61 with respect to residential rental property a 80 or more of the gross rental inco 4313140

61 with respect to residential rental property a 80 or more of the gross rental inco 4313140

61) With respect to residential rental property

A) 80% or more of the gross rental income from the building or structure must be rental income from dwelling units in order for it to be classified as residential rental property.

B) hotels are not included in this category if less than half of the units are used on a transient basis.

C) 80% or more of the net rental income from the building or structure must be rental income from dwelling units in order for it to be classified as residential rental property.

D) gain is not subject to the depreciation recapture provisions if the property is held more than one year.

62) Marta purchased residential rental property for $600,000 on January 1, 1985.  Total ACRS deductions for 1985 through the date of sale amounted to $600,000. If the straight-line method of depreciation had been used, depreciation would have been $600,000. The property is sold for $750,000 on January 1 of the current year. The amount and character of the gain is

A) $750,000 Sec. 1231 gain.

B) $150,000 Sec. 1231 gain and $600,000 ordinary income.

C) $750,000 ordinary gain due to Sec 1245.

D) $750,000 ordinary gain due to Sec. 1250.

63) Emily, whose tax rate is 28%, owns an office building which she purchased for $900,000 on March 18 of last year. The building is sold for $950,000 on February 20 of this year when the adjusted basis of the building was $876,000. The tax results to Emily are

A) $74,000 1231 gain taxed at 15%.

B) $74,000 ordinary income taxed at 28%.

C) $24,000 1250 unrecaptured gain taxed at 25% and $50,000 1231 gain taxed at 15%.

D) $24,000 1231 gain taxed at 15% and $50,000 ordinary income taxed at 28%.

64) In 1980, Mr. Lyle purchased a factory building to use in business for $480,000. When Mr. Lyle sells

the building for $580,000, he has taken depreciation of $470,000. Straight-line depreciation would have been $400,000.  Mr. Lyle must report

A) $570,000 of ordinary gain.

B) $570,000 of Sec. 1231 gain.

C) $70,000 of ordinary income and $500,000 of Sec. 1231 gain.

D) $470,000 of ordinary gain and $100,000 of Sec. 1231 gain.

65) Ross purchased a building in 1985, which he uses in his manufacturing business. Ross uses the ACRS statutory rates to determine the cost-recovery deduction for the building. Ross's original cost for the building is $500,000 and cost-recovery deductions allowed are $500,000. If the building is sold for $340,000, the tax results to Ross are

A) $340,000 LTCG.

B) $340,000 Sec. 1231 gain.

C) $340,000 Sec. 1245 ordinary income.

D) $340,000 Sec. 1250 ordinary income.

66) Eric purchased a building in 2003 that he uses in his business. Eric uses the straight-line method for the building. Eric's original cost for the building is $420,000 and cost-recovery deductions are $120,000. Eric is in the top tax bracket and has never sold any other business assets.  If the building is sold for $560,000, the tax results are

A) $260,000 Sec. 1231 gain, all taxable at 20%.

B) $260,000 unrecaptured Sec. 1250 gain, all taxable at 25%.

C) $260,000 Sec. 1231 gain, of which $120,000 is unrecaptured Sec. 1250 gain taxable at 25% and the $140,000 balance is taxable at 20%.

D) $120,000 Sec. 1245 ordinary income, $140,000 Sec. 1231 gain taxable at 20%.

67) With regard to noncorporate taxpayers, all of the following statements are true regarding Sec. 1250 recapture except

A) Sec. 1250 affects the character of the gain, not the amount of the gain.

B) Sec. 1250 applies to assets sold or exchanged at either a gain or a loss.

C) Sec. 1250 ordinary income does not exist if the straight-line method of depreciation is used.

D) Sec. 1250 ordinary income is never more than the additional depreciation allowed.

68) In 1980, Artima Corporation purchased an office building for $400,000 for use in its business. The

building is sold during the current year for $550,000. Total depreciation allowed for the building was $350,000; straight-line would have been $320,000. As result of the sale, how much section 1231 gain will Artima Corporation report?

A) $350,000

B) $406,000

C) $320,000

D) $500,000

69) A corporation sold a warehouse during the current year. The straight-line depreciation method was used. Information about the building is presented below:

Date acquired

1984

Cost

$800,000

Accumulated Depreciation – Straight-line

620,000

Selling Price

890,000

How much gain should the corporation report as section 1231 gain?

A) $124,000

B) $620,000

C) $586,000

D) $710,000

70) Octet Corporation placed a small storage building in service in 1993. Octet's original cost for the building is $800,000 and the cost recovery deductions are $300,000. This year the building is sold for $1,100,000.  The amount and character of the gain are

A) Ordinary gain of $60,000 and Sec. 1231 gain of $540,000.

B) Ordinary gain of $300,000 and Sec. 1231 gain of $300,000.

C) Ordinary gain of $600,000.

D) Sec. 1231 gain of $600,000.

71) Millicent makes a gift of an organ to a church. Millicent uses the organ in her trade or business. The organ has a FMV of $6,500; a cost of $11,000; and $7,000 depreciation claimed. What is the amount of Millicent's charitable contribution deduction?

A) $2,500

B) $4,000

C) $6,500

D) 11,000

72) A taxpayer purchased a factory building in 1985 for $800,000. After claiming ACRS-accelerated depreciation of $800,000, she sells the asset for $1,000,000 during the current year. No payment is received during the current year, and the $1,000,000 balance to be paid with interest at the interest rate in four annual payments beginning one year from date of sale. The installment sales method is adopted. How much ordinary income is recognized in the current year?

A) $ -0-

B) $200,000

C) $800,000

D) $1,000,000

73) Douglas bought office furniture two years and four months ago for $25,000 to use in his business and elected to expense all of it under Sec. 179. Depreciation of $3,500 would have been taken under the MACRS rules. If Douglas converts the furniture to nonbusiness use today, Douglas must

A) amend the prior two years tax returns.

B) include $3,500 in gross income in year of conversion.

C) include $21,500 in gross income in year of conversion.

D) include $25,000 in gross income in year of conversion.

74) Clarise bought a building three years ago for $180,000 to use in her business. The straight-line method of depreciation was used and $15,000 of depreciation deductions were allowed. During the current year, Clarise sells the building to her wholly-owned corporation for $235,000. The tax results to Clarise are

A) $70,000 ordinary income.

B) $70,000 of Sec. 1231 gain.

C) $55,000 ordinary income and $15,000 Sec. 1231 gain.

D) $15,000 of ordinary income and $55,000 Sec. 1231 gain.

75) All of the following are considered related parties for purposes of Sec. 1239 recapture with the exception of

A) an individual and a partnership where the individual has a one-fourth interest in the partnership.

B) an individual and a corporation where the individual owns more than 50% of the value of the outstanding stock of the corporation.

C) an individual and a corporation where the individual's spouse owns more than 50% of the value of the outstanding stock of the corporation.

D) an individual and a partnership where the individual owns more than 50% of the capital of the partnership.

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