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Exam 14: Property Transactions, capital Gains and Losses, sec1231, and Recapture Provisions

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Question 41

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Copper Corporation sold machinery for $47,000 on December 31,2017.The machinery had been purchased on January 2,2014,for $60,000 and had an adjusted basis of $41,000 at the date of the sale.For 2017,what should Copper Corporation report?

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

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Question 42

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Involuntary conversion gains may be deferred if the proceeds of the involuntary conversion are reinvested.

A) True
B) False

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Question 43

Multiple Choice

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

Section 1231 property includes nonpersonal use property where casualty gains exceed casualty losses for the taxable year.

An accrual basis taxpayer accepts a note receivable from a retail customer with a weak credit rating.The taxpayer immediately sells the note to a bank for less than the note's stated value.The taxpayer has an ordinary loss.

Orange Company had machinery destroyed by a fire on December 23,2017.The machinery had been acquired on April 1,2015,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:

On June 10,2017,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?

Cason is filing as single and has 2017 taxable income of $36,000 which includes $34,000 of 0%/15%/20% net long-term capital gain.What is his tax on taxable income using the alternative tax method? Note: Use the tax rate schedule rather than the tax table.

Stella purchased vacant land in 2010 that she subdivided for resale as lots.All 10 of the lots were sold during 2017.The lots had a tax basis of $12,000 each and sold for $35,000 each.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?

Which of the following is correct concerning short sales of stock?

Theresa and Oliver,married filing jointly,and both over 65 years of age,have no dependents.Their 2017 income tax facts are: What is their taxable income for 2017?

A business taxpayer sells inventory for $80,000.The adjusted basis of the property is $58,000 at the time of the sale and the inventory had been held more than one year.The taxpayer has:

The maximum § 1245 depreciation recapture generally equals the accumulated depreciation.

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

An individual taxpayer has the gains and losses shown below.There are $3,000 of § 1231 lookback losses.What is the net long-term capital gain?

Samuel,head of household with two dependents,has 2017 wages of $26,000,paid alimony of $3,000,has taxable interest income of $2,000,and a $12,000 0%/15%/20% net long-term capital gain.Samuel uses the standard deduction and is age 38.What is his 2017 taxable income and the tax on the taxable income?

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?

Residential real estate was purchased in 2014 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 10,2017,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?

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

The holding period of property given up in a like-kind exchange includes the holding period of the asset received if the property that has been exchanged is a capital asset.