Question 1

The taxpayer generally has only 1 year to replace involuntarily converted property in order to postpone the recognition of gain.

Accepted Answer

A) True 
 B)False  False

Question 2

Jerry bought his home 15 years ago for $60,000. Three years ago Jerry married Debbie and she moved into the same house and has lived there since. If they sell Jerry's house in the current year for $340,000, what is their taxable gain on a joint tax return?

Accepted Answer

A) $0 
B) $280,000 
C) $155,000 
D) $30,000 
A) $0 
B) $280,000 
C) $155,000 
D) $30,000 A

Question 3

In 2015, Paul, a single taxpayer, has taxable income of $30,000 exclusive of capital gains and losses. Paul incurred a $1,000 short-term capital loss and a $4,000 long-term capital loss. What is the amount of his long-term capital loss carryover to 2016?

Accepted Answer

A) $0 
B) $2,000 
C) $3,000 
D) $5,000 
E) None of the above 
A) $0 
B) $2,000 
C) $3,000 
D) $5,000 
E) None of the above B

Question 4

Martha has a net capital loss of $20,000 and other ordinary taxable income of $45,000 for the current tax year. What is the amount of Martha's taxable income after deducting the allowed capital loss?

Accepted Answer

A) $28,000 
B) $38,000 
C) $42,000 
D) $45,000 
E) None of the above 
A) $28,000 
B) $38,000 
C) $42,000 
D) $45,000 
E) None of the above

Question 5

The owner of M&N Milling exchanged a milling machine used in his business for a new one. M&N Milling's basis in the machine was $20,000 and the owner still owes $6,000 related to the purchase of the machine. The other party to the exchange, M. Grinding, assumed the liability along with the machine and transferred a newer and smaller machine worth $30,000 to M&N Milling.
a.Calculate M&N Milling's
1.Realized gain on the exchange.$__________
2.Recognized gain on the exchange.$__________
b.Calculate the adjusted basis of the newer machine.$__________

Accepted Answer

a. 1. Value of new machine, $30,000, plu

Question 6

For the current year, Susan had salary income of $20,000. In addition she reported the following capital transactions during the year: There were no other items includable in her gross income. What is the amount of her adjusted gross income for the current year?

Accepted Answer

A) $19,000 
B) $23,000 
C) $24,000 
D) $25,000 
E) None of the above 
A) $19,000 
B) $23,000 
C) $24,000 
D) $25,000 
E) None of the above

Question 7

Cows used in a farming business are Section 1231 property.

Accepted Answer

A) True 
 B)False

Question 8

Perry acquired raw land as an investment 16 years ago. The land cost $50,000. In the current year, the land is sold for a total sales price of $120,000, consisting of $10,000 cash and the buyer's note for $110,000. Assume that Perry uses the installment method to recognize the gain and receives only the $10,000 down payment in the year of sale. How much gain should Perry recognize in the current year?

Accepted Answer

A) $4,166 
B) $5,833 
C) $7,000 
D) $9,000 
E) None of the above 
A) $4,166 
B) $5,833 
C) $7,000 
D) $9,000 
E) None of the above

Question 9

In the current year, Henry, a sole proprietor, sold for $65,000 a machine that was used in his business. The machine had been purchased in a few years ago for $50,000, and when it was sold, it had accumulated depreciation of $20,000 and an adjusted basis of $30,000. For the current year, how should this gain be treated?

Accepted Answer

A) Ordinary income of $35,000 
B) Section 1231 gain of $35,000 
C) Section 1231 gain of $20,000 and ordinary income of $15,000 
D) Section 1231 gain of $15,000 and ordinary income of $20,000 
E) None of the above 
A) Ordinary income of $35,000 
B) Section 1231 gain of $35,000 
C) Section 1231 gain of $20,000 and ordinary income of $15,000 
D) Section 1231 gain of $15,000 and ordinary income of $20,000 
E) None of the above

Question 10

Sally acquired an apartment building 15 years ago for $150,000 and sold it for $410,000 in the current year. At the time of the sale, there is $65,000 of accumulated straight-line depreciation on the apartment building. Assuming Sally is in the 35 percent tax bracket for ordinary income, how much of her gain is taxed at 15 percent?

Accepted Answer

A) None 
B) $65,000 
C) $260,000 
D) $325,000 
E) $345,000 
A) None 
B) $65,000 
C) $260,000 
D) $325,000 
E) $345,000

Question 11

Lorreta has a manufacturing business. In the current year, her storage building is completely destroyed by fire and she receives $315,000 from her insurance company. She purchased the building for $300,000 20 years ago and has claimed depreciation of $85,000 using the straight-line method. In the following year, she purchases a new storage building at a cost of $295,000.
a.Calculate Lorreta's realized gain or loss.
b.​
Assuming Lorreta makes an election under the involuntary conversion provision, calculate Lorreta's recognized gain or loss?
c.​
Assuming Lorreta makes an election under the involuntary conversion provision, what is Lorreta's basis in the new building?

Accepted Answer

The answer of Lorreta has a manufacturing business. In the...

Question 12

Which of the following is true of a like-kind exchange:

Accepted Answer

A) There must be no cash exchanged to qualify. 
B) The properties exchanged cannot be personal residences. 
C) Office furniture can be exchanged for computers. 
D) A new holding period for capital gains treatment starts on the day the exchange is completed. 
A) There must be no cash exchanged to qualify. 
B) The properties exchanged cannot be personal residences. 
C) Office furniture can be exchanged for computers. 
D) A new holding period for capital gains treatment starts on the day the exchange is completed.

