Actg Tax Ch. 10

Front 1

36. Which of the following is not used in the calculation of the amount realized?
A. Cash.
B. Adjusted basis.
C. Fair market value of other property received.
D. Buyer's assumption of liabilities.
E. All of the above.

Back 1

B

Front 2

37. Which of the following is not true regarding an asset's adjusted basis?
A. Tax adjusted basis is usually greater than book adjusted basis.
B. Tax adjusted basis is usually less than book adjusted basis.
C. Adjusted basis is cost basis less cost recovery deductions.
D. All of the above are true.

Back 2

A

Front 3

38. Which of the following is not usually included in an asset's tax basis?
A. Purchase price
B. Sales tax
C. Shipping costs
D. Installation costs
E. None of the above

Back 3

E

Front 4

39. Which of the following is how gain or loss realized is calculated?
A. Cash less selling costs.
B. Cost basis less cost recovery.
C. Cash less cost recovery.
D. Amount realized less adjusted basis.
E. None of the above.

Back 4

D

Front 5

40. Which of the following realized gains results in a recognized gain?
A. Farm machinery traded for farm machinery.
B. Sale to a related party.
C. Involuntary conversion.
D. Iowa cropland exchanged for a Minnesota warehouse.

Back 5

B

Front 6

42. The sale of land held for investment results in the following type of gain or loss?
A. Capital.
B. Ordinary.
C. Section 1231.
D. Section 1245.
E. None of the above.

Back 6

A

Front 7

43. The sale of machinery at a loss that was used in a trade or business and held for more than one year
results in the following type of loss?
A. Capital.
B. Ordinary.
C. Section 1231.
D. Section 1245.
E. None of the above.

Back 7

C

Front 8

44. The sale of computer equipment used in a trade or business for 9 months results in the following type of
gain or loss?
A. Capital.
B. Ordinary.
C. Section 1231.
D. Section 1245.
E. None of the above.

Back 8

B

Front 9

45. The sale of machinery for more than the original cost basis (before depreciation), used in a trade or
business, and held for more than one year results in the following types of gain or loss?
A. Capital and Ordinary.
B. Ordinary only.
C. Capital and Section 1231.
D. Section 1245 and Section 1231.
E. None of the above.

Back 9

D

Front 10

46. Which of the following results in an ordinary gain or loss?
A. Sale of a machine at a gain.
B. Sale of stock held for investment.
C. Sale of a section 1231 asset.
D. Sale of inventory.
E. None of the above.

Back 10

D

Front 11

47. What is the character of land used in an active trade or business for two years?
A. Capital.
B. Ordinary.
C. Section 1231.
D. Investment.
E. None of the above.

Back 11

C

Front 12

48. Which of the following gains does not result solely in an ordinary gain or loss?
A. Sale of equipment held for less than a year.
B. Sale of inventory.
C. Sale of equipment where the gain realized exceeds the accumulated depreciation.
D. Sale of equipment where the accumulated depreciation exceeds the gain realized.
E. None of the above.

Back 12

C

Front 13

49. Which of the following does not ultimately result in a capital gain or loss?
A. Sale of a personal use asset.
B. Sale of inventory.
C.
Loss on equipment used in a trade or business held for more than one year, if it is the only asset sale
during the year.
D. Sale of capital stock in another company.
E. None of the above.

Back 13

B

Front 14

52. Which of the following is true regarding depreciation recapture?
A. Changes the character of a loss.
B. Changes the character of a gain.
C. Changes the amount of a gain.
D. Only applies to ordinary assets.
E. None of the above.

Back 14

B

Front 15

53. Which of the following is not a section 1245 asset if held for more than one year?
A. Machinery.
B. Automobile.
C. Building purchased in 1985 for which accelerated depreciation was elected.
D. Land.
E. None of the above.

Back 15

D

Front 16

56. Which of the following sections does not currently recapture or recharacterize a taxpayer's gain?
A. Section 1239.
B. Section 1244.
C. Section 1245.
D. Section 1250.
E. None of the above.

Back 16

D

Front 17

57. Which of the following sections recaptures or recharacterizes only corporate taxpayer's gains?
A. Section 291.
B. Section 1239.
C. Section 1245.
D. Unrecaptured section 1250 gains.
E. None of the above.

Back 17

A

Front 18

58. Which of the following transactions results solely in section 1245 gain?
A. Sale of machinery held for less than one year.
B.
Sale of machinery held for more than one year and where the gain realized exceeds the accumulated
deprecation.
C.
Sale of machinery held for more than one year and where the accumulated deprecation exceeds the
gain realized.
D. Sale of land held for more than one year and where the amount realized exceeds the adjusted basis.
E. None of the above.

