Question 1

Edward purchased stock last year as follows:

In April of this year,Edward sells 80 shares for $250.Edward cannot specifically identify the stock sold.The basis for the 80 shares sold is

Accepted Answer

A)  $160. 
B)  $184. 
C)  $216. 
D)  $240.

Question 2

Courtney sells a cottage at the lake that the family had used for their summer vacations.The purchaser paid Courtney $100,000 and assumed the mortgage which had a principal balance of $50,000.Courtney had purchased the cottage five years ago for $170,000.Courtney will recognize

Accepted Answer

A)  a gain of $20,000. 
B)  no gain or loss. 
C)  a loss of $70,000. 
D)  a loss of $20,000.

Question 3

Jade is a single taxpayer in the top tax bracket,with salary of $450,000 and investment income of $100,000.She is considering the sale of some shares of stock which will result in a $50,000 gain.She purchased the shares three years ago.Taking all taxes into account,how much tax will she pay due to this gain?

Accepted Answer

The answer of Jade is a single taxpayer in the...

Question 4

The gain or loss on an asset purchased on March 31,2016,and sold on March 31,2017,is classified as short-term.

Accepted Answer

A) True 
 B)False

Question 5

Joy purchased 200 shares of HiLo Mutual Fund on July 15,2013,for $10,500,and has been reinvesting dividends.On December 15,2017,she sells 100 shares.
  
What is the basis for the shares sold assuming (1) FIFO and (2) average cost method?

Accepted Answer

The answer of Joy purchased 200 shares of HiLo Mutual...

Question 6

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 7

Andrea died with an unused capital loss carryover of $3,300.The carryover

Accepted Answer

A)  may be carried back three years. 
B)  will be fully used on Andrea's final income tax return. 
C)  will be inherited by Andrea's heirs. 
D)  expires with death.

Question 8

Galvin Corporation has owned all of the stock of Rialto Corporation for five years.Rialto Corporation has been actively engaged in manufacturing in Kansas,but it is now bankrupt,and the stock is worthless.Galvin Corporation will recognize a long-term capital loss.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Josh purchases a personal residence for $278,000 but subsequently converts the property to rental property when its FMV is $275,000.Assume depreciation of $65,000 has been deducted after conversion to rental use.If Josh sells the property for $280,000,his gain or loss will be

Accepted Answer

A)  $2,000 gain. 
B)  $5,000 gain. 
C)  $67,000 gain. 
D)  $70,000 gain.

Question 11

How long must a capital asset be held to qualify for long-term treatment?

Accepted Answer

A)  6 months 
B)  one year 
C)  one year and one day 
D)  same trade date one year from purchase

Question 12

Antonio is single and has taxable income of $150,000 without considering the sale of a capital asset (land held for investment) in September of 2017 for $25,000.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain (without consideration of the additional Medicare tax) is

Accepted Answer

A)  $1,000. 
B)  $3,000. 
C)  $5,600. 
D)  $7,000.

Question 13

All of the following are capital assets with the exception of

Accepted Answer

A)  personal residence. 
B)  corporate stock held for investment. 
C)  equipment used in a trade or business. 
D)  a Rembrandt painting held in a private collection.

Question 14

Candice owns a mutual fund that reinvests her dividends and capital gains earned during the year.The mutual fund reported to her that her share of earnings was: $500 in dividends,$1,500 in short-term net capital gains,and $1,300 in long-term net capital gains.She reported the items on her tax return and paid the appropriate tax on these earnings.If her basis in the fund was $25,000 at the beginning of the year,what is her basis at the end of the year?

Accepted Answer

A)  $25,000 
B)  $25,500 
C)  $27,000 
D)  $28,300

Question 15

A taxpayer reports capital gains and losses on

Accepted Answer

A)  Schedule D of Form 1040. 
B)  Form 8949. 
C)  Schedule D of Form 1040 and Form 8949. 
D)  None of the above.

Question 16

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 17

On January 31 of this year,Mallory pays $800 for an option to acquire 100 shares of Mesa Corporation common stock for $85 per share.As a result of an increase in the market value of the Mesa stock,the market price of the option increases and Mallory sells the option for $1,000 on August 4.As a result of the sale,Mallory must recognize

Accepted Answer

A)  $200 STCG. 
B)  $800 STCG. 
C)  $200 ordinary income. 
D)  $800 ordinary income.

Question 18

If Houston Printing Co.purchases a new printing press during the current year for $30,000,pays sales taxes of $2,000,and pays $1,000 for installation,the cost basis for the printing press is $33,000.

Accepted Answer

A) True 
 B)False

Question 19

Mike,a dealer in securities and calendar-year taxpayer,purchased a security for inventory on November 18,2016 for $15,000.The FMV on December 31,2016 was $16,000.The security was sold on December 19,2017 for $16,500.These transactions result in

Accepted Answer

A)  $0 ordinary income in 2016; $1,500 ordinary income in 2017. 
B)  $0 ordinary income in 2016; $1,500 LTCG in 2017. 
C)  $1,000 ordinary income in 2016; $500 LTCG in 2017. 
D)  $1,000 ordinary income in 2016; $500 ordinary income in 2017.

Question 20

Abra Corporation generated $100,000 of taxable income from operations this year and realized a $4,000 loss on the sale of Starbucks stock.Abra Corporation will pay taxes on $97,000 of taxable income.

Accepted Answer

A) True 
 B)False

Exam 5: Property Transactions: Capital Gains and Losses

Edward purchased stock last year as follows: In April of this year,Edward sells 80 shares for $250.Edward cannot specifically identify the stock sold.The basis for the 80 shares sold is

Courtney sells a cottage at the lake that the family had used for their summer vacations.The purchaser paid Courtney $100,000 and assumed the mortgage which had a principal balance of $50,000.Courtney had purchased the cottage five years ago for $170,000.Courtney will recognize

The gain or loss on an asset purchased on March 31,2016,and sold on March 31,2017,is classified as short-term.

Joy purchased 200 shares of HiLo Mutual Fund on July 15,2013,for $10,500,and has been reinvesting dividends.On December 15,2017,she sells 100 shares. What is the basis for the shares sold assuming (1) FIFO and (2) average cost method?

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

Andrea died with an unused capital loss carryover of $3,300.The carryover

Galvin Corporation has owned all of the stock of Rialto Corporation for five years.Rialto Corporation has been actively engaged in manufacturing in Kansas,but it is now bankrupt,and the stock is worthless.Galvin Corporation will recognize a long-term capital loss.

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.

Josh purchases a personal residence for $278,000 but subsequently converts the property to rental property when its FMV is $275,000.Assume depreciation of $65,000 has been deducted after conversion to rental use.If Josh sells the property for $280,000,his gain or loss will be

How long must a capital asset be held to qualify for long-term treatment?

All of the following are capital assets with the exception of

A taxpayer reports capital gains and losses on

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?

If Houston Printing Co.purchases a new printing press during the current year for $30,000,pays sales taxes of $2,000,and pays $1,000 for installation,the cost basis for the printing press is $33,000.

Mike,a dealer in securities and calendar-year taxpayer,purchased a security for inventory on November 18,2016 for $15,000.The FMV on December 31,2016 was $16,000.The security was sold on December 19,2017 for $16,500.These transactions result in

Abra Corporation generated $100,000 of taxable income from operations this year and realized a $4,000 loss on the sale of Starbucks stock.Abra Corporation will pay taxes on $97,000 of taxable income.