Which of the following statements about Section 1245 property dispositions is FALSE?

a. The gains recaptured as ordinary income cannot exceed the amount of the realized gain.

b. The recapture provisions of section 1245 property apply to all depreciation taken on the property, it does not matter which method of depreciation was used.

c. Section 1245 applies to losses.

d. A disposition gain on section 1245 property is treated as ordinary income to the extent of the total amount of depreciation deductions allowed.

Compact Corporation purchased $90,000 of five-year equipment on March 10, 2018 and elected to expense only $20,000 of the cost under Section 179.Compact sells the equipment on July 30, 2019, for $95,000.Compact properly deducted $25,200 under MACRS depreciation for 2018 & 2019.What is the proper classification of the gain?

a. Section 1245 ordinary income is $45,200; Section 1231 gain is $5,000.

b. Section 1245 ordinary income is $50,200; Section 1231 gain is $0.

c. Section 1245 ordinary income is $5,000; Section 1231 gain is $45,200.

d. Section 1245 ordinary income is $0; Section 1231 gain is $50,200.

All of the following are classified as Section 1231 gains and losses EXCEPT?

a. Gains and losses from involuntary conversions of property used in a trade or business.

b. Gains and losses from inventory.

c. Gains and losses from condemnations of Section 1231 property and capital assets.

d. Gains and losses from real or depreciable property used in a trade or business.

John works as a salesman and has a salary of $30,000 in 2020. John also wins the Colorado Lottery "Mega Millions" prize and receives $25,000,000 in 2020. John is wondering whether the $25,000,000 is taxable. Which of the following is most true of John's Gross Income?

a. John's Gross Income is $30,000 because only salary and business income are taxable.

b. John's Gross Income is $30,000 because only salary, business income, and property transactions are taxable.

c. John's Gross Income is $25,030,000 because salary and prize winnings are specifically mentioned in the Internal Revenue Code.

d. John's Gross Income is $25,030,000 because all income from whatever source derived is taxable and includable in Gross Income unless specifically excluded by law.

Cecilia and Jared are married, file a joint return, and have no kids. They have the following occurrences during the 2019 tax year:

• Jared has a salary of $65,000
• Cecilia has business revenues of $80,000
• Cecilia has deductible business expenses of $50,000
• Standard Deduction (married):$24,400
• Personal Exemption: $0

What is Sally and Josh's Adjusted Gross Income?

a. $70,600.

b. $95,000.

c. $121,000.

d. $145,000.

Unrecaptured 1250 gains are taxed at a rate of 25%.

True

False

Sam buys Sally a gold ring as a gift. Sally sells the ring the next day. The ring is automatically considered long term because it is a gift.

True

False

Trusts are qualifying taxpayers for the purpose of taking a code section 179 deduction.

True

False

Robyn purchased Red Acre, a 2 acre property in Reunion Colorado, for $200,000 in 2015. Robyn purchased Red Acre as an investment property. In 2019, Robyn trades Red Acre for Blue Acre, a 3 acre property with a fair market value of $215,000 with a $15,000 mortgage. What is the effect of this exchange on Robyn's Gross Income in 2019?

a. No effect.

b. $5,000 gain.

c. $15,000 gain.

d. $205,000 gain.

Brian purchased 10 bitcoins in 2017 for $220,000. In 2019, the 10 bitcoins are worth $250,000. Brian uses the 10 bitcoins to purchases a home with a fair market value of $250,000 in 2019. What is the effect of this transaction on Brian's Gross Income?

a. No effect because Brian exchanged the property with currency and not property.

b. No effect because gains from exchanges of property are not taxable under the Internal Revenue Code.

c. No effect because the transaction does not result in a gain for Brian.

d. Brian has taxable gain of $30,000.