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

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Question 41

True/False

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

A) True
B) False

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Question 42

Multiple Choice

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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 2015?

A) $25,000
B) $27,000
C) $28,500
D) $30,000
E) None of the above

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

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Question 43

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

Gold Company signs a 13-year franchise agreement with Silver.Silver retained significant powers,rights,and a continuing interest.Gold Company (the franchisee) makes noncontingent payments of $18,000 per year for the first four years of the franchise.Gold Company also pays a contingent fee of 2% of gross sales every month.Which of the following statements is correct?

Individuals who are not professional real estate developers may get capital gain treatment for sale of their real property if they engage only in limited development activities.

Rental use depreciable machinery held more than 12 months is an example of a § 1231 asset.

On June 1,2015,Brady purchased an option to buy 1,000 shares of General,Inc.at $40 per share.He purchased the option for $3,000.It was to remain in effect for five months.The market experienced a decline during the latter part of the year,so Brady decided to let the option lapse as of December 1,2015.On his 2015 tax return,what should Brady report?

For tax purposes,there is no original issue discount on a bond unless the bond is issued for less than its face value and the difference between the face value and the bond issue price is at least one-fourth of 1 percent of the redemption price at maturity multiplied by the number of years to maturity.

In 2015,Mark has $18,000 short-term capital loss,$7,000 28% gain,and $6,000 0%/15%/20% gain.Which of the statements below is correct?

Which of the following comparisons is correct?

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

Lease cancellation payments received by a lessor are always ordinary income because they are considered to be in lieu of rental payments.

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?

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

The tax law requires that capital gains and losses be separated from other types of gains and losses because an alternative tax calculation may be used when taxable income includes net long-term capital gain.

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.

An individual taxpayer with 2015 net short-term capital loss of $5,000 generally can deduct up to $3,000 for AGI and carry the balance forward to 2016.

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.

Cason is filing as single and has 2015 taxable income of $36,000 which includes $34,000 of 0%/15%/20% net long-term capital gain.What is his tax on taxable income using the alternative tax method? Note: Use the tax rate schedule rather than the tax table.

Section 1231 property generally does not include artistic compositions.