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Exam 14: Property Transactions: Capital Gains and Losses

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Question 71

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Spencer has an investment in two parcels of vacant land.Parcel 1 is a capital asset and parcel 2 is a § 1231 asset.Spencer already has short-term capital loss for the year he would like to offset with capital gain.Spencer has § 1231 lookback loss that exceeds the gain from the disposition of either land parcel.Spencer only wants to sell one land parcel and each of them would yield the same amount of gain.The gain that would be recognized exceeds the short-term capital loss Spencer already has.Which of the statements below is correct?

A) Spencer will have a net capital loss no matter which land parcel he sells.
B) Spencer will have a net capital loss if he sells parcel 2.
C) Spencer will have a net capital loss if he sells parcel 1.
D) Spencer will have a net capital gain if he sells either parcel 1 or parcel 2.
E) None of the above.

F) A) and B)
G) A) and C)

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Question 72

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The tax law does not require that capital gains and losses be separated from other types of gains and losses because there is no alternative tax calculation when taxable income includes net long-term capital gain.

A) True
B) False

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Question 73

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A business taxpayer sold all the 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 $53,000 of adjusted gross income before considering the gains and losses from sale of the business assets.The taxpayer had unrecaptured § 1231 lookback loss of $22,000.What is the treatment of the gains and losses summarized in the chart below after all possible netting and reclassification has been completed? What is the taxpayer's adjusted gross income? (Ignore the self-employment tax deduction.)

The chart below describes the § 1231 assets sold by the Tan 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 $14,000.

On June10,2011,Ebon,Inc.acquired an office building as a result of a like-kind exchange.Ebon had given up a factory building that it had owned for 26 months as part of the like-kind exchange.Which of the statements below is correct?

Verdum,Inc.,has a 2011 net § 1231 gain of $57,000 and had a $12,000 net § 1231 loss in 2010.For 2011,Verdum's net § 1231 gain is treated as:

Lee was the holder of a patent on a wireless modem.During 2011,he sold all substantial rights in the patent for $365,000 in cash and a 2% royalty on the purchaser's first $10,600,000 of sales each year related to the product in which the patent is incorporated.Lee had not reduced the patent to practice.He had a $56,000 basis for the patent.During 2011,he received $10,000 in royalties.What is the nature and amount of Lee's gain?

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?

The maximum § 1245 depreciation recapture generally equals the accumulated depreciation.

A silo held more than one year and used in a business is destroyed in an earthquake.The silo originally cost $356,000 and was fully depreciated using straight-line depreciation.The silo was insured for its $543,000 replacement cost minus a deductible of $1,000.Which of the statements below is correct concerning these facts?

Residential real estate was purchased in 2008 for $145,000,held as rental property,and depreciated straight-line.Assume the land cost was $45,000 and the building cost was $100,000.Depreciation totaled $4,089.The building and land were sold on June 10,2011,for $383,000 total.What is the tax status of the property,the nature of the gain from the disposition,and is any of it § 1250 depreciation recapture gain or unrecaptured § 1250 gain?

Casualty gains and losses from nonpersonal use assets are netted against casualty gains and losses from personal use assets to determine the net casualty gain or loss.

Section 1231 property generally does not include paintings of artistic value held by the creator.

Harry inherited a residence from his mother when she died.The mother had a tax basis of $566,000 for the residence when she died and the residence was worth $433,000 at the date of her death.Which of the statements below is correct?

An individual has a $10,000 § 1245 gain,a $15,000 § 1231 gain,a $13,000 § 1231 loss,a $4,000 § 1231 lookback loss,and a $15,000 long-term capital gain.The net long-term capital gain is:

The three tax statuses are:

If a capital asset is sold at a gain,the holding period is not important.

The tax law does not require that capital gains and losses be separated from other types of gains and losses because there are no limitations on the deduction of net capital losses.

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

Nonrecaptured § 1231 losses from the six prior tax years may cause current year net § 1231 gain to be treated as ordinary income.