Question 1

Classify the gain or loss on each of George's assets listed below using the following codes. Note: a code may be used once, more than once, or not at all.
-George sells land purchased in 1989 that he used to park construction equipment at a gain of $16,500.

Accepted Answer

A) Long-term capital 
B) Short-term capital 
C) Collectible gain 
D) Section 1231 
E) Section 1245
F)Section 1250
G)Ordinary income/loss
H)Nontaxable/nondeductible

Question 2

When a security becomes worthless
I.no loss can be deducted because a realization has not occurred.
II.the measure of the loss is the adjusted basis of the securities.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 3

Which of the following trade or business assets are Section 1245 properties?
I.Racehorses.
II.Livestock held for breeding purposes
III.Manufacturing equipment.
IV.Residential rental property placed in service in 2008.
​

Accepted Answer

A) Only statement I is correct. 
B) Statements II and IV are correct. 
C) Statements I, II, and III are correct. 
D) Statements I and IV are correct. 
E) Statements I, II, III, and IV are correct.

Question 4

The exclusion of a percentage of the capital gain realized on the sale of qualified small business stock acquired after February 17, 2009, and before September 27, 2010, results in an effective tax rate on these capital gains of

Accepted Answer

A) 7.0% 
B) 14.0% 
C) 15.0% 
D) 27.0% 
E) 30.0%

Question 5

Match each statement with the correct term below.
-Section 1245 property

Accepted Answer

A) Stocks, bonds, options. 
B) Depreciable real property. 
C) All or part of any gain on sale is excluded. 
D) Taxed at a maximum rate of 25%. 
E) Gain or loss on the sale of artwork.
F)Depreciable tangible personal property.
G)Subject to full recapture as ordinary income of all depreciation taken.
H)Gain on real property attributable to excess depreciation is ordinary income.

Question 6

Which of the following best describes the tax treatment of a taxpayer's net Section 1231 loss that resulted from the sale of depreciable equipment used in a business activity?

Accepted Answer

A) Such losses are not deductible. 
B) Such losses are deducted as ordinary losses. 
C) Such losses are deducted as long-term capital losses. 
D) Such losses are deductible as short-term capital losses. 
E) Such losses are deducted as ordinary losses only to the extent that the business activity produces other ordinary net income.

Question 7

The lookback recapture rule nets the current-year net Section 1231 gain against Section 1231 ordinary loss deductions taken in the previous three years.

Accepted Answer

A) True 
 B)False

Question 8

Capital gain and loss planning strategies include
I.the optimal action of using capital gains to reduce an individual taxpayer's net capital loss for a year to zero.
II.selling enough capital assets to create a $3,000 capital loss.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 9

Dallas Wildcat Drilling Co. sells an oil-drilling rig for $3,000,000. The drilling rig was purchased in 2012 for $2,000,000. Depreciation deductions of $1,200,000 have been taken up to the time of sale. What amount and character of gain will Dallas report from the sale of this asset?

Accepted Answer

A) $2,200,000 Section 1245 ordinary income. 
B) $2,200,000 long-term capital gain. 
C) $1,200,000 Section 1245 ordinary income, $1,000,000 Sec 1231 gain. 
D) $1,200,000 Section 1245 ordinary income, $1,000,000 long-term capital gain.

Question 10

Brock exchanges property with an adjusted basis of $40,000 subject to a mortgage of $20,000 for other property owned by Reese with a fair market value of $80,000. Reese assumes the mortgage. No cash or other assets were part of the trade. Brock's amount realized is

Accepted Answer

A) $40,000 
B) $50,000 
C) $80,000 
D) $90,000 
E) $100,000

Question 11

Serenity has the following capital gains and losses for the current year:
?
$$\begin{array} { l c } 
\text { Short-term capital loss } & \$ ( 8,000 ) \
\text { Long-term capital gain } & 3,000 \
\text { Collectible gain } & 2,000 \
\text { Collectible loss } & ( 4,000 )
\end{array}$$
If Serenity is single and has taxable income from other sources of $75,000, what is the impact of her capital gains and losses on her income tax liability?

