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Exam 11: Property Dispositions

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Question 51

Multiple Choice

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The sale at a loss of machinery that was used in a trade or business and held for more than one year results in which of the following types of loss?

A) Capital.
B) §291.
C) §1231.
D) §1245.
E) None of the choices are correct.

F) A) and C)
G) B) and D)

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Question 52

Multiple Choice

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

A) Sale of a machine at a gain.
B) Sale of stock held for investment.
C) Sale of a §1231 asset.
D) Sale of inventory.
E) None of the choices are correct.

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

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Question 53

Multiple Choice

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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?

§1239 recharacterizes 50 percent of the gain on sales to a related party as ordinary income.

Kristi had a business building destroyed in an earthquake.The old building was purchased for $250,000, and $80,000 of depreciation deductions had been taken.Her insurance proceeds were $550,000.Although the replacement property was much larger and nicer than her old building, Kristi's new property qualified as replacement property.She acquired the new property 13 months after the earthquake for $620,000.What is the amount of Kristi's realized gain and recognized gain and the basis in her new property?

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

Sandra sold some equipment for $10,000 in cash, $1,000 of office products, the buyer's assumption of her $1,500 loan, and incurred selling expenses of $500.What is Sandra's amount realized in the transaction?

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

Sarah sold 1,000 shares of stock to her brother, David, for $18,000 more than a year ago.Sarah had purchased the stock for $20,000 several years earlier.What is the amount and character of David's recognized gain or loss in the current year if he sells the stock for either $15,000 or $25,000?

A loss realized for property destroyed in a hurricane is deferred under the involuntary conversion rules.

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?

An installment sale is any sale where at least a portion of the sale proceeds is received in a subsequent taxable year.

Collins Corporation, of Camden, Maine, wants to exchange its manufacturing facility for Rockland Company's building.Both parties agree that Collins's facility is worth $200,000 and that Rockland's building is worth $175,000.Collins will not enter into the transaction unless it qualifies as a like-kind exchange.If Collins wants to avoid gain, what could the parties do to equalize the value exchanged but still allow the exchange to qualify as a 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?

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?

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

Which of the following is not used in the calculation of the amount realized:

Which of the following is not usually included in an asset's tax basis?

A parcel of land is always a capital asset.

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