Question 1

Which of the following statements is correct with respect to the deferral provisions of the tax law?

Accepted Answer

A) The like-kind exchange provision is elective. 
B) The involuntary conversion provision is elective. 
C) The exclusion of gain on the sale of a personal residence is elective. 
D) Both the like-kind exchange and the involuntary conversion provisions are elective. 
E) None of the above. 
A) The like-kind exchange provision is elective. 
B) The involuntary conversion provision is elective. 
C) The exclusion of gain on the sale of a personal residence is elective. 
D) Both the like-kind exchange and the involuntary conversion provisions are elective. 
E) None of the above.

Question 2

The office building Donna owned and used for her desk-top publishing business was destroyed by a hurricane.Although the basis of the building was $80,000,Donna carried replacement cost insurance and received $160,000 from the insurance company after it was determined that the building was a complete loss.It cost her $152,000 to rebuild the store in the current year.
a.Calculate Donna's recognized gain,assuming an election under the involuntary conversion provision is made.$__________
b.Calculate Donna's basis in the replacement building.$__________

Accepted Answer

a.A gain of $80,000 was realized,but onl

Question 3

If a taxpayer sells his personal residence and purchases a new residence,realized gain may be recognized.

Accepted Answer

A) True 
 B)False

Question 4

If a capital asset acquired August 5,2016 is sold on February 6,2017,any gain is a short-term capital gain.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) Equipment used in a business 
B) The unharvested crops of a farmer 
C) Timber 
D) Inventory 
E) All of the above are Section 1231 assets 
A) Equipment used in a business 
B) The unharvested crops of a farmer 
C) Timber 
D) Inventory 
E) All of the above are Section 1231 assets

Question 6

In the current year,Estes has net short-term capital losses of $3,000,a net long-term capital loss of $45,000,and taxable income from wages of $35,000.
a.Calculate the amount of Estes' deduction for capital losses for the current year.
b.Calculate the amount and nature (short-term or long-term)of his capital loss carryforward.
c.For how many years may Estes carry the unused loss forward?

Accepted Answer

The answer of In the current year,Estes has net short-term...

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The condemnation of property is not an involuntary conversion,since it is done pursuant to a government decree.

Accepted Answer

A) True 
 B)False

Question 9

Perry acquired raw land as an investment 16 years ago.The land cost $50,000.In the current year,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.Assume that Perry uses the installment method to recognize the gain and receives only the $10,000 down payment in the year of sale.How much gain should Perry recognize in the current year?

Accepted Answer

A) $4,166 
B) $5,833 
C) $7,000 
D) $9,000 
E) None of the above 
A) $4,166 
B) $5,833 
C) $7,000 
D) $9,000 
E) None of the above

Question 10

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 11

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 12

Accounts receivable are capital assets.

Accepted Answer

A) True 
 B)False

Question 13

Dan acquired rental property in June 2007 for $370,000 and sold it in October,2017.$40,000 in straight-line depreciation has been taken on the house.A run-up in housing prices allowed him to sell the house for $575,000.In the year of sale,Dan received $175,000 when the buyer sold some investments,an additional $200,000 when the buyer closed a loan from the bank,and took a $200,000 note from the buyer,payable on the anniversary of the sale date in 10 installments of $20,000 each plus interest on the unpaid balance.
​
Using the installment method,calculate his taxable gain in the year of sale.

Accepted Answer

$575,000 - ($370,000 - $40,000)= $245,00

Question 14

In the current year,Marc,a single taxpayer,has ordinary income of $35,000.In addition,he has $3,000 in short-term capital gains,short-term capital losses of $6,000,and long-term capital gains of $4,000.What is Marc's adjusted gross income (AGI)for the current year?

Accepted Answer

A) $32,000 
B) $39,000 
C) $36,000 
D) $34,000 
A) $32,000 
B) $39,000 
C) $36,000 
D) $34,000

Question 15

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.

