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

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Question 21

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Which of the following comparisons is correct?

A) Corporations may carryback capital losses; individuals may not.
B) Both corporation and individual long-term capital losses carryover as short-term capital losses.
C) Corporations may carryforward capital losses indefinitely; individuals may only carryforward capital losses for five years.
D) Both corporations and individuals may use an alternative tax rate on net capital gains.
E) None of the above.

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Question 22

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Michael is in the business of creating posters (display art) for the movie industry.He creates a poster and sells it for a lump sum.He has:

A) Sold a capital asset.
B) Sold an ordinary asset.
C) No gain or loss.
D) An ordinary gain.
E) b.and d.

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Question 23

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Which of the following statements is correct?

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

Betty,a single taxpayer with no dependents,has the gains and losses shown below.Before considering these transactions,Betty has $45,000 of other taxable income.What is the treatment of the gains and losses and what is Betty's taxable income?

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

Which of the following assets held by a manufacturing business is a § 1231 asset?

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

Charmine,Inc.has already incurred a $10,000 § 1231 gain in 2013 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,Inc.already has $322,000 of taxable income which does not include a $10,000 §1231 gain or any capital gains or losses,what is taxable income?

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:

Casualty gains and losses from nonpersonal use assets are not netted against casualty gains and losses from personal use assets.

All collectibles short-term gain is subject to a potential alternative tax rate of 28%.

Phil's father died on January 10,2013.The father had owned stock for 20 years with a basis of $45,000 that was transferred to Phil as a gift on August 10,2012,when the stock was worth $430,000.His father paid gift tax of $31,000.This stock was worth $566,000 at the date of the father's death.Phil sold the stock for $545,000 net of commissions on February 23,2013.What is the amount and nature of Phil's gain or loss from disposition of this property?

Which of the following is correct concerning short sales of stock?

In the "General Procedure for § 1231 Computation: Step 2.§ 1231 Netting," if the gains exceed the losses,the net gain is offset by the "lookback" nonrecaptured § 1231 losses.

Section 1231 property generally includes certain purchased intangible assets (such as patents and goodwill)that are eligible for amortization and held for more than one year.

A net short-term capital loss first offsets any 28% net long-term capital gain before it offsets either 25% net long-term capital gain or 0%/15%/20% net long-term capital gain.

Hank inherited Green stock from his mother when she died.The mother had a tax basis of $366,000 for the Green stock when she died and the Green stock was worth $437,000 at the date of her death.Which of the statements below is correct?

Section 1245 may apply to amortizable § 197 intangible assets.

The tax law requires that capital gains and losses be separated from other types of gains and losses.Among the reasons for this treatment are: