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Exam 8: Property Transactions: Capital Gains and Losses, section 1231, and Recapture Provisions

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Question 51

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Cason is filing as single and has 2013 taxable income of $36,000 which includes $34,000 of 0%/15%/20% net long-term capital gain.What is his tax on taxable income using the alternative tax method?

A) $0.
B) $200.
C) $4,954.
D) $300.
E) None of the above.

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Question 52

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The possible holding periods for capital assets include:

A) Short-term = held 14 months or less.
B) Long-term = greater than six months.
C) Long-term = greater than 12 months.
D) Short-term = greater than 12 months.
E) None of the above.

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Question 53

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Why is it generally better to have a net § 1231 gain year followed by a net § 1231 loss year rather than a net § 1231 loss year followed by a net § 1231 gain year?

Which of the following events could result in § 1250 depreciation recapture?

Recognized gains and losses from disposition of a capital asset may occur as a result of a:

Gold Company signs a 13-year franchise agreement with Silver.Silver retained significant powers,rights,and a continuing interest.Gold Company (the franchisee) makes noncontingent payments of $18,000 per year for the first four years of the franchise.Gold Company also pays a contingent fee of 2% of gross sales every month.Which of the following statements is correct?

Martha is single with one dependent and files as head of household.She had 2013 taxable income of $45,000 which included $16,000 of 0%/15%/20% net long-term capital gain.What is her tax on taxable income using the alternative tax on net long-term capital gain method?

The following assets in Jack's business were sold in 2013: The office equipment had a zero adjusted basis and was purchased for $8,000.The automobile was purchased for $2,000 and sold for $1,200.The ABC stock was purchased for $1,800 and sold for $3,200.In 2013 (the year of sale) ,Jack should report what amount of net capital gain and net ordinary income?

The tax law requires that capital gains and losses be separated from other types of gains and losses because an alternative tax calculation may be used when taxable income includes net long-term capital gain.

In 2013,Mark has $18,000 short-term capital loss,$7,000 28% gain,and $6,000 0%/15%/20% gain.Which of the statements below is correct?

Section 1245 depreciation recapture potential does not carryover from the deceased taxpayer to the beneficiary taxpayer.

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.

A business taxpayer sells inventory for $80,000.The adjusted basis of the property is $58,000 at the time of the sale and the inventory had been held more than one year.The taxpayer has:

Short-term capital gain is eligible for a special tax rate only when it exceeds long-term capital gain.

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

A business taxpayer sells depreciable business property with an adjusted basis of $40,000 for $32,000.The taxpayer held the property for more than a year.The taxpayer has an $8,000 capital loss.

A retail building used in the business of a sole proprietor is sold on March 10,2013,for $342,000.The building was acquired in 2003 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?

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

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.

A lease cancellation payment received by a lessee is generally treated as an exchange because the lease extinguished is usually a capital asset.