Question 1

Vanna owned an office building that had been held more than one year when it was sold for $567,000. The real estate had an adjusted basis of $45,000 for the land and $233,000 for the building. Straight-line depreciation of $162,000 had been taken on the building. What is the amount and initial character of the gain or loss from disposition of the real estate? Is any of the gain unrecaptured § 1250 (25%) gain?

Accepted Answer

The answer of Vanna owned an office building that had...

Question 2

Williams owned an office building (but not the land) that was destroyed by a fire. The building was insured and Williams has a $156,000 gain because his insurance recovery exceeded his adjusted basis for the building. Williams may replace the building. Williams had taken $145,000 of depreciation on the building, has no § 1231 lookback loss, has no other § 1231 transactions for the year, and has no Schedule D transactions for the year. What is the final nature of Jamison's gain for the year and what tax rate(s) apply to the gain if:

Accepted Answer

The answer of Williams owned an office building (but not...

Question 3

Business equipment is purchased on March 10, 2015, used in the business until September 29, 2015, and sold at a $23,000 loss on October 10, 2015. The equipment was not suitable for the work the business had purchased it for. The loss on the disposition should have been reported in the 2015 Form 4797, Part:

Accepted Answer

The loss on the disposition of business equipment should be reported in Part II of Form 4797. This section is for reporting gains or losses on the sale or exchange of business property, including equipment. The fact that the equipment was not suitable for the business's needs does not affect the reporting requirements. The loss should be calculated as the difference between the selling price (which is presumably less than the original cost) and the adjusted basis (which takes into account any depreciation that was taken while the equipment was in use).

Question 4

An individual has a $40,000 § 1245 gain, a $35,000 § 1231 gain, a $33,000 § 1231 loss, a $3,000 § 1231 lookback loss, and a $15,000 long-term capital gain. The net long-term capital gain is:

Accepted Answer

The answer of An individual has a $40,000 § 1245...

Question 5

A business taxpayer sold all the depreciable assets of the business, calculated the gains and losses, and would like to know the final character of those gains and losses. The taxpayer had $353,000 of adjusted gross income before considering the gains and losses from sale of the business assets. The taxpayer had unrecaptured § 1231 lookback loss of $22,000. What is the treatment of the gains and losses summarized in the chart below after all possible netting and reclassification has been completed? What is the taxpayer's adjusted gross income? (Ignore the self-employment tax deduction.)

Accepted Answer

The answer of A business taxpayer sold all the depreciable...

Question 6

Betty, a single taxpayer with no dependents, has the gains and losses shown below. Before considering these transactions, Betty has $45,000 of other taxable income. What is the treatment of the gains and losses and what is Betty's taxable income?

Accepted Answer

The answer of Betty, a single taxpayer with no dependents,...

Question 7

Why is it generally better to have a net § 1231 gain year followed by a net § 1231 loss year rather than a net § 1231 loss year followed by a net § 1231 gain year?

Accepted Answer

The answer of Why is it generally better to have...

Question 8

The chart below describes the § 1231 assets sold by the Ecru Company (a sole proprietorship) this year. Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year. Assume there is a § 1231 lookback loss of $4,000.

Accepted Answer

The answer of The chart below describes the § 1231...

Question 9

A business machine purchased April 10, 2015, for $62,000 was fully depreciated in 2015 using § 179 immediate expensing. On August 15, 2016, the sole proprietor who owned the machine gave it to his son. On that date, the machine's fair market value was $57,000. The son did not use the machine in business or hold it as inventory and the machine was sold on November 22, 2016, for $53,000.What is the amount and nature of the gain or loss from disposition of the machine? Where is it reported in the son's tax return?

Accepted Answer

The answer of A business machine purchased April 10, 2015,...

Question 10

A business machine purchased April 10, 2014, for $98,000 was fully depreciated in 2014 using § 179 immediate expensing. On August 15, 2016, the machine was sold for $67,000. What is the amount and nature of the gain or loss from disposition of the machine?

Accepted Answer

The answer of A business machine purchased April 10, 2014,...

Question 11

A business taxpayer sold all the depreciable assets of the business, calculated the gains and losses, and would like to know the final character of those gains and losses. The taxpayer had $353,000 of adjusted gross income before considering the gains and losses from sale of the business assets. The taxpayer had unrecaptured § 1231 lookback loss of $12,000. What is the treatment of the gains and losses summarized in the chart below after all possible netting and reclassification has been completed? What is the taxpayer's adjusted gross income? (Ignore the self-employment tax deduction.)

Accepted Answer

The answer of A business taxpayer sold all the depreciable...

Question 12

Residential real estate was purchased in 2013 for $345,000, held as rental property, and depreciated straight-line. Assume the land cost was $45,000 and the building cost was $300,000. Depreciation totaled $34,089. The building and land were sold on June 10, 2016, for $683,000 total. What is the tax status of the property, the nature of the gain from the disposition, and is any of it § 1250 depreciation recapture gain or unrecaptured § 1250 gain?

Accepted Answer

The answer of Residential real estate was purchased in 2013...

Question 13

Describe the circumstances in which the maximum unrecaptured § 1250 gain (25% gain) does not become part of the Schedule D netting process for an individual taxpayer?

Accepted Answer

The answer of Describe the circumstances in which the maximum...

Question 14

Describe the circumstances in which the potential § 1245 depreciation recapture is extinguished.

Accepted Answer

The answer of Describe the circumstances in which the potential...

Question 15

Section 1239 (relating to the sale of certain property between related taxpayers) does not apply unless the property:

Accepted Answer

Section 1239 applies to the sale of certain property between related taxpayers if the property is depreciable in the hands of the transferee.

Question 16

The chart below describes the § 1231 assets sold by the Tan Company (a sole proprietorship) this year. Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year. Assume there is a § 1231 lookback loss of $14,000.

Accepted Answer

The answer of The chart below describes the § 1231...

Question 17

Charmine, a single taxpayer with no dependents, has already incurred a $10,000 § 1231 gain in 2016 and has no § 1231 lookback losses. The taxpayer purchased a business machine for $100,000 five years ago, $70,000 of depreciation has been taken on it, and the machine is now worth $90,000. How will the net § 1231 gain or loss be affected if the taxpayer trades in the business machine for a like-kind business machine and pays an additional $12,000 in cash to obtain the replacement machine? If Charmine already has $352,000 of taxable income which does not include a $10,000 §1231 gain or any capital gains or losses, what is her taxable income?

Accepted Answer

The answer of Charmine, a single taxpayer with no dependents,...

Question 18

An individual has the following recognized gains and losses from disposition of § 1231 assets (all the assets were vacant land): $15,000 gain, $10,000 loss, $25,000 gain, and $2,000 loss. The individual has a $5,500 § 1231 lookback loss. The individual also has a $16,000 net short-term capital loss from the disposition of stock. Which of the following statements is correct?

Accepted Answer

The answer of An individual has the following recognized gains...

Question 19

In 2016 Angela, a single taxpayer with no dependents, disposed of for $44,000 a business building which cost $100,000. $60,000 of depreciation had been taken on the building. Angela has a short-term capital loss of $3,000 this year. She has taxable income (not related to property transactions) of $125,000. She has no § 1231 lookback loss. What is the amount and nature of the gain or loss, what is Angela's taxable income, and what is her tax on the taxable income?

Accepted Answer

The answer of In 2016 Angela, a single taxpayer with...

Question 20

An individual taxpayer has the gains and losses shown below. There are $3,000 of § 1231 lookback losses. What is the net long-term capital gain?

Accepted Answer

The answer of An individual taxpayer has the gains and...

Quiz 8: Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions