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Exam 11: Property Dispositions

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Question 1

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Sarah sold 1,000 shares of stock to her brother, David, for $18,000 more than a year ago. Sarah had purchased the stock for $20,000 several years earlier. What is the amount and character of David's recognized gain or loss in the current year if he sells the stock for $15,000 and $25,000,respectively?

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$3,000 long-term capital loss if sold fo...

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Question 2

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Why does §1250 recapture generally no longer apply?

A) Because unrecaptured §1250 gains now apply to all taxpayers instead.
B) §1245 recapture trumps §1250 recapture.
C) The Tax Reform Act of 1986 changed the depreciation of real property to the straight-line method.
D) Congress repealed the code section.
E) None of the choices are correct.

F) None of the above
G) B) and C)

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Question 3

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

Generally, the amount realized is everything of value received in a sale less sellingexpenses.

Koch traded machine 1 for machine 2. Koch originally purchased machine 1 for $75,000 and machine 1's adjusted basis was $40,000 at the time of the exchange. Machine 2'sseller purchased it for $65,000 and machine 2's adjusted basis was $55,000 at the time of the exchange. What is Koch's adjusted basis in machine 2 after the exchange?

Suzanne, an individual, began business four years ago and has never sold a §1231 asset. Suzanne owned each of the assets for several years. In the current year, Suzanne sold the following business assets: Assuming Suzanne's marginal ordinary income tax rate is 35 percent, what is the character of the gains and losses and what affect do they have on Suzanne's tax liability?

Which of the following is not used in the calculation of the amount realized:

The sale of land held for investment results in the following type of gain or loss?

Leesburg sold a machine for $2,200 on November 10th of the current year. The machine was purchased for $2,600. Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale. What is Leesburg's gain or loss realized on the machine?

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?

Which one of the following is not true regarding a like-kind exchange?

Losses on sales between related parties are realized but not recognized.

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?

Sumner sold equipment that it uses in its business for $30,000. Sumner bought theequipment 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?

The sale of machinery for more than the original cost basis (before depreciation) , used in a trade or business, and held for more than one year results in the following types of gain or loss?

§1250 recaptures the excess of accelerated depreciation over straight line depreciation on real property placed in service between 1981 and 1986 as ordinary income.

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?

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?

Which of the following is true regarding depreciation recapture?

Pelosi Corporation sold a parcel of land valued at $300,000. Its basis in the land was$250,000. For the land, Pelosi received $150,000 in cash in the current year and a note providing Pelosi with $150,000 in the subsequent year. What is Pelosi's recognized gain in the current and subsequent year, respectively?