Question 1

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?

Accepted Answer

The answer of Frederique sold furniture that she uses in...

Question 2

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

Accepted Answer

The answer of Gainesville LLC sold the following business assets...

Question 3

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?

Accepted Answer

The answer of Sunshine LLC sold furniture for $75,000.Sunshine bought...

Question 4

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

Accepted Answer

The answer of Sandra sold some equipment for $10,000 in...

Question 5

Explain whether the sale at a loss of a machine used in a trade or business generates an ordinary or capital loss?

Accepted Answer

The answer of Explain whether the sale at a loss...

Question 6

Bull Run sold a computer for $1,200 on November 10^th 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?

Accepted Answer

The answer of Bull Run sold a computer for $1,200...

Question 7

Sadie sold 10 shares of stock to her brother, George, for $500 16 months ago.Sadie had purchased the stock for $600 two years earlier.If George sells the stock for $700, what are the amount and character of his recognized gain or loss in the current year?

Accepted Answer

To calculate George's gain or loss, we need to determine the basis of the stock. Since Sadie sold the stock to George for $500, his basis is $500.

When George sells the stock for $700, he has a long-term capital gain of $200 ($700 selling price - $500 basis). The holding period for George is also more than one year, so it is a long-term capital gain.

Question 8

Manassas purchased a computer several years ago for $2,200.On November 10^th of the current year, the computer was worth $800.If $1,000 of depreciation deductions had been taken, what is Manassas's tax-adjusted basis for the computer?

Accepted Answer

The answer of Manassas purchased a computer several years ago...

Question 9

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?

Accepted Answer

The answer of Jessie sold a piece of land held...

Question 10

Andrew, an individual, began business four years ago and has never sold a §1231 asset.Andrew owned each of the assets for several years.In the current year, Andrew sold the following business assets:
 $$\begin{array} { l r r r r } 
&&{ \text { Accurnulated } }\
\text { Asset } & \text { Original Cost } &\text { Depreciation } & \text { Gair/Loss } \
\text { Machinery } & \$ 12,000 & \$ 7,000 & \$ 6,000 \
\text { Furniture } & 10,000 &2,00 0 & 3,000 \
\text { Building } & 90,000 & 20,000 & ( 5,000 )
\end{array}$$ Assuming Andrew's marginal ordinary income tax rate is 32 percent, what is the character of the gains and losses and what affect do they have on Andrew's tax liability?

Accepted Answer

The answer of Andrew, an individual, began business four years...

Question 11

Which of the following is true regarding disallowed losses between related taxpayers?

Accepted Answer

The tax laws essentially treat related parties as the same taxpayer, which means any losses between related parties are disallowed. This is to prevent taxpayers from using related parties to shift losses and reduce their overall tax liability. The other choices are not accurate statements regarding disallowed losses between related taxpayers.

Question 12

Silver sold machinery that it used in its business to Gold, a related entity, 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?

Accepted Answer

The answer of Silver sold machinery that it used in...

Question 13

Andrea sold a piece of machinery she used in her business for nine 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?

Accepted Answer

The answer of Andrea sold a piece of machinery she...

Question 14

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?

Accepted Answer

The answer of Buzz Corporation sold an office building that...

Question 15

Brandy sold a rental house that she owned for $150,000.Brandy bought the house four years ago for $140,000 and has claimed $25,000 of depreciation expense.What is the amount and character of Brandy's gain or loss?

Accepted Answer

The answer of Brandy sold a rental house that she...

Question 16

Peroni Corporation sold a parcel of land valued at $300,000.Its basis in the land was $250,000.For the land, Peroni received $150,000 in cash in the current year and a note providing Peroni with $150,000 in the subsequent year.What is Peroni's recognized gain in the current and subsequent year, respectively?

Accepted Answer

The answer of Peroni Corporation sold a parcel of land...

Question 17

Which of the following is not true regarding installment sales?

Accepted Answer

The answer of Which of the following is not true...

Question 18

Which of the following may qualify as an installment sale?

Accepted Answer

Only the sale of an asset used in a business at a gain may qualify as an installment sale. The sale of inventory, securities, and land sold at a loss do not qualify for installment sale treatment.

Question 19

Alexandra sold equipment that she uses in her business for $100,000.Alexandra bought the equipment two years ago for $90,000 and has claimed $25,000 of depreciation expense.What is the amount and character of Alexandra's gain or loss?

Accepted Answer

The answer of Alexandra sold equipment that she uses in...

Question 20

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:
 $$\begin{array} { l r r r r } 
& &  { \text { Accurmulated } } &  \
\text { Asset } & \text { Original Cost } & \text { Depreciation } &  { \text { Gair/Loss } }  \
\text { Machirzery } & \$ 12,000 & \$7 , 000 & \$ 6,000 \
\text { Funiture } & 10,000& 2,000 & ( 3,000 ) \
\text { Building } & 90,000 & 20,000 & 15,000
\end{array}$$ Assuming Suzanne's marginal ordinary income tax rate is 32 percent, what is the character of the gains and losses and what affect do they have on Suzanne's tax liability?

Accepted Answer

The answer of Suzanne, an individual, began business four years...

Quiz 11: Property Dispositions