Question 1

All assets owned by a trade or business are Section 1231 assets.

Accepted Answer

A) True 
 B)False

Question 2

What are the carryover provisions for unused capital losses applicable to individuals?

Accepted Answer

A) Carry back 3 years and forward 5 years 
B) Carry back 2 years and forward 20 years 
C) Carry forward 20 years only 
D) Carry forward indefinitely 
A) Carry back 3 years and forward 5 years 
B) Carry back 2 years and forward 20 years 
C) Carry forward 20 years only 
D) Carry forward indefinitely

Question 3

Justin, who is single, sells his principal residence that he has owned and occupied for the past five years.His adjusted basis for the residence is $90,000.He incurred selling expenses of $10,000.How much gain must Justin recognize if sells the residence for $390,000?

Accepted Answer

A) 0 
B) $40,000 
C) $50,000 
D) $290,000 
A) 0 
B) $40,000 
C) $50,000 
D) $290,000

Question 4

Liam used his auto 70 percent for business and 30 percent for personal use.He purchased it for $15,000 and has taken $5,460 of depreciation on it.What is his recognized gain on a sale for $12,000 and what is its character?

Accepted Answer

A) $2,940 Section 1231 gain 
B) $3,360 Section 1245 ordinary income 
C) $5,460 Section 1245 ordinary income 
D) $6,540 Section 1231 gain 
A) $2,940 Section 1231 gain 
B) $3,360 Section 1245 ordinary income 
C) $5,460 Section 1245 ordinary income 
D) $6,540 Section 1231 gain

Question 5

Martone Corporation sells two machines and a warehouse it has been using for storage in the current tax year.Each of the machines cost $25,000 and has an adjusted basis of $11,000 when each was sold for $14,000.The warehouse cost $105,000, has an adjusted basis of $60,000 and is sold for $95,000.All assets were depreciated using MACRS depreciation.What is the amount and type of gain recognized by Martone on the sale of these assets?

Accepted Answer

A) $6,000 Section 1245 recapture; $35,000 Section 1231 gain 
B) $6,000 Section 1245 recapture; $7,000 Section 291 recapture; $28,000 Section 1231 gain 
C) $6,000 section 1245 recapture; $35,000 Section 291 recapture 
D) $41,000 capital gain 
A) $6,000 Section 1245 recapture; $35,000 Section 1231 gain 
B) $6,000 Section 1245 recapture; $7,000 Section 291 recapture; $28,000 Section 1231 gain 
C) $6,000 section 1245 recapture; $35,000 Section 291 recapture 
D) $41,000 capital gain

Question 6

William purchased his personal residence in 2011 for $285,000.In early 2017, he lost his job and was unable to make payments on the mortgage.In December 2017, William worked out a new repayment schedule with his bank after he obtained a new job that reduced his mortgage from $235,000 to $120,000.Which of the following statements is true regarding this mortgage reduction?

Accepted Answer

A) William was required to include the debt in income because he continued to own the home. 
B) William has to include any forgiveness of debt income only if he sells the house for more than $285,000. 
C) The basis of the home for any future sale is $120,000. 
D) The basis of the home on any future sale is $170,000. 
A) William was required to include the debt in income because he continued to own the home. 
B) William has to include any forgiveness of debt income only if he sells the house for more than $285,000. 
C) The basis of the home for any future sale is $120,000. 
D) The basis of the home on any future sale is $170,000.

Question 7

Melody works in her home using a computer she purchased two years ago for $2,500.The total adjusted basis for the computer is now $1,000.Her husband and children used the computer 20 percent of the time to play computer games and for personal correspondence.She sells the computer for $1,200.How much and what kind of gain does Melody recognize?

Accepted Answer

A) $200 capital gain 
B) $200 Section 1245 recapture 
C) $200 Section 1231gain 
D) $460 Section 1245 recapture 
A) $200 capital gain 
B) $200 Section 1245 recapture 
C) $200 Section 1231gain 
D) $460 Section 1245 recapture

Question 8

A taxpayer who had $250,000 of acquisition debt forgiven in 2017 on his $325,000 principal residence is required to reduce the basis of the home by the cancelled debt.

