Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

On August 8, 2015, Sam, single, age 62, sold for $210,000 his principal residence, which he has lived in for 10 years, and which had an adjusted basis of $60,000. On November 1, 2015, he purchased a new residence for $80,000. For 2015, Sam should recognize a gain on the sale of his residence of:

Accepted Answer

A) $0 
B) $25,000 
C) $50,000 
D) $130,000 
E) None of the above 
A) $0 
B) $25,000 
C) $50,000 
D) $130,000 
E) None of the above

Question 3

Currently, long-term capital gains are not afforded preferential tax treatment.

Accepted Answer

A) True 
 B)False

Question 4

In the current year, 70 year-old Jeanette sells her personal residence of the last 40 years for $365,000. Jeanette's basis in her residence is $70,000. The expenses associated with the sale of her home total $20,000. Jeanette decides to move in with her daughter rather than purchase a new residence. Calculate Jeanette's realized gain and recognized gain on the sale of her residence.
a.Realized gain
b.Recognized gain

Accepted Answer

The answer of In the current year, 70 year-old Jeanette...

Question 5

Sol purchased land as an investment on January 12, 2009 for $85,000. On January 31, 2015, Sol sold the land for $30,000 cash. In addition, the purchaser assumed the mortgage of $70,000 on the land. What is the amount of the realized gain or loss on the sale?

Accepted Answer

A) $65,000 loss 
B) $15,000 gain 
C) $5,000 gain 
D) $90,000 gain 
E) None of the above 
A) $65,000 loss 
B) $15,000 gain 
C) $5,000 gain 
D) $90,000 gain 
E) None of the above

Question 6

During the current year, an office desk used by Pat in his business was completely destroyed by a fire. The adjusted basis of the desk was $900 (original cost of $1,500 less accumulated depreciation of $600). Pat received $500 from his insurance company, but he did not replace the desk.
a.What is the amount of Pat's recognized gain or loss (deduction) as a result of the casualty?
b.Assuming this is Pat's only casualty gain or loss for the year, what is the nature of the gain or loss?

Accepted Answer

The answer of During the current year, an office desk...

Question 7

Terry has a casualty gain of $1,000 and a casualty loss of $5,500, before the $100 floor and before the adjusted gross income limitation. The gain and loss were the result of two separate casualties occurring during the current year and both properties were personal-use assets. If Terry itemizes deductions on her current year return and has adjusted gross income of $25,000, what is Terry's gain or net itemized deduction as a result of these casualties?

Accepted Answer

A) $5,300 itemized deduction, $1,000 capital gain 
B) $1,900 itemized deduction 
C) $1,800 itemized deduction 
D) $2,800 itemized deduction, $1,000 capital gain 
E) None of the above 
A) $5,300 itemized deduction, $1,000 capital gain 
B) $1,900 itemized deduction 
C) $1,800 itemized deduction 
D) $2,800 itemized deduction, $1,000 capital gain 
E) None of the above

Question 8

If a capital asset acquired August 5, 2015 is sold on February 6, 2016, any gain is a short-term capital gain.

Accepted Answer

A) True 
 B)False

Question 9

After 4 years of life in the slow lane, Doug decided to give up his goat ranch and move back to the big city. He sold the goat milking machine for $1,000. The machine originally cost $1,200 and had $820 of accumulated depreciation at the time of sale.
​
a.What is the total gain or loss on the sale of the goat milking machine?
b.Is the gain or loss treated as capital or ordinary? Explain.

Accepted Answer

a. $620 gain. $1,000 - ($1,200

Question 10

Which one of the following is a capital asset?

Accepted Answer

A) Accounts receivable 
B) Copyright held by the author 
C) Securities held for investment 
D) Inventories 
E) All of the above are capital assets 
A) Accounts receivable 
B) Copyright held by the author 
C) Securities held for investment 
D) Inventories 
E) All of the above are capital assets

Question 11

The amount of ordinary income recognized on the sale of a Section 1245 asset is limited to the total gain realized on the sale.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following sales results in a short-term gain/loss?

Accepted Answer

A) A capital asset bought on June 30, 2014 and sold June 20, 2015. 
B) A capital asset bought on July 25, 2014 and sold August 19, 2015. 
C) A capital asset bought on September 12, 2008 and sold August 19, 2015. 
D) A capital asset bought on August 15, 2014 and sold August 16, 2015. 
E) All of the above are long-term gains/losses. 
A) A capital asset bought on June 30, 2014 and sold June 20, 2015. 
B) A capital asset bought on July 25, 2014 and sold August 19, 2015. 
C) A capital asset bought on September 12, 2008 and sold August 19, 2015. 
D) A capital asset bought on August 15, 2014 and sold August 16, 2015. 
E) All of the above are long-term gains/losses.

Question 13

If a taxpayer sells his personal residence and purchases a new residence, realized gain may be recognized.

Accepted Answer

A) True 
 B)False

Question 14

In 2015, the basis of a taxpayer's replacement residence is equal to the cost of the replacement residence less the gain which was deferred on the sale of the old residence.

