A finished ACC-681 Topic 7 related sale simulation answer example, applying sections 1239 and 453(g) to depreciable assets sold to an 80 percent corporation and deferring only the land gain. Searches like "acc 681 topic 7 assignment example", "acc681 topic 7 sample" and "acc-681 topic 7 example" land here.
What a finished ACC-681 Topic 7 related sale simulation answer looks like
Each exhibit is worked in turn in the finished answer, every figure illustrative. She sells for $900,000, 10 percent at closing and the rest by note: a building for $600,000 against a $350,000 adjusted basis, equipment for $100,000 against $20,000, and land for $200,000 against $120,000. Because she owns more than 50 percent of the buyer, section 1239 makes the gain on property the corporation will depreciate ordinary: $250,000 on the building and $80,000 on the equipment. Section 453(g) then denies installment reporting for that depreciable property, so all $330,000 is recognized this year despite the note. The land is not depreciable, keeps its section 1231 character and stays on the installment method: its 40 percent gross profit ratio applied to the $20,000 received gives $8,000 now. Year-one gain totals $338,000, against $113,000 had the buyer been unrelated.
How an ACC-681 Topic 7 example is structured
Task blocks organize the answer, one per scored item, and each names its exhibit and a time budget before any computation. The first block tests the relationship: 80 percent ownership, more than the 50 percent that makes the corporation a controlled entity under section 1239(c). The second builds a character table asset by asset, showing that section 1239 reaches the building and equipment because the buyer can depreciate them, but not the land. The third turns to timing, setting section 453(g) against the note and noting the exception for sales without a tax avoidance purpose, which the facts give no basis to claim. A fourth block computes the land's gross profit ratio and this year's installment gain. The fifth prices the unrelated-buyer baseline so the cost of the relationship is visible. The research block cites section 1239(a) as the governing provision, entered in the form the item requests.
Control tested against section 1239(c)
Her 80 percent of the stock exceeds the more-than-50-percent line, so the corporation is her controlled entity and every later block depends on that finding.
Character set by the buyer's depreciation
Section 1239 asks whether the property is depreciable to the corporation, which makes the building's entire $250,000 gain ordinary, not section 1231 gain.
Installment reporting denied for depreciable assets
Under section 453(g) the note does not defer the $330,000, because payments on depreciable property sold to a related person count as received in the year of sale.
The land deferred, with a warning
The land's $80,000 gain stays on the installment method at a 40 percent ratio, though section 453(e) would accelerate it if the corporation resold within two years.
The relationship priced against a stranger
An unrelated buyer would leave $113,000 taxable this year, most of it equipment recapture, so the related sale accelerates $225,000 and converts the building's gain to ordinary.
Where marks go in ACC-681 Topic 7
The answer loses the most when the relationship in the first exhibit is read and then forgotten, producing the $113,000 unrelated-party result. Papers that apply section 1239 to the land have missed that the rule turns on depreciability in the buyer's hands. Those that recharacterize the building gain but keep it on the installment method apply one related-party rule and skip the other. Treating part of the building gain as unrecaptured section 1250 gain is right only for an unrelated buyer; here section 1239 makes all of it ordinary. Simulations are typically scored task by task, so an answer that spends its time on the character table and leaves the research item blank forfeits points it could have taken in a minute. A research item asking for the precise reference is not satisfied by the section's name.
Get an ACC-681 Topic 7 example written to your instructions
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ACC-681 Topic 7 questions, answered
Why does section 1239 exist?
Because a sale of depreciable property to a controlled corporation would otherwise let the owner report capital or section 1231 gain while her corporation takes depreciation deductions on the stepped-up basis against ordinary income. Treating her gain as ordinary removes that mismatch. The rule applies whether or not the price was fair, since the concern is the character conversion rather than the value.
Does section 1239 look only at shares she owns directly?
No. Control is measured with constructive ownership, borrowed from the section 267 attribution rules, so shares held by her family members or by entities she owns can count toward the 50 percent line. In this simulation she holds 80 percent directly and an unrelated employee holds the rest, so attribution changes nothing, and the answer says so in one line.
How does the example handle time on each task?
The example records a budget for each block, set from the number of items and the total time the assignment allows, and notes where it ran over. The simulation in many sections is practice for an examination that samples broadly, so the example favors finishing every item over perfecting one, and leaves the research citation for a moment at the end rather than skipping it.