WEEK 7 HOMEWORK1) Rogers owns land that is operated as a parking lot. A shed was erected on the lot

WEEK 7 HOMEWORK1) Rogers owns land that is operated as a parking lot. A shed was erected on the lot for therelated transactions with customers. With regard to capital assets and Section 1231 assets, howshould these assets be classified? Land Sheda. Capital Capitalb. Section 1231 Capitalc. Section 1231 Section 1231d. Capital Section 12312) Which of the following sales should be reported as a capital gain?a. Sale of equipment.b. Sale of inventory.c. Real property subdivided and sold by a dealer.d. Government bonds sold by an individual investor.3) Which of the following items is a capital asset?a. Real property used in a trade or business.b. Accounts receivable for inventory sold.c. An automobile for personal use.d. Depreciable business property.4) A heavy equipment dealer would like to trade some business assets in a nontaxable exchange.Which of the following exchanges would qualify as nontaxable?a. A road grader held in inventory for another road grader.b. The company jet for a large truck to be used in the corporation.c. A corporate office building for a vacant lot.d. Investment securities for antiques to be held as investments.5) A sole proprietor of a farm implement store sold a truck for $15,000 that had been used tomake service calls. The truck cost $30,000 three years ago, and $21,360 depreciation was taken.What is the appropriate classification of the $6,360 gain for tax purposes?a. Section 1231 gain.b. Long-term capital gain.c. Ordinary gain.d. Short-term capital gain.6) Lanham, Inc. incurs the following losses on disposition of business assets during the year:Loss on the abandonment of office equipment $25,000Loss on the sale of a building (straight-linedepreciation taken in prior years of $200,000) 250,000Loss on the sale of delivery trucks 15,000What is the amount and character of the losses to be reported on Lanham’s tax return?a. $290,000 Section 1231 loss.b. $40,000 Section 1231 loss only.c. $40,000 Section 1231 loss, $250,000 long-term capital loss.d. $40,000 Section 1231 loss, $50,000 long-term capital loss.7) A taxpayer sold for $200,000 equipment that had an adjusted basis of $180,000. Through thedate of the sale, the taxpayer had deducted $30,000 of depreciation. Of this amount, $17,000 wasin excess of straight-line depreciation. What amount of gain would be recaptured under Section1245 (Gain from Dispositions of Certain Depreciable Property)?a. $20,000b. $17,000c. $13,000d. $30,0008) Four years ago, a self-employed taxpayer purchased office furniture for $30,000. During thecurrent tax year, the taxpayer sold the furniture for $37,000. At the time of the sale, thetaxpayer’s depreciation deductions totaled $20,700. What part of the gain is taxed as long-termcapital gain?a. $0b. $27,700c. $20,700d. $7,0009) Which of the following transactions or events generates a Section 1231 gain or loss. Assumeall assets are held for more than one year. For each option explain your answer.a. Theft of an uninsured diamond engagement ring, with $8,000 basis and a $15,000 FMV.b. Gain due to condemnation of land used in a business.c. Loss on sale of a warehouse.d. Gain of $4,000 on the sale of equipment. Depreciation deductions allowed were $10,000.10) Lorenzo owns equipment that cost $500,000 and has an adjusted basis of $230,000. If thestraight-line method of depreciation had been used, the adjusted basis would have been$300,000.a. What is the maximum selling price that Lorenzo could sell the equipment for withouthaving to recognize any Section 1245 ordinary income?b. If he sold the equipment and had to recognize $61,000 of Section 1245 ordinary income,what was his selling price?

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