21. Determination and Character of Gains and Losses DDF
Corporation sold land it had used for parking and storage for 20 years for
$575,000. Its basis in the land was $68,000. It also sold some manufacturing
equipment for $125,000 that it replaced with more modern equipment. The
equipment sold had a basis of $760,000. a. Determine the amount and character
of DDF’s gains or losses on these sales. b. If DDF has no other property
transactions, how is the net gain or loss treated?
22. Determination and
Character of Gain Barry Corporation sold a machine used in its business for two
years for $27,000. The machine originally cost $24,000 and it had an adjusted
basis at the time of the sale of $17,000. Determine the amount and type of gain
realized on the sale.
23. Determination and Character of Gains and Losses The Grid
Corporation owns a bank of boring machines. They regularly replace two machines
each year. In the current year, the company sold Machine 8 for $12,000. It was
purchased six years earlier for $40,000 and its adjusted basis was $14,000.
Machine 6 was sold for $24,000. It was purchased four years ago for $45,000 and
had an adjusted basis of $19,000. a. How much gain or loss is realized on each
asset? b. What is the character of the gain or loss? c. If the company disposed
of no other assets during the year, how are the results of these sales treated
for tax purposes?
24. Determination and Character of Gains and Losses Jonas,
an individual, acquired a building nine years ago for $650,000. He sold it in
the current year for $680,000 when its adjusted basis was $500,000. Determine
the amount and type of gain or loss realized on the sale a. if the building is
a factory. b. if the building is an apartment complex. c. if Jonas is a
corporation rather than an individual.
25. Determination and Character of Gains and Losses Barbara
sold two assets during year 5. How much and what kind of gain or loss does she
have from each sale? a. On February 25 of year 5, she sold 200 shares of XYZ
stock for $19,000. She bought that stock for $16,000 on February 23 of year 4.
b. On July 20 of year 5, she sold an antique automobile for $30,000. She
purchased the automobile for $31,000 on July 21 of year 4.
26. Section 1231 Recapture Barbara had the following Section
1231 gains and losses in the previous four years: Year Section 1231 gain (loss) 1 $50,000
2 (45,000) 3 $20,000 4 $15,000 a. How
will Barbara treat a $25,000 gain in year 5? b. Is there any unrecaptured
Section 1231 loss remaining?
27. Recapture The Angel Corporation acquired an office
building for $600,000 12 years ago. The corporation claimed $80,000 of cost
recovery deductions before it sold the building for $700,000. a. Determine the
amount and type of gain or loss that Angel Corporation must recognize on the
sale of the building. b. Would your answer change if Angel were a sole
proprietorship? c. Would your answer change if Angel Corporation incurred
$43,000 of Section 1231 losses in the prior year?
28. Section 1245/1250 Recapture Performance Industries, Inc.
sold three pieces of equipment and a small building on March 1, year 6. Data on
these disposals are as follows:
a. Determine the amount and character of the gain or loss on
each of these machines. b. Determine the
sum of each type of gain or loss and the net effect these gains/losses have on
Performance Industries’ net income. c.
How would your answer change if Performance Industries had $6,000 of Section
1231 losses in year 3?
29. Capital Gains and Losses Determine the amount of the
capital gain or loss in each of the following transactions and state whether
the gain or loss is long term or short term. a. 100 shares of Bilco stock bought
for $8,000 on January 22 of year 3 and sold for $10,000 on January 22 of year
4. b. 20 acres of investment land bought for $8,000 on January 31 of year 3 and
sold for $7,000 on February 2 of year 4. c. 150 shares of Dantron stock bought
for $15,000 on April 1 of year 3 and sold for $17,000 on May 28 of year 5.
30. Capital Asset Netting Late in the current year, Brad
Corporation’s factory was destroyed by a tornado. Brad determined that it had a
$200,000 unreimbursed loss on the building built ten years ago and a $75,000
gain on ten-year-old machinery (cost $100,000). Prior to the tornado, Brad had
a condemnation gain on land of $100,000, a Section 1231 loss of $150,000 and a
$25,000 Section 1231 gain. a. Determine the results of both Step 1 and Step 2
of the Section 1231 netting process and the effect of these occurrences on
Brad’s net income. b. How would your answers change if Brad was a sole
proprietorship instead of a corporation?
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