Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Bev owns an apartment complex she purchased 10 years ago for $500,000 with a $100,000 cash down payment accompanied by a $400,000 loan.Bev has made $75,000 of capital improvements on the complex and her depreciation claimed on the building to date is $120,000.Calculate Bev's adjusted basis in the building.

Accepted Answer

$455,000 =

Question 3

Terry has a casualty gain of $1,000 and a casualty loss of $5,400,before the $100 floor and before the adjusted gross income limitation.The gain and loss were the result of two separate casualties occurring during 2013 and both properties were personal-use assets.If Terry itemizes deductions on her 2013 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) $4,300 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) $4,300 itemized deduction 
C) $1,800 itemized deduction 
D) $2,800 itemized deduction,$1,000 capital gain 
E) None of the above

Question 4

Rod had the following personal casualty in 2013:
Decrease in fair market
 $\begin{array}{cccc}
&\begin{array}{c}
\text { value due to } \
\text { casualty }
\end{array} & \begin{array}{c}
\text { Adjusted } \
\text { basis }
\end{array} & \begin{array}{c}
\text { Insurance } \
\text { reimbursement }
\end{array} & \begin{array}{c}
\text { Holding } \
\text { period }
\end{array} \\
\text { Rod's antique furniture was }&\$ 2,500 & \$ 500 & \$ 1,700 & 20 \text { years }
\end{array}$ $\begin{array}{cccc}
&\begin{array}{c}
\text { value due to } \
\text { casualty }
\end{array} & \begin{array}{c}
\text { Adjusted } \
\text { basis }
\end{array} & \begin{array}{c}
\text { Insurance } \
\text { reimbursement }
\end{array} & \begin{array}{c}
\text { Holding } \
\text { period }
\end{array} \\
\text { Rod's antique furniture was }&\$ 2,500 & \$ 500 & \$ 1,700 & 20 \text { years }
\end{array}$ vandalized.
Calculate the amount and nature of Rod's gain or loss as a result of this casualty.

Accepted Answer

$1,200 long-term capital gain

Question 5

Net short-term capital gains may be offset by net long-term capital losses.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

In 2013,Tim sells Section 1245 property for $28,000 that he had purchased in 2007.Tim has claimed $5,000 in depreciation on the property and originally purchased it for $15,000.How much of the gain is taxable as ordinary income?

Accepted Answer

A) $5,000 
B) $8,000 
C) $18,000 
D) $13,000 
E) None of the above is correct 
A) $5,000 
B) $8,000 
C) $18,000 
D) $13,000 
E) None of the above is correct

Question 8

Dan acquired rental property in June 2003 for $380,000 and sold it in October,2013.$30,000 in straight- line depreciation has been taken on the house.A run-up in housing prices in San Diego allowed him to sell the house for $570,000.In the year of sale,Dan received $170,000 when the buyer sold some investments,an additional $200,000 when the buyer closed a loan from the bank,and took a $200,000 note from the buyer,payable on the anniversary of the sale date in 10 installments of $20,000 each plus interest on the unpaid balance.
Using the installment method,calculate his taxable gain in the year of sale.

Accepted Answer

$570,000 - $380,000 - $30,000)= $220,000

Question 9

Carlos bought a building for $111,000 in 2009.He built an addition to the building for $24,000.In 2013,he sold it for $190,000.What was his long-term capital gain?

Accepted Answer

A) $190,000 
B) $55,000 
C) $79,000 
D) $175,000 
E) $59,000 
A) $190,000 
B) $55,000 
C) $79,000 
D) $175,000 
E) $59,000

Question 10

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 $920 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.$720 gain.$1,000 - $1,200 -

Question 11

Verlin sells a commercial building and receives $50,000 in cash and a note for $50,000 at 10 percent interest.Verlin's adjusted basis in the building on the date of sale is $40,000 and he collects only the
$50,000 down payment in the year of the sale.
a.If Verlin elects to recognize the total gain on the property in the year of sale,calculate the taxable gain.
b.Assuming Verlin uses the installment sale method,calculate the taxable gain he must report for the year of the sale.
c.Assuming Verlin collects $10,000 not including interest)of the note principal in the year following the year of sale,calculate the amount of income recognized under the installment sale method.

Accepted Answer

a.$60,000 = $50,000 + $50,000

Question 12

Which of the following is not true about capital assets?

