TXX5768

1. Question 1 Which of the following statements is false?

A.IRC1231 gives taxpayers the best of both worlds because it requires all sales of1231 assetsto be "netted."If the result is a net loss, the taxpayer deducts an ordinary loss; if the netted 1231 transactions result in a net gain, the taxpayer reports capital gain.

B.In determining whether 1231applies or whether capital gain is long-term, the taxpayer must determine the holding period of the asset sold.

C.Generally the holding period of property begins on the day following the day the property is acquired and includes the day the property is sold.

D.In some cases when property is acquired by means other than purchase, the holding perioddoes not necessarily begin on the date the property is acquired; instead the holding period ofexchanged propertymay be "tacked on" to the holding period of thenewly acquired property.

E.ALL of the above statements are true.

4 points

QUESTION 2

1. Which of the following statements is false?

A.In determining the amount realized on the sale or disposition of real estate, the seller must include any liabilities assumed by the buyer and any liabilities to which the property soldis subject.

B.The amount realized on the sale is NOT reduced by selling expenses; instead selling expenses are deducted against the net income from operations as a trade or business expense.

C.The amount realized on a sale includes the fair market value of any property or servicesreceived in the transaction.

D.All of the above are true.

4 points

QUESTION 3

Which of the following statements is false?

A.The purpose of the depreciation recapture rules of IRC1245 & 1250 are to prevent taxpayers from converting the ordinary deduction for depreciation into capital gain when the depreciable property is sold.

B.IRC1245 applies primarily to depreciable personal property and other property where certain special tax benefits were taken; 1245 requires the taxpayer to recaptureALL depreciation and amortization deductions taken on property sold as ordinary income.

C.IRC1250generally applies to depreciable real property andrequires recapture ofdepreciation in excess of the amount ofdepreciationcalculated under the straight-line method.

D.For most depreciable real property placed in service after 1986, generally, there is no depreciation recapture under IRC1250.

E.All of the above statements are true.

4 points