Exam 5: Property Transactions: Capital Gains and Losses

Arthur,age 99,holds some stock purchased many years ago for $10,000 which is now worth $100,000.He is trying to plan for the eventual disposition of this stock.Arthur's only remaining family member is his grandson.For income tax purposes,Arthur should

All recognized gains and losses must eventually be classified either as capital or ordinary.

Adam purchased 1,000 shares of Airco Inc.common stock for $22,000 on February 3,2014.On April 1,2017,Adam received 100 new shares in a nontaxable stock dividend.As of April 1,the stock was trading at $25 per share.Adam sells the 100 new shares on June 15,2017 for $2,400.Due to the stock sale,Adam will recognize a

In a community property state,jointly owned property left to the surviving spouse will have a basis after the estate is settled equal to

Joycelyn gave a diamond necklace to her granddaughter Emma.Joycelyn had purchased the necklace in 1980 for $15,000.The FMV of the necklace at the time of the gift was $44,000.After deducting the annual exclusion,the amount of the gift was $30,000.Gift taxes of $10,000 were paid.What is Emma's adjusted basis in the necklace?

Bob owns 100 shares of ACT Corporation common stock with a basis of $3,500 and a FMV of $12,000.Bob receives 10 stock rights as a nontaxable distribution,and no basis is allocated to the stock rights.With each stock right,Bob may acquire one share of stock for $25.Bob exercises all 10 stock rights.The total basis of the newly acquired stock is

With regard to taxable gifts after 1976,no gift tax is added to the basis of the property if the donor's basis is greater than the FMV of the property.

A taxpayer sells an asset with a basis of $25,000 to an unrelated party for $28,000.The taxpayer has a realized gain of $3,000.

Normally,a security dealer reports ordinary income on the sale of securities unless it is specifically identified as a security being held for investment.

Mike sold the following shares of stock in 2017: What are the tax consequences of these transactions,assuming his marginal tax rate is (a) 33% and (b) 39.6%? Ignore the medicare tax on net investment income.

Antonio owns land held for investment with a basis of $28,000.The city of Lafayette exercises the right of eminent domain and Antonio receives a payment of $48,000.What is Antonio's realized gain?

Michelle purchased her home for $150,000,and subsequently added a garage costing $25,000 and a new porch costing $5,000.Repairs to the home's plumbing cost $1,000.The adjusted basis in the home is

What are arguments for and against preferential treatment of capital gains?

If the shares of stock sold or exchanged are not specifically identified,the average cost method of identification must be used.

Nate sold two securities in 2017: Nate has a 25% marginal tax rate.What is the additional tax resulting from the above sales?

Dustin purchased 50 shares of Short Corporation for $500.During the current year,Short declared a nontaxable 10% stock dividend.What is the basis per share before and after the stock dividend is distributed?

On January 31 of this year,Jennifer pays $700 for an option to acquire 100 shares of Lifetime Corporation common stock for $70 per share.Jennifer exercises the option on June 2.Jennifer sells the stock on April 30 of next year for $10,000.Jennifer's basis for the stock immediately before the sale is

Gain on sale of a patent by an inventor generally is ordinary income.

For purposes of calculating depreciation,property converted from personal use to business use will take on a basis equal to the greater of its FMV or its adjusted basis on the date of the conversion.

Emma Grace acquires three machines for $80,000,which have FMVs of $32,000,$28,000,and $20,000 respectively.The delivery cost is $500,and installation costs amount to $2,500.What is the basis of each machine?