TAX 4001 Exam Questions with Complete Solutions
depreciation recapture for real property sold at a gain - ANSWER is not subject to a different
type of recapture called §1250 depreciation recapture
depreciable real property is frequently referred to as - ANSWER §1250 property
when depreciable real property is sold at a gain - ANSWER the amount of gain recaptured as
ordinary income is limited to excess of AD deductions on property over the amount that
would have been deducted if the taxpayer had used straight-line
§1250 recapture generally no longer applies to gains on disposition of real property - ANSWER
now a modified version called §291 depreciation recapture applies to corps
§1250 recapture applies to gains on real property held - ANSWER one year or less even if the
taxpayer used straight-line`
tax treatment of unrecaptured §1250 gains - ANSWER other provisions may affect the rate
at which taxpayer gains are taxed
unrecaptured §1250 gain for individuals, gain from disposition of §125 property is - ANSWER a
§1231 gain and is netted with other §1231 gains and losses to determine whether the taxpayer
has a net §1231 gain or loss for the year
,unrecaptured §1250 gain is §1231 gain - ANSWER that is taxed at a max rate of 25%
if ultimately is is characterized as a long-term capital gain
all gain recognized from selling property that is a depreciable asset to related buyer is -
ANSWER ordinary income
regardless of the character of the asset to the seller
tax treatment of section 1231 gains or losses - ANSWER after recharacterizing §1231 gain as
ordinary income under §1245 and §291 the remaining §1231 gains and losses are netted
if gain exceeds the loss, - ANSWER net gain is long-term capital gain
if loss exceeds gain - ANSWER the net loss is treated as an ordinary loss
§1231 look-back rule - ANSWER turns what would otherwise be §1231 gain into ordinary
income
affects the character nut not the amount of gains on which a taxpayer is taxed
§1231 look back rule is designed to - ANSWER require taxpayers who recognize net §1231
gains to recapture those gains as ordinary gains to the extent they recognized §1231 losses
that were treated as ordinary losses in prior years
without the look-back rule - ANSWER taxpayers could carefully time the year in which
the §1231 assets are sold to maximize tax benefits
common exceptions to general rule that realized gains and losses are recognized for taxation
- ANSWER like-kind exchanges, installment sales, other nonrecognition provisions, and
related-person loss disallowance rules
, like-kind exchanges (§1031 - ANSWER taxpayers realize gains on exchanges just as taxpayers do
selling property for cash
taxpayers exchanging property are in a different situation than - ANSWER taxpayers selling
property for cash
taxpayers exchanging one property for another - ANSWER haven't changed their
relative economic position, before and they hold similar assets for use in their business
exchanges of property - ANSWER do not generate the wherewithal to pay taxes
while taxpayers that sell real property for cash must recognize gain - ANSWER taxpayers
exchanging property must defer gain realized if meeting certain requirements
to be a like-kind exchange, criteria - ANSWER 1. real property is exchanged for "like-kind" real
property
2. real property given up and real property received are "used in trade or business" or are
"held for investment" by the taxpayer
3. the exchange must meet certain time restrictions
definition of like-kind property - ANSWER real property used in a business or held for
investment is "like-kind" with other real property used in a business or held for investment
property ineligible for like-kind treatment - ANSWER real property held for sale, personal
property, domestic property exchanged for property used in a foreign country, all property
used in a foreign country
property use - ANSWER timing requirements (intermediaries), tax laws do not require
simultaneous exchange of assets
depreciation recapture for real property sold at a gain - ANSWER is not subject to a different
type of recapture called §1250 depreciation recapture
depreciable real property is frequently referred to as - ANSWER §1250 property
when depreciable real property is sold at a gain - ANSWER the amount of gain recaptured as
ordinary income is limited to excess of AD deductions on property over the amount that
would have been deducted if the taxpayer had used straight-line
§1250 recapture generally no longer applies to gains on disposition of real property - ANSWER
now a modified version called §291 depreciation recapture applies to corps
§1250 recapture applies to gains on real property held - ANSWER one year or less even if the
taxpayer used straight-line`
tax treatment of unrecaptured §1250 gains - ANSWER other provisions may affect the rate
at which taxpayer gains are taxed
unrecaptured §1250 gain for individuals, gain from disposition of §125 property is - ANSWER a
§1231 gain and is netted with other §1231 gains and losses to determine whether the taxpayer
has a net §1231 gain or loss for the year
,unrecaptured §1250 gain is §1231 gain - ANSWER that is taxed at a max rate of 25%
if ultimately is is characterized as a long-term capital gain
all gain recognized from selling property that is a depreciable asset to related buyer is -
ANSWER ordinary income
regardless of the character of the asset to the seller
tax treatment of section 1231 gains or losses - ANSWER after recharacterizing §1231 gain as
ordinary income under §1245 and §291 the remaining §1231 gains and losses are netted
if gain exceeds the loss, - ANSWER net gain is long-term capital gain
if loss exceeds gain - ANSWER the net loss is treated as an ordinary loss
§1231 look-back rule - ANSWER turns what would otherwise be §1231 gain into ordinary
income
affects the character nut not the amount of gains on which a taxpayer is taxed
§1231 look back rule is designed to - ANSWER require taxpayers who recognize net §1231
gains to recapture those gains as ordinary gains to the extent they recognized §1231 losses
that were treated as ordinary losses in prior years
without the look-back rule - ANSWER taxpayers could carefully time the year in which
the §1231 assets are sold to maximize tax benefits
common exceptions to general rule that realized gains and losses are recognized for taxation
- ANSWER like-kind exchanges, installment sales, other nonrecognition provisions, and
related-person loss disallowance rules
, like-kind exchanges (§1031 - ANSWER taxpayers realize gains on exchanges just as taxpayers do
selling property for cash
taxpayers exchanging property are in a different situation than - ANSWER taxpayers selling
property for cash
taxpayers exchanging one property for another - ANSWER haven't changed their
relative economic position, before and they hold similar assets for use in their business
exchanges of property - ANSWER do not generate the wherewithal to pay taxes
while taxpayers that sell real property for cash must recognize gain - ANSWER taxpayers
exchanging property must defer gain realized if meeting certain requirements
to be a like-kind exchange, criteria - ANSWER 1. real property is exchanged for "like-kind" real
property
2. real property given up and real property received are "used in trade or business" or are
"held for investment" by the taxpayer
3. the exchange must meet certain time restrictions
definition of like-kind property - ANSWER real property used in a business or held for
investment is "like-kind" with other real property used in a business or held for investment
property ineligible for like-kind treatment - ANSWER real property held for sale, personal
property, domestic property exchanged for property used in a foreign country, all property
used in a foreign country
property use - ANSWER timing requirements (intermediaries), tax laws do not require
simultaneous exchange of assets
