TAX 4001 Final 2024/2025 Exam
Questions and Corresponding Answers
with Surety of 100% Pass Mark
Gain or loss recognized on Disposition of Assets - 🧠ANSWER ✔✔used in a
trade or business
every asset disposition triggers - 🧠ANSWER ✔✔a realization event for tax
purposes
for disposition of assets, must determine - 🧠ANSWER ✔✔the amount
realized and adjusted basis for each asset
amount realized - 🧠ANSWER ✔✔-everything of value received from the
buyer less any selling costs
taxpayers selling subject to loans or mortgages must - 🧠ANSWER
✔✔increase amount realized by amount of debt relief
amount realized = - 🧠ANSWER ✔✔cash received + FMV of other property
+ buyer's assumption of liabilities - seller's expenses
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
1
PRIVACY STATEMENT. ALL RIGHTS RESERVED
,determination of adjusted basis - 🧠ANSWER ✔✔-cost basis is the amount
subject to cost recovery
-initial basis is generally its cost
=initial basis - cost recovery deductions
realized gain or loss on disposition - 🧠ANSWER ✔✔gain (loss) realized =
amount realized - adjusted basis
recognized gain or loss on disposition - 🧠ANSWER ✔✔gains(losses)
increase (decrease) the taxpayers' gross income
-must report on tax returns
in certain ciscumstances - 🧠ANSWER ✔✔taxpayers may defer
permanently exclude gains from taxable income
character of gain or loss - 🧠ANSWER ✔✔character recognized affects the
taxpayers income tax liability
every gain or loss characterized as - 🧠ANSWER ✔✔either ordinary or
capital(long or short-term)
ordinary assets - 🧠ANSWER ✔✔-created or used in a trade or business
-held for less than a year
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
2
PRIVACY STATEMENT. ALL RIGHTS RESERVED
, -ex: inventory, AR, machinery, and equipment
capital assets - 🧠ANSWER ✔✔-assets held for investment purposes for
production of income
-held for personal-use purposes
§1231 assets - 🧠ANSWER ✔✔depreciable assets and land used in a trade
or business held for more than one year
depreciation recapture - 🧠ANSWER ✔✔potentially applies to gains (BUT
NOT LOSSES) on the sale of depreciable or amortizable business property
depreciation recapture re characterizes - 🧠ANSWER ✔✔the gain on the
sale of a §1231 asset (all or a portion of the gain) from §1231 gain into
ordinary income
computing the amount of depreciation recapture depends on - 🧠ANSWER
✔✔the type of §1231 assets the taxpayer is selling (personal or real
property)
§1245 property - 🧠ANSWER ✔✔the gain from the sale of a §1245 property
is characterized as ordinary income to the extent the gain was created by
depreciation or amortization deductions
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
3
PRIVACY STATEMENT. ALL RIGHTS RESERVED
Questions and Corresponding Answers
with Surety of 100% Pass Mark
Gain or loss recognized on Disposition of Assets - 🧠ANSWER ✔✔used in a
trade or business
every asset disposition triggers - 🧠ANSWER ✔✔a realization event for tax
purposes
for disposition of assets, must determine - 🧠ANSWER ✔✔the amount
realized and adjusted basis for each asset
amount realized - 🧠ANSWER ✔✔-everything of value received from the
buyer less any selling costs
taxpayers selling subject to loans or mortgages must - 🧠ANSWER
✔✔increase amount realized by amount of debt relief
amount realized = - 🧠ANSWER ✔✔cash received + FMV of other property
+ buyer's assumption of liabilities - seller's expenses
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
1
PRIVACY STATEMENT. ALL RIGHTS RESERVED
,determination of adjusted basis - 🧠ANSWER ✔✔-cost basis is the amount
subject to cost recovery
-initial basis is generally its cost
=initial basis - cost recovery deductions
realized gain or loss on disposition - 🧠ANSWER ✔✔gain (loss) realized =
amount realized - adjusted basis
recognized gain or loss on disposition - 🧠ANSWER ✔✔gains(losses)
increase (decrease) the taxpayers' gross income
-must report on tax returns
in certain ciscumstances - 🧠ANSWER ✔✔taxpayers may defer
permanently exclude gains from taxable income
character of gain or loss - 🧠ANSWER ✔✔character recognized affects the
taxpayers income tax liability
every gain or loss characterized as - 🧠ANSWER ✔✔either ordinary or
capital(long or short-term)
ordinary assets - 🧠ANSWER ✔✔-created or used in a trade or business
-held for less than a year
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
2
PRIVACY STATEMENT. ALL RIGHTS RESERVED
, -ex: inventory, AR, machinery, and equipment
capital assets - 🧠ANSWER ✔✔-assets held for investment purposes for
production of income
-held for personal-use purposes
§1231 assets - 🧠ANSWER ✔✔depreciable assets and land used in a trade
or business held for more than one year
depreciation recapture - 🧠ANSWER ✔✔potentially applies to gains (BUT
NOT LOSSES) on the sale of depreciable or amortizable business property
depreciation recapture re characterizes - 🧠ANSWER ✔✔the gain on the
sale of a §1231 asset (all or a portion of the gain) from §1231 gain into
ordinary income
computing the amount of depreciation recapture depends on - 🧠ANSWER
✔✔the type of §1231 assets the taxpayer is selling (personal or real
property)
§1245 property - 🧠ANSWER ✔✔the gain from the sale of a §1245 property
is characterized as ordinary income to the extent the gain was created by
depreciation or amortization deductions
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
3
PRIVACY STATEMENT. ALL RIGHTS RESERVED
