Question 1

If there is a net § 1231 loss, it is treated as an ordinary loss.

Accepted Answer

According to the IRS, if there is a net § 1231 loss, it is treated as an ordinary loss.

Question 2

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

Accepted Answer

This is true according to Section 1231 of the Internal Revenue Code, which defines certain types of property as Section 1231 property and allows for certain tax treatment of gains and losses on this property. Specifically, if a taxpayer has net gains from the sale or exchange of Section 1231 property, the gains are treated as long-term capital gains. However, if the taxpayer has net losses from the sale or exchange of Section 1231 property, the losses are treated as ordinary losses. In the case of casualty gains and losses on Section 1231 property, if the gains exceed the losses for the taxable year, the property is still considered Section 1231 and the gains are treated as long-term capital gains.

Question 3

Section 1231 property generally does not include artistic compositions.

Accepted Answer

Section 1231 property typically includes depreciable property and real property (like buildings and equipment) used in a trade or business and held for more than one year. Artistic compositions are not included in this category as they are considered intellectual property, not depreciable business property.

Question 4

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 purchased intangible assets eligible for amortization that are held for more than one year, including patents and goodwill.

Question 5

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

Question 6

Nonrecaptured § 1231 losses from the six 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 six...

Question 7

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 are reported separately from any casualty gains and losses from personal use assets. They cannot be offset or netted against each other.

Question 8

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 9

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

Accepted Answer

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

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 correct 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. This means that any net gain from the current year is reduced by any nonrecaptured § 1231 losses from the previous five years.

Question 11

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 pertain to the taxation of gains and losses from the sale or exchange of business property.

Question 12

An individual taxpayer with 2014 net short-term capital loss of $5,000 generally can deduct up to $3,000 for AGI and carry the balance forward to 2015.

Accepted Answer

This is correct. An individual taxpayer can deduct up to $3,000 of their net short-term capital loss for AGI for a given tax year, and any remaining loss can be carried forward to future tax years.

Question 13

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 always taxed at a higher rate than long-term capital gain, regardless of their respective amounts.

Question 14

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

Accepted Answer

If the net gains from § 1231 asset casualty losses exceed the net losses, the gain is treated as a § 1231 gain for tax purposes.

Question 15

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, which is a type of asset that can result in both ordinary income and capital gains treatment for tax purposes.

Question 16

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 17

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

Accepted Answer

This statement is true. If the proceeds from an involuntary conversion (such as property damage or loss due to theft or condemnation) are reinvested in similar property, the gain on the conversion may be deferred. This is known as a like-kind exchange.

Question 18

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

Accepted Answer

Section 1231 property refers to certain types of property used in a trade or business, such as real estate, depreciable property, and certain livestock. Accounts receivables are not included in this definition because they are not considered to be physical property.

Question 19

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

Accepted Answer

The answer of All collectibles short-term gain is subject to...

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%/20% net long-term capital gain.

Accepted Answer

This is correct according to the IRS tax code. Short-term capital losses can first offset any net long-term capital gains taxed at 28%, before offsetting gains taxed at lower rates of 25%, 15%, or 0%.

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

If there is a net § 1231 loss, it is treated as an ordinary loss.

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

Section 1231 property generally does not include artistic compositions.

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.

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

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

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

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

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

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.

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

An individual taxpayer with 2014 net short-term capital loss of $5,000 generally can deduct up to $3,000 for AGI and carry the balance forward to 2015.

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

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

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

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

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

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

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

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%/20% net long-term capital gain.