Question 1

The amount realized from a sale or trade of property is the amount received for the asset minus the basis that will be recognized for tax purposes.

Accepted Answer

A) True 
 B)False  False

Question 2

Otis, the taxpayer, has the following capital gains and losses for the year:   a. What is his net short-term gain (loss)?
b. What is his net long-term gain (loss)?
c. What amount of the gain (loss) is entered on his 1040, (line 13) Capital gain or (loss) from Schedule D?

Accepted Answer

a. ($1,500)
b. $1,000
c. ($500)

Question 3

Jake purchased a $300,000 earthmover for his business. He sold the earthmover for $245,000 after taking $210,000 of depreciation. What is the nature and amount of the gain or loss on the sale?

Accepted Answer

A)  $55,000 Section 1245 ordinary income and $100,000 Section 1231 gain. 
B)  $90,000 Section 1245 ordinary income and $65,000 Section 1231 gain. 
C)  $155,000 Section 1231 gain. 
D) $155,000 Section 1245 ordinary income. 
A)  $55,000 Section 1245 ordinary income and $100,000 Section 1231 gain. 
B)  $90,000 Section 1245 ordinary income and $65,000 Section 1231 gain. 
C)  $155,000 Section 1231 gain. 
D) $155,000 Section 1245 ordinary income. D

Question 4

Juanita is a sole proprietor who has some outstanding receivables she wishes to sell. The receivables have a $16,000 FMV and a basis of $10,000. Juanita sells the receivables for $12,500. What gain or loss does Juanita recognize on the sale?

Accepted Answer

A)  $3,500 capital loss. 
B)  $3,500 ordinary loss. 
C)  $2,500 capital gain. 
D) $2,500 ordinary gain. 
A)  $3,500 capital loss. 
B)  $3,500 ordinary loss. 
C)  $2,500 capital gain. 
D) $2,500 ordinary gain.

Question 5

Greg sold some equipment for $72,510 on June 13, 2015. Greg had originally purchased the equipment for $86,750 on November 21, 2014. The equipment was subject to depreciation of $17,350. What gain or loss will Greg recognize on the sale?

Accepted Answer

A)  $3,110 ordinary gain. 
B)  $3,110 capital gain. 
C)  $8,250 capital loss. 
D) $8,250 ordinary loss. 
A)  $3,110 ordinary gain. 
B)  $3,110 capital gain. 
C)  $8,250 capital loss. 
D) $8,250 ordinary loss.

Question 6

Majoo inherited property from his uncle on August 15, 2015. His uncle purchased the property on December 10, 2013 for $100,000. At the date of his death, the property's FMV was $102,000. Majoo sold the property on September 30, 2015 for $105,000.
a. What is the gain on the sale of the property?
b. What is the nature of the gain?

Accepted Answer

a. $3,000.

Question 7

Dan sold 135 shares (assume 100 are long-term) of Elite Mutual Fund on July 26, 2015 for $95 per share and received a 1099-B (box 3 was not checked for basis) to record the sale of the shares. Dan's investment portfolio includes the following purchases of Elite Mutual Fund:   In 2015, Dan will recognize:

Accepted Answer

A)  no long-term gain or loss and a $333.45 short-term gain. 
B)  $315 short-term gain and a $900 long-term gain. 
C)  $250 long-term loss and $583.45 short-term gain. 
D) no short-term gain or loss and a $1,215 long-term gain. 
A)  no long-term gain or loss and a $333.45 short-term gain. 
B)  $315 short-term gain and a $900 long-term gain. 
C)  $250 long-term loss and $583.45 short-term gain. 
D) no short-term gain or loss and a $1,215 long-term gain.

Question 8

Otis bought a 2-unit apartment building in July 2008 for $330,000 and sold it for $400,000 on December 20, 2015. At the time of sale there was $83,493 of accumulated straight-line depreciation on the apartment building. Assuming Otis is in the 33% tax bracket, how much of the gain will be taxed at 25%?

Accepted Answer

A)  $0. 
B)  $70,000. 
C)  $83,493. 
D) $153,493. 
A)  $0. 
B)  $70,000. 
C)  $83,493. 
D) $153,493.

