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Exam 11: Property Dispositions

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Question 21

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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.

A) True
B) False

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Question 22

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Silver sold machinery to Gold, a related entity, which it used in its business for $55,000. Silverbought the equipment a few years ago for $50,000 and has claimed $15,000 of depreciation expense. What is the amount and character of Silver's gain?

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Question 23

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What is the character of land used in an active trade or business for two years?

Buzz Corporation sold an office building that it used in its business for $500,000. Buzz bought the building ten years ago for $650,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Buzz's gain or loss?

The amount realized is the sale proceeds less the adjusted basis.

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?

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

A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.

Which of the following may qualify as an installment sale?

Manassas purchased a computer several years ago for $2,200. On November 10th of the current year, the computer was worth $800. If $1,000 of depreciation deductions had been taken, what is Manassas' tax adjusted basis for the computer?

Andrew, an individual, began business four years ago and has never sold a §1231 asset. Andrew owned each of the assets for several years. In the current year, Andrew sold the following business assets: Assuming Andrew's marginal ordinary income tax rate is 30 percent, what is the character of the gains and losses and what affect do they have on Andrew's tax liability?

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

Boot is not like-kind property involved in a like-kind exchange.

Tyson had a parcel of undeveloped investment land that he wanted to trade for a warehouse to be used in his business. He found a buyer willing to pay him $450,000 for the land. He transferred the land to a third party intermediary on April 1st of the current year. On May 10th, with the help of a commercial real estate agent, Tyson identified two suitable warehouses. On August 10th he made an offer on the first building which was rejected. On August 13th an offer was accepted on the second warehouse. On September 23rd the third party intermediary transferred $500,000 ($450,000 fromthe original property plus $50,000 from Tyson) to the seller and conveyed title to the warehouse toTyson. Explain whether the exchange of property qualifies as a like-kind exchange.

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

Which of the following is not true regarding installment sales?

The adjusted basis is the cost basis less cost recovery deductions.

An asset's tax adjusted basis is usually greater than its book adjusted basis.

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 amountand character of Frederique's gain or loss?

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