University of South Dakota - ACCT 430 Chapter 11 Quiz 1)An assets tax adjusted basis is usually less than its book adjusted basis

Question

University of South Dakota - ACCT 430

Chapter 11 Quiz

1)An assets tax adjusted basis is usually less than its book adjusted basis.

In a deferred like-kind exchange the like-kind property to be received must be identified within 60 days and acquired within 200 days from the initial exchange.
Which of the following is not used in the calculation of the amount realized:
1. Cash received
2. Liabilities assumed by buyer
3. Fair market value of other property received

d. Accumulated depreciation

e. The fair market value of other property received is included in amount realized.

Which of the following realized gains results in a recognized gain?
1. Computer equipment traded for computer equipment.
2. Los Angeles office building for Nebraska farm land.

c. Sale to a related party at a gain.

a. Sale of a machine held for six months at a gain.

Which of the following is true regarding §1245 depreciation recapture?
1. Changes the character of a loss.
2. The lesser of accumulated depreciation or gain recognized becomes ordinary.
3. Changes the amount of a gain.
4. Only applies to ordinary assets.
5. None of the choices are correct.
6. Depreciation recapture changes the lesser of accumulated depreciation or the gain recognized from section 1231 to ordinary gain.
Kimberly sold equipment that it uses in her business for $50,000. Kimberly bought the equipment two years ago for $60,000 and has claimed $30,000 of depreciation expense. What is the amount and character of Kimberly’s gain or loss?
1. $30,000 section 1231 gain.

b. $20,000 ordinary gain.

$5,000 ordinary gain, and $15,000 section 1231 gain.
$20,000 capital gain.
None of the choices are correct.
Section 1245 recaptures the lesser of depreciation taken ($30,000) or gain ($20,000) as ordinary income.

Erika Corporation sold an office building that it used in its business for $600,000. Erika bought the building ten years ago for $400,000 and has claimed $100,000 of depreciation expense. What is the amount and character of Erika’s gain or loss?

$20,000 ordinary and $280,000 section 1231 gain.

1. $100,000 ordinary and $200,000 section 1231 gain.
2. $300,000 ordinary gain.
3. $300,000 capital gain.
4. None of the choices are correct.
5. ** For corporations, section 291 recapture 20 percent of the lesser of depreciation taken or the realized gain as ordinary income. The remaining gain is section 1231.
Which of the following is true regarding section 1239?
1. It only applies to sales between unrelated taxpayers.
2. It only applies to gains on sales of capital gain property.
3. It only applies to gains on sales of depreciable property between related taxpayers.
4. It only applies to sales of non-residential property.
5. None of the choices are correct.
6. Section 1239 only applies to gains on sales of depreciable property between related taxpayers.
Baker traded furniture used in her business to a furniture dealer for some new furniture. Baker originally purchased the furniture for $50,000 and it had an adjusted basis of

$30,000 at the time of the exchange. The new furniture had a fair market value of

$35,000. Baker also gave $5,000 to the dealer in the transaction. What is Baker’s adjusted basis in the new furniture after the exchange?

a. $30,000.

b. $34,000.

c. $35,000.

d. $40,000.

None of the choices are correct.
The exchange qualifies as a like-kind exchange. Since boot was given in the transaction, the fair market value of the boot given ($5,000) is added to the adjusted basis ($30,000) of the property given up.