Question 9

If Section 1231 losses exceed Section 1231 gains, the excess is treated as an ordinary loss.

Accepted Answer

A) True 
 B)False

Question 10

Shanstella bought a 4-unit apartment building in July 2006 for $360,000 and sold it for $480,000 in 2015. There was $96,541 of accumulated straight-line depreciation on the apartment building. Assuming that Shanstella is in the 33% tax bracket, how much of her gain is taxed at 25%?

Accepted Answer

A)  $0. 
B)  $96,541. 
C)  $120,000. 
D) $216,541. 
A)  $0. 
B)  $96,541. 
C)  $120,000. 
D) $216,541.

Question 11

Jack purchased 100 shares of Ford stock on April 22, 2014. If he sells the stock on April 21, 2015, what is the character of the sale?

Accepted Answer

A)  If the sale produces a gain, the gain is taxed at preferential rates because the holding period requirement does not apply to stock sales. 
B)  If the sale produces a loss, the entire loss can be taken only in the year of the sale because the stock was held for less than one year. 
C)  Regardless of whether the sale produces a gain or loss, the transaction qualifies for preferential treatment because the asset sold is stock. 
D) Regardless of whether the sale produces a gain or loss, the transaction does not qualify for preferential treatment because the stock was not held for more than one year. 
A)  If the sale produces a gain, the gain is taxed at preferential rates because the holding period requirement does not apply to stock sales. 
B)  If the sale produces a loss, the entire loss can be taken only in the year of the sale because the stock was held for less than one year. 
C)  Regardless of whether the sale produces a gain or loss, the transaction qualifies for preferential treatment because the asset sold is stock. 
D) Regardless of whether the sale produces a gain or loss, the transaction does not qualify for preferential treatment because the stock was not held for more than one year.

Question 12

Aneta sold an apartment building for $713,470 in 2015. She purchased the building in 2009 for $600,000 and has taken $151,806 in depreciation on the building. Assuming Aneta is in the 33% tax bracket, how is her gain taxed?

Accepted Answer

A)  $113,470 at 0% and $151,806 at 28%. 
B)  $113,470 at 25% and $151,806 at 15%. 
C)  $151,806 at 28% and $113,470 at 15%. 
D) $151,806 at 25% and $113,470 at 15%. 
A)  $113,470 at 0% and $151,806 at 28%. 
B)  $113,470 at 25% and $151,806 at 15%. 
C)  $151,806 at 28% and $113,470 at 15%. 
D) $151,806 at 25% and $113,470 at 15%.

Question 13

Joe received a parcel of land as a gift from his sister, Lisa, in 2010. At the time of the gift, the land had a FMV of $10,000. Lisa purchased the land in 2006 for $13,000. If Joe sells the land in 2015 for $22,450, he will report a

Accepted Answer

A)  $9,450 ordinary gain. 
B)  $9,450 capital gain. 
C)  $12,450 capital gain. 
D) $19,540 capital gain. 
A)  $9,450 ordinary gain. 
B)  $9,450 capital gain. 
C)  $12,450 capital gain. 
D) $19,540 capital gain.

Question 14

A taxpayer purchased land in 2008 for $85,000 and sold it in 2015 for $75,000 cash. The buyer also assumed the mortgage of $5,000. What is the amount of gain/loss on the sale of the land?

Accepted Answer

A)  $5,000 loss. 
B)  $5,000 gain. 
C)  $15,000 gain. 
D) $20,000 loss. 
A)  $5,000 loss. 
B)  $5,000 gain. 
C)  $15,000 gain. 
D) $20,000 loss.

Question 15

Gabriella, a single taxpayer, has wage income of $160,000. In addition, she has $7,000 in long-term capital losses, $1,000 in long-term capital gains, $3,000 in short-term capital gains, and $1,000 in short-term losses. What is Gabriella's AGI for 2015?

Accepted Answer

A)  $156,000. 
B)  $157,000. 
C)  $160,000. 
D) $161,000. 
A)  $156,000. 
B)  $157,000. 
C)  $160,000. 
D) $161,000.

