Question 1

Which of the following is not a §1245 asset if held for more than one year?

Accepted Answer

Land is not considered a §1245 asset, regardless of how long it is held. §1245 assets are tangible or intangible property that is subject to depreciation or amortization and used in a trade or business or for the production of income. Machinery and automobiles are examples of §1245 assets that could potentially lose their value over time due to wear and tear, making them subject to depreciation. A business cell phone could also be considered a §1245 asset if it is used in a trade or business and subject to depreciation.

Question 2

The sale of computer equipment used in a trade or business for nine months results in which of the following types of gain or loss?

Accepted Answer

The answer of The sale of computer equipment used in...

Question 3

Which of the following gains does not result solely in an ordinary gain or loss?

Accepted Answer

The sale of equipment where the gain realized exceeds the accumulated depreciation does not result solely in an ordinary gain or loss because the portion of the gain exceeding the accumulated depreciation is treated as a Section 1231 gain, which can be taxed as a long-term capital gain if certain conditions are met.

Question 4

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

Accepted Answer

Sections §1239, §1250, §1245, and §291 all involve specific rules for recapturing or recharacterizing a taxpayer's gain under certain conditions, indicating that none of the choices provided are sections that do not recapture or recharacterize a taxpayer's gain.

Question 5

The sale at a loss of machinery that was used in a trade or business and held for more than one year results in which of the following types of loss?

Accepted Answer

The sale of machinery used in a trade or business and held for more than one year results in a §1231 loss, which is a loss from the sale or exchange of property used in a trade or business. This type of loss can be used to offset other capital gains and losses, as well as ordinary income, and is given special treatment under the tax code.

Question 6

Which of the following transactions results solely in §1245 gain?

Accepted Answer

§1245 gain occurs when there is depreciation recapture of certain types of property, including machinery and equipment. Option A does not provide enough information to determine if there is depreciation recapture, and option B includes gain over and above the accumulated depreciation, which could potentially result in some capital gain. Option D does not involve machinery or equipment, which is necessary for §1245 gain. Option C, on the other hand, explicitly states that the accumulated depreciation exceeds the gain realized, indicating depreciation recapture and therefore resulting solely in §1245 gain.

Question 7

The sale of land held for investment results in which of the following types of gain or loss?

Accepted Answer

The sale of land held for investment results in capital gain or loss.

Question 8

The sale for more than the original cost basis (before depreciation)of machinery used in a trade or business and held for more than one year results in which of the following types of gain or loss?

Accepted Answer

The sale of machinery used in a trade or business, held for more than one year, and sold for more than its original cost basis results in §1245 recapture (to the extent of depreciation taken or allowable) which is treated as ordinary income, and any gain in excess of the recaptured amount is treated as §1231 gain, which can be capital if the §1231 gains exceed the §1231 losses for the year.

Question 9

Leesburg sold a machine for $2,200 on November 10^th of the current year.The machine was purchased for $2,600.Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale.What is Leesburg's gain or loss realized on the machine?

Accepted Answer

The answer of Leesburg sold a machine for $2,200 on...

Question 10

Brad sold a rental house that he owned for $250,000.Brad bought the rental house five years ago for $225,000 and has claimed $50,000 of depreciation expense.What is the amount and character of Brad's gain or loss?

Accepted Answer

Brad's gain is calculated by subtracting the adjusted basis (original cost minus depreciation) from the selling price. The adjusted basis is $225,000 - $50,000 = $175,000. Selling price ($250,000) minus adjusted basis ($175,000) equals a $75,000 gain. This gain is split into two parts: $25,000 §1231 gain (the difference between the selling price and the original cost) and $50,000 unrecaptured §1250 gain (the recapture of depreciation claimed).

Question 11

Which of the following does not ultimately result in a capital gain or loss?

Accepted Answer

The sale of inventory is considered part of ordinary business operations and results in ordinary income or loss, not a capital gain or loss. Capital gains or losses are typically realized from the sale of capital assets, not inventory.