Accepted Answer

A) True 
 B)False

Question 15

The office building Donna owned and used for her desk-top publishing business was destroyed by a hurricane. Although the basis of the building was $80,000, Donna carried replacement cost insurance and received $160,000 from the insurance company after it was determined that the building was a complete loss. It cost her $152,000 to rebuild the store in the current year.
a.Calculate Donna's recognized gain, assuming an election under the involuntary conversion provision is made.$__________
b.Calculate Donna's basis in the replacement building.$__________

Accepted Answer

a. A gain of $80,000 was realized, but o

Question 16

For purposes of determining the adjusted basis of a capital asset at the time of its sale,

Accepted Answer

A) Capital improvements are added to the basis. 
B) Ordinary repairs reduce the adjusted basis. 
C) Accumulated depreciation is added to the basis. 
D) The basis does not include costs such as title insurance and escrow fees related to the initial purchase. 
A) Capital improvements are added to the basis. 
B) Ordinary repairs reduce the adjusted basis. 
C) Accumulated depreciation is added to the basis. 
D) The basis does not include costs such as title insurance and escrow fees related to the initial purchase.

Question 17

To have the like-kind exchange provisions apply, a taxpayer must make an election.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a capital asset?

Accepted Answer

A) Inventory held by a manufacturer 
B) Accounts receivable held by a dentist 
C) All property owned by a taxpayer other than property specifically noted in the law as an exception 
D) Depreciable property and real estate used in a trade or business 
A) Inventory held by a manufacturer 
B) Accounts receivable held by a dentist 
C) All property owned by a taxpayer other than property specifically noted in the law as an exception 
D) Depreciable property and real estate used in a trade or business

Question 19

There is no limit on the amount of capital losses that an individual may deduct against ordinary income.

Accepted Answer

A) True 
 B)False

Question 20

Karen received a stock portfolio upon the death of her grandmother. The stock originally cost her grandmother $32,000, but was worth $250,000 when she died. What is Karen's tax basis in the stock portfolio? Explain.

Accepted Answer

$250,000. If property is recei

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

On August 8, 2015, Sam, single, age 62, sold for $210,000 his principal residence, which he has lived in for 10 years, and which had an adjusted basis of $60,000. On November 1, 2015, he purchased a new residence for $80,000. For 2015, Sam should recognize a gain on the sale of his residence of:

Currently, long-term capital gains are not afforded preferential tax treatment.

Sol purchased land as an investment on January 12, 2009 for $85,000. On January 31, 2015, Sol sold the land for $30,000 cash. In addition, the purchaser assumed the mortgage of $70,000 on the land. What is the amount of the realized gain or loss on the sale?

If a capital asset acquired August 5, 2015 is sold on February 6, 2016, any gain is a short-term capital gain.

Which one of the following is a capital asset?

The amount of ordinary income recognized on the sale of a Section 1245 asset is limited to the total gain realized on the sale.

Which of the following sales results in a short-term gain/loss?

If a taxpayer sells his personal residence and purchases a new residence, realized gain may be recognized.

In 2015, the basis of a taxpayer's replacement residence is equal to the cost of the replacement residence less the gain which was deferred on the sale of the old residence.

For purposes of determining the adjusted basis of a capital asset at the time of its sale,

To have the like-kind exchange provisions apply, a taxpayer must make an election.

Which of the following is a capital asset?

There is no limit on the amount of capital losses that an individual may deduct against ordinary income.

Karen received a stock portfolio upon the death of her grandmother. The stock originally cost her grandmother $32,000, but was worth $250,000 when she died. What is Karen's tax basis in the stock portfolio? Explain.

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

Exam 8: Capital Gains and Losses

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

On August 8, 2015, Sam, single, age 62, sold for $210,000 his principal residence, which he has lived in for 10 years, and which had an adjusted basis of $60,000. On November 1, 2015, he purchased a new residence for $80,000. For 2015, Sam should recognize a gain on the sale of his residence of:

Currently, long-term capital gains are not afforded preferential tax treatment.

Sol purchased land as an investment on January 12, 2009 for $85,000. On January 31, 2015, Sol sold the land for $30,000 cash. In addition, the purchaser assumed the mortgage of $70,000 on the land. What is the amount of the realized gain or loss on the sale?

If a capital asset acquired August 5, 2015 is sold on February 6, 2016, any gain is a short-term capital gain.

Which one of the following is a capital asset?

The amount of ordinary income recognized on the sale of a Section 1245 asset is limited to the total gain realized on the sale.

Which of the following sales results in a short-term gain/loss?

If a taxpayer sells his personal residence and purchases a new residence, realized gain may be recognized.

In 2015, the basis of a taxpayer's replacement residence is equal to the cost of the replacement residence less the gain which was deferred on the sale of the old residence.

For purposes of determining the adjusted basis of a capital asset at the time of its sale,

To have the like-kind exchange provisions apply, a taxpayer must make an election.

Which of the following is a capital asset?

There is no limit on the amount of capital losses that an individual may deduct against ordinary income.

Karen received a stock portfolio upon the death of her grandmother. The stock originally cost her grandmother $32,000, but was worth $250,000 when she died. What is Karen's tax basis in the stock portfolio? Explain.

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