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Exam 3: Property Dispositions

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Question 1

Multiple Choice

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

A) Tax adjusted basis is usually greater than book adjusted basis.
B) Tax adjusted basis is usually less than book adjusted basis.
C) Adjusted basis is cost basis less cost recovery deductions.
D) Tax adjusted basis may change over time.

E) None of the above
F) B) and D)

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A

Question 2

Multiple Choice

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Arlington LLC traded machinery used in its business to a machinery dealer for some new machinery.Arlington originally purchased the machinery for $60,000 and it had an adjusted basis of $28,000 at the time of the exchange.The new machinery had a fair market value of $35,000.Arlington also received $2,000 of office equipment in the transaction.What is Arlington's gain or loss recognized on the exchange?

A) $0.
B) $2,000.
C) $7,000.
D) $9,000.
E) None of the choices are correct.

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

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Question 3

Multiple Choice

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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?

Which one of the following is NOT considered boot in a like-kind exchange?

When does unrecaptured §1250 gains apply?

Which of the following is how gain or loss realized is calculated?

Generally,the amount realized is everything of value received in a sale less selling expenses.

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 $15,000 and $25,000,respectively?

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

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?

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

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?

In a deferred like-kind exchange the like-kind property to be received must be identified within 45 days and acquired within 180 days from the initial exchange.

Reid had a business building destroyed in a fire.The old building was purchased for $375,000 and $60,000 of depreciation deductions had been taken.Although the old building had a fair market value of $425,000 at the time of the fire,his insurance proceeds were limited to $400,000.Reid found qualified replacement property which he acquired six months later for $390,000.What is the amount of Reid's realized gain and recognized gain?

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

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?

§1250 recaptures the excess of accelerated depreciation over straight line depreciation on real property placed in service between 1981 and 1986 as ordinary income.

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

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

Odintz traded machinery for machinery.Odintz originally purchased its machine for $150,000 and the adjusted basis was $90,000 at the time of the exchange.The machinery received was purchased for $200,000,had an adjusted basis of $155,000 at the time of the exchange,and was subject to a mortgage of $50,000 that was paid off before the transfer.What is Odintz's adjusted basis in the new machinery after the exchange?