Question 12

Bozeman sold equipment that it uses in its business for $80,000.Bozeman bought the equipment two years ago for $75,000 and has claimed $20,000 of depreciation expense.What is the amount and character of Bozeman's gain or loss?

Accepted Answer

The selling price of $80,000 minus the adjusted basis of $55,000 ($75,000 original cost minus $20,000 accumulated depreciation) results in a gain of $25,000. However, only $20,000 of the gain is due to depreciation recapture, which is treated as ordinary income. The remaining $5,000 gain is a §1231 gain, which is characterized as long-term capital gain.

Question 13

Which of the following is true regarding depreciation recapture?

Accepted Answer

Depreciation recapture refers to the portion of the gain on the sale of an asset that must be taxed as ordinary income rather than capital gain. This means that it changes the character of a gain from capital to ordinary income.

Question 14

Butte sold a machine to a machine dealer for $50,000.Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine.What is the amount and character of Butte's gain or loss?

Accepted Answer

The answer of Butte sold a machine to a machine...

Question 15

Foreaker LLC sold a piece of land that it uses in its business for $52,000.Foreaker bought the land two years ago for $42,500.What is the amount and character of Foreaker's gain?

Accepted Answer

The gain is $9,500 ($52,000 sales price minus $42,500 cost basis). Since Foreaker held the land for more than one year and used it in its business, the gain is classified as §1231 gain, which is characterized as long-term capital gain.

Question 16

Which of the following results in an ordinary gain or loss?

Accepted Answer

Sale of inventory results in an ordinary gain or loss, while the other options may result in capital gains or losses.

Question 17

Bateman Corporation sold an office building that it used in its business for $800,000.Bateman bought the building 10 years ago for $600,000 and has claimed $200,000 of depreciation expense.What is the amount and character of Bateman's gain or loss?

Accepted Answer

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

Question 18

Sumner sold equipment that it uses in its business for $30,000.Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 of depreciation expense.Assuming that this is Sumner's only disposition during the year,what is the amount and character of Sumner's gain or loss?

Accepted Answer

The calculation of gain or loss on the sale of property involves comparing the amount received from the sale to the adjusted basis of the property. The adjusted basis is the original cost of the property minus any depreciation claimed. In this case, Sumner sold the equipment for $30,000, and the adjusted basis of the property is $80,000 - $40,000 = $40,000.

Since Sumner sold the property for less than the adjusted basis, there is a loss on the sale. However, the type of loss depends on the nature of the property sold. In this case, the property is considered to be §1231 property since it is used in a trade or business.

Therefore, the loss is classified as a §1231 loss, which can be used to offset any other gains or losses from the sale of §1231 property during the year.

Question 19

What is the character of land used in an active trade or business for two years?

Accepted Answer

Section 1231 of the U.S. Internal Revenue Code classifies property used in a trade or business and held for more than one year as §1231 property. This classification allows for the favorable treatment of gains, where they are taxed at capital gains rates, and losses, which can be deducted as ordinary losses.

Question 20

Which of the following sections recaptures or recharacterizes only corporate taxpayers' gains?

Accepted Answer

Section 291 specifically deals with the recapture of depreciation for corporate taxpayers, recharacterizing certain gains as ordinary income rather than capital gains.

Quiz 11: Property Dispositions

Which of the following is not a §1245 asset if held for more than one year?

The sale of computer equipment used in a trade or business for nine months results in which of the following types of gain or loss?

Which of the following gains does not result solely in an ordinary gain or loss?

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

The sale at a loss of machinery that was used in a trade or business and held for more than one year results in which of the following types of loss?

Which of the following transactions results solely in §1245 gain?

The sale of land held for investment results in which of the following types of gain or loss?

The sale for more than the original cost basis (before depreciation) of machinery used in a trade or business and held for more than one year results in which of the following types of gain or loss?

