Question 1

Jessica owned 200 shares of OK Corporation with a basis of $12,000 and a FMV of $24,000.Jessica received 20 stock rights as a nontaxable distribution with a total FMV of $8,000.Jessica sold the stock rights for $4,000.Jessica's gain or loss on the sale was

Accepted Answer

A) $1,000. 
B) $3,000. 
C) $4,000. 
D) ($4,000).

Question 2

In a common law state,jointly owned property left to the surviving spouse will have a basis after the estate is settled equal to

Accepted Answer

A) the decedent's basis before death. 
B) the total fair market value of the entire property at the date of death (the alternative valuation date was not elected). 
C) half of the fair market value of the entire property at the date of death (the alternative valuation date was not elected). 
D) half of the basis just before death,plus half of the fair market value at the date of death (the alternative valuation date was not elected).

Question 3

Sergio acquires a $100,000 Ternco Corporation bond (5%,20-year bond)on January 1,2017 for $75,000.The bond had been issue on January 1,2015.If Sergio holds the bond to maturity,at redemption he will recognize

Accepted Answer

A) $0 gain or loss. 
B) ordinary income. 
C) a long-term capital gain. 
D) a mix of ordinary income and long-term capital gain.

Question 4

In a basket purchase,the total cost is apportioned among the assets purchased according to the relative adjusted basis of the assets.

Accepted Answer

A) True 
 B)False

Question 5

During the current year,Don's aunt Natalie gave him a house.At the time of the gift,the house had a FMV of $144,000 and his aunt's adjusted basis was $133,000.After deducting the annual exclusion,the amount of the gift was $130,000.His aunt paid a gift tax of $20,000 on the house.What is Don's basis in the house for purposes of determining gain?

Accepted Answer

A) $130,000 
B) $133,000 
C) $134,692 
D) $144,000

Question 6

Nate sold two securities in 2017:  Nate has a 25% marginal tax rate.What is the additional tax resulting from the above sales?

Accepted Answer

A) $150 
B) $200 
C) $300 
D) $400

Question 7

Rana purchases a 5%,$100,000 corporate bond at issuance on January 1,2017 for $91,500.The bond matures in five years.In 2017 Rana will recognize interest income of

Accepted Answer

A) $0. 
B) $5,000. 
C) an amount less than $5,000 (but more than $0). 
D) an amount greater than $5,000.

Question 8

Topaz Corporation had the following income and expenses during the current year:  What is Topaz's taxable income?

Accepted Answer

A) $30,000 
B) $50,000 
C) $52,000 
D) $20,000

Question 9

Gina owns 100 shares of XYZ common stock with a $12,000 basis and a $25,000 FMV.She receives 100 stock rights with a total FMV of $15,000.Answer the following:
a.What is the basis of the 100 shares of stock?
b.What is the basis of the 100 stock rights?

Accepted Answer

The answer of Gina owns 100 shares of XYZ common...

Question 10

On January 31 of the current year,Sophia pays $1,000 for an option to acquire 100 shares of Texas Corporation common stock for $105 per share at any time prior to December 31.As of December 31,Sophia had not exercised the option or sold it.Which of the following statements is correct?

Accepted Answer

A) Sophia may recognize a $1,000 STCL. 
B) Sophia may recognize a $1,000 LTCL. 
C) Sophia may recognize a $1,000 ordinary income. 
D) Sophia may not recognize a loss.

Question 11

Rachel holds 110 shares of Argon Mutual Fund.She is planning to sell 90 shares.Her record of the share purchases is noted below.What could be her basis for the 90 shares to be sold for purposes of determining gain?

Accepted Answer

A) $9,000 
B) $9,500 
C) $9,409 
D) Any of the above could be used as basis for the 90 shares sold.

Question 12

What type of property should be transferred to heirs at a decedent's death and why? Should estate planning also mean that some property is transferred prior to death? Why?

Accepted Answer

The answer of What type of property should be transferred...

Question 13

An individual taxpayer who is not a dealer in real estate plans to subdivide a parcel of land into four lots and sell them at a substantial gain.The parcel of land had been held six years.In order to qualify for capital gain treatment,the individual must satisfy all of the requirements except

Accepted Answer

A) the individual must not hold any other real property primarily for sale in the ordinary course of business. 
B) no substantial improvements can be made while holding the lots if the improvements substantially increase the value of the lots. 
C) the parcel of land (or any part of it)cannot have been held primarily for sale to customers in the individual's business. 
D) All of the above criteria must be satisfied to allow capital gain treatment.

Question 14

Trista,a taxpayer in the 33% marginal tax bracket sold the following capital assets this year:
  What is the amount of and nature of (LT or ST)capital gain or loss? Be specific as to the rates at which gains,if any,are taxed.

Accepted Answer

The answer of Trista,a taxpayer in the 33% marginal tax...

Question 15

Rita died on January 1,2017 owning an asset with a FMV of $730,000 that she purchased in 2010 for $600,000.Bert inherited the asset from Rita.When Bert sells the asset for $800,000 on August 20,2017,he must recognize a

Accepted Answer

A) STCG of $70,000. 
B) LTCG of $70,000. 
C) STCG of $200,000. 
D) LTCG of $200,000.

Question 16

Erik purchased qualified small business corporation stock on December 1,2010 and sold it for a $500,000 gain on December 12,2017.The gain subject to tax is

Accepted Answer

A) $0. 
B) $500,000. 
C) $250,000. 
D) $125,000.

Question 17

Margaret died on September 16,2017,when she owned securities with a basis of $50,000 and a FMV of $60,000.Caroline inherited the property and sold it on December 19,2017 for $67,000.What is Caroline's reported gain on this sale?

Accepted Answer

A) $7,000 STCG 
B) $7,000 LTCG 
C) $17,000 STCG 
D) $17,000 LTCG

Question 18

What are arguments for and against preferential treatment of capital gains?

Accepted Answer

The answer of What are arguments for and against preferential...

Question 19

Arthur,age 99,holds some stock purchased many years ago for $10,000 which is now worth $100,000.He is trying to plan for the eventual disposition of this stock.Arthur's only remaining family member is his grandson.For income tax purposes,Arthur should

Accepted Answer

A) sell the stock and gift the proceeds to his grandson. 
B) gift the stock to his grandson. 
C) leave the stock to his grandson as an inheritance. 
D) All of the above will result in the same income tax consequences.

Question 20

Rick sells stock of Ty Corporation,which has an adjusted basis of $20,000,for $22,000.He pays a sales commission of $500.In computing his gain or loss,the amount realized by Rick is $1,500.

Accepted Answer