Business Property: Gain, Loss, and Other Issues Exam Flashcards
Reinie George owns an X-Ray factory. She paid $3,000,000 for it in 2017. In 2021, she decides to sell it for $3,500,000. Her adjusted basis at the time of sale is $2,500,000. Based only on this information, what is Reinie’s gain?
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a. $1,000,000
b. $2,500,000
c. $3,000,000
d. $0
Tracy purchased land and a building for $200,000. The appraisal valued the land at $180,000 and the building at $45,000. What amounts should Tracy record as the basis for each asset? What would the results be of her purchase price allocation?
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a. land, $40,000; building, $160,000
b. land, $160,000; building, $40,000
c. land, $180,000; building, $45,000
d. land, $200,000; building, $0
- Moby Smith owns a covered dog park for which he paid $250,000. He decides he wants to sell the property. Moby’s adjusted basis is $225,000. His buyer, Wallace, pays Moby $350,000. Based only on this information, what is Moby’s gain?
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a. $100,000
b. $225,000
c. $350,000
d. $125,000
What is realized gain?
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a. the taxable portion of a gain
b. sales price received less the seller’s adjusted basis
c. perceived gain
d. nine-tenths of the law
Farid Zakaria is the exchanger in a 1031 transaction. He is to acquire replacement property with a value of $400,000. His adjusted basis is $350,000. In the exchange, he receives $100,000 in cash and $300,000 in like-kind real property. What amount is boot?
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a. $400,000
b. $100,000
c. $350,000
d. $250,000
Alpha Corporation uses a building in Ohio that was purchased five years ago for $100,000. Alpha has deducted $15,000 of depreciation on the building. This year, Alpha exchanged the building for real property in Illinois. The Illinois property had a FMV of $150,000. What amount of gain or loss should Alpha recognize on the exchange?
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a. $0, as this qualifies as a like-kind exchange
b. $65,000
c. $50,000
d. $15,000
Jason sold the building he used in his business for $100,000 cash, a note for $50,000, and the buyer assumed the $75,000 mortgage on the property. What is Jason’s amount realized on the transaction?
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a. $100,000
b. $150,000
c. $175,000
d. $225,000
An investor owns a commercial property which was bought for $1,000,000. The investor’s adjusted basis in the property is $900,000. The investor decides to sell and a buyer pays the investor $1,300,000 for the property. What is the investor’s realized gain?
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a. $100,000
b. $400,000
c. $1,000,000
d. $1,300,000
Which of the following types of property is not eligible to be exchanged in a tax-deferred manner under Section 1031?
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a. an apartment complex
b. a strip mall
c. stock in GameStop Corporation
d. a medical equipment storage warehouse
Kyle sold a machine used in his business for $10,000. Kyle paid $100,000 for the machine plus $2,000 in transfer taxes and $5,000 to deliver the machine. He has deducted $80,000 of depreciation on the machine. What is Kyle’s realized gain or loss on the transaction?
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a. loss of $10,000 Wrong Answer
b. loss of $15,000
c. loss of $17,000
d. loss of $97,000
When two or more taxpayers form a partnership, each partner contributes to some or all aspects of the business, including money, property, labor, or skill. In return for his or her contribution, each partner:
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a. shares in the profits of the business only
b. is exempt from income tax on the profits of the partnership
c. shares in both the profits and losses of the business
d. is liable only for his or her own actions
c. shares in both the profits and losses of the business
Mitch is a shareholder in a calendar year partnership that made a profit last year. How should Mitch expect to receive official notification of his share of the profits, and when should he expect to receive this notice?
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a. The details will be on Form W-2, due by January 31.
b. The details will be on Schedule K-1, due by the date Form 1065 is required to be filed, including extensions.
c. The details will be on Form W-2, due by the date Form 1065 is required to be filed, including extensions.
d. The details will be on Schedule K-1, due by January 31.
b. The details will be on Schedule K-1, due by the date Form 1065 is required to be filed, including extensions.
How many partners are required for a partnership to be eligible to elect to be treated as a large partnership?
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a. at least 5
b. more than 50
c. 100 or more
d. more than 75
c. 100 or more
Smith Enterprises, an eligible entity that has been in operation for several years, made an election by filing Form 8832, Entity Classification Election, on December 15 to be taxed as a partnership effective from January 1 of the next year. Under the general rule that binds business entities for a certain period after their Form 8832 election, how long must Smith Enterprises wait until it can elect to change its classification again by filing another Form 8832?
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a. 1 year
b. 60 months
c. 2 years
d. It can change its classification immediately if it so desires.
b. 60 months
Herbert Vehicles has three partners who decided to file Form 8832 to change the entity’s status to a C corporation instead of a partnership. When and how can they later make another election to change this classification?
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a. by filing Form 8832 any time after 60 months from the effective date of the original election
b. by filing Form 2553 at any time
c. They are not permitted to change their classification.
d. by filing Form 8832 at any time
a. by filing Form 8832 any time after 60 months from the effective date of the original election