Accepted Answer

$250,000.If property is receiv

Question 16

Perry acquired raw land as an investment 16 years ago.The land cost $60,000.In the current year,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 the current year?

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 17

Ben purchased an apartment building about 10 years ago,for $200,000.The building has been depreciated over the appropriate recovery period using the straight-line method.In the current year,the building was sold for $220,000,when the accumulated depreciation was $62,500.Ben is in the highest tax bracket;on his current year tax return,he should report:

Accepted Answer

A) Section 1231 gain of $20,000 and ordinary income of $62,500 
B) Section 1231 gain of $62,500 and ordinary income of $20,000 
C) Ordinary income of $82,500 
D) Section 1231 gain of $20,000 and "unrecaptured depreciation" taxed at 25 percent of $62,500 
E) None of the above 
A) Section 1231 gain of $20,000 and ordinary income of $62,500 
B) Section 1231 gain of $62,500 and ordinary income of $20,000 
C) Ordinary income of $82,500 
D) Section 1231 gain of $20,000 and "unrecaptured depreciation" taxed at 25 percent of $62,500 
E) None of the above

Question 18

For purposes of determining the adjusted basis of a capital asset at the time of its sale,

Accepted Answer

A) Capital improvements are added to the basis. 
B) Ordinary repairs reduce the adjusted basis. 
C) Accumulated depreciation is added to the basis. 
D) The basis does not include costs such as title insurance and escrow fees related to the initial purchase. 
A) Capital improvements are added to the basis. 
B) Ordinary repairs reduce the adjusted basis. 
C) Accumulated depreciation is added to the basis. 
D) The basis does not include costs such as title insurance and escrow fees related to the initial purchase.

Question 19

A taxpayer eligible to use the installment method for reporting gain on the sale of an asset must use the installment method unless he or she elects out of the provision.

Accepted Answer

A) True 
 B)False

Question 20

Simon sold investment property 2 years ago for $750.Simon's basis in the property was $200.Simon is receiving $150 per year from the buyer.Simon reports this income on the installment method.If Simon collects $150 in principal during the current year,how much gain should he report from the sale for the year?

Accepted Answer

A) $0 
B) $75 
C) $90 
D) $110 
E) None of the above 
A) $0 
B) $75 
C) $90 
D) $110 
E) None of the above

Which of the following statements is correct with respect to the deferral provisions of the tax law?

If a taxpayer sells his personal residence and purchases a new residence,realized gain may be recognized.

If a capital asset acquired August 5,2016 is sold on February 6,2017,any gain is a short-term capital gain.

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.

The condemnation of property is not an involuntary conversion,since it is done pursuant to a government decree.

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

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.

Accounts receivable are capital assets.

In the current year,Marc,a single taxpayer,has ordinary income of $35,000.In addition,he has $3,000 in short-term capital gains,short-term capital losses of $6,000,and long-term capital gains of $4,000.What is Marc's adjusted gross income (AGI)for the current 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.

For purposes of determining the adjusted basis of a capital asset at the time of its sale,

A taxpayer eligible to use the installment method for reporting gain on the sale of an asset must use the installment method unless he or she elects out of the provision.

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

Exam 8: Capital Gains and Losses

Which of the following statements is correct with respect to the deferral provisions of the tax law?

If a taxpayer sells his personal residence and purchases a new residence,realized gain may be recognized.

If a capital asset acquired August 5,2016 is sold on February 6,2017,any gain is a short-term capital gain.

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.

The condemnation of property is not an involuntary conversion,since it is done pursuant to a government decree.

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

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.

Accounts receivable are capital assets.

In the current year,Marc,a single taxpayer,has ordinary income of $35,000.In addition,he has $3,000 in short-term capital gains,short-term capital losses of $6,000,and long-term capital gains of $4,000.What is Marc's adjusted gross income (AGI)for the current 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.

For purposes of determining the adjusted basis of a capital asset at the time of its sale,

A taxpayer eligible to use the installment method for reporting gain on the sale of an asset must use the installment method unless he or she elects out of the provision.

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