Question 1

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 2

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

Accepted Answer

According to the tax code, a net § 1231 loss is treated as an ordinary loss. This means it can be used to offset ordinary income, whereas a net § 1231 gain is treated as a capital gain.

Question 3

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

Accepted Answer

This statement is false. Short-term capital gains are generally subject to ordinary income tax rates, while long-term capital gains are eligible for special tax rates that are typically lower than ordinary income tax rates.

Question 4

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

Accepted Answer

This statement is true. Under certain circumstances, involuntary conversion gains can be deferred if the proceeds are reinvested in similar property as part of a like-kind exchange.

Question 5

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 that are used in a trade or business, such as real estate, depreciable property, and certain other assets. Accounts receivable that arise in the ordinary course of business are not considered Section 1231 property.

Question 6

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

Accepted Answer

§ 1231 assets include property used in a trade or business, held for more than 1 year, and used in the production of income. Rental use depreciable machinery held more than 12 months meets these criteria and is therefore a § 1231 asset.

Question 7

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 true according to the IRS rules for capital gains tax. Net short-term capital losses are first applied to offset any 28% net long-term capital gains before being applied to 25% or 0%/15%/20% net long-term capital gains.

Question 8

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 treated separately from those of personal use assets and are not netted together.

Question 9

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 are specifically for gains and losses from the sale or exchange of property used in a trade or business.

Question 10

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

Accepted Answer

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

Question 11

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 12

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 13

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

Accepted Answer

The Code does contain two major depreciation recapture provisions: § 1245 and § 1250.

Question 14

An individual taxpayer with 2017 net short-term capital loss of $5,000 generally can deduct up to $3,000 for AGI and carry the balance forward to 2018.

Accepted Answer

This is correct. The taxpayer can deduct up to $3,000 of the net short-term capital loss for AGI, and carry forward the remaining $2,000 to future tax years.

Question 15

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

Accepted Answer

Section 1231 property refers to depreciable and real property used in a trade or business that is held for more than one year. If a net gain is realized from the sale of such property, it is subject to special tax treatment. Additionally, if there are casualty gains that exceed casualty losses for the taxable year related to this type of property, they are also considered under the Section 1231 rules.

Question 16

Once § 1231 gains are netted against § 1231 losses,if the gains exceed the losses,the net gain is offset by the "lookback" nonrecaptured § 1231 losses.

Accepted Answer

This statement is true. When calculating the net gain from § 1231 gains and losses, if the gains exceed the losses, the taxpayer must then look back to see if any nonrecaptured § 1231 losses from the previous five years can offset the net gain. If there are any such losses, they will reduce the net gain and potentially lower the tax liability.

Question 17

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 subject to a 10% AGI limitation. This means that the loss can only be deducted if it exceeds 10% of your adjusted gross income (AGI).

Question 18

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

Accepted Answer

Section 1231 specifically pertains to the sale or exchange of business properties, such as real estate, equipment, and depreciable assets. It does not apply to personal use property or casualty losses that occur outside of a business context.

Question 19

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

Question 20

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...

Quiz 14: Property Transactions, capital Gains and Losses, sec1231, and Recapture Provisions