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Exam 3: Property Dispositions

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Question 41

Multiple Choice

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The sale of computer equipment used in a trade or business for 9 months results in the following type of gain or loss?

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

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

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Question 42

Multiple Choice

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Mary exchanged an office building used in her business for some land. Mary originally purchased the building for $45,000 and it had an adjusted basis of $20,000 at the time of the exchange. The land had a fair market value of $40,000. Mary also gave $4,000 to the  in the transaction. What is Mary's adjusted basis in the land after the exchange?

A) $20,000.
B) $24,000.
C) $36,000.
D) $40,000.
E) None of the choices are correct.

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

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Question 43

Multiple Choice

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Ashburn reported a $105,000 net §1231 gain in year 6. Assuming Ashburn reported $60,000 of nonrecaptured §1231 losses during years 1-5, what amount of Ashburn's net §1231 gain for year 6, if any, is treated as ordinary income?

Buzz Corporation sold an office building that it used in its business for $500,000. Buzz bought the building ten 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?

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

Accounts receivable and inventory are examples of ordinary assets.

Which of the following is not True regarding §1239?

Assets held for investment and personal use assets are examples of capital assets.

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?

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

A parcel of land is always a capital asset.

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

Andrea sold a piece of machinery she used in her business for 9 months. The amount realized was $50,000 and the adjusted basis was $55,000. What is Andrea's gain or loss realized and what is the character of the gain or loss?

Which of the following is not used in the calculation of the amount realized:

Luke sold land valued at $210,000. His original basis in the land was $180,000. For the land, Luke received $60,000 in cash in the current year and a note providing $150,000 in the subsequent year. What is Luke's recognized gain in the current and subsequent year, respectively?

Which of the following is not an involuntary conversion?

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

Sandra sold some equipment for $10,000 in cash, $1,000 of office products, the buyer assumption of her $1,500 loan, and incurred selling expenses of $500. What is the Sandra's amount realized in the transaction?

Silver sold machinery to Gold, a related entity, which it used in its business for $55,000. Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense. What is the amount and character of Silver's gain?

Gainesville LLC sold the following business assets during the current year: (1) machinery, $20,000 cost basis, $4,000 depreciation, proceeds $22,000; (2) automobile, $15,000 cost basis, $12,000 depreciation, proceeds $7,000; (3) equipment, $15,000 cost basis, $10,000 depreciation, proceeds $4,000; (4) computer equipment, $35,000 cost basis, $16,000 depreciation, proceeds $15,000; (5) Winchester had unrecaptured §1231 losses of $5,000 in the prior 5 years. What is the amount and character of Winchester's gains and losses before the 1231 netting process?