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Exam 10: Property Dispositions

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Question 51

True/False

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Depreciation recapture changes both the amount and character of a gain.

A) True
B) False

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Question 52

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Which of the following is true regarding the §1231 look-back rule?

A) It only applies when a §1231 loss occurs.
B) It only applies when a §1231 gain occurs.
C) It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 loss in the prior five years.
D) It only applies when a §1231 gain occurs and there is a nonrecaptured §1231 gain in the prior five years.
E) None of the choices are correct.

F) A) and E)
G) A) and B)

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Question 53

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Boot is not like-kind property involved in a like-kind exchange.

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?

Residential real property is not like-kind with non-residential real property.

§1231 assets include all assets used in a trade or business.

A simultaneous exchange must take place for a transaction to qualify as a like-kind exchange.

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?

Which of the following is not true regarding an asset's adjusted basis?

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?

Koch traded machine 1 for machine 2 when the fair market value of both machines was $50,000.Koch originally purchased machine 1 for $75,000 and machine 1's adjusted basis was $40,000 at the time of the exchange.Machine 2's seller purchased it for $65,000 and machine 2's adjusted basis was $55,000 at the time of the exchange.What is Koch's adjusted basis in machine 2 after the exchange?

Which one of the following is not a requirement of a deferred like-kind exchange?

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?

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?

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?

§1250 recaptures the excess of accelerated depreciation over straight-line depreciation on real property placed in service before 1987 as ordinary income.

Taxpayers can recognize a taxable gain on the sale of an asset even though an asset's real economic value has declined.

Luke sold land valued at $210,000.His original basis in the land was $180,000.For the land,Luke received $60,000 in cash in the current year and a note providing $150,000 in the subsequent year.What is Luke's recognized gain in the current and subsequent year,respectively?

Losses on sales between related parties are realized but not recognized.

Ordinary gains and losses are obtained on the sale of investments.