Accepted Answer

A) True 
 B)False

Question 9

Abby has a $10,000 loss on some collectibles, a $5,000 Sec.1202 gain, and an $11,000 gain on some securities.If all gains and losses are long-term and Abby is in the 24 percent tax bracket, how is her net gain taxed?

Accepted Answer

A) $5,000 at 25%; $1,000 at 15% 
B) $6,000 at 15% 
C) $5,000 at 28%; $1,000 at 15% 
D) $6,000 at 28% 
A) $5,000 at 25%; $1,000 at 15% 
B) $6,000 at 15% 
C) $5,000 at 28%; $1,000 at 15% 
D) $6,000 at 28%

Question 10

Section 1245 recapture is primarily applicable to realty.

Accepted Answer

A) True 
 B)False

Question 11

Brent sold his personal car and some household furniture during the year.He had a $3,000 gain on the car but a $5,000 loss on the furniture.What is his recognized gain or loss included in taxable income as a result of these sales?

Accepted Answer

A) 0 
B) $2,000 loss 
C) $3,000 gain 
D) $5,000 loss 
A) 0 
B) $2,000 loss 
C) $3,000 gain 
D) $5,000 loss

Question 12

Bobsy Company has a $14,000 net Section 1231 gain for the current tax year from its only property transaction.In the previous year, it had a $7,000 net Section 1231 loss.For the current year, the net Section 1231 gain will be taxed as:

Accepted Answer

A) A $14,000 ordinary income 
B) A $14,000 capital income 
C) A $7,000 ordinary income and a $7,000 long-term capital gain 
D) A $7,000 ordinary income and a $7,000 short-term capital gain 
A) A $14,000 ordinary income 
B) A $14,000 capital income 
C) A $7,000 ordinary income and a $7,000 long-term capital gain 
D) A $7,000 ordinary income and a $7,000 short-term capital gain

Question 13

Shawn, a single taxpayer, sold the house he lived in for seven years for $700,000.He purchased the house for $285,000.He made improvements at a cost of $125,000 and paid a $30,000 commission on the sale.What are Shawn's realized and recognized gains on the sale?

Accepted Answer

A) $260,000 realized and recognized 
B) $290,000 realized and recognized 
C) $260,000 realized and $10,000 recognized 
D) $260,000 realized and no gain recognized 
A) $260,000 realized and recognized 
B) $290,000 realized and recognized 
C) $260,000 realized and $10,000 recognized 
D) $260,000 realized and no gain recognized

Question 14

In 2019, Isabella sold several shares of different stocks held for investment.The following is a summary of her capital transactions for the year: $\begin{array}{lrrrr}
\underline{\text { Stock }}&\underline{\text { Purchased }} &\underline{\text { Sold }}&\underline{ \text { Selling Price }} &\underline{\text { Cost }}\
\mathrm{ABC} &02 / 15 / 19 &07 / 15 / 19 & \$ 2,200 & \$ 1,750 \
\mathrm{DEF} & 10 / 25 / 12 & 08 / 01 / 19 & 3,500 & 2,300 \
\mathrm{GHI} & 10 / 25 / 19 & 12 / 15 / 19 & 800 & 1,000 \
\mathrm{JKL} & 12 / 28 / 13 & 12 / 18 / 19 & 750 & 900
\end{array}$
 What is the amount of Isabella's net capital gains or losses for 2019?

Accepted Answer

A) $1,300 long-term capital gain 
B) $850 long-term capital gain and $450 short-term capital gain 
C) $1,050 long-term capital loss and $250 short-term capital loss 
D) $1,050 long-term capital gain and $250 short-term capital gain 
A) $1,300 long-term capital gain 
B) $850 long-term capital gain and $450 short-term capital gain 
C) $1,050 long-term capital loss and $250 short-term capital loss 
D) $1,050 long-term capital gain and $250 short-term capital gain

Question 15

Bennett, who is single, owns all of the outstanding stock of Bennett Company.In 2019 Bennett sells all of his stock in the company for $30,000.If the stock qualifies as Section 1244 and his basis in the stock is $140,000, how is his loss on the sale classified for tax purposes?

