Exam 8: Capital Gains and Losses

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

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?

In the current year,70 year-old Jeanette sells her personal residence of the last 40 years for $365,000.Jeanette's basis in her residence is $70,000.The expenses associated with the sale of her home total $20,000.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

Emily sold the following investments during the year: For each stock,calculate the amount and the nature of the gain or loss.

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.

For the current tax year,Morgan had $25,000 of ordinary income.In addition,he had an $1,900 long-term capital loss and a $1,600 short-term capital loss.What will be the amount of Morgan's capital loss carryforward to the next year?

Robert acquired his rental property 10 years ago for $110,000 and sold it in the current year for $230,000.The accumulated straight-line depreciation on the property at the time of the sale was $35,000.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)?

A taxpayer's personal automobile is a capital asset.

What are capital assets?

In 2017,Paul,a single taxpayer,has taxable income of $30,000 exclusive of capital gains and losses.Paul incurred a $1,000 short-term capital loss and a $4,000 long-term capital loss.What is the amount of his long-term capital loss carryover to 2018?

If not entirely used in one sale,the unused portion of the $250,000 exclusion on the sale of a taxpayer's principal residence may be used to reduce the recognized gain on the sale of the taxpayer's next residence.

Assuming a taxpayer has no other gains or losses for the year,a loss from the theft of a Section 1231 asset is treated as a capital loss.

If insurance proceeds exceed the taxpayer's basis in property destroyed by fire and the proceeds are not invested in similar property,the taxpayer may be required to recognize a gain.

Lorreta has a manufacturing business.In the current year,her storage building is completely destroyed by fire and she receives $315,000 from her insurance company.She purchased the building for $300,000 20 years ago and has claimed depreciation of $85,000 using the straight-line method.In the following year,she purchases a new storage building at a cost of $295,000. a.Calculate Lorreta's realized gain or loss. b.​ Assuming Lorreta makes an election under the involuntary conversion provision,calculate Lorreta's recognized gain or loss? c.​ Assuming Lorreta makes an election under the involuntary conversion provision,what is Lorreta's basis in the new building?

In the current year,Helen sold Section 1245 property for $6,000.The property cost $26,000 when it was purchased 5 years ago.The depreciation claimed on the property was $24,000. a.Calculate the adjusted basis of the property. b.Calculate the amount of ordinary income under Section 1245. c.Calculate the Section 1231 gain.

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

Nick received a gift of stock from his father.Nick's father had purchased the stock 2 years earlier and his father's basis in the stock was $30,000.On the date of the gift,the stock had a fair market value of $25,000. a.If Nick sells the stock for $33,000,calculate the amount of Nick's gain or loss on the transaction. b.If Nick sells the stock for $22,000,calculate the amount of Nick's gain or loss on the transaction. c.If Nick sells the stock for $27,000,calculate the amount of Nick's gain or loss on the transaction.

An asset's adjusted basis is computed as:

In the current year,Henry,a sole proprietor,sold for $65,000 a machine that was used in his business.The machine had been purchased a few years ago for $50,000,and when it was sold,it had accumulated depreciation of $20,000 and an adjusted basis of $30,000.For the current year,how should this gain be treated?

During 2017,William sold the following capital assets: Calculate the following: a.Total short-term capital gain/loss realized for tax purposes b.Total long-term capital gain/loss realized for tax purposes c.Deductible capital gain/loss d.The amount and nature (short-term or long-term)of his capital loss carryforward e.Assuming that William has no capital gain or loss for 2018,how much can he deduct in 2018 and what is the amount and nature of any carryforward to 2019?