Quiz 3






Kip started a wholesale store this year selling bulk peanut butter. In January of this year Kip purchased an initial five tubs of peanut butter for a total cost of $5,000. In July Kip purchased three tubs for a total cost of $6,000. Finally, in November Kip bought two tubs for a total cost of $1,000. Kip sold six tubs by year end. What is Kip’s ending inventory under the FIFO cost-flow method?






The MACRS recovery period for automobiles and computers is:

[removed] 3 years
[removed] 5 years
[removed] 7 years
[removed] 10 years
[removed] None of these







Each of the following is true except for:

[removed] A direct involuntary conversion occurs when property taken under imminent domain is replaced with other property.
[removed] Qualified replacement property rules are more restrictive than the like-kind property rules.
[removed] An indirect involuntary conversion occurs when property is destroyed and insurance proceeds are used to purchase qualified replacement property.
[removed] Losses realized in involuntary conversions are deferred.
[removed] All of these are true.





Which one of the following is not a requirement of a deferred like-kind exchange?

[removed] The like-kind property to be received must be identified within 45 days.
[removed] The exchange must be completed within the taxable year.
[removed] The like-kind property must be received within 180 days.
[removed] A third party intermediary is often used to facilitate the exchange.
[removed] All of these.





What is the primary purpose of a third-party intermediary in a deferred like-kind exchange?

[removed] To facilitate finding replacement property.
[removed] To help acquire the replacement property.
[removed] To prevent the seller from receiving cash (boot) that will taint the transaction.
[removed] To certify the taxpayer’s Form 8824.
[removed] All of these.





Which of the following sections recaptures or recharacterizes only corporate taxpayer’s gains?

[removed] §291.
[removed] §1239.
[removed] §1245.
[removed] Unrecaptured §1250 gains.
[removed] None of these.







Which of the following is not true regarding installment sales?

[removed] Only gains are eligible for installment sale reporting.
[removed] Depreciation recapture is deferred in an installment sale.
[removed] The gross profit percentage is needed to determine the annual gain recognized.
[removed] Stock sales are ineligible for installment sale treatment.
[removed] None of these.







Brad sold a rental house that he owned for $250,000. Brad bought the rental house five years ago for $225,000 and has claimed $50,000 of depreciation expense. What is the amount and character of Brad’s gain or loss?

[removed] $25,000 ordinary and $50,000 unrecaptured §1250 gain.
[removed] $25,000 §1231 gain and $50,000 unrecaptured §1250 gain.
[removed] $75,000 ordinary gain.
[removed] $75,000 capital gain.
[removed] None of these.







Leesburg sold a machine for $2,200 on November 10th of the current year. The machine was purchased for $2,600. Leesburg had taken $1,200 of depreciation deductions. What is Leesburg’s gain or loss realized on the machine?

[removed] $800 gain.
[removed] $1,000 gain.
[removed] $1,200 loss.
[removed] $1,400 loss.
[removed] None of these.







Which of the following is not used in the calculation of the amount realized:

[removed] Cash.
[removed] Adjusted basis.
[removed] Fair market value of other property received.
[removed] Buyer’s assumption of liabilities.
[removed] All of these.

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