ACC250 Chapter 10

Question 1

The taxpayer’s acquisition basis plus capital improvements less amortization or depreciation.

Answer 1

ADJUSTED BASIS

Question 2

The value of everything received by the seller in a transaction (cash, FMV of other property and relief of liabilities) less selling costs.

Answer 2

AMOUNT REALIZED

Question 3

Property given or received in an otherwise nontaxable transaction such as a like-kind exchange that may trigger gain to a party to the transaction.

Answer 3

BOOT

Question 4

In general, an asset other than an asset used in a trade or business or an asset such as an account or note receivable acquired in a business from the sale of services or property.

Answer 4

CAPITAL ASSET

Question 5

A like-kind exchange where the taxpayer transfers like-kind property before receiving the like-kind property in exchange. The property to be received must be identified within 45 days and received within 180 days of the transfer of the property given up.

Answer 5

DEFERRED LIKE-KIND EXCHANGE

Question 6

The conversion of Section 1231 gain into ordinary income on a sale (or exchange) based on the amount of accumulated depreciation on the property at the time of sale or exchange.

Answer 6

DEPRECIATION RECAPTURE

Question 7

When a taxpayer receives noncash property as a replacement for property damaged or destroyed in an involuntary conversion rather than a cash payment.

Answer 7

DIRECT CONVERSION

Question 8

The basis of an asset received in a nontaxable exchange. This is generally the basis of the asset given up in a nontaxable exchange. This may also be referred to as substituted basis.

Answer 8

EXCHANGED BASIS

Question 9

The receipt of money or other property as a replacement for property that was destroyed or damaged in an involuntary conversion.

Answer 9

INDIRECT CONVERSION

Question 10

A sale for which the taxpayer receives payment in more than one period.

Answer 10

INSTALLMENT SALE

Question 11

A direct or indirect conversion of property through natural disaster, government condemnation, or accident that allows a taxpayer to defer realized gain if certain requirements are met.

Answer 11

INVOLUNTARY CONVERSION

Question 12

A nontaxable (or partially taxable) trade or exchange of assets that are similar or related in use.

Answer 12

LIKE-KIND EXCHANGE

Question 13

A net Section 1231 loss that is deducted as an ordinary loss in one year and has not caused subsequent Section 1231 gain to be taxed as ordinary income.

Answer 13

NONRECAPTURED NET SECTION 1231 LOSSES

Question 14

A transaction where at least a portion of the realized gain or loss is not currently recognized.

Answer 14

NONRECOGNITION TRANSACTION

Question 15

An asset created or used in a taxpayer’s trade or business (e.g. accounts receivable or inventory) that generates ordinary income (or loss) on disposition.

Answer 15

ORDINARY ASSET

Question 16

A for-profit activity that doesn’t rise to the level of a trade or business.

Answer 16

PRODUCTION OF INCOME

Question 17

Property acquired to replace property damaged or destroyed in an involuntary conversion. It must be of a similar or related use to the original property even if the replacement property is real property (rental real estate for rental real estate).

Answer 17

QUALIFIED REPLACEMENT PROPERTY

Question 18

The difference between the amount realized and the adjusted basis of an asset sold or otherwise disposed of.

Answer 18

REALIZED GAIN OR LOSS

Question 19

The recharacterization of income from capital gain to ordinary income.

Answer 19

RECAPTURE

Question 20

The gain or loss included in gross income on a taxpayer’s tax return. This is usually the realized gain or loss unless a nonrecognition provision applies.

Answer 20

RECOGNIZED GAIN OR LOSS

Question 21

The portion of a corporate taxpayer’s gain on real property that is converted from Section 1231 gain to ordinary income.

Answer 21

SECTION 291 DEPRECIATION RECAPTURE

Question 22

Depreciable or real property used in a taxpayer’s trade or business owned for more than one year.

Answer 22

SECTION 1231 ASSETS

Question 23

Tangible personal property and intangible property subject to cost recovery deductions.

Answer 23

SECTION 1245 PROPERTY

Question 24

Real property subject to cost recovery deductions.

Answer 24

SECTION 1250 PROPERTY

Question 25

People or organizations that facilitate the transfer of property between taxpayers in a like-kind exchange. Typically, they receive the cash from selling the property received from the taxpayer and use it to acquire like-kind property identified by the taxpayer.

Answer 25

THIRD-PARTY INTERMEDIARIES

Question 26

A gain from the sale of real estate held by a noncorporate taxpayer for more than one year in a trade or business or as rental property attributable to tax depreciation deducted at ordinary tax rates. This gain is taxable at a maximum 25% capital gains rate.

Answer 26

UNRECAPTURED SECTION 1250 GAIN