Question 1

Allie, a well-known artist, gave one of her paintings to her nephew Alfred. When Alfred sells the painting he will have a capital gain.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not a capital asset?

Accepted Answer

A) Office building used as a rental property by a real estate professional. 
B) Antique automobile. 
C) Land held for investment. 
D) Stock held for investment. 
A) Office building used as a rental property by a real estate professional. 
B) Antique automobile. 
C) Land held for investment. 
D) Stock held for investment.

Question 3

Marybelle paid $400,000 for a warehouse. Using 39-year straight-line depreciation, Marybelle deducts $24,868 for the first two years of usage. At the beginning of the third year, Marybelle sells the warehouse for $380,000. What is the character of the gain.

Accepted Answer

A) Long-term capital gain. 
B) Section 1250 gain. 
C) Ordinary income. 
D) Unrecaptured section 1250 gain. 
E) Section 1245 gain. 
A) Long-term capital gain. 
B) Section 1250 gain. 
C) Ordinary income. 
D) Unrecaptured section 1250 gain. 
E) Section 1245 gain.

Question 4

A taxable entity has the following capital gains and losses in 2018:
?
$\begin{array}{lr}
\text { Short-term capital loss } & \$(20,000) \
\text { Long-term capital gain } & 13,000
\end{array}$

I.If the entity is an individual, $ a \$ 7,000 $ deduction is all owed in 2018 .
II.If the entity is a corporation, no deduction is allowed in 2018.

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 5

Net collectibles gains are taxed at a maximum rate of 28%.

Accepted Answer

A) True 
 B)False

Question 6

Match each statement with the correct term below.
-Collectible gain (loss)

Accepted Answer

A) Stocks, bonds, options. 
B) Depreciable real property. 
C) All or part of any gain on sale is excluded. 
D) Taxed at a maximum rate of 25%. 
E) Gain or loss on the sale of artwork.
F)Depreciable tangible personal property.
G)Subject to full recapture as ordinary income of all depreciation taken.
H)Gain on real property attributable to excess depreciation is ordinary income. 
A) Stocks, bonds, options. 
B) Depreciable real property. 
C) All or part of any gain on sale is excluded. 
D) Taxed at a maximum rate of 25%. 
E) Gain or loss on the sale of artwork.
F)Depreciable tangible personal property.
G)Subject to full recapture as ordinary income of all depreciation taken.
H)Gain on real property attributable to excess depreciation is ordinary income.

Question 7

Nicole has the following transactions related to her investments and her sole proprietorship during 2018:
?
 (1) Stock that was purchased in 2010 is sold at a loss of $ \$ 12,000 $.
(2) Bonds that were purchased in 2018 are sold at a gain of $ \$ 6,000 $.
(3) A buil ding used in her business is sold at a gain of $ \$ 17,000 $. The building was purchased in 1997 and $ \$ 24,000 $ of depreciation had been taken on the building.
(4) Equipment purchased in 2010 is sold at a loss of $ \$ 16,000 $. Depreciati on of $ \$ 25,000 $ had been taken prior to the sale.
(5) A delivery van is destroyed in an accident. Nicole realizes a gain of $ \$ 5,000 $ on the van. She had deducted $ \$ 3,000 $ of depreciation on the van prior to the accident. She does not intend to replace the van.
 
a.Determine the character of each gain or loss:
b.Determine the effect of the gains and losses on Nicole's current-year adjusted gross income.?

Accepted Answer

?
 (1) Long-term capital loss of @#LAT-DLM&.
(2) S

Question 8

Hank realizes Section 1231 losses of $12,000 and Section 1231 gains of $7,000 during the current year. Hank's current-year adjusted gross income will increase (decrease) by what amount?

Accepted Answer

A) $(12,000) 
B) $(5,000) 
C) $(3,000) 
D) $7,000 
A) $(12,000) 
B) $(5,000) 
C) $(3,000) 
D) $7,000

Question 9

Gains on the sale of certain types of business assets, referred to as Section 1231 property, are always treated as capital gains.

Accepted Answer

A) True 
 B)False

Question 10

Benson Company purchased a drill press on November 13, 2014, at a cost of $30,000. Benson sells the drill press on January 3, 2018, for $16,000. Regular MACRS depreciation on the drill press would be $18,500, while straight-line MACRS depreciation would total $12,000.
I.If Benson used regular MACRS depreciation, it would have a Section 1231 gain of $4,500.
II.If Benson used straight-line depreciation, it would have a Section 1231 loss of $2,000.
III.If Benson used regular MACRS depreciation, it would have Section 1245 ordinary income of $4,500.
IV.If Benson used straight-line depreciation, it would have an ordinary loss of $4,500.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Statements I and II are correct. 
D) Statements I and IV are correct. 
E) Statements II and III are correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Statements I and II are correct. 
D) Statements I and IV are correct. 
E) Statements II and III are correct.

