exam i problem 1 recapture of depreciation 20 t square corporation purchases nonresi 545467

Exam I Problem. 1 Recapture of Depreciation (20%) T-Square Corporation purchases nonresidential real property on May 1, 2000 for $650,000. Straight-line depreciation is taken in the amount of $223,611 before the property is sold on October 1, 2013 for $1,500,000. Required: Determine ordinary income under § 1250, ordinary income under § 291 and § 1231 gain. Conclude with a schedule showing how the recognized gain is accounted for. Use the 4 step method as illustrated in chapter 17 of your text. Exam I Problem.2 Consequence to Shareholder Sale or Exchange Treatment (20%) During the current year, Elm Corporation is liquidated and distributes its only asset, land, to Jimmy, the sole shareholder. On the date of distribution, the land has a basis of $200,000, a fair market value of $550,000, and is subject to a liability of $300,000. Jimmy, who takes the land subject to the liability, has a basis of $75,000 in the Elm stock. Required: Determine Jimmy’s Recognized Gain or Loss. Prepare a schedule showing your computation in good form. (Hint, all you need to do is label 5 lines with appropriate amounts that produce the correct amount.) Print Name:______________________________________________________________ Sign:___________________________________________________________________ Date:___________________________________________________ 12. Vinnie owns 100% of the stock of Lime Corporation. In the current year Vinnie transfers an installment obligation, tax basis of $150,000 and fair market value of $300,000, for additional stock in Lime worth $300,000. A. Vinnie recognizes no taxable gain on the transfer. B. Vinnie has a taxable gain of $150,000. C. Vinnie has a taxable gain of $300,000. D. Vinnie has a basis of $300,000 in the additional stock she received in Lime Corporation. E. None of the above. 15. Willace incorporates his business by transferring property with a basis of $200,000 for 200 shares of stock. The stock qualifies as § 1244 stock. Willace later gives 100 shares to his daughter, Louisa, when the stock was worth $400,000. Eventually the business fails, and the corporation becomes bankrupt in the current year. Willace files a joint return in the current year. Louisa files as a single person. With respect to the worthless stock: A. Willace has ordinary loss of $200,000. B. Louisa has an ordinary loss of $100,000. C. Willace has a capital loss of $100,000. D. Willace has ordinary loss of $100,000. E. None of the above.

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