Back 18

C

Front 19

61. Why does section 1250 recapture no longer apply?
A. Congress repealed the section.
B. The Tax Reform Act of 1986 changed the depreciation of real property to the straight-line method.
C. Section 1245 recapture trumps section 1250 recapture.
D. Because unrecaptured section 1250 gains now apply to all taxpayers instead.
E. None of the above.

Back 19

B

Front 20

62. When does unrecaptured section 1250 gains apply?
A. When the taxpayer makes the election.
B. It applies only when non-corporate taxpayers sell depreciable real property at a gain.
C. It applies when section 1245 recapture trumps section 1250 recapture.
D. It applies only when real property purchased before 1986 is sold at a gain.
E. None of the above.

Back 20

B

Front 21

65. Which of the following is not true regarding section 1239?
A. It only applies to related taxpayers.
B. It only applies to gains on sales of depreciable property.
C. It only applies to gains on sales of non-residential real property.
D. It does not apply to losses.
E. None of the above.

Back 21

C

Front 22

73. Which one of the following is not considered boot in a like-kind exchange?
A. Cash.
B. Other property.
C. Mortgage given.
D. Mortgage received.
E. All of the above.

Back 22

D

Front 23

74. Which one of the following is not true regarding a like-kind exchange?
A. Loss on like-kind property is not recognized.
B. Gains on boot given are deferred.
C. Losses on boot given is not recognized.
D. Securities can be like-kind with any other securities.
E. All of the above.

Back 23

C

Front 24

75. Which one of the following is not a requirement of a deferred like-kind exchange?
A. The like-kind property to be received must be identified within 45 days.
B. The exchange must be completed within the taxable year.
C. The like-kind property must be received within 180 days.
D. A third party intermediary is often used to facilitate the exchange.
E. All of the above.

Back 24

B

Front 25

76. How long does a taxpayer have to identify replacement property in a like-kind exchange?
A. The like-kind property to be received must be identified within 45 days.
B.
The like-kind property to be received must be identified by the earlier of 45 days or the last day of the
taxpayer's taxable year.
C. The like-kind property to be received must be identified within 180 days.
D. There is no deadline for the identification of replacement property.
E. All of the above

Back 25

A

Front 26

77. The general rule regarding the exchanged basis in a like-kind exchange is:
A. The basis is equal to the fair market value of the new property.
B. The basis is equal to the fair market value of the old property.
C. The basis is equal to the adjusted basis of the old property.
D. The basis is equal to the cost basis of the old property.
E. All of the above.

Back 26

C

Front 27

78. What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?
A. To facilitate finding replacement property.
B. To help acquire the replacement property.
C. To prevent the seller from receiving cash (boot) that will taint the transaction.
D. To certify the taxpayer's Form 8824.
E. All of the above.

Back 27

C

Front 28

80. Each of the following is true except for:
A.
A direct involuntary conversion occurs when property taken under imminent domain is replaced with
other property.
B. Qualified replacement property rules are more restrictive than the like-kind property rules.
C.
An indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used
to purchase qualified replacement property.
D. Losses realized in involuntary conversions are deferred.
E. All of the above are true.

Back 28

D

Front 29

81. Which of the following is not an involuntary conversion?
A. Destruction caused by a hurricane.
B. Imminent domain.
C. A foreclosure.
D. Fire damage.
E. All of the above are involuntary conversions.

Back 29

C

Front 30

.
82. Which of the following may qualify as an installment sale?
A. Sale of inventory at a gain.
B. Sale of securities.
C. Sale of asset used in a business at a gain.
D. Land sold at a loss.
E. All of the above are true.

Back 30

C

Front 31

84. Which of the following is not true regarding installment sales?
A. Only gains are eligible for installment sale reporting.
B. Depreciation recapture is deferred in an installment sale.
C. The gross profit percentage is needed to determine the annual gain recognized.
D. Stock sales are ineligible for installment sale treatment.
E. None of the above.

Back 31

B

Front 32

85. Which of the following is true regarding disallowed losses between related taxpayers?
A. The tax laws essentially treat related parties as the same taxpayer.
B. The holding period of the related party begins over.
C. The related party always receives a carryover basis.
D. The seller's realized loss is deferred until the buyer sells the assets.
E. None of the above.

Back 32

A