1)Identify which characteristics as relates to Sec. 1231 and Recapture are True or False
Sec. 1245 applies to gains on the sale of depreciable personal property, but it generally does not apply to depreciable real property.
| Answer 1Choose…FalseTrue |
Depreciation recapture on Sec. 1231 assets is treated as ordinary gain and is not eligible for Sec. 1231 treatment. | Answer 2Choose…FalseTrue |
A holding period of more than one year is required of property that otherwise meets the criteria of Sec. 1231.
| Answer 3Choose…FalseTrue |
Mark owns an unincorporated business and has $20,000 of Sec. 1231 gains and $22,000 of Sec. 1231 losses. He must report a net capital loss of $2,000 on his tax return.
| Answer 4Choose…FalseTrue |
The sale of inventory results in ordinary gain or loss.
| Answer 5Choose…FalseTrue |
Depreciable property placed in service nine months earlier is considered Sec. 1231 property.
| Answer 6Choose…FalseTrue |
If the accumulated depreciation on business equipment held longer than one year exceeds realized gain on the sale of the equipment, all of the realized gain will be treated as Sec. 1231 gain.
| Answer 7Choose…FalseTrue |
Gains and losses from involuntary conversions of property used in a trade or business generally are classified as capital gains and losses. | Answer 8Choose…FalseTrue |
If a taxpayer has gains on Sec. 1231 assets, Secs. 1245 and 1250 must be applied first to determine any amounts recaptured as ordinary income, and any excess gain may then be netted with Sec. 1231 losses for possible long-term capital gain treatment. | Answer 9Choose…FalseTrue |
The purpose of Sec. 1245 is to eliminate the advantage taxpayers would have if they were able to reduce ordinary income by depreciation deductions and also receive favorable Sec. 1231 treatment when the asset was sold. | Answer 10Choose…FalseTrue |
Net Sec. 1231 losses are deducted as ordinary losses when incurred, but they cause net Sec. 1231 gains within the following five years to be recaptured as ordinary income rather than LTCG.
| Answer 11Choose…FalseTrue |
If the netting of Sec. 1231 gains and losses at the end of the year results in a net loss, the Sec. 1231 gains and losses are treated as ordinary gains and losses.
| Answer 12Choose…FalseTrue |
Gains and losses resulting from condemnations of Sec. 1231 property and capital assets held more than one year are classified as ordinary gains and losses. | Answer 13Choose…FalseTrue |
If realized gain from disposition of business equipment exceeds total depreciation or cost recovery, a portion of the gain will receive Sec. 1231 treatment if the equipment’s holding period is more than one year.
| Answer 14Choose…FalseTrue |
Any gain or loss resulting from the sale or disposition of depreciable property used in trade or business and held one year or less is considered ordinary. |
