Question 1

Sunshine LLC sold furniture for $75,000.Sunshine bought the furniture for $90,000 several years ago and has claimed $25,000 of depreciation expense on the machine.What is the amount and character of Sunshine's gain or loss?

Accepted Answer

The answer of Sunshine LLC sold furniture for $75,000.Sunshine bought...

Question 2

Explain whether the sale at a loss of a machine used in a trade or business generates an ordinary or capital loss?

Accepted Answer

The answer of Explain whether the sale at a loss...

Question 3

Buzz Corporation sold an office building that it used in its business for $500,000.Buzz bought the building 10 years ago for $650,000 and has claimed $200,000 of depreciation expense.What is the amount and character of Buzz's gain or loss?

Accepted Answer

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

Question 4

Frederique sold furniture that she uses in her business for $15,000.Frederique bought the furniture a few years ago for $40,000 and has claimed $20,000 of depreciation expense.What is the amount and character of Frederique's gain or loss?

Accepted Answer

The answer of Frederique sold furniture that she uses in...

Question 5

Andrea sold a piece of machinery she used in her business for nine months.The amount realized was $50,000 and the adjusted basis was $55,000.What is Andrea's gain or loss realized,and what is the character of the gain or loss?

Accepted Answer

The answer of Andrea sold a piece of machinery she...

Question 6

Which of the following may qualify as an installment sale?
A)Sale of inventory at a gain.
B)Sale of securities.
C)Sale of asset used in a business at a gain.
D)Land sold at a loss.
E)All of the choices qualify for installment sale treatment.

Accepted Answer

Only the sale of an asset used in a business at a gain may qualify as an installment sale. The other choices do not involve the sale of an asset with a gain and therefore would not qualify for installment sale treatment.

Question 7

Manassas purchased a computer several years ago for $2,200.On November 10^th of the current year,the computer was worth $800.If $1,000 of depreciation deductions had been taken,what is Manassas's tax-adjusted basis for the computer?

Accepted Answer

The answer of Manassas purchased a computer several years ago...

Question 8

Andrew,an individual,began business four years ago and has never sold a §1231 asset.Andrew owned each of the assets for several years.In the current year,Andrew sold the following business assets:
  Assuming Andrew's marginal ordinary income tax rate is 32 percent,what is the character of the gains and losses and what affect do they have on Andrew's tax liability?

Accepted Answer

The answer of Andrew,an individual,began business four years ago and...

Question 9

Which of the following is not true regarding installment sales?
A)Only gains are eligible for installment sale reporting.
B)Depreciation recapture is deferred in an installment sale.
C)The gross profit percentage is needed to determine the annual gain recognized.
D)Stock sales are ineligible for installment sale treatment.
E)None of the choices are correct.

Accepted Answer

The answer of Which of the following is not true...

Question 10

Bull Run sold a computer for $1,200 on November 10^th of the current year.The computer was purchased for $2,800.Bull Run had taken $1,000 of depreciation deductions.What is Bull Run's gain or loss realized on the computer?

Accepted Answer

The answer of Bull Run sold a computer for $1,200...

Question 11

Gainesville LLC sold the following business assets during the current year: (1)machinery,$20,000 cost basis,$4,000 depreciation,$22,000 proceeds; (2)automobile,$15,000 cost basis,$12,000 depreciation,$7,000 proceeds; (3)equipment,$15,000 cost basis,$10,000 depreciation,$4,000 proceeds; (4)computer equipment,$35,000 cost basis,$16,000 depreciation,$15,000 proceeds; (5)Winchester had unrecaptured §1231 losses of $5,000 in the prior five years.What is the amount and character of Winchester's gains and losses before the 1231 netting process?

Accepted Answer

The answer of Gainesville LLC sold the following business assets...

Question 12

Brandy sold a rental house that she owned for $150,000.Brandy bought the house four years ago for $140,000 and has claimed $25,000 of depreciation expense.What is the amount and character of Brandy's gain or loss?

Accepted Answer

The answer of Brandy sold a rental house that she...

Question 13

Which of the following is true regarding disallowed losses between related taxpayers?
A)The tax laws essentially treat related parties as the same taxpayer.
B)The holding period of the seller carries over to the buyer.
C)The related person always receives a carryover basis.
D)The seller's realized loss is deferred until the buyer sells the assets.
E)None of the choices are correct.

Accepted Answer

The tax laws essentially treat related parties as the same taxpayer, disallowing losses between them. This is done to prevent taxpayers from artificially shifting losses among themselves in order to reduce overall tax liability. The specific rules surrounding related party transactions can be complex and depend on the specific relationship between the parties involved.