Accepted Answer

A) $300 decrease. 
B) $450 decrease. 
C) $660 decrease. 
D) $720 decrease. 
E) $840 decrease.

Question 12

Marilyn sells 200 shares of General Motors stock for $80 per share. She pays a $100 commission on the sale and has an adjusted basis of $8,000 on the stock.
I.The amount realized from the sale is $15,900.
II.Marilyn has a recognized gain of $8,000.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 13

Classify the gain or loss on each of George's assets listed below using the following codes. Note: a code may be used once, more than once, or not at all.
-After using a house as his personal home for 20 years, George converts it in 2007 to an office building for use in his construction business. He sells the building at a $65,000 loss in 2018.

Accepted Answer

A) Long-term capital 
B) Short-term capital 
C) Collectible gain 
D) Section 1231 
E) Section 1245
F)Section 1250
G)Ordinary income/loss
H)Nontaxable/nondeductible

Question 14

Rachael purchased 500 shares of Qualified Small Business Stock (QSB) for $900,000 on March 2, 2009. On November 29, 2018, she sells the stock for $1,000,000. Rachael also sells 100 shares of stock she acquired two years ago realizing a loss of $10,000. Which of the following explain(s) tax consequences of the QSB stock sale?
I.The effective tax rate applied to the net gain on the sale of the QSB stock is 15%.
II.Rachael nets her $10,000 loss with her $100,000 gain after applying her exclusion rate.
III.Rachael is eligible for a 75% exclusion of the gain from the QSB stock sale.
IV.The QSB stock is QSB stock partly because Rachael held the stock for the required 3-year minimum.
​

Accepted Answer

A) Statements I and II are correct. 
B) Statements II and III are correct. 
C) Statements III and IV are correct. 
D) Statements I, II, and III are correct. 
E) Statements I, II, III, and IV are correct.

Question 15

Watson sells equipment he used in his business. The equipment cost $50,000 and had an adjusted basis of $32,000 on the date of sale.
a.If Watson sells the equipment for $23,000, what is the amount and character of the recognized gain or loss?
b.If Watson sells the equipment for $55,000 what is the amount and character of the recognized gain or loss?

Accepted Answer

The answer of Watson sells equipment he used in his...

Question 16

Sigma Corporation had the following capital gains and losses for 2014 through 2018:
?
$$\begin{array} { c c c c c } 
2014 & 2015 & 2016 & 2017 & 2018 \
\$ 30,000 & \$ ( 20,000 ) & \$ 15,000 & \$ ( 30,000 ) & \$ 60,000
\end{array}$$
Sigma's net capital gain for 2018 is:

Accepted Answer

A) $25,000 
B) $30,000 
C) $35,000 
D) $55,000 
E) $60,000

Question 17

Discuss the general differences between Section 1245 and Section 1250 recapture provisions.

Accepted Answer

The answer of Discuss the general differences between Section 1245...

Question 18

In September 2018, Eduardo sells stock he purchased in October 2014 at a gain of $5,000. If Eduardo is in the 10% marginal tax rate bracket and he has no other capital asset sales in 2018, what is his tax on the sale of the stock?

Accepted Answer

A) $- 0 - 
B) $500 
C) $750 
D) $1,000 
E) $1,250

Question 19

Match each statement with the correct term below.
-Qualified Small Business stock gain

Accepted Answer

A) Stocks, bonds, options. 
B) Depreciable real property. 
C) All or part of any gain on sale is excluded. 
D) Taxed at a maximum rate of 25%. 
E) Gain or loss on the sale of artwork.
F)Depreciable tangible personal property.
G)Subject to full recapture as ordinary income of all depreciation taken.
H)Gain on real property attributable to excess depreciation is ordinary income.

Question 20

Unrecaptured Section 1250 gain is the amount of gain on the sale of personal assets by individuals not otherwise treated as ordinary income.