Question 11

Which of the following properties that was sold during January 2018 is Section 1231 property for Baylan Toy Manufacturing Corporation?
I.Automobile purchased in 2014.
II.Land used in the business since 2015.
III.Factory building purchased and placed into service in May 2017.
IV.Office building purchased and placed into service in June 2014.
​

Accepted Answer

A) Only statement I is correct. 
B) Statements I, II, and IV are correct. 
C) Statements III and IV are correct. 
D) Statements II and III are correct. 
E) Statements I, II, III, and IV are correct. 
A) Only statement I is correct. 
B) Statements I, II, and IV are correct. 
C) Statements III and IV are correct. 
D) Statements II and III are correct. 
E) Statements I, II, III, and IV are correct.

Question 12

Section 1245 property is subject to a full recapture of all depreciation taken as ordinary income.

Accepted Answer

A) True 
 B)False

Question 13

Virginia and Dan each own investment realty that they would like to trade. Virginia's property is subject to mortgage debt of $2,000 and has a net of mortgage value of $6,000. Dan's property is subject to mortgage debt of $30,000 and has a net of mortgage value of $5,000. Virginia and Dan agree to exchange properties and assume each other's debt. Dan pays Virginia $1,000 cash, and the exchange is completed. What is the gross selling price of Virginia's property?

Accepted Answer

A) $2,000 
B) $6,000 
C) $8,000 
D) $5,000 
E) $35,000 
A) $2,000 
B) $6,000 
C) $8,000 
D) $5,000 
E) $35,000

Question 14

The Section 1231 netting procedure involves several steps. What is the proper order of these steps?
I.All Section 1231 gains and losses for the year are netted.
II.All casualty (theft) gains and losses on Section 1231 property are netted.
III.Current-year net Section 1231 gain is netted against any Section 1231 ordinary loss deductions taken in the previous 5 years.
​

Accepted Answer

A) Statements I, III, and II. 
B) Statements II, I, and III. 
C) Statements III, I, and II. 
D) Statements III, II, and I. 
E) Statements I, II, and III. 
A) Statements I, III, and II. 
B) Statements II, I, and III. 
C) Statements III, I, and II. 
D) Statements III, II, and I. 
E) Statements I, II, and III.

Question 15

Mountainview Corporation sells depreciable residential real estate for $525,000. The property cost $675,000, and $200,000 of accelerated depreciation was deducted on the property. Allowable straight-line depreciation for the same period would have been $180,000. Which of the following correctly states the character of the gain from the sale of the property?

Accepted Answer

A) $ 50,000 ordinary gain. 
B) $ 50,000 Section 1231 gain. 
C) $ 30,000 Section 1231 gain and $20,000 Section 1250 ordinary income. 
D) $ 20,000 Section 1231 gain and $30,000 Section 1250 ordinary income. 
E) $150,000 Section 1231 gain and $20,000 Section 1250 ordinary gain. 
A) $ 50,000 ordinary gain. 
B) $ 50,000 Section 1231 gain. 
C) $ 30,000 Section 1231 gain and $20,000 Section 1250 ordinary income. 
D) $ 20,000 Section 1231 gain and $30,000 Section 1250 ordinary income. 
E) $150,000 Section 1231 gain and $20,000 Section 1250 ordinary gain.

Question 16

Raymond, a single taxpayer, has taxable income of $210,000 from all sources except capital gains. He has a $10,000 gain from the sale of qualified small business stock he acquired in 1995. What is the total tax saving Raymond receives because of any special treatment of his $10,000 long-term capital gain on small business stock?

Accepted Answer

A) $700 
B) $1,150 
C) $1,400 
D) $2,100 
E) $2,800 
A) $700 
B) $1,150 
C) $1,400 
D) $2,100 
E) $2,800

Question 17

Classify the gain or loss on each of George's assets listed below using the following codes. Note: a code may be used once, more than once, or not at all.
-George regularly invests unneeded business cash in Eli Lilly common stock. He has bought 200 shares of stock on May 1 of each year from 1987 through 2017. Because of an urgent need for cash, he sells 100 shares of the stock at an $850 gain on March 28, 2018. Because the stock is held in a brokerage account, he did not have any paper shares of stock to surrender. He merely told his broker to sell 100 shares.

