Question7Marks: 1If the fair market value of Section 1245 property is greater than its basis, which of the following events would give rise to Section 1245 recapture as ordinary income?Choose one answer. a. Disposition at death b. Disposition by gift c. Like-kind exchange where boot is received d. All of the above e. None of the above A like-kind exchange where boot is received results in recapture, but the disposition at death or by gift does not. Correct Marks for this submission: 1/1. Question8Marks: 1Net capital gain is defined as:
Correct Marks for this submission: 1/1. Question9Marks: 1Karen Kirbey grants Pamela Prentiss a franchise to sell handcrafted gifts. Pamela pays Karen 15 percent of all revenue. Sales for 2011 were $550,000. How will Karen treat the payment she receives on her 2011 return?Choose one answer. Correct Marks for this submission: 1/1. Question10Marks: 1Tom Truman sells a business machine which he has owned for four years for $27,000. Tom purchased the machine for $42,000 and has taken $18,000 in depreciation. How much and what type of gain will result from this sale?Choose one answer.
Correct Marks: 1Jennifer Judd gives her son, Jim, Section 1245 property. The property has an adjusted basis of $11,000 to Jennifer, who has taken $2,000 in depreciation expense. Jim uses the property for three years, takes depreciation of $3,000 and then sells it for $14,000. What amount of gain must Jennifer recognize and what amount of gain must Jim recognize?Choose one answer. a. $2,000 Section 1231 gain; $3,000 Section 1231 gain b. $0; $5,000 ordinary income and $1,000 Section 1231 gac. $2,000 ordinary income; $6,000 Section 1231 gain d. $0; $3,000 ordinary income and $3,000 Section 1231 gaThere is no recapture when Jennifer gives the property to her son, Jim. Jim, however, will carry over the recapture potential of $2,000 and will also have recapture potential of $3,000 from the time that he owned it. The total of $5,000 is less than the realized gain of $6,000 ($14,000 - $8,000 basis); therefore, $5,000 is recaptured as ordinary income and the remaining $1,000 is Section 1231 gain.
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- Spring '11