Question 1

The depreciation recapture provisions are designed to prevent taxpayers from converting capital gains into ordinary income.

Accepted Answer

A) True 
 B)False

Question 2

The exclusion of gain on the sale of a personal residence may be elected only by a taxpayer who has owned three or more residences.

Accepted Answer

A) True 
 B)False

Question 3

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

Question 4

For purposes of taxation of capital gains:

Accepted Answer

A) Short-term capital gains are taxed at 5 percent. 
B) Ordinary income tax rates are applied to gains on collectibles. 
C) Gains on Section 1231 assets may be treated as long-term capital gains, while losses in some cases may be deducted as ordinary losses. 
D) Under the provisions of Section 1245, any gain recognized on the disposition of a Section 1245 asset will be classified as a capital gain. 
A) Short-term capital gains are taxed at 5 percent. 
B) Ordinary income tax rates are applied to gains on collectibles. 
C) Gains on Section 1231 assets may be treated as long-term capital gains, while losses in some cases may be deducted as ordinary losses. 
D) Under the provisions of Section 1245, any gain recognized on the disposition of a Section 1245 asset will be classified as a capital gain.

Question 5

In November, 2014, 70 year-old Jeanette sells her personal residence of the last 40 years for $360,000. Jeanette's basis in her residence is $60,000. The expenses associated with the sale of her home total $15,000. Jeanette decides to move in with her daughter rather than purchase a new residence. Calculate Jeanette's realized gain and recognized gain on the sale of her residence.
a.Realized gain
b.Recognized gain

Accepted Answer

The answer of In November, 2014, 70 year-old Jeanette sells...

Question 6

The following are owned by Robert. Indicate which are capital assets.
​
a. Rental property at 123 Main Street ______
b. Tables and chairs sold in his furniture business ______
c. The cash register used in his furniture business ______
d. A 1972 Porsche 916 ______
e. The rights to Weezer's song, "The Good Life" ______

Accepted Answer

a. Rental property at 123 Main

Question 7

On August 8, 2014, Sam, single, age 62, sold for $210,000 his principal residence, which he has lived in for 10 years, and which had an adjusted basis of $60,000. On November 1, 2014, he purchased a new residence for $80,000. For 2014, Sam should recognize a gain on the sale of his residence of:

Accepted Answer

A) $0 
B) $25,000 
C) $50,000 
D) $130,000 
E) None of the above 
A) $0 
B) $25,000 
C) $50,000 
D) $130,000 
E) None of the above

Question 8

Cows used in a farming business are Section 1231 property.

Accepted Answer

A) True 
 B)False

Question 9

Johnny owned a gas station with an adjusted basis of $300,000. After it was destroyed in a fire, he received $560,000 from the insurance company. Within the next year, he bought a new gas station for $500,000. What is Johnny's taxable gain and what is the basis in the new building?

Accepted Answer

A) $260,000; $500,000 
B) $200,000; $300,000 
C) $60,000; $300,000 
D) $260,000; $300,000 
E) $60,000; $500,000 
A) $260,000; $500,000 
B) $200,000; $300,000 
C) $60,000; $300,000 
D) $260,000; $300,000 
E) $60,000; $500,000

Question 10

Perry acquired raw land as an investment in 1997. The land cost $60,000. In 2014, 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 2014?

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 11

What are capital assets?

Accepted Answer

A capital asset is any property whether

Question 12

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 13

Which one of the following qualifies as a like-kind exchange?

Accepted Answer

A) A chicken held by a farmer exchanged for medical services. 
B) A home owned and lived in by a taxpayer exchanged for a new personal residence. 
C) IBM stock exchanged for Exxon stock. 
D) A Dodge Ram pickup truck used in business traded in for a new Ford 250 pickup truck also intended for business use. 
E) None of the above are like-kind property. 
A) A chicken held by a farmer exchanged for medical services. 
B) A home owned and lived in by a taxpayer exchanged for a new personal residence. 
C) IBM stock exchanged for Exxon stock. 
D) A Dodge Ram pickup truck used in business traded in for a new Ford 250 pickup truck also intended for business use. 
E) None of the above are like-kind property.

Question 14

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 15

An artist's painting is not a capital asset when held by the artist.

Accepted Answer

A) True 
 B)False

Question 16

Robert acquired his rental property in November 2004 for $110,000 and sold it in October 2014 for $230,000. The accumulated straight-line depreciation on the property at the time of the sale was $40,000. Robert is in the 35 percent tax bracket for ordinary income.
​
a. What is Robert's gain on the sale of his rental property?
b. How is the gain taxed? (i.e., What tax bracket is the gain subject to)?

