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Exam 17: Property Transactions: Section 1231 and Recapture Provisions

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Question 41

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A business taxpayer sold all depreciable assets of the business, calculated the gains and losses, and would like to know the final character of those gains and losses.The taxpayer had $353,000 of adjusted gross income before considering the gains and losses from sale of the business assets.The taxpayer had unrecaptured § 1231 lookback loss of $12,000.What is the treatment of the gains and losses summarized in the following table after all possible netting and reclassification have been completed? What is the taxpayer's adjusted gross income? (Ignore the self- employment tax deduction.) $\begin{array} { l c c c c } \text { Asset } & \text { Purchase Date } & \text { Sale Date } & \text { Depreciation } & \text { Gain (Loss) } \\\text { Machine 1 } & 10 / 10 / 17 & 11 / 11 / 19 & \$ 323,000 & \$ 66,000 \\\text { Machine 2 } & 10 / 02 / 17 & 11 / 11 / 19 & 65,000 & ( 15,000 ) \\\text { Machine 3 } & 09 / 23 / 15 & 11 / 11 / 19 & 183,000 & 23,000 \\\text { Machine 4 } & 09 / 23 / 15 & 11 / 11 / 19 & 28,000 & 64,000\end{array}$

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The taxpayer has adjusted gross income o...

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Question 42

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Vanna owned an office building that had been held more than one year when it was sold for $567,000.The real estate had an adjusted basis of $45,000 for the land and $233,000 for the building.Straight-line depreciation of $162,000 had been taken on the building.What are the amount and initial character of the gain or loss from disposition of the real estate? Is any of the gain unrecaptured § 1250 (25%) gain?

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The real estate was used in business and...

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Question 43

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For § 1245 recapture to apply, accelerated depreciation must have been taken on the property.

Betty, a single taxpayer with no dependents, has the following gains and losses.Before considering these transactions, she has $45,000 of other taxable income.What is the treatment of the gains and losses and what is Betty's taxable income? $\begin{array} { l r } \text { § 1245 gain \#1 } & \$ 18,000 \\\text { §1245 gain \#2 } & 5,000 \\\text { Business equipment long-term casualty loss } & ( 8,000 ) \\\text { Business real property long-term casualty gain } & 12,000 \\\text { §1231 gain } & 13,000 \\\text { §1231 lookback loss } & ( 2,000 )\end{array}$

A retail building used in the business of a sole proprietor is sold on March 10, 2019, for $342,000.The building was acquired in 2009 for $400,000 and straight-line depreciation of $104,000 had been taken on it.What is the maximum unrecaptured § 1250 gain from the disposition of this building?

Section 1245 applies to amortizable § 197 intangible assets.

Section 1239 (relating to the sale of certain property between related taxpayers) does not apply unless the property:

The § 1245 depreciation recapture potential does not reduce the amount of the charitable contribution deduction under § 170.