Question 1

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...

Question 2

Which of the following is not true regarding installment sales?

Accepted Answer

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

Question 3

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: $$\begin{array} { | l | r | r | r | } 
\hline { \text { Asset } } & \text { Original Cost } & \begin{array} { c } 
\text { Accumulated } \
\text { Depreciation }
\end{array} & \text { Gain/Loss } \
\hline \text { Machinery } & \$ 12,000 & \$ 7,000 & \$ 6,000 \
\hline \text { Furniture } & 10,000 & 2,000 & 3,000 \
\hline \text { Building } & 90,000 & 20,000 & ( 5,000 ) \
\hline
\end{array}$$ Assuming Andrew's marginal ordinary income tax rate is 30 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 4

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 5

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?

Accepted Answer

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

Question 6

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?

Accepted Answer

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

Question 7

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?

Accepted Answer

The answer of Silver sold machinery to Gold, a related...

Question 8

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, meaning disallowed losses between related taxpayers are not recognized and are deferred until the related person disposes of the asset to an unrelated party. The holding period and basis of the related person are not affected.

Question 9

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

Accepted Answer

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

Question 10

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

Accepted Answer

George purchased the stock from Sadie six months ago for $500, which means it is a short-term capital gain/loss for George.

George sold the stock for $700. To calculate the gain/loss, we need to subtract the cost basis from the sales price:

Sales price - cost basis = Gain/Loss

$700 - $600 = $100

Since Sadie owned the stock for more than one year, it is a long-term capital asset for her. However, since George held the stock for less than one year, it is a short-term capital asset for him. Therefore, George has a short-term capital gain of $100.

Question 11

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?

Accepted Answer

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

Question 12

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?

Accepted Answer

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

Question 13

Which of the following may qualify as an installment sale?

Accepted Answer

An installment sale is the sale of an asset where at least one payment is received in a year following the sale. The sale of an asset used in a business at a gain may qualify as an installment sale. The sale of inventory at a gain is not an installment sale. The sale of securities is not usually an installment sale, unless it meets specific criteria. The sale of land at a loss is not an installment sale.

Question 14

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

Accepted Answer

The answer of Explain whether the sale of a machine...

Question 15

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?

Accepted Answer

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

Question 16

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 17

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?

Accepted Answer

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

Question 18

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

Accepted Answer

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

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

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...

Quiz 10: Property Dispositions