Exam 8: Capital Gains and Losses

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.

Casualty gains and losses from business or investment property:

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

Perry acquired raw land as an investment in 1996.The land cost $60,000.In 2013,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.If Perry elects to recognize the entire gain in the year of sale,what is his recognized gain in 2013?

During 2013,William sold the following capital assets: Description ABC Stock 123 Bond Fund Dune buggy Antique chair Calculate the following: Description Purchased Sold Price Basis ABC Stock 05-05-2009 08-03-2013 \ 500 \ 9,000 123 Bond Fund 11-07-2012 02-25-2013 \ 2,000 \ 6,000 Dune buggy 06-12-2008 09-29-2013 \ 2,400 \ 4,600 Antique chair 10-09-2000 04-21-2013 \ 4,000 \ 3,000 a.Total short-term capital gain/loss realized for tax purposes b.Total long-term capital gain/loss realized for tax purposes c.Deductible capital gain/loss d.The amount and nature short-term or long-term)of his capital loss carryforward e.Assuming that William has no capital gain or loss for 2014,how much can he deduct in 2014 and what is the amount and nature of any carryforward to 2015?

Lorreta has a manufacturing business.In 2013,her storage building is completely destroyed by fire and she receives $300,000 from her insurance company.She purchased the building for $295,000 in 1994 and has claimed depreciation of $80,000 using the straight-line method.In 2014,she purchases a new storage building at a cost of $285,000. 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?

What are capital assets?

Johnny owned a gas station with an adjusted basis of $300,000.After it was destroyed in a fire,he received $600,000 from the insurance company.Within the next year,he bought a new gas station for $480,000.What is Johnny's taxable gain and what is the basis in the new building?

For the 2013 tax year,Morgan had $25,000 of ordinary income.In addition,he had an $1,800 long-term capital loss and a $1,500 short-term capital loss.What will be the amount of Morgan's capital loss carryforward to 2014?

Which of the following assets is not a Section 1231 asset?

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

At the end of 2013,Falstaff sold for $5,000 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?

Emily sold the following investments during the year: $\quad$$\quad$ stock $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ date purchased $\quad$$\quad$$\quad$ date sold $\quad$$\quad$ data cost price $\quad$ data cost basis $\quad$ sales a. $1,000 \text { shares Dot Com Co. } \quad \quad 03-21-2002 \quad 02-04-2013 \quad \$ 20,000 \quad \$ 5,000$ b. $500 \text { shares Big Box Store } \quad\quad\quad 05-19-2012 \quad 01-22-2013 \quad \$ 8,200 \quad \$ 7,500$ c. $300 \text { shares Lotta Fun, Inc. } \quad \quad 10-02-2012 \quad 09-21-2013 \quad \$ 3,000 \quad \$ 4,500$ d. $700 \text { shares Local Gas Co. } \quad\quad\quad 06-17-2012 \quad 11-11-2013 \quad \$ 14,000 \quad \$ 17,000$ For each stock,calculate the amount and the nature of the gain or loss.

For the year 2013,Susan had salary income of $19,000.In addition she reported the following capital transactions during the year: $\begin{array}{lr}\text { Long-term capital gain } & \$ 7,000 \\\text { Short-term capital gain } & \$ 3,000 \\\text { Long-term capital loss } & \$(2,000) \\\text { Short-term capital loss } & \$(4,000)\end{array}$ There were no other items includable in her gross income.What is the amount of her adjusted gross income for 2013?

In 2013,Estes has net short-term capital losses of $3,000,a net long-term capital loss of $45,000,and taxable income from wages of $35,000. a.Calculate the amount of Estes' deduction for capital losses for 2013. b.Calculate the amount and nature short-term or long-term)of his capital loss carryforward. c.For how many years may Estes carry the unused loss forward?

Karen received a stock portfolio upon the death of her grandmother.The stock originally cost her grandmother $32,000,but was worth $300,000 when she died.What is Karen's tax basis in the stock portfolio? Explain.

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

The first day a capital asset,acquired on August 31,2013,may be sold for long-term capital gain or loss treatment is September 1,2014.

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

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 $\quad$ ____ b. Ford Motor Credit Company bond held by aninvestor c. A baseball for sale at Sports.com $\quad$ ____ d. J.K. Rowling's personal copy of her original manuscript of Harry Potter and the Sorcerer's Stone e. An antique grand father clock inherited from the taxpayer's aunt $\quad$ ____