Question 14

Suzanne,an individual,began business four years ago and has never sold a §1231 asset.Suzanne owned each of the assets for several years.In the current year,Suzanne sold the following business assets:
  Assuming Suzanne's marginal ordinary income tax rate is 32 percent,what is the character of the gains and losses and what affect do they have on Suzanne's tax liability?

Accepted Answer

The answer of Suzanne,an individual,began business four years ago and...

Question 15

Alexandra sold equipment that she uses in her business for $100,000.Alexandra bought the equipment two years ago for $90,000 and has claimed $25,000 of depreciation expense.What is the amount and character of Alexandra's gain or loss?

Accepted Answer

The answer of Alexandra sold equipment that she uses in...

Question 16

Sandra sold some equipment for $10,000 in cash,$1,000 of office products,the buyer's assumption of her $1,500 loan,and incurred selling expenses of $500.What is Sandra's amount realized in the transaction?

Accepted Answer

The answer of Sandra sold some equipment for $10,000 in...

Question 17

Peroni Corporation sold a parcel of land valued at $300,000.Its basis in the land was $250,000.For the land,Peroni received $150,000 in cash in the current year and a note providing Peroni with $150,000 in the subsequent year.What is Peroni's recognized gain in the current and subsequent year,respectively?
A)$0,$50,000.
B)$10,000,$40,000.
C)$25,000,$25,000.
D)$50,000,$0.
E)None of the choices are correct.

Accepted Answer

Peroni's recognized gain in the current year is calculated as follows:
Amount realized ($150,000 cash received) - Adjusted basis ($250,000) = $0 gain

In the subsequent year, Peroni will receive a note for $150,000, which will be treated as a payment. Peroni's recognized gain in the subsequent year is calculated as follows:
Amount realized ($150,000 note received) - Adjusted basis ($0, since the adjusted basis is reduced to zero in the current year) = $150,000 gain

Therefore, Peroni's recognized gain in the current and subsequent year, respectively, is $0 and $150,000, totaling $25,000 as shown in choice C.

Question 18

Jessie sold a piece of land held for investment for $250,000.Jessie bought the land two years ago for $195,000.What is the amount and character of Jessie's gain?

Accepted Answer

The answer of Jessie sold a piece of land held...

Question 19

Sadie sold 10 shares of stock to her brother,George,for $500 16 months ago.Sadie had purchased the stock for $600 two years earlier.If George sells the stock for $700,what are the amount and character of his recognized gain or loss in the current year?
A)$0.
B)$100 short-term capital gain.
C)$100 long-term capital gain.
D)$200 short-term capital gain.
E)None of the choices are correct.

Accepted Answer

George purchased the stock for $500 from Sadie. Sadie's basis in the stock was $600, so she recognized a loss of $100 at the time of the sale to George. George has now sold the stock for $700, resulting in a long-term capital gain of $200 ($700 selling price - $500 basis). Since George held the stock for more than one year, the gain is considered long-term.

Question 20

Silver sold machinery that it used in its business to Gold,a related entity,for $55,000.Silver bought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense.What is the amount and character of Silver's gain?

Accepted Answer

The answer of Silver sold machinery that it used in...

Quiz 11: Property Dispositions

Sunshine LLC sold furniture for $75,000.Sunshine bought the furniture for $90,000 several years ago and has claimed $25,000 of depreciation expense on the machine.What is the amount and character of Sunshine's gain or loss?

Explain whether the sale at a loss of a machine used in a trade or business generates an ordinary or capital loss?

Buzz Corporation sold an office building that it used in its business for $500,000.Buzz bought the building 10 years ago for $650,000 and has claimed $200,000 of depreciation expense.What is the amount and character of Buzz's gain or loss?

Frederique sold furniture that she uses in her business for $15,000.Frederique bought the furniture a few years ago for $40,000 and has claimed $20,000 of depreciation expense.What is the amount and character of Frederique's gain or loss?

Andrea sold a piece of machinery she used in her business for nine months.The amount realized was $50,000 and the adjusted basis was $55,000.What is Andrea's gain or loss realized,and what is the character of the gain or loss?

Which of the following may qualify as an installment sale?

Manassas purchased a computer several years ago for $2,200.On November 10th of the current year,the computer was worth $800.If $1,000 of depreciation deductions had been taken,what is Manassas's tax-adjusted basis for the computer?

Which of the following is not true regarding installment sales?

Bull Run sold a computer for $1,200 on November 10th of the current year.The computer was purchased for $2,800.Bull Run had taken $1,000 of depreciation deductions.What is Bull Run's gain or loss realized on the computer?