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Exam 17: Property Transactions: Section 1231 and Recapture Provisions

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Question 21

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If there is a net § 1231 loss,it is treated as a long-term capital loss.

A) True
B) False

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Question 22

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Section 1250 depreciation recapture will apply when accelerated depreciation was used on property used outside the United States and the property is sold at a gain.

A) True
B) False

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Question 23

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Which of the following real property could be subject to § 1250 depreciation recapture?

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

Section 1245 generally recaptures as ordinary income the portion of the gain that is equal to the sale price minus the original cost.

Which of the following events could result in § 1250 depreciation recapture?

A retail building used in the business of a sole proprietor is sold on March 10,2012,for $342,000.The building was acquired in 2002 for $400,000 and straight-line depreciation of $104,000 had been taken on the building.What is the maximum unrecaptured § 1250 gain from the disposition of this building?

Section 1245 depreciation recapture potential does not carryover from the deceased taxpayer to the beneficiary taxpayer.

Section 1231 applies to the sale or exchange of business properties,but not to personal use activity casualties.

The chart below describes the § 1231 assets sold by the Tan Company (a sole proprietorship)this year.Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year.Assume there is a § 1231 lookback loss of $14,000.

A business taxpayer sold all the depreciable assets of the business,calculated the gains and losses,and would like to know the final character of those gains and losses.The taxpayer had $353,000 of adjusted gross income before considering the gains and losses from sale of the business assets.The taxpayer had unrecaptured § 1231 lookback loss of $12,000.What is the treatment of the gains and losses summarized in the chart below after all possible netting and reclassification has been completed? What is the taxpayer's adjusted gross income? (Ignore the self-employment tax deduction.)

The maximum amount of the unrecaptured § 1250 gain (25% gain)is the depreciation taken on real property sold at a recognized gain.

A personal use property casualty loss is generally deductible only to the extent it exceeds 10% of AGI.

For § 1245 recapture to apply,accelerated depreciation must have been taken on the property.

Blue Company sold machinery for $45,000 on December 23,2012.The machinery had been acquired on April 1,2010,for $49,000 and its adjusted basis was $14,200.The § 1231 gain,§ 1245 recapture gain,and § 1231 loss from this transaction are:

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

A business taxpayer sold all the depreciable assets of the business,calculated the gains and losses,and would like to know the final character of those gains and losses.The taxpayer had $353,000 of adjusted gross income before considering the gains and losses from sale of the business assets.The taxpayer had unrecaptured § 1231 lookback loss of $22,000.What is the treatment of the gains and losses summarized in the chart below after all possible netting and reclassification has been completed? What is the taxpayer's adjusted gross income? (Ignore the self-employment tax deduction.)

Describe the circumstances in which the potential § 1245 depreciation recapture is extinguished.

In 2012 Angela,a single taxpayer with no dependents,disposed of for $44,000 a business building which cost $100,000.$60,000 of depreciation had been taken on the building.Angela has a short-term capital loss of $3,000 this year.She has taxable income (not related to property transactions)of $125,000.She has no § 1231 lookback loss.What is the amount and nature of the gain or loss,what is Angela's taxable income,and what is her tax on the taxable income?

Rental use depreciable machinery held more than 12 months is an example of a § 1231 asset.