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Exam 8: Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

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Question 71

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In 2016, Mark has $18,000 short-term capital loss, $7,000 28% gain, and $6,000 0%/15%/20% gain. Which of the statements below is correct?

A) Mark has a $5,000 capital loss deduction.
B) Mark has a $3,000 capital loss deduction.
C) Mark has a $13,000 net capital gain.
D) Mark has a $5,000 net capital gain.
E) Mark has a $18,000 net capital loss.

F) B) and E)
G) B) and C)

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Question 72

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A business machine purchased April 10, 2014, for $98,000 was fully depreciated in 2014 using § 179 immediate expensing. On August 15, 2016, the machine was sold for $67,000. What is the amount and nature of the gain or loss from disposition of the machine?

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The machine was a § 1231 asset because i...

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Question 73

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A retail building used in the business of a sole proprietor is sold on March 10, 2016, for $342,000. The building was acquired in 2006 for $400,000 and straight-line depreciation of $104,000 had been taken on the building. What is the maximum unrecaptured § 1250 gain from the disposition of this building?

The maximum amount of the unrecaptured § 1250 gain (25% gain) is the depreciation taken on real property sold at a recognized gain.

Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?

The holding period of property given up in a like-kind exchange includes the holding period of the asset received if the property that has been exchanged is a capital asset.

The chart below describes the § 1231 assets sold by the Ecru Company (a sole proprietorship) this year. Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year. Assume there is a § 1231 lookback loss of $4,000.

If there is a net § 1231 loss, it is treated as an ordinary loss.

Involuntary conversion gains may be deferred if the proceeds of the involuntary conversion are reinvested.

An individual had the following gains and losses during 2016 on property held for the long-term holding period: sale of Orange common stock ($8,000 gain) ; sale of real property used in the taxpayer's business ($1,800 loss) ; destruction of real property used in the taxpayer's business by fire ($1,000 loss) . Which of the following statements is correct?

Copper Corporation sold machinery for $47,000 on December 31, 2016. The machinery had been purchased on January 2, 2013, for $60,000 and had an adjusted basis of $41,000 at the date of the sale. For 2016, what should Copper Corporation report?

Williams owned an office building (but not the land) that was destroyed by a fire. The building was insured and Williams has a $156,000 gain because his insurance recovery exceeded his adjusted basis for the building. Williams may replace the building. Williams had taken $145,000 of depreciation on the building, has no § 1231 lookback loss, has no other § 1231 transactions for the year, and has no Schedule D transactions for the year. What is the final nature of Jamison's gain for the year and what tax rate(s) apply to the gain if:

If § 1231 asset casualty gains and losses net to a gain, the gain is treated as a § 1231 gain.

Individuals who are not professional real estate developers may get capital gain treatment for sale of their real property if they engage only in limited development activities.

Jambo invented a new flexible cover for a popular brand of cellphone, but did not have the finances to begin production of the cover. Instead, he sold all his rights to the invention (after patenting it) for $450,000 plus $.10 for each cover sold by the company that purchased the patent. Jambo had a zero tax basis for the invention. What is the character of his gain from disposition of the patent?

Michael is in the business of creating posters (display art) for the movie industry. He creates a poster and sells it for a lump sum. He has:

Red Company had an involuntary conversion on December 23, 2016. The machinery had been acquired on April 1, 2014, for $49,000 and its adjusted basis was $14,200. The machinery was completely destroyed by fire and Red received $10,000 of insurance proceeds for the machine and did not replace it. This was Red's only casualty or theft event for the year. As a result of this event, Red initially has:

When a patent is transferred, the most common forms of payment received by the transferor are a lump sum and/or periodic payment.

In 2016, Satesh has $5,000 short-term capital loss, $13,000 0%/15%/20% long-term capital gain, and $7,000 qualified dividend income. Satesh is single and has other taxable income of $15,000. Which of the following statements is correct?

Section 1231 property generally does not include artistic compositions.