Accepted Answer

A) $110,000 capital loss 
B) $110,000 ordinary loss 
C) $60,000 capital loss; $50,000 ordinary loss 
D) $100,000 ordinary loss; $10,000 capital loss 
E) None of the above 
A) $110,000 capital loss 
B) $110,000 ordinary loss 
C) $60,000 capital loss; $50,000 ordinary loss 
D) $100,000 ordinary loss; $10,000 capital loss 
E) None of the above

Question 16

Becky bought a home with her husband, Ken, in 2004 for $125,000.They were divorced in 2013 and Becky became sole owner of the home under the divorce decree.On January 5, 2018, Becky married Michael.Michael and Becky have been living in the house since their marriage but they are planning now to move.If Michael and Becky sell their home on December 15, 2019 for $500,000, how much taxable gain must they report on their 2019 joint tax return?

Accepted Answer

A) zero 
B) $125,000 
C) $250,000 
D) $375,000 
A) zero 
B) $125,000 
C) $250,000 
D) $375,000

Question 17

Corporate net capital gains receive no tax-favored treatment.

Accepted Answer

A) True 
 B)False

Question 18

Noah sold investment land for $70,000 cash and the buyer's assumption of Noah's $30,000 mortgage on the property.Noah paid a realtor's commission of $2,800 on the sale.What is Noah's realized gain if the land has an adjusted basis of $57,000?

Accepted Answer

A) $43,000 
B) $40,200 
C) $13,000 
D) $10,200 
A) $43,000 
B) $40,200 
C) $13,000 
D) $10,200

Question 19

During the current year, Mrs.Mayhew received a used computer as a gift from her son for her personal use.The computer has a current fair market value of $350 and cost her son $850.He took $400 of depreciation deductions while it was used in his business.Mrs.Mayhew uses the computer for several years and then sells it for $200.What is the amount and type of gain or loss that Mrs.Mayhew recognizes on the sale?

Accepted Answer

A) $0 gain or loss 
B) $150 Section 1245 loss 
C) $150 Section 1231 loss 
D) $250 Section 1231 loss 
A) $0 gain or loss 
B) $150 Section 1245 loss 
C) $150 Section 1231 loss 
D) $250 Section 1231 loss

Question 20

During the current tax year, the Jeckel Company has the following gains and losses from property transactions: $12,000 Section 1231 gain
$23,000 long-term capital gain
$21,000 Section 1231 loss
$4,000 Section 1231 gain
What is the amount and type of gain or loss reported by Jeckel for the year?

Accepted Answer

A) $21,000 Section 1231 loss; $39,000 capital gain 
B) $16,000 Section 1231 gain; $21,000 Section 1231 loss; $23,000 capital gain 
C) $18,000 net capital loss 
D) $5,000 net Section 1231 loss; $23,000 capital gain 
A) $21,000 Section 1231 loss; $39,000 capital gain 
B) $16,000 Section 1231 gain; $21,000 Section 1231 loss; $23,000 capital gain 
C) $18,000 net capital loss 
D) $5,000 net Section 1231 loss; $23,000 capital gain

All assets owned by a trade or business are Section 1231 assets.

What are the carryover provisions for unused capital losses applicable to individuals?

Justin, who is single, sells his principal residence that he has owned and occupied for the past five years.His adjusted basis for the residence is $90,000.He incurred selling expenses of $10,000.How much gain must Justin recognize if sells the residence for $390,000?

Liam used his auto 70 percent for business and 30 percent for personal use.He purchased it for $15,000 and has taken $5,460 of depreciation on it.What is his recognized gain on a sale for $12,000 and what is its character?

A taxpayer who had $250,000 of acquisition debt forgiven in 2017 on his $325,000 principal residence is required to reduce the basis of the home by the cancelled debt.

Abby has a $10,000 loss on some collectibles, a $5,000 Sec.1202 gain, and an $11,000 gain on some securities.If all gains and losses are long-term and Abby is in the 24 percent tax bracket, how is her net gain taxed?

