Taxation for Decision Makers, 2012 Edition

Shirley Dennis-Escoffier, Karen A. Fortin

ISBN: 978-1-118-09155-5

ACTG542 Chapter 7 Property Dispositions Problem Assignments Questions

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. What is 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. What is 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 acquired a building in 1992 for $650,000. He sold it in the current year for $680,000 when its adjusted basis was $500,000. What is 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 the seller is a corporation?

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.