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Exam 17: Property Transactions: Section 1231 and Recapture Provisions

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Question 41

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A business machine purchased April 10,2010,for $202,000 was fully depreciated in 2010 using § 179 immediate expensing.On August 15,2012,the machine was sold for $67,000.What is the amount and nature of the gain or loss from disposition of the machine?

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The machine was a § 1231 asset because i...

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Question 42

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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.

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B) False

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Question 43

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Which of the following is correct?

Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?

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

An individual had the following gains and losses during 2012 on property held for the long-term holding period: sale of Orange common stock ($8,000 gain) ; sale of real property used in the taxpayer's business ($1,800 loss) ; destruction of real property used in the taxpayer's business by fire ($1,000 loss) .Which of the following statements is correct?

Personal use property casualty gains and losses are not subject to the § 1231 rules.

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

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.

Section 1231 property generally does not include musical compositions.

Business equipment is purchased on March 10,2011,used in the business until September 29,2011,and sold at a $23,000 loss on October 10,2011.The equipment was not suitable for the work the business had purchased it for.The loss on the disposition should have been reported in the 2011 Form 4797,Part:

A business taxpayer trades in a used fully depreciated machine on a replacement machine.Because the machine traded in was worth more than the replacement machine,the taxpayer received cash in the transaction.Assume the used machine originally cost $100,000,was worth $32,000 when it was traded in,and the replacement machine was worth $20,000.Consequently,the taxpayer received $12,000 cash in the transaction.Is there recognized gain in this transaction and,if so,what type of gain?

A business machine purchased April 10,2011,for $62,000 was fully depreciated in 2011 using § 179 immediate expensing.On August 15,2012,the sole proprietor who owned the machine gave it to his son.On that date,the machine's fair market value was $57,000.The son did not use the machine in business or hold it as inventory and the machine was sold on November 22,2012,for $53,000.What is the amount and nature of the gain or loss from disposition of the machine? Where is it reported in the son's tax return?

Section 1245 may apply to depreciable farm equipment.