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Exam 3: Property Dispositions

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Question 51

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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?

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$8,571 gain recognized in the current ye...

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Question 52

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Jessie sold a piece of land held for investment for $250,000. Jessie bought the land two years ago for $195,000. What is the amount and character of Jessie's gain?

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Capital gain of $55,000.
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Question 53

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

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

Pelosi Corporation sold a parcel of land valued at $300,000. Its basis in the land was $250,000. For the land, Pelosi received $150,000 in cash in the current year and a note providing Pelosi with $150,000 in the subsequent year. What is Pelosi's recognized gain in the current and subsequent year, respectively?

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

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. Misha also received a used copier worth $2,000 in the transaction. What is Misha's adjusted basis in the new equipment after the exchange?

Winchester LLC sold the following business assets during the current year: (1) automobile, $30,000 cost basis, $12,000 depreciation, proceeds $20,000; (2) machinery, $25,000 cost basis, $20,000 depreciation, proceeds $10,000; (3) furniture, $15,000 cost basis, $10,000 depreciation, proceeds $4,000; (4) computer equipment, $25,000 cost basis, $6,000 depreciation, proceeds $10,000; (5) Winchester had unrecaptured §1231 losses of $3,000 in the prior 5 years. What is the amount and character of Winchester's gains and losses before the 1231 netting process?

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?

Explain whether the sale of a machine used in a trade or business that is sold at a loss generates an ordinary or capital loss?

Which of the following sections recaptures or recharacterizes only corporate taxpayer's gains?

§1239 recharacterizes 50 percent of the gain on sales to a related party as ordinary income. 100 percent of the gain is recharacterized as ordinary income.

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

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?

The §1231 look-back rule applies whether there is a net gain or loss.

Accounts receivable and inventory are examples of ordinary assets.

Collins Corporation, of Camden, Maine, wants to exchange its manufacturing equipment for Rockland Company's equipment. Both parties agree that Collins's machinery is worth $200,000 and that Rockland's machinery 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?

How long after the initial exchange does a taxpayer have to identify replacement property in a like-kind exchange?

Koch traded machine 1 for machine 2. 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?

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?