Exam 8: Capital Gains and Losses

For the current tax year, Morgan had $25,000 of ordinary income. In addition, he had an $1,900 long-term capital loss and a $1,600 short-term capital loss. What will be the amount of Morgan's capital loss carryforward to the next year?

Which of the following statements is true?

Simon sold investment property 2 years ago for $750. Simon's basis in the property was $200. Simon is receiving $150 per year from the buyer. Simon reports this income on the installment method. If Simon collects $150 in principal during the current year, how much gain should he report from the sale for the year?

A taxpayer eligible to use the installment method for reporting gain on the sale of an asset must use the installment method unless he or she elects out of the provision.

If property is received from a decedent, the taxpayer who inherits the property has the same basis in the property as the decedent.

A net long-term gain from the theft of a Section 1231 asset is treated as a Section 1231 gain.

Sol purchased land as an investment on February 12, 2014 for $85,000. On January 31, 2015, Sol sold the land for $90,000 cash. What is the nature of the gain or loss?​

Bennett purchased a tract of land for $20,000 in 2009 when he heard that a new highway was going to be constructed through the property and the land would soon be worth $200,000. The highway project was abandoned in 2015 and the value of the land fell to $15,000. Bennett can claim a loss in 2015 of:

In December, 2015, Ben and Jeri (married, filing jointly) have a long-term capital gain of $55,000 on the sale of stock held for 4 years. They have no other capital gains and losses for the year. After standard deduction and personal exemptions, their ordinary income for the year, before the capital gain, is $74,900, making their total income for the year $129,900, ($74,900 + $55,000). In 2015, married taxpayers pay tax of $10,313 at 10 percent and 15 percent rates (from the tax rate schedules) on the first $74,900 of ordinary taxable income and 25 percent on ordinary taxable income up to $151,200. What is their total tax liability?

In the current year, Helen sold Section 1245 property for $6,000. The property cost $26,000 when it was purchased 5 years ago. The depreciation claimed on the property was $24,000. a.Calculate the adjusted basis of the property. b.Calculate the amount of ordinary income under Section 1245. c.Calculate the Section 1231 gain.

If insurance proceeds exceed the taxpayer's basis in property destroyed by fire and the proceeds are not invested in similar property, the taxpayer may be required to recognize a gain.

Elmer sold machinery used in his business for $20,000. The machinery originally cost $80,000 and had $45,000 of accumulated depreciation at the time of the sale. It is his only sale this year. a.What is the gain or loss on the sale of the machinery? b.Is the gain or loss treated as capital or ordinary? Explain.

Indicate whether a gain or loss realized in each of the following situations would be long-term or short-term by putting an "X" on the appropriate blank line: ​

In October of the current year, Mike sold a share of Berkshire-Hathaway for $73,000. He had acquired it several years ago at a cost of $42,000. He also sold Microsoft stock he had held for 3 years at a gain of $17,000. He had a short-term $2,000 loss on the sale of stock of a start-up technology company. He has $85,000 in taxable income before capital transactions are taken into account. ​ Assuming Mike is single with no dependents, what is the amount of Mike's tax on the capital transactions?

Robert acquired his rental property 10 years ago for $110,000 and sold it in the current year for $230,000. The accumulated straight-line depreciation on the property at the time of the sale was $35,000. Robert is in the 35 percent tax bracket for ordinary income. ​ a.What is Robert's gain on the sale of his rental property? b.How is the gain taxed? (i.e., What tax bracket is the gain subject to)?

In the current year, Keyaki Construction Company exchanged an old truck, which cost $53,000 and had accumulated depreciation of $16,000, for a new truck having a fair market value of $65,000. In connection with the exchange, Keyaki paid $28,000 in cash. What is the tax basis of the new truck?

The depreciation recapture provisions are designed to prevent taxpayers from converting capital gains into ordinary income.

In a like-kind exchange, relief from a liability is treated as boot.

Which of the following is not true about capital assets?

At the end of the current year, Falstaff sold for $4,800 General Martin stock that was purchased 5 months ago for $4,000. He also sold Cedar stock for $6,000 at the same time. The Cedar stock cost $4,000, 2 years ago. In addition, Falstaff has a short-term capital loss of $500 on the sale of silver. a.Calculate the amount of Falstaff's net short-term and net long-term capital gain or loss. b.If Falstaff has a net capital gain, what is the maximum rate at which the gain will be taxed?