Accepted Answer

A) Real property used in a trade or business is not a capital asset. 
B) Capital losses may be carried back for 3 years to offset capital gains in those years. 
C) For 2013,net long-term capital gains are granted preferential tax treatment. 
D) Individual taxpayers may deduct net capital losses of up to $3,000 per year. 
E) Shares of stock held for investment are capital assets. 
A) Real property used in a trade or business is not a capital asset. 
B) Capital losses may be carried back for 3 years to offset capital gains in those years. 
C) For 2013,net long-term capital gains are granted preferential tax treatment. 
D) Individual taxpayers may deduct net capital losses of up to $3,000 per year. 
E) Shares of stock held for investment are capital assets.

Question 13

Which of the following statements is correct with respect to the deferral provisions of the Tax Code?

Accepted Answer

A) The like-kind exchange provision is elective. 
B) The involuntary conversion provision is elective. 
C) The exclusion of gain on the sale of a personal residence is elective. 
D) Both the like-kind exchange and the involuntary conversion provisions are elective. 
E) None of the above. 
A) The like-kind exchange provision is elective. 
B) The involuntary conversion provision is elective. 
C) The exclusion of gain on the sale of a personal residence is elective. 
D) Both the like-kind exchange and the involuntary conversion provisions are elective. 
E) None of the above.

Question 14

Which of the following is a capital asset?

Accepted Answer

A) A literary work held by the author 
B) Real estate held by a developer 
C) A taxpayer's personal automobile 
D) A truck used in a taxpayer's business 
E) None of the above 
A) A literary work held by the author 
B) Real estate held by a developer 
C) A taxpayer's personal automobile 
D) A truck used in a taxpayer's business 
E) None of the above

Question 15

Simon sold investment property 2 years ago for $750.Simon's basis in the property was $300.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?

Accepted Answer

A) $0 
B) $75 
C) $90 
D) $150 
E) None of the above 
A) $0 
B) $75 
C) $90 
D) $150 
E) None of the above

Question 16

If a capital asset acquired August 5,2013 is sold on February 6,2014,any gain is a short-term capital gain.

Accepted Answer

A) True 
 B)False

Question 17

In 2013,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 18

Joseph exchanged land tax basis of $36,000),that he had held for 4 years as an investment,for similar land valued at $40,000 which was owned by Adrian.In connection with this transaction,Adrian assumed Joseph's $12,000 mortgage.As a result of this transaction Joseph should report a long-term capital gain of:

Accepted Answer

A) $0 
B) $4,000 
C) $12,000 
D) $16,000 
E) None of the above 
A) $0 
B) $4,000 
C) $12,000 
D) $16,000 
E) None of the above

Question 19

The exclusion of gain on the sale of a personal residence may be elected only by a taxpayer who has owned three or more residences.

Accepted Answer

A) True 
 B)False

Question 20

Robert acquired his rental property in November 2003 for $100,000 and sold it in October 2013 for
$225,000.The accumulated straight-line depreciation on the property at the time of the sale was
$20,000.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)?

Accepted Answer

a.$145,000.Calculated as $225,000 - $100

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

Net short-term capital gains may be offset by net long-term capital losses.

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

In 2013,Tim sells Section 1245 property for $28,000 that he had purchased in 2007.Tim has claimed $5,000 in depreciation on the property and originally purchased it for $15,000.How much of the gain is taxable as ordinary income?

Carlos bought a building for $111,000 in 2009.He built an addition to the building for $24,000.In 2013,he sold it for $190,000.What was his long-term capital gain?

Which of the following is not true about capital assets?

Which of the following statements is correct with respect to the deferral provisions of the Tax Code?

Which of the following is a capital asset?

If a capital asset acquired August 5,2013 is sold on February 6,2014,any gain is a short-term capital gain.

In 2013,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.

The exclusion of gain on the sale of a personal residence may be elected only by a taxpayer who has owned three or more residences.

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

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

Net short-term capital gains may be offset by net long-term capital losses.

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

In 2013,Tim sells Section 1245 property for $28,000 that he had purchased in 2007.Tim has claimed $5,000 in depreciation on the property and originally purchased it for $15,000.How much of the gain is taxable as ordinary income?

Carlos bought a building for $111,000 in 2009.He built an addition to the building for $24,000.In 2013,he sold it for $190,000.What was his long-term capital gain?

Which of the following is not true about capital assets?

Which of the following statements is correct with respect to the deferral provisions of the Tax Code?

Which of the following is a capital asset?

If a capital asset acquired August 5,2013 is sold on February 6,2014,any gain is a short-term capital gain.

In 2013,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.

The exclusion of gain on the sale of a personal residence may be elected only by a taxpayer who has owned three or more residences.

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