Leesburg sold a machine for $2,200 on November 10^th of the current year.The machine was purchased for $2,600.Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale.What is Leesburg's gain or loss realized on the machine?

Brad sold a rental house that he owned for $250,000.Brad bought the rental house five years ago for $225,000 and has claimed $50,000 of depreciation expense.What is the amount and character of Brad's gain or loss?

Which of the following does not ultimately result in a capital gain or loss?

Bozeman sold equipment that it uses in its business for $80,000.Bozeman bought the equipment two years ago for $75,000 and has claimed $20,000 of depreciation expense.What is the amount and character of Bozeman's gain or loss?

Which of the following is true regarding depreciation recapture?

Butte sold a machine to a machine dealer for $50,000.Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine.What is the amount and character of Butte's gain or loss?

Foreaker LLC sold a piece of land that it uses in its business for $52,000.Foreaker bought the land two years ago for $42,500.What is the amount and character of Foreaker's gain?

Which of the following results in an ordinary gain or loss?

Bateman Corporation sold an office building that it used in its business for $800,000.Bateman bought the building 10 years ago for $600,000 and has claimed $200,000 of depreciation expense.What is the amount and character of Bateman's gain or loss?

Sumner sold equipment that it uses in its business for $30,000.Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 of depreciation expense.Assuming that this is Sumner's only disposition during the year,what is the amount and character of Sumner's gain or loss?

What is the character of land used in an active trade or business for two years?

Which of the following sections recaptures or recharacterizes only corporate taxpayers' gains?

Quiz 11: Property Dispositions

Which of the following is not a §1245 asset if held for more than one year?

The sale of computer equipment used in a trade or business for nine months results in which of the following types of gain or loss?

Which of the following gains does not result solely in an ordinary gain or loss?

Which of the following sections does not recapture or recharacterize a taxpayer's gain?

The sale at a loss of machinery that was used in a trade or business and held for more than one year results in which of the following types of loss?

Which of the following transactions results solely in §1245 gain?

The sale of land held for investment results in which of the following types of gain or loss?

The sale for more than the original cost basis (before depreciation) of machinery used in a trade or business and held for more than one year results in which of the following types of gain or loss?

Leesburg sold a machine for $2,200 on November 10th of the current year.The machine was purchased for $2,600.Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale.What is Leesburg's gain or loss realized on the machine?

Brad sold a rental house that he owned for $250,000.Brad bought the rental house five years ago for $225,000 and has claimed $50,000 of depreciation expense.What is the amount and character of Brad's gain or loss?

Which of the following does not ultimately result in a capital gain or loss?

Bozeman sold equipment that it uses in its business for $80,000.Bozeman bought the equipment two years ago for $75,000 and has claimed $20,000 of depreciation expense.What is the amount and character of Bozeman's gain or loss?

Which of the following is true regarding depreciation recapture?

Butte sold a machine to a machine dealer for $50,000.Butte bought the machine for $55,000 several years ago and has claimed $12,500 of depreciation expense on the machine.What is the amount and character of Butte's gain or loss?

Foreaker LLC sold a piece of land that it uses in its business for $52,000.Foreaker bought the land two years ago for $42,500.What is the amount and character of Foreaker's gain?

Which of the following results in an ordinary gain or loss?

Bateman Corporation sold an office building that it used in its business for $800,000.Bateman bought the building 10 years ago for $600,000 and has claimed $200,000 of depreciation expense.What is the amount and character of Bateman's gain or loss?

Sumner sold equipment that it uses in its business for $30,000.Sumner bought the equipment a few years ago for $80,000 and has claimed $40,000 of depreciation expense.Assuming that this is Sumner's only disposition during the year,what is the amount and character of Sumner's gain or loss?

What is the character of land used in an active trade or business for two years?

Which of the following sections recaptures or recharacterizes only corporate taxpayers' gains?

Leesburg sold a machine for $2,200 on November 10^th of the current year.The machine was purchased for $2,600.Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale.What is Leesburg's gain or loss realized on the machine?