Property Transactions - Capital Gains & Losses, §1231, & Recapture Provisions -

Property Transactions - Capital Gains & Losses, §1231, & Recapture Provisions -

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CHAPTER 8 PROPERTY TRANSACTIONS: CAPITAL GAINS AND LOSSES, SECTION 1231, AND RECAPTURE PROVISIONS SOLUTIONS TO PROBLEM MATERIALS Status: Q/P Question/ Present in Prior Problem Topic Edition Edition 1 Capital assets Unchanged 1 2 Capital assets Unchanged 2 3 § 1237 treatment Unchanged 3 4 Options Unchanged 4 5 Issue recognition Unchanged 5 6 Options Unchanged 6 7 Franchise Unchanged 7 8 Issue recognition New 9 Short sale Unchanged 9 10 Definition of a capital asset New 11 Net capital gain Unchanged 11 12 Collectibles Unchanged 12 13 Corporate capital losses Unchanged 13 14 Ethics problem Unchanged 14 15 Issue recognition Unchanged 15 16 Sec. 1231 nonpersonal use property casualty Unchanged 16 17 Capital assets New 18 Section 1231 gain from disposition with New §1245 depreciation recapture 19 Issue recognition New 20 Ethics problem Unchanged 18 21 Sec. 1231 lookback Modified 19 22 Sec. 1231 gain and loss planning Unchanged 20 23 Sec. 1245 recapture Unchanged 21 24 Sec. 197 amortization and § 1245 recapture Unchanged 22 25 Comprehensive §§ 1231, 1245, and 1250 Modified 23 26 Ethics problem Unchanged 24 8-1
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8-22003 Entities Volume/Solutions Manual Status: Q/P Question/ Present in Prior Problem Topic Edition Edition 27 Depreciation recapture and gifts Modified 27 28 Depreciation recapture for inherited property Unchanged 28 29 Covenant not to compete versus goodwill Unchanged 29 30 Sec. 1231: timber Modified 30 Bridge Discipline Problem 1 Financial accounting and tax differences Unchanged 1 Research Problem 1 Installment sale Unchanged 1 2 Sec 1245 recapture Unchanged 2 3 Definition of capital assets Unchanged 3 4 Sec. 1250 recapture Unchanged 4 5 Internet activity Unchanged 5 6 Internet activity Unchanged 6 7 Internet activity Unchanged 7 PROBLEM MATERIAL 1. The vacation home is a personal use asset and is, therefore, a capital asset. The $31,000 loss is nondeductible because it arose from the disposition of a personal use asset. The antique clock is a capital asset held for personal use. The basis of the clock is $12,000 -- its value in Mariah's grandmother's estate. The clock is sold at a $1,500 LTCG gain. The $48,000 song payment is ordinary income because Mariah was in the business of being a songwriter. Song payment $48,000 Clock 1,500 Gross income $49,500 pp. 8-3 to 8-5 2. By the close of business on the day Hyacinth purchases the shares, it must designate them as held for investment. The $48 ($63 - $15) per share gain would be long-term capital gain if the firm sells the shares after holding them more than a year. Smith, Raabe, and Maloney, CPAs 5191 Natorp Boulevard Mason, OH 45040
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Property Transactions: Capital, Section 1231 8-3 March 17, 2002 Vice-President, Finance Hyacinth, Inc. 200 Morningside Drive
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Property Transactions - Capital Gains & Losses, §1231, & Recapture Provisions -

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