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Exam 14: Property Transactions: Capital Gains and Losses

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Question 31

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Vivien owned an office building that had been held more than one year when it was sold for $67,000.The real estate had an adjusted basis of $5,000 for the land and $33,000 for the building.Straight-line depreciation of $62,000 had been taken on the building.What is the amount and initial character of the gain or loss from disposition of the real estate? Is any of the gain unrecaptured § 1250 (25%)gain?

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The real estate was used in business and...

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Question 32

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A security that is a capital asset becomes worthless.The loss is deemed to have occurred on the day that the security was declared worthless.

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B) False

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Question 33

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Cyan Company signs a 13-year franchise agreement with Fast Taco.Fast Taco retained significant powers,rights,and a continuing interest.Cyan Company (the franchisee) makes noncontingent payments of $17,000 per year for the first five years of the franchise.Cyan Company also pays a contingent fee of 1% of gross sales every month.Which of the following statements is correct?

Seamus had $16,000 of net short-term capital loss in 2010.In 2011,Seamus has $15,000 of long-term capital loss and $26,000 of long-term capital gain.Which of the following statements is correct?

Which of the following is correct?

In 2011,Satesh has $4,000 short-term capital loss,$14,000 0%/15% long-term capital gain,and $7,000 qualified dividend income.Satesh is single and has other taxable income of $15,000.Which of the following statements is correct?

What characteristics must the seller of a patent have in order to be classified as a holder?

Sam operates a retail hardware store as a sole proprietorship.Which of the following items are capital assets in the hands of Sam?

Describe the circumstances in which the maximum unrecaptured § 1250 gain (25% gain)does not become part of the Schedule D netting process for an individual taxpayer?

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.

Ronald has the following capital gains and losses for 2011: $8,000 STCL,$6,000 28% gain,$4,000 25% gain,and $16,000 0%/15% gain.Which of the following is correct?

Blue Company acquires a used machine for $45,000 and uses it in Blue's manufacturing operations.A few months after Blue places the machine in service,it discovers that the machine is not suitable for Blue's business.Blue had fully expensed the machine in the year of acquisition using § 179.Blue sells the machine for $5,000 in the tax year after it was acquired,but held the machine only for a total of 10 months.What was the tax status of the machine when it was disposed of and the amount of the gain or loss?

Orange,Inc.,has a 2011 net § 1231 gain of $45,000 and had a $72,000 net § 1231 loss in 2010.For 2011,Orange's net § 1231 gain is treated as:

Jonah owned a rental building (but not the land)that was destroyed by a fire.The building was insured and Jonah has a $66,000 gain because his insurance recovery exceeded his adjusted basis for the building.Jonah does not intend to replace the building.Jonah had taken $45,000 of depreciation on the building,has no § 1231 lookback loss,has no other § 1231 transactions for the year,and has no Schedule D transactions for the year.What is the final nature of Jonah's gain for the year and what tax rate(s)apply to the gain?

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?

A business machine purchased April 10,2009,for $102,000 was fully depreciated in 2009 using § 179 immediate expensing.On August 15,2011,the machine was sold for $67,000.What is the amount and nature of the gain or loss from disposition of the machine?

A business taxpayer trades in a used fully depreciated machine on a replacement machine.Because the machine traded in was worth less than the replacement machine,the taxpayer paid cash in the transaction.Assume the used machine originally cost $100,000,was worth $12,000 when it was traded in,and the replacement machine was worth $20,000.Consequently,the taxpayer paid $12,000 cash in the transaction.Is there recognized gain in this transaction and,if so,what type of gain?

Property sold to a related party purchaser that is depreciable by the purchaser may cause the seller to have ordinary gain.

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

Section 1231 property generally does not include notes receivable arising in the ordinary course of business.