Question 16

Glenn sells a piece of equipment used in his business for $31,500. The equipment was purchased on July 1, 2013, at a cost of $22,000. Glenn has taken $6,600 of depreciation on the equipment. What are the amount and classification of the gain on the sale by Glenn?

Accepted Answer

A)  $6,600 ordinary income under Section 1245 and $9,500 Section 1231 gain. 
B)  $9,500 Section 1231 gain. 
C)  $16,100 ordinary income under Section 1245. 
D) $16,100 Section 1231 gain. 
A)  $6,600 ordinary income under Section 1245 and $9,500 Section 1231 gain. 
B)  $9,500 Section 1231 gain. 
C)  $16,100 ordinary income under Section 1245. 
D) $16,100 Section 1231 gain.

Question 17

Any Section 1245 gain is recognized as "ordinary" to the extent of the depreciation taken.

Accepted Answer

A) True 
 B)False

Question 18

In 2015, Linda gave her son, Jonathan 425 shares of School Products Inc., common stock. Linda paid $8,350 for the stock in 2009. At the date of the gift, the FMV of the stock was $5,800. Assuming that there is no gift tax paid, if Jonathan sells the stock for $5,000, he will recognize:

Accepted Answer

A)  no gain or loss. 
B)  $800 loss. 
C)  $3,350 loss. 
D) $3,450 loss. 
A)  no gain or loss. 
B)  $800 loss. 
C)  $3,350 loss. 
D) $3,450 loss.

Question 19

Inventory on hand at the end of the year is Section 1231 property.

Accepted Answer

A) True 
 B)False

Question 20

Unused capital losses in any one year carry forward indefinitely to offset any future short-term or long-term gains.

Accepted Answer

A) True 
 B)False

The amount realized from a sale or trade of property is the amount received for the asset minus the basis that will be recognized for tax purposes.

Otis, the taxpayer, has the following capital gains and losses for the year: a. What is his net short-term gain (loss)? b. What is his net long-term gain (loss)? c. What amount of the gain (loss) is entered on his 1040, (line 13) Capital gain or (loss) from Schedule D?

Jake purchased a $300,000 earthmover for his business. He sold the earthmover for $245,000 after taking $210,000 of depreciation. What is the nature and amount of the gain or loss on the sale?

Juanita is a sole proprietor who has some outstanding receivables she wishes to sell. The receivables have a $16,000 FMV and a basis of $10,000. Juanita sells the receivables for $12,500. What gain or loss does Juanita recognize on the sale?

Greg sold some equipment for $72,510 on June 13, 2015. Greg had originally purchased the equipment for $86,750 on November 21, 2014. The equipment was subject to depreciation of $17,350. What gain or loss will Greg recognize on the sale?

If Section 1231 losses exceed Section 1231 gains, the excess is treated as an ordinary loss.

Shanstella bought a 4-unit apartment building in July 2006 for $360,000 and sold it for $480,000 in 2015. There was $96,541 of accumulated straight-line depreciation on the apartment building. Assuming that Shanstella is in the 33% tax bracket, how much of her gain is taxed at 25%?

Jack purchased 100 shares of Ford stock on April 22, 2014. If he sells the stock on April 21, 2015, what is the character of the sale?

Aneta sold an apartment building for $713,470 in 2015. She purchased the building in 2009 for $600,000 and has taken $151,806 in depreciation on the building. Assuming Aneta is in the 33% tax bracket, how is her gain taxed?

Joe received a parcel of land as a gift from his sister, Lisa, in 2010. At the time of the gift, the land had a FMV of $10,000. Lisa purchased the land in 2006 for $13,000. If Joe sells the land in 2015 for $22,450, he will report a

A taxpayer purchased land in 2008 for $85,000 and sold it in 2015 for $75,000 cash. The buyer also assumed the mortgage of $5,000. What is the amount of gain/loss on the sale of the land?

Gabriella, a single taxpayer, has wage income of $160,000. In addition, she has $7,000 in long-term capital losses, $1,000 in long-term capital gains, $3,000 in short-term capital gains, and $1,000 in short-term losses. What is Gabriella's AGI for 2015?