Section 1245 recapture is primarily applicable to realty.

Brent sold his personal car and some household furniture during the year.He had a $3,000 gain on the car but a $5,000 loss on the furniture.What is his recognized gain or loss included in taxable income as a result of these sales?

Bobsy Company has a $14,000 net Section 1231 gain for the current tax year from its only property transaction.In the previous year, it had a $7,000 net Section 1231 loss.For the current year, the net Section 1231 gain will be taxed as:

Shawn, a single taxpayer, sold the house he lived in for seven years for $700,000.He purchased the house for $285,000.He made improvements at a cost of $125,000 and paid a $30,000 commission on the sale.What are Shawn's realized and recognized gains on the sale?

Bennett, who is single, owns all of the outstanding stock of Bennett Company.In 2019 Bennett sells all of his stock in the company for $30,000.If the stock qualifies as Section 1244 and his basis in the stock is $140,000, how is his loss on the sale classified for tax purposes?

Corporate net capital gains receive no tax-favored treatment.

Noah sold investment land for $70,000 cash and the buyer's assumption of Noah's $30,000 mortgage on the property.Noah paid a realtor's commission of $2,800 on the sale.What is Noah's realized gain if the land has an adjusted basis of $57,000?

During the current tax year, the Jeckel Company has the following gains and losses from property transactions: $12,000 Section 1231 gain $23,000 long-term capital gain $21,000 Section 1231 loss $4,000 Section 1231 gain What is the amount and type of gain or loss reported by Jeckel for the year?

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters

Exam 8: Property Dispositions

All assets owned by a trade or business are Section 1231 assets.

What are the carryover provisions for unused capital losses applicable to individuals?

Justin, who is single, sells his principal residence that he has owned and occupied for the past five years.His adjusted basis for the residence is $90,000.He incurred selling expenses of $10,000.How much gain must Justin recognize if sells the residence for $390,000?

Liam used his auto 70 percent for business and 30 percent for personal use.He purchased it for $15,000 and has taken $5,460 of depreciation on it.What is his recognized gain on a sale for $12,000 and what is its character?

A taxpayer who had $250,000 of acquisition debt forgiven in 2017 on his $325,000 principal residence is required to reduce the basis of the home by the cancelled debt.

Abby has a $10,000 loss on some collectibles, a $5,000 Sec.1202 gain, and an $11,000 gain on some securities.If all gains and losses are long-term and Abby is in the 24 percent tax bracket, how is her net gain taxed?

Section 1245 recapture is primarily applicable to realty.

Brent sold his personal car and some household furniture during the year.He had a $3,000 gain on the car but a $5,000 loss on the furniture.What is his recognized gain or loss included in taxable income as a result of these sales?

Bobsy Company has a $14,000 net Section 1231 gain for the current tax year from its only property transaction.In the previous year, it had a $7,000 net Section 1231 loss.For the current year, the net Section 1231 gain will be taxed as:

Shawn, a single taxpayer, sold the house he lived in for seven years for $700,000.He purchased the house for $285,000.He made improvements at a cost of $125,000 and paid a $30,000 commission on the sale.What are Shawn's realized and recognized gains on the sale?

Bennett, who is single, owns all of the outstanding stock of Bennett Company.In 2019 Bennett sells all of his stock in the company for $30,000.If the stock qualifies as Section 1244 and his basis in the stock is $140,000, how is his loss on the sale classified for tax purposes?

Corporate net capital gains receive no tax-favored treatment.

Noah sold investment land for $70,000 cash and the buyer's assumption of Noah's $30,000 mortgage on the property.Noah paid a realtor's commission of $2,800 on the sale.What is Noah's realized gain if the land has an adjusted basis of $57,000?

During the current tax year, the Jeckel Company has the following gains and losses from property transactions: $12,000 Section 1231 gain $23,000 long-term capital gain $21,000 Section 1231 loss $4,000 Section 1231 gain What is the amount and type of gain or loss reported by Jeckel for the year?

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters