Question 1

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 personal use assets and nonpersonal use assets are reported separately, and cannot be offset against each other.

Question 2

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

Accepted Answer

This statement is true according to the Internal Revenue Code. If the netting of § 1231 asset casualty gains and losses results in a gain, then that gain is classified as a § 1231 gain for tax purposes.

Question 3

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 4

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

Accepted Answer

Rental use depreciable machinery held more than 12 months is considered a § 1231 asset for tax purposes.

Question 5

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 6

Section 1231 property generally includes certain purchased intangible assets (such as patents and goodwill)that are eligible for amortization and held for more than one year.

Accepted Answer

Section 1231 property includes certain purchased intangible assets that are eligible for amortization and held for more than one year, including patents and goodwill.

Question 7

An individual taxpayer with 2009 net short-term capital loss of $5,000 generally can deduct up to $3,000 for AGI and carry the balance forward to 2010.

Accepted Answer

This is true according to the IRS tax code. An individual taxpayer can deduct up to $3,000 of net capital losses against ordinary income in the current tax year, and carry over any remaining losses to future tax years.

Question 8

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 subject to the § 1231 rules, which apply to gains and losses from the sale or exchange of business or investment property.

Question 9

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

This is correct according to the U.S. tax code. Net short-term capital losses are first used to offset any net long-term capital gains taxed at 28%. After that, they can be used to offset net long-term capital gains taxed at 25% or 0%/15%.

Question 10

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

This is true. If the gains exceed the losses in Step 2 of the § 1231 netting procedure, the net gain is offset by any nonrecaptured § 1231 losses from the previous five tax years.

Question 11

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

Accepted Answer

According to the IRS, personal use property casualty losses are generally deductible only if they exceed 10% of the taxpayer's adjusted gross income (AGI).

Question 12

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 13

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

Accepted Answer

A § 1231 loss is a type of loss incurred from the sale or exchange of certain business assets. If there is a net § 1231 loss, it is treated as an ordinary loss and can be used to offset ordinary income. It is not treated as a short-term capital loss.

Question 14

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

Accepted Answer

The answer of Section 1231 applies to the sale or...

Question 15

Section 1231 property generally does not include notes receivable arising in the ordinary course of business.

Accepted Answer

Section 1231 property refers to depreciable assets (such as equipment and buildings) and real property (such as land and buildings). Notes receivable are not considered depreciable assets and therefore do not fall under Section 1231 property.

Question 16

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 17

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

Accepted Answer

The answer of All collectibles gain is subject to a...

Question 18

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

Accepted Answer

This is true under certain circumstances and conditions, as outlined in the Internal Revenue Code.

Question 19

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

Accepted Answer

This statement is false. Short-term capital gain is generally taxed at a higher rate than long-term capital gain, regardless of the amounts.

Question 20

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

Accepted Answer

This statement is true. The two major depreciation recapture provisions in the U.S. tax code are §1245 and §1250.

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