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Winchester LLC sold the following business assets during the current year: (1) automobile, $30,000 cost basis, $12,000 depreciation, proceeds $20,000; (2) machinery,$25,000 cost basis, $20,000 depreciation, proceeds $10,000; (3) furniture, $15,000 cost basis, $10,000 depreciation, proceeds $4,000; (4) computer equipment, $25,000 cost basis, $6,000 depreciation, proceeds $10,000; (5) Winchester had unrecaptured §1231 losses of $3,000 in the prior 5 years. What is the amount and character of Winchester's gains and losses before the 1231 netting process? Assume all assets were held for more than one year.


A) $7,000 ordinary gain, $10,000 §1231 loss.
B) $1,000 ordinary gain, $4,000 §1231 loss.
C) $7,000 ordinary loss, $4,000 §1231 gain.
D) $3,000 ordinary loss, $0 §1231 loss.
E) None of the choices are correct.

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

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Odintz traded machinery for machinery. Odintz originally purchased its machine for $150,000 and the adjusted basis was $90,000 at the time of the exchange. The machinery received was purchased for $200,000, had an adjusted basis of $155,000 at the time of the exchange, and was subject to a mortgage of $50,000 that was paid off before the transfer. What is Odintz's adjusted basis in the new machinery after the exchange?

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$90,000.
The exchange qualifie...

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Brandon, an individual, began business four years ago and has never sold a §1231 asset. Bra6n4d) on owned each of the assets for several years. In the current year, Brandon sold the followingbusiness assets: Brandon, an individual, began business four years ago and has never sold a §1231 asset. Bra6n4d) on owned each of the assets for several years. In the current year, Brandon sold the followingbusiness assets: Assuming Brandon's marginal ordinary income tax rate is 35 percent, what effect do the gains and losses have on Brandon's tax liability? A) $7,000 ordinary income, $1,000 §1231 loss and $2,100 tax liability. B) $7,000 §1231 gain and $1,050 tax liability. C) $6,000 ordinary income and $2,100 tax liability. D) $7,000 §1231 gain and $2,450 tax liability. E) None of the choices are correct. Assuming Brandon's marginal ordinary income tax rate is 35 percent, what effect do the gains and losses have on Brandon's tax liability?


A) $7,000 ordinary income, $1,000 §1231 loss and $2,100 tax liability.
B) $7,000 §1231 gain and $1,050 tax liability.
C) $6,000 ordinary income and $2,100 tax liability.
D) $7,000 §1231 gain and $2,450 tax liability.
E) None of the choices are correct.

F) None of the above
G) All of the above

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Which of the following gains does not result solely in an ordinary gain or loss?


A) Sale of equipment where the accumulated depreciation exceeds the gain realized.
B) Sale of equipment where the gain realized exceeds the accumulated depreciation.
C) Sale of inventory.
D) Sale of equipment held for less than a year.
E) None of the choices are correct.

F) B) and C)
G) A) and E)

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Which one of the following is not considered boot in a like-kind exchange?


A) Cash.
B) Mortgage given.
C) Other property.
D) Mortgage received.
E) All of the choices can be considered as boot.

F) A) and B)
G) A) and E)

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Unrecaptured §1250 gains apply only to individuals.

A) True
B) False

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When does unrecaptured §1250 gains apply?


A) When the taxpayer makes the election.
B) It applies only when real property purchased before 1986 is sold at a gain.
C) It applies when §1245 recapture trumps §1250 recapture.
D) It applies only when non-corporate taxpayers sell depreciable real property at a gain.
E) None of the choices are correct.

F) D) and E)
G) B) and D)

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Bull Run sold a computer for $1,200 on November 10th of the current year. The computer was purchased for $2,800. Bull Run had taken $1,000 of depreciation deductions. What is Bull Run's gain or loss realized on the computer?

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$600 loss realized.
The gain o...

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Brandon, an individual, began business four years ago and has sold §1231 assets with $5,00065o) f losses within the last 5 years. Brandon owned each of the assets for several years. In the currentyear, Brandon sold the following business assets: Brandon, an individual, began business four years ago and has sold §1231 assets with $5,00065o) f losses within the last 5 years. Brandon owned each of the assets for several years. In the currentyear, Brandon sold the following business assets: Assuming Brandon's marginal ordinary income tax rate is 35 percent, what effect do the gains and losses have on Brandon's tax liability? A) $25,000 §1231 gain and $3,750 tax liability. B) $12,000 §1231 gain, $13,000 ordinary income, and $6,350 tax liability. C) $25,000 ordinary income, $8,750 tax liability. D) $13,000 §1231 gain, $12,000 ordinary income, and $6,150 tax liability. E) None of the choices are correct. Assuming Brandon's marginal ordinary income tax rate is 35 percent, what effect do the gains and losses have on Brandon's tax liability?


A) $25,000 §1231 gain and $3,750 tax liability.
B) $12,000 §1231 gain, $13,000 ordinary income, and $6,350 tax liability.
C) $25,000 ordinary income, $8,750 tax liability.
D) $13,000 §1231 gain, $12,000 ordinary income, and $6,150 tax liability.
E) None of the choices are correct.

F) C) and D)
G) A) and B)

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Ordinary gains and losses are obtained on the sale of investments.

A) True
B) False

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Which of the following is not true regarding §1239?


A) It only applies to gains on sales of depreciable property.
B) It does not apply to losses.
C) It only applies to gains on sales of non-residential real property.
D) It only applies to related taxpayers.
E) None of the choices are correct.

F) C) and E)
G) A) and B)

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For corporations, §291 recaptures 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.

A) True
B) False

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The sale of machinery at a loss that was used in a trade or business and held for more than one year results in the following type of loss?


A) §1245.
B) Capital.
C) §1231.
D) §291.
E) None of the choices are correct.

F) A) and D)
G) C) and D)

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For an installment sale, the gross profit percentage is the gain recognized divided by the gain realized.

A) True
B) False

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For a like-kind exchange, realized gain is deferred if the exchange is solely for like-kind property.

A) True
B) False

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Jessie sold a piece of land held for investment for $250,000. Jessie bought the land two years ago for $195,000. What is the amount and character of Jessie's gain?

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Capital gain of $55,000.
The $...

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Which of the following is not a §1245 asset if held for more than one year?


A) Business cell phone.
B) Machinery.
C) Land.
D) Automobile.
E) None of the choices are correct.

F) A) and B)
G) A) and C)

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Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the amount and character of Foreaker's gain?


A) $9,500 §1245.
B) $9,500 §1231.
C) $9,500 §1250.
D) $9,500 §1221.
E) None of the choices are correct.

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

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A parcel of land is always a capital asset.

A) True
B) False

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Which of the following realized gains results in a recognized gain?


A) Iowa cropland exchanged for a Minnesota warehouse.
B) Involuntary conversion.
C) Sale to a related party.
D) Farm machinery traded for farm machinery.

E) All of the above
F) B) and C)

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Showing 41 - 60 of 110

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