Question 1

The sale of computer equipment used in a trade or business for 9 months results in the following type of gain or loss?

Accepted Answer

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

Question 2

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

Accepted Answer

The answer of Which of the following sections does not...

Question 3

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?

Accepted Answer

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

Question 4

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

Accepted Answer

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Question 5

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

Accepted Answer

The answer of Which of the following sections recaptures or...

Question 6

The sale of machinery at a loss that was used in a trade or business and held for more than one year results in the following type 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. This type of loss is characterized as a net loss from the sale or exchange of certain business property, including real and depreciable property. The amount of the loss is calculated by subtracting the adjusted basis of the property from its selling price. Depending on the circumstances, this loss may be treated as an ordinary loss or a capital loss.

Question 7

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

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Question 8

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

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Question 9

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

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Question 10

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

Accepted Answer

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Question 11

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

Accepted Answer

When land held for investment is sold, any resulting gain or loss is generally treated as a capital gain or loss. This is because the land is considered a capital asset, and the sale of a capital asset typically results in a capital gain or loss. However, there may be other factors that could impact the tax treatment of the gain or loss, such as whether the land is considered "dealer property" or whether the taxpayer elected to treat the sale as §1231 property.

Question 12

Which of the following is true regarding depreciation recapture?

Accepted Answer

Depreciation recapture changes the character of a gain, as it shifts a portion of the gain from a capital gain to ordinary income. This occurs when the amount of depreciation claimed on an asset exceeds its adjusted basis. It applies to both real property and personal property. Option A is incorrect as it suggests that depreciation recapture changes the character of a loss, which is not true. Option C is also incorrect as it does not accurately describe what depreciation recapture does. Option D is incorrect, as depreciation recapture can apply to both ordinary assets and capital assets. Option E is incorrect, as one of the options (option B) is true.

Question 13

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

To calculate Sumner's gain or loss, we need to determine the adjusted basis of the equipment, which is the original cost of $80,000 minus the accumulated depreciation of $40,000, or $40,000.

The amount realized is $30,000, which is less than the adjusted basis of $40,000, resulting in a loss of $10,000.

Since this is Sumner's only disposition during the year and the equipment was used in its business, the loss is classified as a §1231 loss.

Question 14

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 calculated as the amount realized ($52,000) minus the adjusted basis of the property ($42,500), which equals $9,500. Because Foreaker held the property for more than one year and used it in its business, the gain is classified as a §1231 gain.

Question 15

Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten 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

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Question 16

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?

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Question 17

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

Accepted Answer

The answer of The sale of machinery for more than...

Question 18

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

Accepted Answer

The sale of inventory results in an ordinary gain or loss.

Question 19

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

Accepted Answer

§1245 gain applies to the sale of depreciable personal property such as equipment, which has been held for more than one year and where the accumulated depreciation exceeds the gain realized. So, option C is the correct choice.

Question 20

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

Accepted Answer

Land is not a §1245 asset because it is a non-depreciable asset. The other options are all depreciable assets and could potentially be considered §1245 assets if they meet certain criteria.

Quiz 10: Property Dispositions