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Chapter_11_and_12_Example_Test_Questions_Solutions

Chapter_11_and_12_Example_Test_Questions_Solutions -...

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Example Test Questions Chapter 11 Cathy owns property subject to a mortgage of \$5,000. Annual real estate taxes are \$800 and are due and payable on December 31. Cathy sells her property on July 1 of the current year. The buyer assumes her \$5,000 mortgage, and Cathy agrees to finance the sale by taking a mortgage note of \$50,000 and property valued at \$7,500. The buyer agrees to pay the seller's portion of the property taxes. What is Cathy's amount realized? a. \$50,000 b. \$57,500 c. \$62,500 d. \$62,900 e. \$63,300 ANS: e PTS: 1 Philip purchased an apartment building in 1987 for \$1,000,000. During 2008, the building is sold for \$800,000. The accumulated depreciation on the building as of the sale date was \$300,000. What is the amount and character of the gain recognized on the sale? a. \$100,000 Section 1250 ordinary income. b. \$100,000 Section 1231 long term capital gain. c. \$100,000 unrecaptured Section 1250 gain. d. \$100,000 ordinary income. ANS: C PTS: 1 Karl paid \$200,000 for business-use equipment. Using straight-line depreciation, his deduction would have been \$22,000, but Karl uses MACRS depreciation and deducts \$37,500 for the first two years of usage. At the beginning of the third year, Karl sells the equipment for \$190,000. How

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