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

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Question 51

True/False

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The effect of § 1244 may be to convert a capital loss into an ordinary loss deductible for adjusted gross income.

A) True
B) False

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Question 52

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In 2019, Satesh has $5,000 short-term capital loss, $13,000 0%/15%/20% long-term capital gain, and $7,000 qualified dividend income.Satesh is single and has other taxable income of $15,000.Which of the following statements is correct?

A) No more than $13,000 of Satesh's taxable income is taxed at 0%.
B) No more than $7,000 of Satesh's taxable income is taxed at 0%.
C) No more than $15,000 of Satesh's taxable income is taxed at 0%.
D) None of Satesh's taxable income is taxed at 0%.
E) All of Satesh's taxable income is taxed at 0%.

F) A) and B)
G) D) and E)

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Question 53

Multiple Choice

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Which of the following is correct?

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 and has an $8,000 capital loss.

There can be three subgroups within the long-term capital gain or loss group - 0%/15%/20%, 25%, and 28%.

To compute the holding period, start counting on the day after the property was acquired and include the day of disposition.

Stanley operates a restaurant as a sole proprietorship.Which of the following items are capital assets in his hands?

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

An individual has the following recognized gains and losses from disposition of § 1231 assets (all were vacant land) : $15,000 gain, $10,000 loss, $25,000 gain, and $2,000 loss.The individual has a $5,500 § 1231 lookback loss.The individual also has a $16,000 net short-term capital loss from the disposition of stock.Which of the following statements is correct?

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

The following assets in Jack's business were sold in 2018: Office equipment, purchased for $8,000, had a zero adjusted basis.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 2018 (the year of sale) , Jack should report what amount of net capital gain and net ordinary income?

Section 1245 applies to amortizable § 197 intangible assets.

Vertical, Inc., has a 2019 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2018.For 2019, Vertical's net § 1231 gain is treated as:

Thoren has the following items for the year: $4,000 of short-term capital gain, $5,000 of 0%/15%/20% long-term capital gain, and $1,500 of 28% capital loss.Which of the following is correct?

Which of the following would extinguish the § 1245 recapture potential?

Lana purchased for $1,410 a $2,000 bond when it was issued two years ago.She amortized $200 of the original issue discount and then sold the bond for $1,800.Which of the following statements is correct?

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

Which of the following events causes the purchaser of an option to add its cost to the basis of the property to which the option relates?

On January 10, 2019, Wally sold an option for $2,000 on vacant land he held as an investment.He had purchased the land in 2015 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, 2019, the option holder exercised the option.What is the amount and nature of Wally's gain or loss from disposition of the land?

A personal use property casualty loss that occurs in a nonfederally declared disaster area is deductible only to the extent it exceeds 10% of AGI.