Q107. Tien purchases an office building for $400,000, paying a $75,000 cash down payment and borrowing $325,000 from Atlantic Meridian Mortgage Co. The purchase price is properly allocated as 90 percent to the building and 10 percent to the land. Two years after the purchase, Tien remodels one floor of the building at a cost of $25,000. Annual maintenance costs and property taxes total $4,000. A total depreciation of $36,000 is deducted over 3 years. Determine the adjusted basis of the building and the land as of the end of the 3 years.

$349,000 for building; $40,000 for land

$353,000 for building; $40,000 for land

$56,500 for building; $7,500 for land

$89,000 for building; $10,000 for land

$346,500 for building; $42,500 for land

Q109. During 2020, Silverado Corporation has the following Section 1231 gains and losses:

Casualty loss$(10,000)

Section 1231 gains12,000

Section 1231 losses(3,000)

During the period 2015-2019, the corporation recognized $8,000 of net Section 1231 losses as ordinary losses that have not been recaptured. How much of the 2020 Section 1231 gains and losses are recognized as long-term capital gains?

$12,000

$9,000

$10,000

$- 0 -

$1,000

Q112. In 2006, Krump Corporation bought a factory building for $500,000. It deducted $180,000 of cost recovery deductions using straight-line depreciation while the building was in service. Krump sold the building in 2020 for $500,000. What are the tax consequences of the sale? (Do not consider Krump's other transactions.)

$180,000 Section 1231 gain

$180,000 Section 1250 gain

$180,000 recaptured under Section 1245

$180,000 unrecaptured Section 1250 gain

$90,000 Section 1231 income and $90,000 ordinary income recaptured under Section 1250

Q113. On June 10, 2019, Akira receives a gift of a rare marble statue with a fair market value of $9,000. The marble statue had an adjusted basis of $12,000 to the donor and was purchased in 2017. Akira sells the marble statue on July 5, 2020, for $8,000. When does Akira's holding period for the rare marble statue begin?

It begins in 2017.

It begins in 2020.

It depends on whether a gift tax was paid at the time of the gift.

It is irrelevant because the transfer was a gift, and gifts are always considered to be held long-term.

It begins in 2019.

Q114. Charles purchases an interest in a uranium mine for $2,500,000 on June 7, 2020. Recoverable tonnage is estimated at 500,000. During 2020, 25,000 tons are mined and sold for $800,000. Charles incurs $500,000 of expenses during 2020. These are the only items affecting taxable income for the year. The percentage depletion rate for uranium is 22 percent. What is the depletion deduction for 2020?

$176,000

$200,000

$150,000

$250,000

$125,000