Glenn sells a piece of equipment used in his business for $31,500. The equipment was purchased on July 1, 2013, at a cost of $22,000. Glenn has taken $6,600 of depreciation on the equipment. What are the amount and classification of the gain on the sale by Glenn?

Any Section 1245 gain is recognized as "ordinary" to the extent of the depreciation taken.

In 2015, Linda gave her son, Jonathan 425 shares of School Products Inc., common stock. Linda paid $8,350 for the stock in 2009. At the date of the gift, the FMV of the stock was $5,800. Assuming that there is no gift tax paid, if Jonathan sells the stock for $5,000, he will recognize:

Inventory on hand at the end of the year is Section 1231 property.

Unused capital losses in any one year carry forward indefinitely to offset any future short-term or long-term gains.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income

Rental Property, Royalties, Income From Flow-Through Entities

Tax Credits

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities:

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters

Exam 7: Capital Gains and Other Sales of Property

The amount realized from a sale or trade of property is the amount received for the asset minus the basis that will be recognized for tax purposes.

Otis, the taxpayer, has the following capital gains and losses for the year: a. What is his net short-term gain (loss)? b. What is his net long-term gain (loss)? c. What amount of the gain (loss) is entered on his 1040, (line 13) Capital gain or (loss) from Schedule D?

Jake purchased a $300,000 earthmover for his business. He sold the earthmover for $245,000 after taking $210,000 of depreciation. What is the nature and amount of the gain or loss on the sale?

Juanita is a sole proprietor who has some outstanding receivables she wishes to sell. The receivables have a $16,000 FMV and a basis of $10,000. Juanita sells the receivables for $12,500. What gain or loss does Juanita recognize on the sale?

Greg sold some equipment for $72,510 on June 13, 2015. Greg had originally purchased the equipment for $86,750 on November 21, 2014. The equipment was subject to depreciation of $17,350. What gain or loss will Greg recognize on the sale?

If Section 1231 losses exceed Section 1231 gains, the excess is treated as an ordinary loss.

Shanstella bought a 4-unit apartment building in July 2006 for $360,000 and sold it for $480,000 in 2015. There was $96,541 of accumulated straight-line depreciation on the apartment building. Assuming that Shanstella is in the 33% tax bracket, how much of her gain is taxed at 25%?

Jack purchased 100 shares of Ford stock on April 22, 2014. If he sells the stock on April 21, 2015, what is the character of the sale?

Aneta sold an apartment building for $713,470 in 2015. She purchased the building in 2009 for $600,000 and has taken $151,806 in depreciation on the building. Assuming Aneta is in the 33% tax bracket, how is her gain taxed?

Joe received a parcel of land as a gift from his sister, Lisa, in 2010. At the time of the gift, the land had a FMV of $10,000. Lisa purchased the land in 2006 for $13,000. If Joe sells the land in 2015 for $22,450, he will report a

A taxpayer purchased land in 2008 for $85,000 and sold it in 2015 for $75,000 cash. The buyer also assumed the mortgage of $5,000. What is the amount of gain/loss on the sale of the land?

Gabriella, a single taxpayer, has wage income of $160,000. In addition, she has $7,000 in long-term capital losses, $1,000 in long-term capital gains, $3,000 in short-term capital gains, and $1,000 in short-term losses. What is Gabriella's AGI for 2015?

Glenn sells a piece of equipment used in his business for $31,500. The equipment was purchased on July 1, 2013, at a cost of $22,000. Glenn has taken $6,600 of depreciation on the equipment. What are the amount and classification of the gain on the sale by Glenn?

Any Section 1245 gain is recognized as "ordinary" to the extent of the depreciation taken.

In 2015, Linda gave her son, Jonathan 425 shares of School Products Inc., common stock. Linda paid $8,350 for the stock in 2009. At the date of the gift, the FMV of the stock was $5,800. Assuming that there is no gift tax paid, if Jonathan sells the stock for $5,000, he will recognize:

Inventory on hand at the end of the year is Section 1231 property.

Unused capital losses in any one year carry forward indefinitely to offset any future short-term or long-term gains.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income

Rental Property, Royalties, Income From Flow-Through Entities

Tax Credits

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities:

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters