Question 1

To figure the gain or loss from the sale of property received as a gift, the donor's adjusted basis at the time of the gift is the basis to the donee.

Accepted Answer

A) True 
 B)False

Question 2

Sylvio purchased an apartment building as an investment in January 2009 for $383,500 and sold it for $475,000 in 2015. He reported $68,436 of allowed accumulated straight-line depreciation. If Sylvio is in the highest tax bracket for ordinary income, how much of his gain qualifies for preferential tax treatment?

Accepted Answer

A)  $0. 
B)  $68,436. 
C)  $91,500. 
D) $159,936. 
A)  $0. 
B)  $68,436. 
C)  $91,500. 
D) $159,936.

Question 3

All net losses exceeding the $3,000 per year are carried over as long-term losses because they will have occurred more than one year ago.

Accepted Answer

A) True 
 B)False

Question 4

Jim, the owner of a sole proprietorship, sold the following assets in 2015:   Complete the following table: and the character of the realized and recognized gain or loss from the sale of each asset. Assume the land was held for investment and had a FMV of $73,000.

Accepted Answer

The answer of Jim, the owner of a sole proprietorship,...

Question 5

In general, the basis of property purchased is the cost of the asset including cash, debt obligations, and other property or services included in acquiring the asset.

Accepted Answer

A) True 
 B)False

Question 6

Section 1221 assets are any asset used in a trade or business.

Accepted Answer

A) True 
 B)False

Question 7

Heidi invested in a mid-sized local company with gross assets of $17,000,000. Heidi purchased 2,000 shares for $44,000 in 1999. In 2015, Heidi sold the stock for $84,000. How is the gain treated for tax purposes?

Accepted Answer

A)  $40,000 capital gain and taxed at preferential rates. 
B)  $20,000 excluded from gross income under Section 1202 with the remaining gain recognized and taxed at regular rates. 
C)  $20,000 excluded from gross income under Section 1202 and $20,000 taxed at 28%. 
D) $20,000 excluded from gross income under Section 1202 and $20,000 taxed at preferential capital gains rates. 
A)  $40,000 capital gain and taxed at preferential rates. 
B)  $20,000 excluded from gross income under Section 1202 with the remaining gain recognized and taxed at regular rates. 
C)  $20,000 excluded from gross income under Section 1202 and $20,000 taxed at 28%. 
D) $20,000 excluded from gross income under Section 1202 and $20,000 taxed at preferential capital gains rates.

Question 8

Sammy sells a piece of specialized equipment (with a high resale value) used in his business for $41,650 on September 10, 2015. The equipment was purchased on May 20, 2012 for $32,000. Sammy has taken $9,200 of depreciation on the equipment. What are the amount and classification of the gain on the sale by Sammy?

Accepted Answer

A)  $18,850 Section 1231 gain. 
B)  $9,200 Section 1231 gain and $9,650 Section 1245 ordinary income. 
C)  $9,200 ordinary income under Section 1250 and $9,650 Section 1231 gain. 
D) $9,200 ordinary income under Section 1245 and $9,650 Section 1231 gain. 
A)  $18,850 Section 1231 gain. 
B)  $9,200 Section 1231 gain and $9,650 Section 1245 ordinary income. 
C)  $9,200 ordinary income under Section 1250 and $9,650 Section 1231 gain. 
D) $9,200 ordinary income under Section 1245 and $9,650 Section 1231 gain.

Question 9

Dancing Feet Company, a sole proprietorship, acquired a building for use in the business on April 15, 2013, for $475,000. Straight-line depreciation allowed was $25,386. Dancing Feet Company sold the building for $380,000 on May 1, 2015:
a. What is the adjusted basis of the property at the time of the sale?
b. What is the amount of the gain (loss) upon the sale of the building?
c. What is the nature of the gain (loss)?

Accepted Answer

a. $449,614
b. ($69,

Question 10

Josephine gave her son, Shane 700 shares of Creative Marketing Inc., common stock on May 26, 2014. Josephine originally paid $9,000 for the stock on April 15, 2014. At the date of the gift, the fair market value of the stock was $8,500. If no gift tax is paid and Shane sells the stock for $5,500 on May 26, 2015, he will recognize:

Accepted Answer

A)  a short-term capital loss. 
B)  a long-term capital loss. 
C)  an ordinary loss. 
D) no loss because Josephine already recognized the loss when she gave the stock to Shane. 
A)  a short-term capital loss. 
B)  a long-term capital loss. 
C)  an ordinary loss. 
D) no loss because Josephine already recognized the loss when she gave the stock to Shane.

Question 11

A computer used exclusively in a sole proprietor's business is a capital asset.

Accepted Answer

A) True 
 B)False

Question 12

Samson purchased some equipment for $86,749 on March 15, 2014. He decided he did not need the equipment and sold it on March 10, 2015 for $82,000. The equipment was subject to depreciation of $16,851 for 2014 and 2015. What gain or loss will Samson recognize on the sale of the equipment?

Accepted Answer

A)  $4,749 capital loss. 
B)  $4,749 ordinary loss. 
C)  $12,102 capital gain. 
D) $12,102 ordinary gain. 
A)  $4,749 capital loss. 
B)  $4,749 ordinary loss. 
C)  $12,102 capital gain. 
D) $12,102 ordinary gain.

Question 13

In 2015, Carmen had a net capital loss of $10,000 and taxable income of $100,000. What is Carmen's loss carryforward to 2016?

Accepted Answer

A)  $0. 
B)  $3,000. 
C)  $5,000. 
D) $7,000. 
A)  $0. 
B)  $3,000. 
C)  $5,000. 
D) $7,000.

Question 14

Wyatt sold 300 shares of Clothes and More Inc., in 2015 for $30,000. Wyatt's investment portfolio includes the following purchases of Clothes and More Inc., stock:   Assuming Wyatt does not identify which shares he sold, he will recognize a(an)

Accepted Answer

A)  $8,000 gain. 
B)  $7,125 gain. 
C)  $500 gain. 
D) $500 loss. 
A)  $8,000 gain. 
B)  $7,125 gain. 
C)  $500 gain. 
D) $500 loss.

Question 15

Capital assets are usually defined by the IRC as any asset used for personal or investment purposes and sometimes are defined by the IRC as what they are not.

Accepted Answer

A) True 
 B)False

Question 16

The 25% bracket is a special rate that relates to capital gains from Section 1250 property used in a trade or business.

Accepted Answer

A) True 
 B)False

Question 17

A taxpayer can deduct a loss on a security when the market price of the stock is less than the basis at the end of the year.

Accepted Answer

A) True 
 B)False

Question 18

The purpose of Code Sections 1245 and 1250 recapture provisions is to restrict the possibility of converting ordinary income into capital gains through use of depreciation deductions.

Accepted Answer

A) True 
 B)False

Question 19

Norman received shares of stock as a gift from his uncle in 2013. At the time of the gift, the stock had a FMV of $5,000. The uncle purchased the stock in 2011 and had a basis of $6,000. If Norman sells the stock for $7,000 in 2015, he will report a:

Accepted Answer

A)  $1,000 ordinary gain. 
B)  $1,000 capital gain. 
C)  $2,000 ordinary gain. 
D) $2,000 capital gain. 
A)  $1,000 ordinary gain. 
B)  $1,000 capital gain. 
C)  $2,000 ordinary gain. 
D) $2,000 capital gain.

Question 20

The donee's basis in depreciated property (when the FMV at the time of the gift is less than the donor's basis) is FMV at the time of the gift.

Accepted Answer

A) True 
 B)False

To figure the gain or loss from the sale of property received as a gift, the donor's adjusted basis at the time of the gift is the basis to the donee.

All net losses exceeding the $3,000 per year are carried over as long-term losses because they will have occurred more than one year ago.

Jim, the owner of a sole proprietorship, sold the following assets in 2015: Complete the following table: and the character of the realized and recognized gain or loss from the sale of each asset. Assume the land was held for investment and had a FMV of $73,000.

In general, the basis of property purchased is the cost of the asset including cash, debt obligations, and other property or services included in acquiring the asset.

Section 1221 assets are any asset used in a trade or business.

