding period is important.

A) True
B) False

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Question 42

Multiple Choice

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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:

A) $30,000.
B) $40,000.
C) $17,000.
D) $15,000.
E) None of these.

F) A) and E)
G) None of the above

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Question 43

Multiple Choice

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Business equipment is purchased on March 10, 2018, used in the business until September 29, 2018, and sold at a $23,000 loss on October 10, 2018.The equipment was not suitable for the work the business had purchased it for.The loss on the disposition should have been reported in the 2018 Form 4797, Part:

An individual taxpayer with 2019 net short-term capital loss of $5,000 generally can deduct up to $3,000 for AGI and carry the balance forward to 2020.

The possible holding periods for capital assets include:

Nonrecaptured § 1231 losses from the six prior tax years may cause current-year net § 1231 gain to be treated as ordinary income.

In 2018, Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction.In 2019, 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 for 2019?

On June 10, 2018, 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 following statements is correct?

If the holder of an option fails to exercise the option, the lapse of the option is considered a sale or exchange on the option expiration date.

A retail building used in the business of a sole proprietor is sold on March 10, 2019, for $342,000.The building was acquired in 2009 for $400,000 and straight-line depreciation of $104,000 had been taken on it.What is the maximum unrecaptured § 1250 gain from the disposition of this building?

Stella purchased vacant land in 2012 that she subdivided for resale as lots.All 10 of the lots were sold during 2019. Each lot had a tax basis of $12,000 and sold for $35,000.Stella made no substantial improvements to the lots.She acted as her own real estate broker; so there were no sales expenses for selling the lots.Which of the following statements is correct?

Short-term capital losses are netted against long-term capital gains, and long-term capital losses are netted against short-term capital gains.

Once § 1231 gains are netted against § 1231 losses, if the gains exceed the losses, the net gain is offset by the lookback nonrecaptured § 1231 losses.

Orange Company had machinery completely destroyed by a fire on December 23, 2019.The machinery had been acquired on April 1, 2017, for $49,000 and its adjusted basis was $14,200.Orange received $30,000 of insurance proceeds for the machinery 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:

Which of the following comparisons is correct?

A franchisor licenses its mode of business operation to a franchisee.

Martha is unmarried with one dependent and files as head of household.She had 2019 taxable income of $45,000, which included $16,000 of 0%/15%/20% net long-term capital gain.What is her tax on taxable income using the alternative tax on net long-term capital gain method?

In 2019, an individual taxpayer has $863,000 of taxable income that includes $48,000 of 0%/15%/20% long-term capital gain.Which of the following statements is correct?

Robin Corporation has ordinary income from operations of $30,000, net long-term capital gain of $10,000, and net short-term capital loss of $15,000.What is the taxable income for 2019?

Theresa and Oliver, both over 65 years of age and married filing jointly, have no dependents.Their 2019 income tax facts are: What is their taxable income for 2018?