Accepted Answer

a. $160,000. Calculated as $230,000 - ($

Question 17

In December, 2014, 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 $73,800, making their total income for the year $128,800, ($73,800 + $55,000). In 2014, married taxpayers pay tax of $10,163 at 10-percent and 15-percent rates (from the tax rate schedules) on the first $73,800 of ordinary taxable income and 25 percent on ordinary taxable income up to $148,850. What is their total tax liability?

Accepted Answer

A) $10,163 
B) $18,413 
C) $19,320 
D) $32,200 
A) $10,163 
B) $18,413 
C) $19,320 
D) $32,200

Question 18

An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000. If the asset's adjusted basis is $15,000, what is the amount of capital improvements that have been made to the asset?

Accepted Answer

A) $5,000 
B) $10,000 
C) $20,000 
D) $30,000 
E) None of the above 
A) $5,000 
B) $10,000 
C) $20,000 
D) $30,000 
E) None of the above

Question 19

If property is received from a decedent, the taxpayer who inherits the property has the same basis in the property as the decedent.

Accepted Answer

A) True 
 B)False

Question 20

Russell purchased a house 1 year ago for $150,000 and, due to an employment-related move, sold the house this year for $190,000. What is Russell's taxable gain?

Accepted Answer

$0. The $250,000 exclusion is

The depreciation recapture provisions are designed to prevent taxpayers from converting capital gains into ordinary income.

The exclusion of gain on the sale of a personal residence may be elected only by a taxpayer who has owned three or more residences.

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

For purposes of taxation of capital gains:

The following are owned by Robert. Indicate which are capital assets. a. Rental property at 123 Main Street b. Tables and chairs sold in his furniture business c. The cash register used in his furniture business d. A 1972 Porsche 916 e. The rights to Weezer's song, "The Good Life" __

On August 8, 2014, Sam, single, age 62, sold for $210,000 his principal residence, which he has lived in for 10 years, and which had an adjusted basis of $60,000. On November 1, 2014, he purchased a new residence for $80,000. For 2014, Sam should recognize a gain on the sale of his residence of:

Cows used in a farming business are Section 1231 property.

Johnny owned a gas station with an adjusted basis of $300,000. After it was destroyed in a fire, he received $560,000 from the insurance company. Within the next year, he bought a new gas station for $500,000. What is Johnny's taxable gain and what is the basis in the new building?

Perry acquired raw land as an investment in 1997. The land cost $60,000. In 2014, 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 2014?

What are capital assets?

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

Which one of the following qualifies as a like-kind exchange?

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.

An artist's painting is not a capital asset when held by the artist.

An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000. If the asset's adjusted basis is $15,000, what is the amount of capital improvements that have been made to the asset?

If property is received from a decedent, the taxpayer who inherits the property has the same basis in the property as the decedent.

Russell purchased a house 1 year ago for $150,000 and, due to an employment-related move, sold the house this year for $190,000. What is Russell's taxable 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

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Exam 8: Capital Gains and Losses

The depreciation recapture provisions are designed to prevent taxpayers from converting capital gains into ordinary income.

The exclusion of gain on the sale of a personal residence may be elected only by a taxpayer who has owned three or more residences.

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

For purposes of taxation of capital gains:

On August 8, 2014, Sam, single, age 62, sold for $210,000 his principal residence, which he has lived in for 10 years, and which had an adjusted basis of $60,000. On November 1, 2014, he purchased a new residence for $80,000. For 2014, Sam should recognize a gain on the sale of his residence of:

Cows used in a farming business are Section 1231 property.

Johnny owned a gas station with an adjusted basis of $300,000. After it was destroyed in a fire, he received $560,000 from the insurance company. Within the next year, he bought a new gas station for $500,000. What is Johnny's taxable gain and what is the basis in the new building?

What are capital assets?

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

Which one of the following qualifies as a like-kind exchange?

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.

An artist's painting is not a capital asset when held by the artist.

An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000. If the asset's adjusted basis is $15,000, what is the amount of capital improvements that have been made to the asset?

If property is received from a decedent, the taxpayer who inherits the property has the same basis in the property as the decedent.

Russell purchased a house 1 year ago for $150,000 and, due to an employment-related move, sold the house this year for $190,000. What is Russell's taxable 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