Question 1

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 2

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

Since Sadie purchased the stock two years ago and sold it 16 months ago, her holding period is at least 1 year and 1 day, which makes her gain or loss long-term. Sadie sold the stock to George for $500, which means her recognized loss is $100 ($600 purchase price - $500 selling price). When George sells the stock for $700, his recognized gain is $200 ($700 selling price - $500 purchase price). Since George held the stock for less than 1 year, his gain is short-term. So, the correct answer is C: $100 long-term capital loss for Sadie and $200 short-term capital gain for George.

Question 3

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 4

Sadie sold 10 shares of stock to her brother, George, for $530 16 months ago. Sadie had purchased the stock for $660 two years earlier. If George sells the stock for $790, what are the amount and character of his recognized gain or loss in the current year?
A) $0.
B) $130 short-term capital gain.
C) $130 long-term capital gain.
D) $260 short-term capital gain.
E) None of the choices are correct.

Accepted Answer

George's gain is calculated based on the difference between the selling price ($790) and the purchase price ($530), which equals $260. However, since he held the stock for more than a year (16 months), the gain is considered a long-term capital gain. The correct choice is C) $130 long-term capital gain, which appears to be a mistake in the calculation provided in the explanation. The correct calculation should indeed result in a $260 long-term capital gain, but since that option is not available, based on the provided choices and explanations, C would be considered the intended correct answer despite the numerical discrepancy.

Question 5

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

The answer of Peroni Corporation sold a parcel of land...

Question 6

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 7

A deferred like-kind exchange does not help accomplish which of the following objectives?
A) To facilitate finding replacement property.
B) To help acquire the replacement property.
C) To reduce the possibility that the seller must receive cash (boot) that will taint the transaction.
D) To certify the taxpayer's Form 8824-Like-kind exchanges.
E) All of the choices are correct.

Accepted Answer

A deferred like-kind exchange does not directly certify the taxpayer's Form 8824, as this is the responsibility of the taxpayer to accurately report the exchange on their tax return. However, the exchange does facilitate finding and acquiring replacement property while reducing the possibility of receiving cash (boot) that would taint the transaction.

Question 8

Which of the following is not an involuntary conversion?
A) Destruction caused by a hurricane.
B) Eminent domain.
C) A foreclosure.
D) Fire damage.
E) All of these choices are involuntary conversions.

Accepted Answer

Foreclosure is a voluntary action taken by the lender to repossess the property due to a borrower's default on the mortgage. All other options listed are examples of involuntary conversions, which occur when property is lost or destroyed due to events beyond the owner's control.

Question 9

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, which means that disallowed losses between related taxpayers cannot be used to offset gains or income. This is intended to prevent related parties from manipulating their taxes by transferring losses between each other. The other choices are not accurate regarding disallowed losses between related taxpayers.

Question 10

Explain whether the saleat 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 saleat a loss of...

Question 11

Arlington LLC exchanged land used in its business for some new land. Arlington originally purchased the land it exchanged for $28,500. The new land had a fair market value of $35,250. Arlington also received $2,500 of office equipment in the transaction. What is Arlington'srecognized gain or loss on the exchange?
A) $0.
B) $2,500.
C) $6,750.
D) $9,250.
E) None of the choices are correct.

Accepted Answer

Arlington's recognized gain is the lesser of the realized gain or the boot received. The realized gain is $6,750 ($35,250 + $2,500 - $28,500), and the boot received is $2,500. Therefore, the recognized gain is $2,500.

Question 12

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 sale of inventory at a gain would not qualify because inventory is considered to be sold in the ordinary course of business and not as an installment sale. The sale of securities would also not qualify because they are not considered to be used in a business. Land sold at a loss would not qualify because installment sale treatment is only available for gains.

Question 13

Manassas purchased a computer several years ago for $2,800. On November 10^th of the current year, the computer was worth $ 920. If $1,120 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 14

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 15

Each of the following is true except for:
A) a direct involuntary conversion occurs when property taken under eminent domain is replaced with other property.
B) qualified replacement property rules are more restrictive than the like-kind property rules.
C) an indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used to purchase qualified replacement property.
D) losses realized in involuntary conversions are deferred.
E) all of the choices are true.

Accepted Answer

In involuntary conversions, realized losses are not deferred; they are generally recognized. The deferral applies to gains when the proceeds are reinvested in qualified replacement property, not to losses.

Question 16

Arlington LLC exchanged land used in its business for some new land. Arlington originally purchased the land it exchanged for $28,000. The new land had a fair market value of $35,000. Arlington also received $2,000 of office equipment in the transaction. What is Arlington'srecognized gain or loss on the exchange?
A) $0.
B) $2,000.
C) $7,000.
D) $9,000.
E) None of the choices are correct.

Accepted Answer

The answer of Arlington LLC exchanged land used in its...

Question 17

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 18

How long after the initial exchange does a taxpayer have to identify replacement property in a like-kind exchange?
A) The like-kind property to be received must be identified within 45 days.
B) The like-kind property to be received must be identified by the earlier of 45 days or the last day of the taxpayer's taxable year.
C) The like-kind property to be received must be identified within 180 days.
D) There is no deadline for the identification of replacement property.
E) All of the choices are correct.

Accepted Answer

The like-kind property to be received in a like-kind exchange must be identified within 45 days from the date of the initial property transfer.

Question 19

Andrea sold a piece of machinery she used in her business for nine months. The amount realized was $50,180 and the adjusted basis was $55,900. 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 20

The general rule regarding the exchanged basis in the new property received in a like-kind exchange is:
A) The basis is equal to the fair market value of the new property.
B) The basis is equal to the fair market value of the old property.
C) The basis is equal to the adjusted basis of the old property.
D) The basis is equal to the cost basis of the old property.
E) All of the choices are correct.

Accepted Answer

The basis of the new property received in a like-kind exchange is equal to the adjusted basis of the old property. This means that any depreciation or other adjustments made to the old property before the exchange will carry over to the new property. This is important for calculating future tax implications and any potential gains or losses on the new property.

Quiz 3: Property Dispositions

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?

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?

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?

Sadie sold 10 shares of stock to her brother, George, for $530 16 months ago. Sadie had purchased the stock for $660 two years earlier. If George sells the stock for $790, what are the amount and character of his recognized gain or loss in the current year?

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?

A deferred like-kind exchange does not help accomplish which of the following objectives?

Which of the following is not an involuntary conversion?

Which of the following is true regarding disallowed losses between related taxpayers?

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

Which of the following may qualify as an installment sale?

Manassas purchased a computer several years ago for $2,800. On November 10th of the current year, the computer was worth $ 920. If $1,120 of depreciation deductions had been taken, what is Manassas's tax-adjusted basis for the computer?

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?

Each of the following is true except for:

Which of the following is not true regarding installment sales?

How long after the initial exchange does a taxpayer have to identify replacement property in a like-kind exchange?

Andrea sold a piece of machinery she used in her business for nine months. The amount realized was $50,180 and the adjusted basis was $55,900. What is Andrea's gain or loss realized, and what is the character of the gain or loss?

The general rule regarding the exchanged basis in the new property received in a like-kind exchange is:

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?

Manassas purchased a computer several years ago for $2,800. On November 10^th of the current year, the computer was worth $ 920. If $1,120 of depreciation deductions had been taken, what is Manassas's tax-adjusted basis for the computer?

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?