Question 13

If the proceeds from the sale of property will be collected over a period of more than one year, a taxpayer is required to use the installment method.

Accepted Answer

A) True 
 B)False

Question 14

What is the treatment given to personal casualty gains and losses?

Accepted Answer

Personal casualty gains and losses are f

Question 15

An artist's painting is not a capital asset when held by the artist.

Accepted Answer

A) True 
 B)False

Question 16

The exchange of shares of stock does not qualify for like-kind exchange treatment.

Accepted Answer

A) True 
 B)False

Question 17

Russell purchased a house 1 year ago for $150,000 and, due to an employment-related move, sold the house this year for $190,000. What is Russell's taxable gain?

Accepted Answer

$0. The $250,000 exclusion is

Question 18

If a taxpayer is relieved of a liability on the disposition of property, the amount of the liability should be included in the amount realized on the sale or other disposition.

Accepted Answer

A) True 
 B)False

Question 19

An asset's adjusted basis is computed as:

Accepted Answer

A) Original basis + capital improvements - accumulated depreciation. 
B) Original basis - capital improvements + accumulated depreciation. 
C) Original basis + capital improvements + accumulated depreciation. 
D) Original basis + capital improvements + gain or loss realized. 
E) None of the above. 
A) Original basis + capital improvements - accumulated depreciation. 
B) Original basis - capital improvements + accumulated depreciation. 
C) Original basis + capital improvements + accumulated depreciation. 
D) Original basis + capital improvements + gain or loss realized. 
E) None of the above.

Question 20

If the following are capital assets, mark with a "Yes." If they are not capital assets, mark with a "No."
a.A taxpayer's personal jet ski ______
b.Ford Motor Credit Company bond held by an investor ______
c.A baseball for sale at Sports.com ______
d.J.K.Rowling's personal copy of her original manuscript of
Harry Potter and the Sorcerer's Stone ______
e.An antique grandfather clock inherited from the taxpayer's aunt ______

Accepted Answer

a. Yes
b.

The taxpayer generally has only 1 year to replace involuntarily converted property in order to postpone the recognition of gain.

Jerry bought his home 15 years ago for $60,000. Three years ago Jerry married Debbie and she moved into the same house and has lived there since. If they sell Jerry's house in the current year for $340,000, what is their taxable gain on a joint tax return?

In 2015, Paul, a single taxpayer, has taxable income of $30,000 exclusive of capital gains and losses. Paul incurred a $1,000 short-term capital loss and a $4,000 long-term capital loss. What is the amount of his long-term capital loss carryover to 2016?

Martha has a net capital loss of $20,000 and other ordinary taxable income of $45,000 for the current tax year. What is the amount of Martha's taxable income after deducting the allowed capital loss?

For the current year, Susan had salary income of $20,000. In addition she reported the following capital transactions during the year: There were no other items includable in her gross income. What is the amount of her adjusted gross income for the current year?

Cows used in a farming business are Section 1231 property.

Which of the following is true of a like-kind exchange:

If the proceeds from the sale of property will be collected over a period of more than one year, a taxpayer is required to use the installment method.

What is the treatment given to personal casualty gains and losses?

An artist's painting is not a capital asset when held by the artist.

The exchange of shares of stock does not qualify for like-kind exchange treatment.

Russell purchased a house 1 year ago for $150,000 and, due to an employment-related move, sold the house this year for $190,000. What is Russell's taxable gain?

If a taxpayer is relieved of a liability on the disposition of property, the amount of the liability should be included in the amount realized on the sale or other disposition.

An asset's adjusted basis is computed as:

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

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Exam 8: Capital Gains and Losses

The taxpayer generally has only 1 year to replace involuntarily converted property in order to postpone the recognition of gain.

Jerry bought his home 15 years ago for $60,000. Three years ago Jerry married Debbie and she moved into the same house and has lived there since. If they sell Jerry's house in the current year for $340,000, what is their taxable gain on a joint tax return?

In 2015, Paul, a single taxpayer, has taxable income of $30,000 exclusive of capital gains and losses. Paul incurred a $1,000 short-term capital loss and a $4,000 long-term capital loss. What is the amount of his long-term capital loss carryover to 2016?

Martha has a net capital loss of $20,000 and other ordinary taxable income of $45,000 for the current tax year. What is the amount of Martha's taxable income after deducting the allowed capital loss?

For the current year, Susan had salary income of $20,000. In addition she reported the following capital transactions during the year: There were no other items includable in her gross income. What is the amount of her adjusted gross income for the current year?

Cows used in a farming business are Section 1231 property.

Which of the following is true of a like-kind exchange:

If the proceeds from the sale of property will be collected over a period of more than one year, a taxpayer is required to use the installment method.

What is the treatment given to personal casualty gains and losses?

An artist's painting is not a capital asset when held by the artist.

The exchange of shares of stock does not qualify for like-kind exchange treatment.

Russell purchased a house 1 year ago for $150,000 and, due to an employment-related move, sold the house this year for $190,000. What is Russell's taxable gain?

If a taxpayer is relieved of a liability on the disposition of property, the amount of the liability should be included in the amount realized on the sale or other disposition.

An asset's adjusted basis is computed as:

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters