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

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Question 41

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Lynne owns depreciable residential rental real estate which has accumulated depreciation (all from straight-line) of $65,000.If Lynne sold the property, she would have a $53,000 gain.The initial characterization of the gain would be:

A) Section 1245 gain.
B) Section 1231 gain.
C) Section 1250 gain.
D) Section 1239 gain.
E) None of the above.

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

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Question 42

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If there is a net § 1231 loss, it is treated as a long-term capital loss.

A) True
B) False

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Question 43

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Section 1231 lookback losses may convert some or all of § 1250 gain into ordinary income.

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

Ryan has the following capital gains and losses for 2012: $6,000 STCL, $5,000 28% gain, $2,000 25% gain, and $6,000 0%/15% gain.Which of the following is correct:

Red Company had an involuntary conversion on December 23, 2012.The machinery had been acquired on April 1, 2010, for $49,000 and its adjusted basis was $14,200.The machinery was completely destroyed by fire and Red received $10,000 of insurance proceeds for the machine and did not replace it.This was Red's only casualty or theft event for the year.As a result of this event, Red initially has:

Sara is filing as head of household and has 2012 taxable income of $27,000 which includes $13,000 of net long-tem capital gain. The net long-term capital gain is made up of $10,000 25% gain and $3,000 0%/15% gain. What is the tax on her taxable income using the alternative tax method?

Describe the circumstances in which the potential § 1245 depreciation recapture is extinguished.

The 2011 "Qualified Dividends and Capital Gain Worksheet" is used:

Judith (now 37 years old) owns a collection of porcelain dolls that she acquired when she was a grade schooler.She had forgotten about them until her mother sent them to her. Her mother had discovered them in a box in her attic while she was cleaning out her house before selling it. Judith had originally acquired all the dolls as gifts from her parents, so she has no way to establish a basis for the dolls. Using information from the Internet, she prepares a careful inventory of the dolls that includes their name, when they were first available for sale, their current value, and other pertinent information. She then lists them for sale on the Internet. To her surprise, she quickly gets an offer of $5,000 for all of them and sells them. Judith has no other gain or loss transactions for the year and is in the 28% marginal tax bracket. What issues do these facts create?

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

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

Virgil was leasing an apartment from Marple, Inc.Marple paid Virgil $1,000 to cancel his lease and move out so that Marple could demolish the building.As a result:

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

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

The tax law requires that capital gains and losses be separated from other types of gains and losses because there are limitations on the deduction of net capital losses.

Martha is single with one dependent and files as head of household. She had 2012 taxable income of $45,000 which included $16,000 of 0%/15% net long-term capital gain. What is her tax on taxable income using the alternative tax on net long-term capital gain method?

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 2012?

Which of the following statements is correct?

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% net long-term capital gain.