Question 1

Jordan paid $30,000 for equipment two years ago and has claimed total depreciation deductions of $15,600 for the two years.The cost of repairs during the same time period was $2,000 while a major overhaul which extended the life of the equipment cost $7,000.What is Jordan's adjusted basis in the equipment at the end of the two-year period?

Accepted Answer

A)  $14,400 
B)  $16,400 
C)  $21,400 
D)  $30,000

Question 2

Coretta sold the following securities during 2017:

What is Coretta's net capital gain or loss result for the year?

Accepted Answer

A)  NSTCL of $3,000 and NLTCG of $15,000 
B)  $9,000 ANCG 
C)  $0 
D)  $12,000 ANCG

Question 3

Stella has two transactions involving the sale of capital assets during the year resulting in a STCL of $5,200 and LTCL of $2,400.As a result,Stella can offset

Accepted Answer

A)  $5,200 of ordinary income and have a LTCL carryforward of $2,400. 
B)  $3,000 of ordinary income and have a $4,600 STCL carryforward. 
C)  $3,000 of ordinary income and have a $2,200 STCL carryforward and $2,400 LTCL carryforward. 
D)  $7,600 of ordinary income.

Question 4

Expenditures which do not add to the value or prolong the life of property may be expensed in the year in which they are incurred.

Accepted Answer

A) True 
 B)False

Question 5

Tina,whose marginal tax rate is 33%,has the following capital gains this year:
  
What is the increase in income tax caused by these items (ignore the Medicare tax on net investment income)?

Accepted Answer

The answer of Tina,whose marginal tax rate is 33%,has the...

Question 6

Jack exchanged land with an adjusted basis of $65,000 subject to a liability of $22,000 for $50,000 (FMV) of stock owned by Hayden.Hayden takes the land subject to the liability.Jack incurs $500 of selling expenses.What is the amount of Jack's realized gain on the exchange?

Accepted Answer

A)  ($14,000) loss 
B)  ($14,500) loss 
C)  $6,500 gain 
D)  $7,000 gain

Question 7

A taxpayer purchased an asset for $50,000 several years ago.He is now planning to sell it.Under the recovery of basis doctrine the taxpayer will not recognize any gain or pay any related taxes unless he sells the asset for more than $50,000.

Accepted Answer

A) True 
 B)False

Question 8

A taxpayer owns 200 shares of stock in a corporation purchased in two blocks of 100 shares for different amounts and at different dates.The taxpayer sells 100 shares.Barring any specific instructions,the brokerage firm will report the cost basis using the higher cost block of stock first.

Accepted Answer

A) True 
 B)False

Question 9

Will exchanges a building with a basis of $35,000,and subject to a liability of $30,000,for land with a FMV of $50,000 owned by Jane.Jane takes the land subject to the liability.The amount realized by Will is

Accepted Answer

A)  $30,000. 
B)  $35,000. 
C)  $50,000. 
D)  $80,000.

Question 10

On July 25,2016,Marilyn gives stock with a FMV of $7,500 and a basis of $5,000 to her nephew Darryl.Marilyn had purchased the stock on March 18,2016.Darryl sold the stock on April 18,2017 for $7,800.As a result of the sale,what will Darryl report on his 2017 tax return?

Accepted Answer

A)  $300 STCG 
B)  $300 LTCG 
C)  $2,800 STCG 
D)  $2,800 LTCG

Question 11

A building used in a trade or business is a capital asset.

Accepted Answer

A) True 
 B)False

Question 12

Max sold the following capital assets this year:
  
What is the amount of and nature of (LT or ST) capital gain or loss?

Accepted Answer

The answer of Max sold the following capital assets this...

Question 13

Because of the locked-in effect,high capital gains tax rates may discourage taxpayer's from selling appreciated capital assets.

Accepted Answer

A) True 
 B)False

Question 14

A nonbusiness bad debt is deductible only in the year in which the debt becomes totally worthless.

