Exam 8: Capital Gains and Losses

Sol purchased land as an investment on January 12, 2010 for $85,000. On January 31, 2016, Sol sold the land for $30,000 cash. In addition, the purchaser assumed the mortgage of $70,000 on the land. What is the amount of the realized gain or loss on the sale?

For the current tax year, Morgan had $25,000 of ordinary income. In addition, he had an $1,900 long-term capital loss and a $1,600 short-term capital loss. What will be the amount of Morgan's capital loss carryforward to the next year?

Karen received a stock portfolio upon the death of her grandmother. The stock originally cost her grandmother $32,000, but was worth $250,000 when she died. What is Karen's tax basis in the stock portfolio? Explain.

Verlin sells a commercial building and receives $50,000 in cash and a note for $60,000 at 10 percent interest. Verlin's adjusted basis in the building on the date of sale is $45,000 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.

Robert and Becca are in the 25 percent tax bracket. They have a long-term capital gain of $28,000 and a long-term capital loss of $17,000 on sales of stock in the current year. What will their capital gains tax be in the current year?

Indicate whether a gain or loss realized in each of the following situations would be long-term or short-term by putting an "X" on the appropriate blank line: ​

Tim sells land to Brad for $90,000. Tim originally purchased the land for $50,000. Brad agrees to pay Tim six annual installments of $15,000 each. In year three, Brad makes his third installment of $15,000. How much taxable gain will Tim recognize in year three?

Which of the following sales results in a short-term gain/loss?

Sally acquired an apartment building 15 years ago for $150,000 and sold it for $410,000 in the current year. At the time of the sale, there is $65,000 of accumulated straight-line depreciation on the apartment building. Assuming Sally is in the 35 percent tax bracket for ordinary income, how much of her gain is taxed at 15 percent?

For the current year, Susan had salary income of $20,000. In addition she reported the following capital transactions during the year: There were no other items includable in her gross income. What is the amount of her adjusted gross income for the current year?

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

The basis of property received as an inheritance is generally equal to the fair market value at the date of death.

What are capital assets?

In the current year, Henry, a sole proprietor, sold for $65,000 a machine that was used in his business. The machine had been purchased in a few years ago for $50,000, and when it was sold, it had accumulated depreciation of $20,000 and an adjusted basis of $30,000. For the current year, how should this gain be treated?

If the proceeds from the sale of property will be collected over a period of more than one year, a taxpayer is required to use the installment method.

Simonne, a single taxpayer, bought her home in La Jolla 25 years ago for $55,000. She has lived continuously in the home since she purchased it. In the current year, she sells her home for $405,000. What is Simonne's taxable gain on the sale?

Which of the following is true of a like-kind exchange:

Martha has a net capital loss of $17,000 and other ordinary taxable income of $45,000 for the current year. What is the amount of Martha's capital loss carryforward?

Taxpayers are allowed to offset net short-term capital losses with net long-term capital gains.

Lorreta has a manufacturing business. In the current year, her storage building is completely destroyed by fire and she receives $315,000 from her insurance company. She purchased the building for $300,000 20 years ago and has claimed depreciation of $85,000 using the straight-line method. In the following year, she purchases a new storage building at a cost of $295,000. 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?