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

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Question 61

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An individual taxpayer received a valuable painting from his uncle, a famous painter. The painter created the painting. After the taxpayer held the painting for two years, he sold it for a $400,000 gain. The gain is a long-term capital gain.

A) True
B) False

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Question 62

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

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Section 1245 depreciation recapture pote...

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Question 63

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Section 1231 applies to the sale or exchange of business properties, but not to personal use activity casualties.

Cason is filing as single and has 2018 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.

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?

In early 2017, Wanda paid $33,000 for an option on a parcel of land she intended to hold as an investment. After a survey of the land (paid for by the grantor) determined that the parcel was much smaller than the grantor said it was, she let the option lapse when it expired in 2018 after 14 months. How should Wanda treat these events in 2017?2018?

Phil's father died on January 10, 2018. 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, 2017, when the stock was worth $430,000. His father paid no gift taxes. 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, 2018. What is the amount and nature of Phil's gain or loss from disposition of this property?

Section 1231 gain that is treated as long-term capital gain carries from the 2017 Form 4797 to the 2017 Form 1040, Schedule D, line .

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

An individual taxpayer has the gains and losses shown below. There are $3,000 of § 1231 lookback losses. What is the net long-term capital gain?

"Collectibles" held long-term and sold at a gain are subject to maximum tax rate of 28%. An individual taxpayer recently sold an antique car for $40,000. The car had been held for several years and $30,000 was originally paid for it. Explain why the car is or is not a collectible.

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

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

Section 1245 applies to amortizable § 197 intangible assets.

Which of the following is correct?

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

In 2014, Aaron purchased a classic car that he planned to restore for $12,000. However, Aaron is too busy to work on the car and he gives it to his daughter Ellie in 2018. At this time, the fair market value of the car has declined to $10,000. Aaron paid no gift tax on the transaction. Ellie completes some of the restoration herself with out-of-pocket costs of $5,000. She later sells the car for $30,000. What is Ellie's recognized gain or loss on the sale of the car?

Short-term capital losses are netted against long-term capital gains and long-term capital losses are netted against short-term capital gains.

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

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