Question 1

Short-term capital gain is eligible for a special tax rate only when it exceeds long-term capital gain.

Accepted Answer

Short-term capital gain is taxed at a higher rate than long-term capital gain, regardless of the amount. There is no special tax rate for short-term capital gain that exceeds long-term capital gain.

Question 2

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

Accepted Answer

The answer of If there is a net § 1231...

Question 3

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

Accepted Answer

Section 1231 of the Internal Revenue Code only applies to the sale or exchange of business properties, such as equipment, buildings, and land used in a trade or business. It does not apply to personal use property or activity casualties. Personal use property may be subject to different tax rules, such as those governing capital gains and losses.

Question 4

Short-term capital losses are netted against long-term capital gains and long-term capital losses are netted against short-term capital gains.

Accepted Answer

The answer of Short-term capital losses are netted against long-term...

Question 5

Nonrecaptured § 1231 losses from the seven prior tax years may cause current year net § 1231 gain to be treated as ordinary income.

Accepted Answer

The answer of Nonrecaptured § 1231 losses from the seven...

Question 6

Involuntary conversion gains may be deferred if the proceeds of the involuntary conversion are reinvested.

Accepted Answer

According to the IRS, involuntary conversion gains may be deferred if the proceeds of the involuntary conversion are used to purchase property similar or related in service or use to the converted property within a certain timeframe. This is known as a like-kind exchange.

Question 7

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

Accepted Answer

According to the IRS, a personal use property casualty loss is generally deductible only to the extent it exceeds 10% of adjusted gross income (AGI).

Question 8

An individual taxpayer with 2012 net short-term capital loss of $5,000 generally can deduct up to $3,000 for AGI and carry the balance forward to 2013.

Accepted Answer

This is correct according to the IRS rules for taxpayers with net short-term capital losses. They can deduct up to $3,000 of the loss against their other income, and carry forward the remaining loss to future years.

Question 9

Personal use property casualty gains and losses are not subject to the § 1231 rules.

Accepted Answer

Personal use property casualty gains and losses are not considered under the § 1231 rules, which apply to gains and losses from the sale or exchange of property used in a trade or business or held for investment purposes.

Question 10

Casualty gains and losses from nonpersonal use assets are not netted against casualty gains and losses from personal use assets.

Accepted Answer

Casualty gains and losses from nonpersonal use assets (such as business property or rental property) are treated separately from casualty gains and losses from personal use assets (such as a personal residence or personal vehicle) and are not netted together.

Question 11

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

Accepted Answer

Depreciable machinery held for rental use for more than 12 months is considered a § 1231 asset. These assets are subject to special tax treatment and any gains or losses from their sale or exchange are categorized as either ordinary or capital gains/losses depending on the specific circumstances.

Question 12

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

Accepted Answer

The answer of Section 1231 property includes nonpersonal use property...

Question 13

In the "General Procedure for § 1231 Computation: Step 2.§ 1231 Netting," if the gains exceed the losses, the net gain is offset by the "lookback" nonrecaptured § 1231 losses.

Accepted Answer

According to the General Procedure for § 1231 Computation, if the gains exceed the losses, the net gain is offset by the "lookback" nonrecaptured § 1231 losses. Therefore, the statement is true.

Question 14

If § 1231 asset casualty gains and losses net to a gain, the gain is treated as a § 1231 gain.

Accepted Answer

The statement is correct. If the net of § 1231 asset casualty gains and losses results in a gain, it is treated as a § 1231 gain.

Question 15

All collectibles long-term gain is subject to a potential alternative tax rate of 28%.

Accepted Answer

This is true. Collectibles, such as art or antiques, are subject to a maximum capital gains tax rate of 28% for long-term holdings. Regular capital gains taxes generally range from 0% to 20%.

Question 16

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

Accepted Answer

The answer of Section 1231 property includes nonpersonal use property...

Question 17

Section 1231 property generally does not include accounts receivables arising in the ordinary course of business.

Accepted Answer

Section 1231 property includes tangible or intangible property used in a trade or business, held for more than one year, and that is either depreciable or a capital asset. Accounts receivables are not typically considered to be a capital asset or depreciable property, and are therefore not eligible for treatment as Section 1231 property.

Question 18

The Code contains two major depreciation recapture provisions-§§ 1245 and 1250.

Accepted Answer

The statement is true, as the Code contains both §1245 and §1250 which are major provisions related to depreciation recapture.

Question 19

Section 1231 property generally does not include musical compositions.

Accepted Answer

Section 1231 property refers to property used in a trade or business and held for more than one year. While it can include items such as real estate, equipment, and livestock, musical compositions are generally not considered Section 1231 property.

Question 20

A net short-term capital loss first offsets any 28% net long-term capital gain before it offsets either 25% net long-term capital gain or 0%/15% net long-term capital gain.

Accepted Answer

According to the Internal Revenue Service (IRS), a net short-term capital loss is first used to offset any net long-term capital gain taxed at 28%, before it offsets either 25% or 0%/15% net long-term capital gain. This is known as the capital gains tax rate hierarchy.

Quiz 14: Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Short-term capital gain is eligible for a special tax rate only when it exceeds long-term capital gain.

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

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

Short-term capital losses are netted against long-term capital gains and long-term capital losses are netted against short-term capital gains.

Nonrecaptured § 1231 losses from the seven prior tax years may cause current year net § 1231 gain to be treated as ordinary income.

Involuntary conversion gains may be deferred if the proceeds of the involuntary conversion are reinvested.

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

An individual taxpayer with 2012 net short-term capital loss of $5,000 generally can deduct up to $3,000 for AGI and carry the balance forward to 2013.

Personal use property casualty gains and losses are not subject to the § 1231 rules.

Casualty gains and losses from nonpersonal use assets are not netted against casualty gains and losses from personal use assets.

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

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

In the "General Procedure for § 1231 Computation: Step 2.§ 1231 Netting," if the gains exceed the losses, the net gain is offset by the "lookback" nonrecaptured § 1231 losses.

If § 1231 asset casualty gains and losses net to a gain, the gain is treated as a § 1231 gain.

All collectibles long-term gain is subject to a potential alternative tax rate of 28%.

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

Section 1231 property generally does not include accounts receivables arising in the ordinary course of business.

The Code contains two major depreciation recapture provisions-§§ 1245 and 1250.

Section 1231 property generally does not include musical compositions.

A net short-term capital loss first offsets any 28% net long-term capital gain before it offsets either 25% net long-term capital gain or 0%/15% net long-term capital gain.