Question 1

Copper Corporation sold machinery for $27,000 on December 31,2012.The machinery had been purchased on January 2,2009,for $30,000 and had an adjusted basis of $21,000 at the date of the sale.For 2012,what should Copper Corporation report?

Accepted Answer

A)   Ordinary income of $6,000.
B)   A § 1231 gain of $3,000 and $3,000 of ordinary income.
C)   A § 1231 gain of $6,000.
D)   A § 1231 gain of $6,000 and $3,000 of ordinary income.
E)   None of the above.F) B) and E)
G) A) and D)

Question 2

Blue Company sold machinery for $45,000 on December 23,2012.The machinery had been acquired on April 1,2010,for $49,000 and its adjusted basis was $14,200.The § 1231 gain,§ 1245 recapture gain,and § 1231 loss from this transaction are:

Accepted Answer

A)   $0 § 1231 gain, $30,800 § 1245 recapture gain, $0 § 1231 loss.
B)   $0 § 1231 gain, $0 § 1245 recapture gain, $34,800 § 1231 loss.
C)   $4,000 § 1231 gain, $34,800 § 1245 recapture gain, $0 § 1231 loss.
D)   $0 § 1231 gain, $34,800 § 1245 recapture gain, $14,200 § 1231 loss.
E)   None of the above.F) A) and E)
G) None of the above

Question 3

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

Accepted Answer

A) True 
 B)False

Question 4

Depreciation recapture under § 1245 and § 1250 is reported on Form 4797.

Accepted Answer

A) True 
 B)False

Question 5

Betty,a single taxpayer with no dependents,has the gains and losses shown below.Before considering these transactions,Betty has $45,000 of other taxable income.What is the treatment of the gains and losses and what is Betty's taxable income?

Accepted Answer

The § 1245 and § 1250 recapture gains ar...

Question 6

Section 1231 property generally does not include accounts receivables arising in the ordinary course of business.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is correct?

Accepted Answer

A)   Improperly classifying a § 1231 loss as a capital loss might affect adjusted gross income.
B)   Improperly classifying a capital loss as a § 1231 loss might affect adjusted gross income.
C)   Misclassifying a § 1231 gain as a short-term capital gain might affect adjusted gross income.
D)   Misclassifying a short-term capital gain as a § 1231 gain might affect adjusted gross income.
E)   All of the above.F) A) and C)
G) C) and E)

Question 8

Vertigo,Inc.,has a 2012 net § 1231 loss of $64,000 and had a $32,000 net § 1231 gain in 2011.For 2012,Vertigo's net § 1231 loss is treated as:

Accepted Answer

A)   Ordinary loss.
B)   Ordinary gain.
C)   Capital loss.
D)   Capital gain.
E)   None of the above.F) B) and E)
G) All of the above

Question 9

Verway,Inc.,has a 2012 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2011.For 2012,Verway's net § 1231 gain is treated as:

Accepted Answer

A)   $55,000 ordinary loss.
B)   $55,000 ordinary gain.
C)   $55,000 capital loss.
D)   $55,000 capital gain.
E)   None of the above.F) B) and C)
G) A) and D)

Question 10

Vertical,Inc.,has a 2012 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2011.For 2012,Vertical's net § 1231 gain is treated as:

Accepted Answer

A)   $45,000 long-term capital gain and $22,000 ordinary loss.
B)   $67,000 ordinary gain.
C)   $45,000 long-term capital gain and $22,000 ordinary gain.
D)   $67,000 capital gain.
E)   None of the above.F) A) and D)
G) None of the above

Question 11

Section 1231 applies to the sale or exchange of business properties,but not to personal use activity casualties.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is correct?

Accepted Answer

A)   When depreciable property is gifted to another individual taxpayer, the depreciation recapture potential is extinguished.
B)   When depreciable property is inherited by a taxpayer, the depreciation recapture potential is extinguished.
C)   When corporate depreciable property is distributed as a dividend, the depreciation recapture potential is generally not recognized.
D)   When depreciable property is contributed to charity, the depreciation recapture potential has no effect on the amount of the charitable contribution deduction.
E)   All of the above are correct.F) B) and E)
G) A) and E)

Question 13

Which of the following would extinguish the § 1245 recapture potential?

Accepted Answer

A)   An exchange of depreciable business equipment for like-kind business equipment with gain realized, but not recognized.
B)   A nontaxable incorporation under § 351.
C)   A nontaxable contribution to a partnership under § 721.
D)   A nontaxable reorganization.
E)   None of the above.F) A) and B)
G) D) and E)

Question 14

Orange Company had machinery destroyed by a fire on December 23,2012.The machinery had been acquired on April 1,2010,for $49,000 and its adjusted basis was $14,200.The machinery was completely destroyed and Orange received $30,000 of insurance proceeds for the machine and did not replace it.This was Orange's only casualty or theft event for the year.As a result of this event,Orange has:

Accepted Answer

A)   $4,200 ordinary loss.
B)   $15,800 § 1245 recapture gain.
C)   $14,200 § 1245 recapture gain.
D)   $30,000 § 1231 gain.
E)   None of the above.F) None of the above
G) A) and E)

Question 15

Part II of Form 4797 is used to report gains from the sale of depreciable business equipment sold at a gain and held more than one year.

Accepted Answer

A) True 
 B)False

Question 16

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.

Accepted Answer

The stamping machine ($21,736),tractor (...

Question 17

Personal use property casualty gains and losses are not subject to the § 1231 rules.

Accepted Answer

A) True 
 B)False

Question 18

A personal use property casualty loss is generally deductible only to the extent it exceeds 10% of AGI.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following real property could be subject to § 1250 depreciation recapture?

