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Exam 3: Property Dispositions

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Question 1

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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?

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$3,000 realized and recognized gain.
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Question 2

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The saleat 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) B) and C)
G) C) and E)

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Question 3

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

A taxpayer that receives boot in a like-kind exchange resulting in a gain recognizes as gain the lesser of the fair market value of the boot received or the gain realized.

Which of the following is not true regarding installment sales?

Frederique sold furniture that she uses in her business for $15,250. Frederique bought the furniture a few years ago for $39,950 and has claimed $20,050 of depreciation expense. What is the amount and character of Frederique's gain or loss?

The sale of land held for investment results in which of the following types of 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.

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

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

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

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

In the current year, Raven sold machinery with a fair market value of $200,000. The machinery's original basis was $190,000 and Raven's accumulated depreciation on the machinery was $40,000, so its adjusted basis to Raven was $150,000. Raven received $50,000 in the current year and a note paying Raven $75,000 a year for two years beginning next year. What is the amount and character of the gain that Raven will recognize in the current year?

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

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?

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

Explain whether the saleat a loss of a machine used in a trade or business generates an ordinary or capital loss?

Brandy sold a rental house that she owned for $150,000. Brandy bought the house four years ago for $140,000 and has claimed $25,000 of depreciation expense. What is the amount and character of Brandy's gain or loss?

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

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