• Question 10
Lynn purchases a house for $52,000. She converts the property to rental property when the
fair market value is $115,000. After deducting depreciation (cost recovery) expense of
$1,130, she sells the house for $120,000. What is her recognized gain or loss?
• Question 11
Hiram is a computer engineer and, while unemployed, invents a switching device for
computer networks. He patents the device, but does not reduce it to practice. Hiram has a
zero tax basis for the patent. In consideration of $800,000 plus a $1 royalty per device sold,
Hiram assigns the patent to a computer manufacturing company. Hiram assigned all
substantial rights in the patent. Which of the following is correct?
• Question 12
Lynne owns depreciable residential rental real estate which has accumulated depreciation
(all from straight-line) of $65,000. If Lynne sold the property, she would have a $53,000
gain. The initial characterization of the gain would be:
• Question 13
Which of the following creates potential § 1245 depreciation recapture and potential § 1231
gain?
• Question 14
A business taxpayer sells inventory for $80,000. The adjusted basis of the property is
$58,000 at the time of the sale and the inventory had been held more than one year. The
taxpayer has:
• Question 15
Section 1239 (relating to the sale of certain property between related taxpayers) does not
apply unless the property: