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Exam 10: Property Dispositions

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Question 21

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Sunshine LLC sold furniture for $75,000. Sunshine bought the furniture for $90,000 several years ago and has claimed $25,000 of depreciation expense on the machine. What is the amount and character of Sunshine's gain or loss?

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$10,000 or...

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Question 22

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Frederique sold furniture that she uses in her business for $15,000. Frederique bought the furniture a few years ago for $40,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Frederique's gain or loss?

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Question 23

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The amount realized is the sale proceeds less the adjusted basis.

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?

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

Sarah sold 1,000 shares of stock to her brother, David, for $18,000 last year. 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?

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

Alpha sold machinery, which it used in its business, to Beta, a related entity, for $40,000. Beta used the machinery in its business. Alpha bought the equipment a few years ago for $50,000 and has claimed $30,000 of depreciation expense. What is the amount and character of Alpha's gain?

Which of the following is true regarding depreciation recapture?

What is the character of land used in an active trade or business for two years?

A loss realized for property destroyed in a hurricane is deferred under the involuntary conversion rules.

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?

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

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

Which of the following sections recaptures or recharacterizes only corporate taxpayer's gains?

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: $\begin{array} { | l | r | r | r | } \hline { \text { Asset } } & \text { Original Cost } & \begin{array} { r } \text { Accumulated } \\\text { Depreciation }\end{array} & \text { Gain/Loss } \\\hline \text { Machinery } & \$ 12,000 & \$ 7,000 & \$ 6,000 \\\hline \text { Furniture } & 10,000 & 2,000 & ( 3,000 ) \\\hline \text { Building } & 90,000 & 20,000 & 15,000 \\\hline\end{array}$ 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?

§1239 recharacterizes 50 percent of the gain on sales to a related party as ordinary income.

Why does §1250 recapture generally no longer apply?

Kristi had a business building destroyed in an earthquake. The old building was purchased for $250,000 and $80,000 of depreciation deductions had been taken. Her insurance proceeds were $550,000. Although the replacement property was much larger and nicer than her old building, Kristi's new property qualified as replacement property. She acquired the new property 13 months after the earthquake for $620,000. What is the amount of Kristi's realized gain and recognized gain and the basis in her new property?

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