b. There is no recapture when Jennifer gives the property to her son, Jim. Jim, however, will carry over the 83. 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. c. A like-kind exchange where boot is received results in recapture, but the disposition at death or by gift 84. does not. d. The amount of ordinary income in a Section 1245 transaction depends on the extent of depreciation 85. allowed or allowable, but not to exceed the realized gain. “Excess” depreciation applies to Section 1250 property. c. Where depreciable property is sold, gain or loss will be recognized to the extent of the difference 86. between the selling price and the adjusted basis of the asset. The sales price of the asset is $11,000, and the adjusted basis is $6,000 (cost basis of $10,000 - depreciation of $4,000), resulting in a gain of $5,000 ($11,000 - $6,000). The amount of depreciation ($4,000) must be recaptured under Section 1245 as ordinary income. The remaining $1,000 ($5,000 - $4,000) quali fi es as Section 1231 gain. b. If depreciable nonresidential realty purchased under ACRS is held for more than 12 months, total 87. depreciation is recaptured as ordinary income to the extent of the gain from the sale of that property (assuming the statutory accelerated depreciation was used). Judy’s realized gain was $10,000. This was the difference between the sales price of $30,000 and her adjusted basis of $20,000 (basis of $100,000 - $80,000 of depreciation). Only $10,000 of the total depreciation is recaptured as ordinary income, because the recapture amount is limited to the extent of the $10,000 realized gain. d. The fi rst three items are Section 1250 property, but a single purpose silo used in agriculture is Section 88. 1245 property. c. Capital losses are deducted for AGI to the extent of capital gains included in the taxpayer’s gross income 89. plus $3,000. a. Net capital gain is de fi ned as the excess of the taxpayer’s net long-term capital gains over its net short- 90. term capital losses. e. Long-term capital gain can be generated from the sale of Section 1231 property or the sale of a capital 91. asset.
603 Testbank © 2010 CCH. All Rights Reserved. Chapter 12 e. Inventory and supplies are ordinary assets and depreciable property and land used in a trade or business 92. is a Section 1231 asset. a. The tax laws require that net Section 1231 gain be recaptured as ordinary income to the extent that the 93. taxpayer has nonrecaptured Section 1231 losses from the previous fi ve tax years. e. When an individual taxpayer sells collectibles held long-term, any gain is taxed at a maximum tax rate of 94. 28 percent. d. The taxpayer has a net short-term capital loss of $4,000 (through netting the $13,000 STCL and the 95. $9,000 STCG) and a net long-term capital loss of $8,000. The taxpayer takes a $3,000 deduction from the short-term capital loss fi rst which leaves a $1,000 short-term capital loss carryover and an $8,000 long- term capital loss carryover.
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- Fall '12
- Depreciation, long-term capital