Accepted Answer

A)   Leasehold improvements placed in service in 2012 on which § 168(k)  additional first-year depreciation was taken.
B)   A building acquired in 1997 on which straight-line depreciation was taken.
C)   Equipment on which accelerated depreciation was taken.
D)   Land which was not depreciated.
E)   a. and b.F) C) and D)
G) All of the above

Question 20

The Code contains two major depreciation recapture provisions-§§ 1245 and 1250.

Accepted Answer

A) True 
 B)False

Exam 17: Property Transactions: Section 1231 and Recapture Provisions

Which of the following statements is correct?

Correct Answer
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Correct Answer
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A personal use property casualty loss is generally deductible only to the extent it exceeds 10% of AGI.

Correct Answer
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Verway,Inc.,has a 2012 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2011.For 2012,Verway's net § 1231 gain is treated as:

Correct Answer
verified

Part II of Form 4797 is used to report gains from the sale of depreciable business equipment sold at a gain and held more than one year.

Correct Answer
verified

Vertical,Inc.,has a 2012 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2011.For 2012,Vertical's net § 1231 gain is treated as:

Correct Answer
verified

The Code contains two major depreciation recapture provisions-§§ 1245 and 1250.

Correct Answer
verified

Section 1231 applies to the sale or exchange of business properties,but not to personal use activity casualties.

Correct Answer
verified

Betty,a single taxpayer with no dependents,has the gains and losses shown below.Before considering these transactions,Betty has $45,000 of other taxable income.What is the treatment of the gains and losses and what is Betty's taxable income?

Correct Answer
verified
The § 1245 and § 1250 recapture gains ar...
View Answer

Copper Corporation sold machinery for $27,000 on December 31,2012.The machinery had been purchased on January 2,2009,for $30,000 and had an adjusted basis of $21,000 at the date of the sale.For 2012,what should Copper Corporation report?

Correct Answer
verified

Personal use property casualty gains and losses are not subject to the § 1231 rules.

Correct Answer
verified

Section 1231 property generally does not include accounts receivables arising in the ordinary course of business.

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

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.

Correct Answer
verified
The stamping machine ($21,736),tractor (...
View Answer

Which of the following real property could be subject to § 1250 depreciation recapture?

Correct Answer
verified

Depreciation recapture under § 1245 and § 1250 is reported on Form 4797.

Correct Answer
verified

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

Correct Answer
verified

Which of the following would extinguish the § 1245 recapture potential?

Correct Answer
verified

Blue Company sold machinery for $45,000 on December 23,2012.The machinery had been acquired on April 1,2010,for $49,000 and its adjusted basis was $14,200.The § 1231 gain,§ 1245 recapture gain,and § 1231 loss from this transaction are:

Correct Answer
verified

Vertigo,Inc.,has a 2012 net § 1231 loss of $64,000 and had a $32,000 net § 1231 gain in 2011.For 2012,Vertigo's net § 1231 loss is treated as:

Correct Answer
verified

Exam 17: Property Transactions: Section 1231 and Recapture Provisions

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A personal use property casualty loss is generally deductible only to the extent it exceeds 10% of AGI.

Correct AnswerverifiedShow Answer

Verway,Inc.,has a 2012 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2011.For 2012,Verway's net § 1231 gain is treated as:

Correct AnswerverifiedShow Answer

Part II of Form 4797 is used to report gains from the sale of depreciable business equipment sold at a gain and held more than one year.

Correct AnswerverifiedShow Answer

Vertical,Inc.,has a 2012 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2011.For 2012,Vertical's net § 1231 gain is treated as:

Correct AnswerverifiedShow Answer

The Code contains two major depreciation recapture provisions-§§ 1245 and 1250.

Correct AnswerverifiedShow Answer

Section 1231 applies to the sale or exchange of business properties,but not to personal use activity casualties.

Correct AnswerverifiedShow Answer

Betty,a single taxpayer with no dependents,has the gains and losses shown below.Before considering these transactions,Betty has $45,000 of other taxable income.What is the treatment of the gains and losses and what is Betty's taxable income?

Correct AnswerverifiedThe § 1245 and § 1250 recapture gains ar...View AnswerShow Answer

Copper Corporation sold machinery for $27,000 on December 31,2012.The machinery had been purchased on January 2,2009,for $30,000 and had an adjusted basis of $21,000 at the date of the sale.For 2012,what should Copper Corporation report?

Correct AnswerverifiedShow Answer

Personal use property casualty gains and losses are not subject to the § 1231 rules.

Correct AnswerverifiedShow Answer

Section 1231 property generally does not include accounts receivables arising in the ordinary course of business.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedThe stamping machine ($21,736),tractor (...View AnswerShow Answer

Which of the following real property could be subject to § 1250 depreciation recapture?

Correct AnswerverifiedShow Answer

Depreciation recapture under § 1245 and § 1250 is reported on Form 4797.

Correct AnswerverifiedShow Answer

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

Correct AnswerverifiedShow Answer

Which of the following would extinguish the § 1245 recapture potential?

Correct AnswerverifiedShow Answer

Blue Company sold machinery for $45,000 on December 23,2012.The machinery had been acquired on April 1,2010,for $49,000 and its adjusted basis was $14,200.The § 1231 gain,§ 1245 recapture gain,and § 1231 loss from this transaction are:

Correct AnswerverifiedShow Answer

Vertigo,Inc.,has a 2012 net § 1231 loss of $64,000 and had a $32,000 net § 1231 gain in 2011.For 2012,Vertigo's net § 1231 loss is treated as:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified
The § 1245 and § 1250 recapture gains ar...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The stamping machine ($21,736),tractor (...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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