Heidi invested in a mid-sized local company with gross assets of $17,000,000. Heidi purchased 2,000 shares for $44,000 in 1999. In 2015, Heidi sold the stock for $84,000. How is the gain treated for tax purposes?

A computer used exclusively in a sole proprietor's business is a capital asset.

Samson purchased some equipment for $86,749 on March 15, 2014. He decided he did not need the equipment and sold it on March 10, 2015 for $82,000. The equipment was subject to depreciation of $16,851 for 2014 and 2015. What gain or loss will Samson recognize on the sale of the equipment?

In 2015, Carmen had a net capital loss of $10,000 and taxable income of $100,000. What is Carmen's loss carryforward to 2016?

Wyatt sold 300 shares of Clothes and More Inc., in 2015 for $30,000. Wyatt's investment portfolio includes the following purchases of Clothes and More Inc., stock: Assuming Wyatt does not identify which shares he sold, he will recognize a(an)

Capital assets are usually defined by the IRC as any asset used for personal or investment purposes and sometimes are defined by the IRC as what they are not.

The 25% bracket is a special rate that relates to capital gains from Section 1250 property used in a trade or business.

A taxpayer can deduct a loss on a security when the market price of the stock is less than the basis at the end of the year.

The purpose of Code Sections 1245 and 1250 recapture provisions is to restrict the possibility of converting ordinary income into capital gains through use of depreciation deductions.

Norman received shares of stock as a gift from his uncle in 2013. At the time of the gift, the stock had a FMV of $5,000. The uncle purchased the stock in 2011 and had a basis of $6,000. If Norman sells the stock for $7,000 in 2015, he will report a:

The donee's basis in depreciated property (when the FMV at the time of the gift is less than the donor's basis) is FMV at the time of the gift.

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

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Exam 7: Capital Gains and Other Sales of Property

To figure the gain or loss from the sale of property received as a gift, the donor's adjusted basis at the time of the gift is the basis to the donee.

All net losses exceeding the $3,000 per year are carried over as long-term losses because they will have occurred more than one year ago.

Jim, the owner of a sole proprietorship, sold the following assets in 2015: Complete the following table: and the character of the realized and recognized gain or loss from the sale of each asset. Assume the land was held for investment and had a FMV of $73,000.

In general, the basis of property purchased is the cost of the asset including cash, debt obligations, and other property or services included in acquiring the asset.

Section 1221 assets are any asset used in a trade or business.

Heidi invested in a mid-sized local company with gross assets of $17,000,000. Heidi purchased 2,000 shares for $44,000 in 1999. In 2015, Heidi sold the stock for $84,000. How is the gain treated for tax purposes?

A computer used exclusively in a sole proprietor's business is a capital asset.

Samson purchased some equipment for $86,749 on March 15, 2014. He decided he did not need the equipment and sold it on March 10, 2015 for $82,000. The equipment was subject to depreciation of $16,851 for 2014 and 2015. What gain or loss will Samson recognize on the sale of the equipment?

In 2015, Carmen had a net capital loss of $10,000 and taxable income of $100,000. What is Carmen's loss carryforward to 2016?

Wyatt sold 300 shares of Clothes and More Inc., in 2015 for $30,000. Wyatt's investment portfolio includes the following purchases of Clothes and More Inc., stock: Assuming Wyatt does not identify which shares he sold, he will recognize a(an)

Capital assets are usually defined by the IRC as any asset used for personal or investment purposes and sometimes are defined by the IRC as what they are not.

The 25% bracket is a special rate that relates to capital gains from Section 1250 property used in a trade or business.

A taxpayer can deduct a loss on a security when the market price of the stock is less than the basis at the end of the year.

The purpose of Code Sections 1245 and 1250 recapture provisions is to restrict the possibility of converting ordinary income into capital gains through use of depreciation deductions.

Norman received shares of stock as a gift from his uncle in 2013. At the time of the gift, the stock had a FMV of $5,000. The uncle purchased the stock in 2011 and had a basis of $6,000. If Norman sells the stock for $7,000 in 2015, he will report a:

The donee's basis in depreciated property (when the FMV at the time of the gift is less than the donor's basis) is FMV at the time of the gift.

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