Chapter 14 2

Chapter 14 2 - CHAPTER 7 PROPERTY TRANSACTIONS: CAPITAL...

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CHAPTER 7 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 ID Unchanged 5 6 Options Unchanged 6 7 Franchise Unchanged 7 8 Issue ID Unchanged 8 9 Holding Period Unchanged 9 10 Definition of a capital asset Unchanged 10 11 Net capital gain Unchanged 11 12 Collectibles Modified 12 13 Corporate capital losses Unchanged 13 14 Ethics problem Unchanged 14 15 Capital asset, holding period, and basis New 15 16 Sec. 1231 nonpersonal use property casualty Unchanged 16 17 Capital assets Modified 17 18 Patents Unchanged 18 19 Issue recognition Unchanged 19 20 Ethics problem Unchanged 20 21 Sec. 1231 lookback New 22 Sec. 1231 gain and loss planning Unchanged 22 23 Sec. 1245 recapture Unchanged 23 24 Sec. 197 amortization and § 1245 recapture Modified 24 25 Comprehensive §§ 1231, 1245, and 1250 Modified 25 26 Ethics problem Unchanged 26 7-1
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7-2 2005 Entities Volume/Solutions Manual Status: Q/P Question/ Present in Prior Problem Topic Edition Edition 27 Sec. 1245 and installment sales New 28 Depreciation recapture for inherited property Unchanged 28 29 Covenant not to compete versus goodwill Unchanged 29 30 Sec. 1231: timber Modified 30 31 Short Sale Unchanged 31 32 Reporting procedure New Bridge Discipline Problem 1 Financial accounting and tax differences Unchanged 1 Research Problem 1 Subdivided property and capital asset Unchanged 1 2 Sec 1245 recapture Unchanged 2 3 Definition of capital assets Unchanged 3 4 Character of gains and losses Unchanged 4 5 Internet activity Modified 5 6 Internet activity Unchanged 6 7 Internet activity Unchanged 7 8 Internet activity New 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. 7-3 to 7-6
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Property Transactions: Capital, Section 1231 7-3 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 & Willis, CPAs 5191 Natorp Boulevard Mason, OH 45040 March 17, 2004 Vice-President, Finance Hyacinth, Inc. 200 Morningside Drive
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Chapter 14 2 - CHAPTER 7 PROPERTY TRANSACTIONS: CAPITAL...

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