If 1231 asset casualty gains and losses net to a gain

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Survey of Accounting
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Chapter 2 / Exercise 5
Survey of Accounting
Warren
Expert Verified
11. If § 1231 asset casualty gains and losses net to a gain, the gain is treated as a § 1231 gain.a. Trueb. FalseANSWER: True
12. Involuntary conversion gains may be deferred if the proceeds of the involuntary conversion are reinvested.
13. Personal use property casualty gains and losses are not subject to the § 1231 rules.
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Chapter 2 / Exercise 5
Survey of Accounting
Warren
Expert Verified
Chapter 17: Property Transactions: § 1231 and Recapture Provisions
14. In the “General Procedure for § 1231 Computation: Step 2. § 1231 Netting,” if the gains exceed the losses, the net gain is offset by the “lookback” nonrecaptured § 1231 losses.
15. Nonrecaptured § 1231 losses from the six prior tax years may cause current year net § 1231 gain to be treated as ordinary income.a. Trueb. FalseANSWER:FalseRATIONALE:The lookback period is five years.
16. A personal use property casualty loss is generally deductible only to the extent it exceeds 10% of AGI.
17. The Code contains two major depreciation recapture provisions—§§ 1245 and 1250.
18. The maximum § 1245 depreciation recapture generally equals the accumulated depreciation.
19. Section 1245 may apply to amortizable § 197 intangible assets.a. Trueb. FalseANSWER: True
20. For § 1245 recapture to apply, accelerated depreciation must have been taken on the property.
Chapter 17: Property Transactions: § 1231 and Recapture Provisions21. Section 1250 depreciation recapture will apply when accelerated depreciation was used on property used outside the United States and the property is sold at a gain.
22. The maximum amount of the unrecaptured § 1250 gain (25% gain) is the depreciation taken on real propertysold at a recognized gain.
23. Section 1231 lookback losses may convert some or all of § 1245 gain into ordinary income.a. Trueb. FalseANSWER:FalseRATIONALE:Section 1245 gain is treated as ordinary income and the gain does not need to be converted by §1231 lookback losses into ordinary income because it is already ordinary income.

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