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Exam 11: Property Dispositions

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Question 51

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Sunshine LLC sold furniture for $76,000. Sunshine bought the furniture for $89,800 several years ago and has claimed $24,900 of depreciation expense on the machine. What is the amount and character of Sunshine's gain or loss?

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Question 52

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Maryexchanged an office building used in her business for some land. Mary originally purchased the building for $45,000, and it had an adjusted basis of $20,000 at the time of the exchange. The land had a fair market value of $40,000. Mary also gave $4,000 to the seller in the transaction. What is Mary's adjusted basis in the land after the exchange?

A) $20,000.
B) $24,000.
C) $36,000.
D) $40,000.
E) None of the choices are correct.

F) All of the above
G) A) and B)

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Question 53

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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?

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

Misha traded computer equipment used in her business to a computer dealer for some new computer equipment. Misha originally purchased the computer equipment for $15,000, and it had an adjusted basis of $11,000 at the time of the exchange.The computer equipment was worth $12,000 at the time of the exchange. Misha also received a used copier worth $2,000 in the transaction. What is Misha's realized and recognized gain/loss on the exchange?

The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Leesburg sold a machine for $2,200 on November 10 ^th 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?

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?

Alpha sold machinery that it used in its business to Beta, a related entity, for $40,000. Beta used the machinery in its business. Alpha bought the machinery a few years ago for $50,000 and has claimed $30,000 of depreciation expense. What is the amount and character of Alpha's gain?

Reid had a business building destroyed in a fire. The old building was purchased for $375,750, and $58,500 of depreciation deductions had been taken. Although the old building had a fair market value of $424,925 at the time of the fire, his insurance proceeds were limited to $398,500. Reid found qualified replacement property that he acquired six months later for $389,250. What is the amount of Reid's realized gain and recognized gain?

Only accelerated depreciation is recaptured for §1245 assets.

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

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

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?

Luke sold land valued at $210,050. His original basis in the land was $179,975. For the land, Luke received $60,050 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? (Do not round intermediate values. Round final values to whole number.)

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

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

Bateman Corporation sold an office building that it used in its business for $800,300. Bateman bought the building 10 years ago for $599,850 and has claimed $200,450 of depreciation expense. What is the amount and character of Bateman's gain or loss?

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

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