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

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Question 51

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Charmine, a single taxpayer with no dependents, has already incurred a $10,000 § 1231 gain in 2014 and has no § 1231 lookback losses. The taxpayer purchased a business machine for $100,000 five years ago, $70,000 of depreciation has been taken on it, and the machine is now worth $90,000. How will the net § 1231 gain or loss be affected if the taxpayer trades in the business machine for a like-kind business machine and pays an additional $12,000 in cash to obtain the replacement machine? If Charmine already has $322,000 of taxable income which does not include a $10,000 §1231 gain or any capital gains or losses, what is her taxable income?

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The current year § 1231 gain will not be...

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Question 52

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Theresa and Oliver, married filing jointly, and both over 65 years of age, have no dependents. Their 2014 income tax facts are: $\begin{array}{lr}\text { Theresa's wages } & \$ 165,000 \\\text { Oliver's wages } & 33,000 \\\text { Short-term capital gain } & 36,000 \\\text { Long-term capital loss } & (41,000)\end{array}$ $\text { What is their taxable income for } 2014?$

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The couple's taxable income is $172,300....

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Question 53

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When a patent is transferred, the most common forms of payment received by the transferor are a lump sum and/or periodic payment.

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

Section 1231 property generally does not include artistic compositions.

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.

Sara is filing as head of household and has 2014 taxable income of $57,000 which includes $3,000 of net long-term capital gain. The net long-term capital gain is made up of $1,000 25% gain and $2,000 0%/15%/20% gain. What is the tax on her taxable income using the alternative tax method?

Martha has both long-term and short-term 2013 capital gains and losses. The result of netting these gains and losses is a net long­term capital loss. Martha has no qualified dividend income. Also, Martha's 2013 taxable income puts her in the 28% tax bracket. Which of the following is correct?

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 short­term 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?

On January 10, 2014, Wally sold an option for $2,000 on vacant land he held as an investment. He had purchased the land in 2010 for $76,000. The option allowed the option holder to purchase the property for $122,000 plus the cost of the option. On March 1, 2014, the option holder exercised the option. What is the amount and nature of Wally's gain or loss from disposition of the land?

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

An individual has a $40,000 § 1245 gain, a $35,000 § 1231 gain, a $33,000 § 1231 loss, a $3,000 § 1231 lookback loss, and a $15,000 long-term capital gain. The net long-term capital gain is:

An individual taxpayer received a valuable painting from his uncle, a famous painter. The painter created the painting. After the taxpayer held the painting for two years, he sold it for a $400,000 gain. The gain is a long-term capital gain.

Section 1231 lookback losses may convert some or all of § 1245 gain into ordinary income.

Describe the circumstances in which the maximum unrecaptured § 1250 gain (25% gain) does not become part of the Schedule D netting process for an individual taxpayer?

Robin Corporation has ordinary income from operations of $30,000, net long-term capital gain of $10,000, and net short-term capital loss of $15,000. What is the taxable income for 2014?

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

A security that was purchased by an individual and qualifies as § 1244 stock becomes worthless. The taxpayer is single and the loss is $30,000. The loss is treated as an ordinary loss.

Sharon has the following results of netting her short-term and long-term capital gains and losses for 2014: $56,000 short-term capital loss, and $82,000 net long-term capital gain ($21,000 0%/15%/20% long-term capital gain, and $61,000 25% long-term capital gain). a() What is her net capital gain or loss for 2014? b() If there is a net capital loss, how much of the loss and what type of loss carries over to 2015? c() If there is a net long-term capital gain, what is it made up of?

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