Accepted Answer

A) True 
 B)False

Question 15

Olivia,a single taxpayer,has AGI of $280,000 which includes $220,000 of salary and $60,000 of investment income.She will pay Medicare tax on the $60,000 of investment income of

Accepted Answer

A)  $0. 
B)  $2,280. 
C)  $9,000. 
D)  $870.

Question 16

Donald has retired from his job as a corporate manager.He buys and sells stocks on a daily basis.He spends 8-9 hours daily studying prospective stock purchases and market news.What tax issues should Donald consider?

Accepted Answer

The answer of Donald has retired from his job as...

Question 17

Chen had the following capital asset transactions during 2017:
  
What is the adjusted net capital gain or loss and the related tax due to the above transactions,assuming Chen has a 25% marginal tax rate?

Accepted Answer

The answer of Chen had the following capital asset transactions...

Question 18

Unlike an individual taxpayer,the corporate taxpayer does not utilize the 25% and 28% specialty capital gain rates,but it does apply the 15% tax rate to adjusted net capital gain.

Accepted Answer

A) True 
 B)False

Question 19

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 20

During the current year,Nancy had the following transactions:

What is the amount of her capital loss deduction for the current year,and what is the amount and character of her capital loss carryover?

Accepted Answer

A)   
B)   
C)   
D)

Exam 5: Property Transactions: Capital Gains and Losses

Coretta sold the following securities during 2017: What is Coretta's net capital gain or loss result for the year?

Stella has two transactions involving the sale of capital assets during the year resulting in a STCL of $5,200 and LTCL of $2,400.As a result,Stella can offset

Expenditures which do not add to the value or prolong the life of property may be expensed in the year in which they are incurred.

Tina,whose marginal tax rate is 33%,has the following capital gains this year: What is the increase in income tax caused by these items (ignore the Medicare tax on net investment income)?

Jack exchanged land with an adjusted basis of $65,000 subject to a liability of $22,000 for $50,000 (FMV) of stock owned by Hayden.Hayden takes the land subject to the liability.Jack incurs $500 of selling expenses.What is the amount of Jack's realized gain on the exchange?

A taxpayer purchased an asset for $50,000 several years ago.He is now planning to sell it.Under the recovery of basis doctrine the taxpayer will not recognize any gain or pay any related taxes unless he sells the asset for more than $50,000.

A taxpayer owns 200 shares of stock in a corporation purchased in two blocks of 100 shares for different amounts and at different dates.The taxpayer sells 100 shares.Barring any specific instructions,the brokerage firm will report the cost basis using the higher cost block of stock first.

Will exchanges a building with a basis of $35,000,and subject to a liability of $30,000,for land with a FMV of $50,000 owned by Jane.Jane takes the land subject to the liability.The amount realized by Will is

On July 25,2016,Marilyn gives stock with a FMV of $7,500 and a basis of $5,000 to her nephew Darryl.Marilyn had purchased the stock on March 18,2016.Darryl sold the stock on April 18,2017 for $7,800.As a result of the sale,what will Darryl report on his 2017 tax return?

A building used in a trade or business is a capital asset.

Max sold the following capital assets this year: What is the amount of and nature of (LT or ST) capital gain or loss?

Because of the locked-in effect,high capital gains tax rates may discourage taxpayer's from selling appreciated capital assets.

A nonbusiness bad debt is deductible only in the year in which the debt becomes totally worthless.

Olivia,a single taxpayer,has AGI of $280,000 which includes $220,000 of salary and $60,000 of investment income.She will pay Medicare tax on the $60,000 of investment income of

Donald has retired from his job as a corporate manager.He buys and sells stocks on a daily basis.He spends 8-9 hours daily studying prospective stock purchases and market news.What tax issues should Donald consider?

Chen had the following capital asset transactions during 2017: What is the adjusted net capital gain or loss and the related tax due to the above transactions,assuming Chen has a 25% marginal tax rate?

Unlike an individual taxpayer,the corporate taxpayer does not utilize the 25% and 28% specialty capital gain rates,but it does apply the 15% tax rate to adjusted net capital gain.

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

During the current year,Nancy had the following transactions: What is the amount of her capital loss deduction for the current year,and what is the amount and character of her capital loss carryover?