Question 1

Which of the following is true about capital gains?

Accepted Answer

A) Short-term capital gains are not netted with other capital gains and losses. 
B) For 2016, long-term capital gains are subject to special tax treatment. 
C) Long-term capital gains are never taxed. 
D) Net short-term capital gains are not netted with net long-term capital losses. 
E) None of the above. 
A) Short-term capital gains are not netted with other capital gains and losses. 
B) For 2016, long-term capital gains are subject to special tax treatment. 
C) Long-term capital gains are never taxed. 
D) Net short-term capital gains are not netted with net long-term capital losses. 
E) None of the above.

Question 2

Jerry bought his home 15 years ago for $60,000. Three years ago Jerry married Debbie and she moved into the same house and has lived there since. If they sell Jerry's house in the current year for $340,000, what is their taxable gain on a joint tax return?

Accepted Answer

A) $0 
B) $280,000 
C) $155,000 
D) $30,000 
A) $0 
B) $280,000 
C) $155,000 
D) $30,000

Question 3

Perry acquired raw land as an investment 16 years ago. The land cost $50,000. In the current year, 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. Assume that Perry uses the installment method to recognize the gain and receives only the $10,000 down payment in the year of sale. How much gain should Perry recognize in the current year?

Accepted Answer

A) $4,166 
B) $5,833 
C) $7,000 
D) $9,000 
E) None of the above 
A) $4,166 
B) $5,833 
C) $7,000 
D) $9,000 
E) None of the above

Question 4

If a taxpayer is relieved of a liability on the disposition of property, the amount of the liability should be included in the amount realized on the sale or other disposition.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Perry acquired raw land as an investment 16 years ago. The land cost $60,000. In the current year, 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 the current year?

Accepted Answer

A) $50,000 
B) $60,000 
C) $100,000 
D) $110,000 
E) None of the above 
A) $50,000 
B) $60,000 
C) $100,000 
D) $110,000 
E) None of the above

Question 7

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 8

In December, 2016, Ben and Jeri (married filing jointly) have a long-term capital gain of $55,000 on the sale of stock held for 4 years. They have no other capital gains and losses for the year. After standard deduction and personal exemptions, their ordinary income for the year, before the capital gain, is $75,300, making their total income for the year $130,300, ($75,300 + $55,000). In 2016, married taxpayers who file jointly pay tax of $10,367.50 at 10 percent and 15 percent rates (from the tax rate schedules) on the first $75,300 of ordinary taxable income and 25 percent on ordinary taxable income up to $151,900. What is their total tax liability?

Accepted Answer

A) $10,367.50 
B) $15.867.50 
C) $18,617.50 
D) $24,117.50 
A) $10,367.50 
B) $15.867.50 
C) $18,617.50 
D) $24,117.50

Question 9

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

Dan acquired rental property in June 2006 for $370,000 and sold it in October, 2016. $40,000 in straight-line depreciation has been taken on the house. A run-up in housing prices allowed him to sell the house for $575,000. In the year of sale, Dan received $175,000 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

$575,000 - ($370,000 - $40,000) = $245,0

Question 12

Carlos bought a building for $113,000 in 2012. He added an addition to the building for $26,000. In 2016, he sold it for $212,000. What was his long-term capital gain (ignore depreciation)?

Accepted Answer

A) $0 
B) $47,000 
C) $73,000 
D) $99,000 
E) $212,000 
A) $0 
B) $47,000 
C) $73,000 
D) $99,000 
E) $212,000

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Martha has a net capital loss of $20,000 and other ordinary taxable income of $45,000 for the current tax year. What is the amount of Martha's taxable income after deducting the allowed capital loss?

Accepted Answer

A) $28,000 
B) $38,000 
C) $42,000 
D) $45,000 
E) None of the above 
A) $28,000 
B) $38,000 
C) $42,000 
D) $45,000 
E) None of the above

Question 15

If insurance proceeds exceed the taxpayer's basis in property destroyed by fire and the proceeds are not invested in similar property, the taxpayer may be required to recognize a gain.

Accepted Answer

A) True 
 B)False

Question 16

The adjusted basis of an asset may be determined by the:

Accepted Answer

A) Selling price + gain realized. 
B) Selling price - gain realized. 
C) Selling price + capital improvements - accumulated depreciation. 
D) Original basis + capital improvements - selling price. 
E) None of the above. 
A) Selling price + gain realized. 
B) Selling price - gain realized. 
C) Selling price + capital improvements - accumulated depreciation. 
D) Original basis + capital improvements - selling price. 
E) None of the above.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Elmer sold machinery used in his business for $20,000. The machinery originally cost $80,000 and had $45,000 of accumulated depreciation at the time of the sale. It is his only sale this year.
a.What is the gain or loss on the sale of the machinery?
b.Is the gain or loss treated as capital or ordinary? Explain.

Accepted Answer

The answer of Elmer sold machinery used in his business...

Question 20

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

Accepted Answer

A) True 
 B)False

Which of the following is true about capital gains?

Jerry bought his home 15 years ago for $60,000. Three years ago Jerry married Debbie and she moved into the same house and has lived there since. If they sell Jerry's house in the current year for $340,000, what is their taxable gain on a joint tax return?

If a taxpayer is relieved of a liability on the disposition of property, the amount of the liability should be included in the amount realized on the sale or other disposition.

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

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

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

Carlos bought a building for $113,000 in 2012. He added an addition to the building for $26,000. In 2016, he sold it for $212,000. What was his long-term capital gain (ignore depreciation)?

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

Martha has a net capital loss of $20,000 and other ordinary taxable income of $45,000 for the current tax year. What is the amount of Martha's taxable income after deducting the allowed capital loss?

If insurance proceeds exceed the taxpayer's basis in property destroyed by fire and the proceeds are not invested in similar property, the taxpayer may be required to recognize a gain.

The adjusted basis of an asset may be determined by the:

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

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

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

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

Which of the following is true about capital gains?

Jerry bought his home 15 years ago for $60,000. Three years ago Jerry married Debbie and she moved into the same house and has lived there since. If they sell Jerry's house in the current year for $340,000, what is their taxable gain on a joint tax return?

If a taxpayer is relieved of a liability on the disposition of property, the amount of the liability should be included in the amount realized on the sale or other disposition.

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

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

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

Carlos bought a building for $113,000 in 2012. He added an addition to the building for $26,000. In 2016, he sold it for $212,000. What was his long-term capital gain (ignore depreciation)?

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

Martha has a net capital loss of $20,000 and other ordinary taxable income of $45,000 for the current tax year. What is the amount of Martha's taxable income after deducting the allowed capital loss?

If insurance proceeds exceed the taxpayer's basis in property destroyed by fire and the proceeds are not invested in similar property, the taxpayer may be required to recognize a gain.

The adjusted basis of an asset may be determined by the:

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

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

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

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