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Exam 3: Property Dispositions

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Question 31

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

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

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Question 32

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§1231 assets include all assets used in a trade or business.

A) True
B) False

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Question 33

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All tax gains and losses are ultimately characterized as either ordinary or capital.

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?

The adjusted basis is the initial basis less cost recovery deductions.

Sadie sold 10 shares of stock to her brother, George, for $530 16 months ago. Sadie had purchased the stock for $660 two years earlier. If George sells the stock for $790, what are the amount and character of his recognized gain or loss in the current year?

Which of the following is not true regarding §1239?

Bozeman sold equipment that it uses in its business for $80,000. Bozeman bought the equipment two years ago for $75,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Bozeman's gain or loss?

Brandon, an individual, began business four years ago and has sold §1231 assets with $5,950 of losses within the last five years. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets: Assuming Brandon's marginal ordinary income tax rate is 32 percent, what effect do the gains and losses have on Brandon's tax liability? Use dividends and capital gains tax rates for reference.

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Unrecaptured §1250 gains apply only to individuals.

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 either $15,000 or $25,000?

Buzz Corporation sold an office building that it used in its business for $500,000. Buzz bought the building 10 years ago for $650,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Buzz's gain or loss?

Arlington LLC exchanged land used in its business for some new land. Arlington originally purchased the land it exchanged for $28,500. The new land had a fair market value of $35,250. Arlington also received $2,500 of office equipment in the transaction. What is Arlington'srecognized gain or loss on the exchange?

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

Why does §1250 recapture generally no longer apply?

Which of the following is not usually included in an asset's tax basis?

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

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