Chapter 17

Question 1

What are 1231 assets?

Answer 1

Assets that are depreciable (AND LAND), used in business, held longer than a year, get treated as LTCG with ordinary losses

Question 2

Ordinary gains and ordinary losses are what

Answer 2

The normal tax rate applied to businesses

Question 3

Net 1231 gains are taxed at what?

Answer 3

LTCG rates

Question 4

Net 1231 losses are taxed at what?

Answer 4

Ordinary losses

Question 5

What is the exception to the 1231 LTCG rule?

Answer 5

Due to the tax benefit rule, gains on sales of assets are taxed at ordinary rates if they were depreciated until the amount of depreciation is recpatured.

Question 6

James sells land for 100k on 12/31/15. What are the tax implications if he bought it on?

6/1/2015 for 70k
6/1/2014 for 70k
6/1/2014 for 130k

Answer 6

Ordinary gain rate MTR
LTCG MTR 30k
Ordinary loss MTR

Question 7

Truck has Book Value of 70. It was bought for 100 three years ago with deprecation of 30. You sell the truck for $80. How is the gain taxed and why?

Answer 7

It is taxed at ordinary rates under the depreciation recapture rule requiring recovery of depreciation be taxed at ordinary rates.

Question 8

A truck bought for $1500 with $150 of depreciation (BV 1350) held longer than 1 year gets sold for $1600. How is this taxed. What is the truck was sold for 1000

Answer 8

The first $150 is taxed at ordinary rates under the depreciation recapture rules. The rest is taxed at LTCG rates. If sold for $1000, the $350 loss is taxed at ordinary rates