Accepted Answer

A) Long-term capital 
B) Short-term capital 
C) Collectible gain 
D) Section 1231 
E) Section 1245
F)Section 1250
G)Ordinary income/loss
H)Nontaxable/nondeductible 
A) Long-term capital 
B) Short-term capital 
C) Collectible gain 
D) Section 1231 
E) Section 1245
F)Section 1250
G)Ordinary income/loss
H)Nontaxable/nondeductible

Question 18

Ramona recognizes a $50,000 Section 1231 loss, a $30,000 Section 1231 gain, and ordinary income of $35,000 in 2018. Before 2018, Ramona's only Section 1231 transaction was a $15,000 loss reported in 2014. How should Ramona report her 2018 transactions?

Accepted Answer

A) $20,000 capital loss and $35,000 ordinary income. 
B) $15,000 net Section 1231 gain. 
C) $15,000 capital loss. 
D) $15,000 ordinary income. 
E) $15,000 capital gain. 
A) $20,000 capital loss and $35,000 ordinary income. 
B) $15,000 net Section 1231 gain. 
C) $15,000 capital loss. 
D) $15,000 ordinary income. 
E) $15,000 capital gain.

Question 19

Match each statement with the correct term below.
-Section 1231 property

Accepted Answer

A) Stocks, bonds, options. 
B) Depreciable real property. 
C) All or part of any gain on sale is excluded. 
D) Taxed at a maximum rate of 25%. 
E) Gain or loss on the sale of artwork.
F)Depreciable tangible personal property.
G)Subject to full recapture as ordinary income of all depreciation taken.
H)Gain on real property attributable to excess depreciation is ordinary income. 
A) Stocks, bonds, options. 
B) Depreciable real property. 
C) All or part of any gain on sale is excluded. 
D) Taxed at a maximum rate of 25%. 
E) Gain or loss on the sale of artwork.
F)Depreciable tangible personal property.
G)Subject to full recapture as ordinary income of all depreciation taken.
H)Gain on real property attributable to excess depreciation is ordinary income.

Question 20

A taxable entity has the following capital gains and losses in 2018:
?
$\begin{array}{lr}
\text { Short-term capital loss } & \$(22,000) \
\text { Long-term capital gain } & 15,000
\end{array}$

I.If the entity is an individual, a $\$ 3,000$ deduction is allowed in 2018 .
II. If the entity is a corporation, a $\$ 7,000$ deduction is allowed in 2018 .

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Allie, a well-known artist, gave one of her paintings to her nephew Alfred. When Alfred sells the painting he will have a capital gain.

Which of the following is not a capital asset?

Marybelle paid $400,000 for a warehouse. Using 39-year straight-line depreciation, Marybelle deducts $24,868 for the first two years of usage. At the beginning of the third year, Marybelle sells the warehouse for $380,000. What is the character of the gain.

Net collectibles gains are taxed at a maximum rate of 28%.

Match each statement with the correct term below. -Collectible gain (loss)

Hank realizes Section 1231 losses of $12,000 and Section 1231 gains of $7,000 during the current year. Hank's current-year adjusted gross income will increase (decrease) by what amount?

Gains on the sale of certain types of business assets, referred to as Section 1231 property, are always treated as capital gains.

Section 1245 property is subject to a full recapture of all depreciation taken as ordinary income.

Ramona recognizes a $50,000 Section 1231 loss, a $30,000 Section 1231 gain, and ordinary income of $35,000 in 2018. Before 2018, Ramona's only Section 1231 transaction was a $15,000 loss reported in 2014. How should Ramona report her 2018 transactions?

Match each statement with the correct term below. -Section 1231 property

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, Depletion, and Amortization

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

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Exam 11: Property Dispositions

Allie, a well-known artist, gave one of her paintings to her nephew Alfred. When Alfred sells the painting he will have a capital gain.

Which of the following is not a capital asset?

Marybelle paid $400,000 for a warehouse. Using 39-year straight-line depreciation, Marybelle deducts $24,868 for the first two years of usage. At the beginning of the third year, Marybelle sells the warehouse for $380,000. What is the character of the gain.

Net collectibles gains are taxed at a maximum rate of 28%.

Match each statement with the correct term below. -Collectible gain (loss)

Hank realizes Section 1231 losses of $12,000 and Section 1231 gains of $7,000 during the current year. Hank's current-year adjusted gross income will increase (decrease) by what amount?

Gains on the sale of certain types of business assets, referred to as Section 1231 property, are always treated as capital gains.

Section 1245 property is subject to a full recapture of all depreciation taken as ordinary income.

Ramona recognizes a $50,000 Section 1231 loss, a $30,000 Section 1231 gain, and ordinary income of $35,000 in 2018. Before 2018, Ramona's only Section 1231 transaction was a $15,000 loss reported in 2014. How should Ramona report her 2018 transactions?

Match each statement with the correct term below. -Section 1231 property

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, Depletion, and Amortization

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters