Question 1. Spencer has an investment in two parcels of vacant land. Parc

1. Spencer has an investment in two parcels of vacant land. Parcel 1 is a capital asset and parcel 2 is a § 1231 asset. Spencer already has short­term capital loss for the year he would like to offset with capital gain. Spencer has § 1231 lookback loss that exceeds the gain from the disposition of either land parcel. Spencer only wants to sell one land parcel and each of them would yield the same amount of gain. The gain that would be recognized exceeds the short-term capital loss Spencer already has. Which of the statements below is correct?

a. Spencer will have a net capital loss no matter which land parcel he sells.

b. Spencer will have a net capital loss if he sells parcel 2.

c. Spencer will have a net capital loss if he sells parcel 1.

d. Spencer will have a net capital gain if he sells either parcel 1 or parcel 2.

e. None of the above.

2. Copper Corporation sold machinery for $47,000 on December 31, 2014. The machinery had been purchased on January 2, 2011, for $60,000 and had an adjusted basis of $41,000 at the date of the sale. For 2014, what should Copper Corporation report?

a. Ordinary income of $6,000.

b. A § 1231 gain of $3,000 and $3,000 of ordinary income.

c. A § 1231 gain of $6,000.

d. A § 1231 gain of $6,000 and $3,000 of ordinary income.

e. None of the above.

3. Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?

a. Depreciable office furniture held more than one year and sold for more than its original cost.

b. Amortizable goodwill held more than one year and disposed of for less than its adjusted basis.

c. Land held more than one year and sold for more than was paid for it.

d. A note receivable held more than one year and sold for less than was paid for it.

e. None of the above.

4. Blue Company sold machinery for $45,000 on December 23, 2014. The machinery had been acquired on April 1, 2012, for $69,000 and its adjusted basis was $34,200. The § 1231 gain, § 1245 recapture gain, and § 1231 loss from this transaction are:

a. $0 § 1231 gain, $10,800 § 1245 recapture gain, $0 § 1231 loss.

b. $0 § 1231 gain, $0 § 1245 recapture gain, $14,800 § 1231 loss.

c. $0 § 1231 gain, $34,200 § 1245 recapture gain, $0 § 1231 loss.

d. $0 § 1231 gain, $10,800 § 1245 recapture gain, $34,200 § 1231 loss.

e. None of the above.

.

5. Red Company had an involuntary conversion on December 23, 2014. The machinery had been acquired on April 1, 2012, for $49,000 and its adjusted basis was $14,200. The machinery was completely destroyed by fire and Red received $10,000 of insurance proceeds for the machine and did not replace it. This was Red’s only casualty or theft event for the year. As a result of this event, Red initiallyhas:

a. $10,000 § 1231 loss.

b. $10,000 § 1245 recapture gain.

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