1. Elaine has the following capital transactions in the current year:

LTCG $22,000

LTCL (8,000)

STCG 19,000

STCL (23,000)

What is Elaine's net capital gain or loss? Elaine's marginal tax rate is 25%. What will be the

tax rate applicable to these transactions?

2. Carla owned land held for investment.Her A/B in the property was $2,000,000.Raymond was interested in buying the land. He believed that the land might be the site of an exit ramp for a new freeway. The land would be a capital asset to him if he acquired the land. Raymond gave Carla $836,000 for an option on her land. The option was good for two years and gave Raymond the right to purchase Carla's property for $4,750,000. The freeway was not approved and Raymond allowed the option to lapse at the end of the two-year option period.

A. What are the tax consequences to Carla when the option lapses?

B. What are the tax consequences to Raymond when the option lapses?

3. Mac invented a process for cleaning old aluminum siding. He obtained a patent for this process. His basis in the patent is $50,000. Because he did not have the capital to reduce his invention to practice, he sold the patent to a wealthy individual for $600,000 six months after acquiring the patent.

A. What is the amount and character (i.e. long-term, short-term) of the gain?

B. Subsequently, the purchaser decided not to reduce the patent to practice and sold the patent within two months to a Chinese company for $1,000,000. What is the amount and character of the gain to the purchaser?

4. Maria meets all of the requirements of 1237. In the current year, she begins selling lots and sells 4 separate lots to 4 different purchasers. She also sells 2 contiguous lots to another purchaser. The sales price of each lot is $30,000. Maria's basis in each lot is $15,000. Selling expenses are $500 per lot.

A. What is the realized and recognized gain on the sales?

B. How would your answer change if, instead, the lots sold to the 5^th purchaser were not contiguous?

5. Dennis sells short 100 shares of ARC stock for $20 per share ($2,000) on January 15, 2020. At the time Dennis sold the shares, he owned 100 shares of ARC stock in which he had a basis of $22 per share ($2,200). He had owned those shares for two years. On April 1, 2020, he buys 100 shares of ARC stock for $25 per share ($2,500) and closes the transaction by delivering those shares to his broker.

A. What is the amount and character of his loss on the short sale?

B. What is the amount and character of the loss if, instead, Dennis used the 100 shares he already owned to close the transaction?

6. Kelly had the following net 1231 gains and losses for each of the years shown. What would be the nature of the net gains in 2020 and 2021 (i.e. ordinary or 1231)?

2021 $41,000 1231 gain

2020 30,0001231 gain

2019 (12,000) 1231 loss

2018 no 1231 transactions

2017 (18,000) 1231 loss

2016 (5,000) 1231 loss

2015 (2,000) 1231 loss

7. Roger had the following 1231 transactions during the current year. There are no lookback losses that apply. What is the amount of the gain or loss on the sale and what is the character of any gain or loss (i.e. 1231 gain or loss; ordinary gain or loss)

A. He sold a rack used in his business. He had owned it for 6 years. His A/B in the rack was $38,000. He had taken $62,000 of depreciation and he sold it for $85,000.

B. He sold a forklift that he had owned for 5 years. His A/B in the forklift was $12,000 and he had taken $23,000 of depreciation. He sold the asset for $5,000.

C. He sold a bin used in the business that he had owned for 2 years. His A/B in the bin was $43,000 and he had taken depreciation of $24,000. He sold the bin for $70,000.

8. (5 points) Larry is the sole proprietor of a trampoline shop. During the current year he had the following transactions. Determine the amount and character (ordinary, 1231) of each transaction:

A. He sold some unimproved land that he used as a parking lot for his business. He had owned the land for 5 years. The purchase price was $25,000 and his A/B was $15,000.

B. He sold a truck used to deliver exercise equipment. The truck had been owned for 6 years. He sold the truck for $3,500. His A/B was $0 (it had been fully depreciated). He had taken $7,000 of depreciation.

C. He sold a cash register that he had used in his business for 3 years. His A/B in the cash register was $2,000. He sold the cash register for $5,200. He had taken $2,400 of depreciation.

D. He sold an apartment building for $300,000. He had owned the building for 6 years. His A/B was $125,000 and he had taken $25,000 of straight-line depreciation.

E. He sold a copier used in the business. He had owned the copier for 3 years. His A/B in the copier was $1,200 and the selling price was $900. He had taken $500 of depreciation.

9. During the current year, Hannah sold an apartment house that she had acquired in 1984. She had depreciated it using the ACRS accelerated method. The apartment house was fully depreciated.Her A/B is $0. She had taken $250,000 of accelerated depreciation.Had she used the straight-line method, the amount of the depreciation taken would have been only $210,000. She sells the apartment house for $600,000 during the current year.

A. What amount of the $600,000 realized and recognized gain will be taxed as ordinary income under 1250?

B. What amount of the $600,000 realized and recognized gain will be taxed as a 25% capital gain (i.e. unrecaptured 1250 gain)?

C. What amount of the $600,000 realized and recognized gain will be taxed at the 15%/20% capital gains rate?