Chap 11

#1
Explanation:
a.
$85,000, computed as follows: Property received Amount Explanation (1) Cash $ 80,000 Given (2) Vehicle 10,000 Given (3) Commissions (5,000) Given ________________________________________ ________________________________________ Amount realized $ 85,000 (1) + (2) + (3) ________________________________________________________________________________ ________________________________________________________________________________
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b.
$105,000, computed as follows: Property received Amount Explanation (1) Cash $ 80,000 (2) Relief of debt 30,000 (3) Commissions (5,000) ________________________________________ ________________________________________ Amount realized $ 105,000 (1) + (2) + (3) ________________________________________________________________________________ ________________________________________________________________________________
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c.
$72,000, computed as follows: Property received Amount Explanation (1) Cash $ 20,000 (2) Land 50,000 (3) Marketable securities 10,000 (4) Commissions (8,000) ________________________________________ ________________________________________ Amount realized $ 72,000 (1) + (2) + (3) + (4) ________________________________________________________________________________ ________________________________________________________________________________
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#2
Explanation:
a. Capital, because it is held for investment.

b. The land and building are both §1231 property because White uses the assets in its trade or business and has held the assets property for more than a year.

c. Ordinary, the property is ordinary even though it is used in a trade or business because it has been held for less than one year. Once White has held the machinery for more than a year, it will become §1231 property.

d. Ordinary, inventory is held in the ordinary course of business.

e. §1231, the property is used in a trade or business and held for more than one year.

f. Capital, because it is held for investment.

g. Ordinary, accounts receivable are created in the ordinary course of business.

h. §1231, the property is used in a trade or business and held for more than one year.

#3
Explanation:
($15,000) loss, computed as follows:

Description Amount Explanation (1) Amount realized $ 25,000 Given (2) Adjusted basis 40,000 $55,000 original basis − $15,000 accumulated depreciation ________________________________________ ________________________________________ Gain (loss) realized $ (15,000) (1) − (2)

#4
Explanation:
a.
$18,000 ordinary income, computed as follows: Description Amount Explanation (1) Amount realized $ 42,000 Given (2) Original basis 56,000 Given (3) Accumulated depreciation (32,000) Given ________________________________________ ________________________________________ (4) Adjusted basis 24,000 (2) + (3) (5) Gain/(loss) recognized $ 18,000 (1) − (4) (6) Ordinary income (§1245 depreciation recapture) $ 18,000 Lesser of (3) or (5) §1231 gain $ 0 (5) − (6)
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Because the entire gain is caused by depreciation deductions, the entire gain is treated as ordinary income under §1245. b.
$18,000; there is no difference in calculating the amount and character of the gain between a partnership and a corporation on §1245 property. c.
$36,000 gain ($32,000 ordinary and $4,000 §1231) computed as follows: Description Amount Explanation (1) Amount realized $ 60,000 Given (2) Original basis 56,000 Given (3)