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Exam 14: Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

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Question 21

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Jamison owned a rental building (but not the land) that was destroyed by a hurricane.The building was insured and Jamison has a $56,000 gain because his insurance recovery exceeded his adjusted basis for the building.Jamison does not intend to replace the building.Jamison had taken $45,000 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?

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Jamison initially has a casualty gain of...

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Question 22

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

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B) False

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Question 23

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Harold is a head of household, has $27,000 of taxable income in 2012 from non-capital gain or loss sources, and has the following capital gains and losses: What is Harold's taxable income and the tax on that taxable income?

Section 1245 may apply to depreciable farm equipment.

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.

Which of the following comparisons is correct?

The only things that the grantee of an option may do with the option are exercise it or let it expire.

Section 1250 depreciation recapture will apply when accelerated depreciation was used on property used outside the United States and the property is sold at a gain.

Laura purchased for $1,610 a $2,000 bond when it was issued two years ago.Laura amortized $200 of the original issue discount and then sold the bond for $1,800.Which of the following statements is correct?

Assume a building is subject to § 1250 depreciation recapture because it was acquired before 1987 and accelerated depreciation was used to depreciate it. The building is destroyed in a fire and this is the taxpayer's only casualty or theft for the year. In which of the following situations could there be a § 1250 depreciation recapture gain?

On June 1, 2012, Brady purchased an option to buy 1,000 shares of General, Inc.at $40 per share.He purchased the option for $3,000.It was to remain in effect for five months.The market experienced a decline during the latter part of the year, so Brady decided to let the option lapse as of December 1, 2012.On his 2012 tax return, what should Brady report?

Ranja acquires $200,000 face value corporate bonds for $186,000 when the bonds are issued.He holds the bonds as an investment for two years and then sells them for $198,000.He amortizes $2,000 of the OID.What tax issues does Ranja have with respect to these bonds?

Since the Code section that defines "capital asset" says what is not a capital asset, other Code sections have to help determine what is and what is not a capital gain or loss.

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

Hiram is a computer engineer and, while unemployed, invents a switching device for computer networks.He patents the device, but does not reduce it to practice.Hiram has a zero tax basis for the patent.In consideration of $800,000 plus a $1 royalty per device sold, Hiram assigns the patent to a computer manufacturing company.Hiram assigned all substantial rights in the patent.Which of the following is correct?

In early 2011, Wendy paid $66,000 for an option on a parcel of land she intended to hold as an investment.After a survey of the land (paid for by the grantor) determined that the parcel was much smaller than the grantor said it was, she let the option lapse when it expired in 2012 after 14 months.How should Wendy treat these events in 2011? 2012?

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:

An individual has the following recognized gains and losses from disposition of § 1231 assets (all the assets were vacant land) : $15,000 gain, $10,000 loss, $25,000 gain, and $2,000 loss.The individual has a $5,500 § 1231 lookback loss.The individual also has a $16,000 net short-term capital loss from the disposition of stock.Which of the following statements is correct?

Which of the following assets held by a cash basis accounting firm is a § 1231 asset?

A retail building used in the business of a sole proprietor is sold on March 10, 2012, for $342,000. The building was acquired in 2002 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?