Accepted Answer

A) True 
 B)False

Exam 11: Property Dispositions

Classify the gain or loss on each of George's assets listed below using the following codes. Note: a code may be used once, more than once, or not at all. -George sells land purchased in 1989 that he used to park construction equipment at a gain of $16,500.

When a security becomes worthless I.no loss can be deducted because a realization has not occurred. II.the measure of the loss is the adjusted basis of the securities.

Which of the following trade or business assets are Section 1245 properties? I.Racehorses. II.Livestock held for breeding purposes III.Manufacturing equipment. IV.Residential rental property placed in service in 2008.

The exclusion of a percentage of the capital gain realized on the sale of qualified small business stock acquired after February 17, 2009, and before September 27, 2010, results in an effective tax rate on these capital gains of

Match each statement with the correct term below. -Section 1245 property

Which of the following best describes the tax treatment of a taxpayer's net Section 1231 loss that resulted from the sale of depreciable equipment used in a business activity?

The lookback recapture rule nets the current-year net Section 1231 gain against Section 1231 ordinary loss deductions taken in the previous three years.

Capital gain and loss planning strategies include I.the optimal action of using capital gains to reduce an individual taxpayer's net capital loss for a year to zero. II.selling enough capital assets to create a $3,000 capital loss.

Dallas Wildcat Drilling Co. sells an oil-drilling rig for $3,000,000. The drilling rig was purchased in 2012 for $2,000,000. Depreciation deductions of $1,200,000 have been taken up to the time of sale. What amount and character of gain will Dallas report from the sale of this asset?

Brock exchanges property with an adjusted basis of $40,000 subject to a mortgage of $20,000 for other property owned by Reese with a fair market value of $80,000. Reese assumes the mortgage. No cash or other assets were part of the trade. Brock's amount realized is

Marilyn sells 200 shares of General Motors stock for $80 per share. She pays a $100 commission on the sale and has an adjusted basis of $8,000 on the stock. I.The amount realized from the sale is $15,900. II.Marilyn has a recognized gain of $8,000.

Sigma Corporation had the following capital gains and losses for 2014 through 2018: ? $\begin{array} { c c c c c } 2014 & 2015 & 2016 & 2017 & 2018 \\\$ 30,000 & \$ ( 20,000 ) & \$ 15,000 & \$ ( 30,000 ) & \$ 60,000\end{array}$ Sigma's net capital gain for 2018 is:

Discuss the general differences between Section 1245 and Section 1250 recapture provisions.

In September 2018, Eduardo sells stock he purchased in October 2014 at a gain of $5,000. If Eduardo is in the 10% marginal tax rate bracket and he has no other capital asset sales in 2018, what is his tax on the sale of the stock?

Match each statement with the correct term below. -Qualified Small Business stock gain

Unrecaptured Section 1250 gain is the amount of gain on the sale of personal assets by individuals not otherwise treated as ordinary income.

Exam 11: Property Dispositions

Classify the gain or loss on each of George's assets listed below using the following codes. Note: a code may be used once, more than once, or not at all. -George sells land purchased in 1989 that he used to park construction equipment at a gain of $16,500.

When a security becomes worthless I.no loss can be deducted because a realization has not occurred. II.the measure of the loss is the adjusted basis of the securities. ​

Which of the following trade or business assets are Section 1245 properties? I.Racehorses. II.Livestock held for breeding purposes III.Manufacturing equipment. IV.Residential rental property placed in service in 2008. ​

The exclusion of a percentage of the capital gain realized on the sale of qualified small business stock acquired after February 17, 2009, and before September 27, 2010, results in an effective tax rate on these capital gains of

Match each statement with the correct term below. -Section 1245 property

Which of the following best describes the tax treatment of a taxpayer's net Section 1231 loss that resulted from the sale of depreciable equipment used in a business activity?

The lookback recapture rule nets the current-year net Section 1231 gain against Section 1231 ordinary loss deductions taken in the previous three years.

Capital gain and loss planning strategies include I.the optimal action of using capital gains to reduce an individual taxpayer's net capital loss for a year to zero. II.selling enough capital assets to create a $3,000 capital loss. ​

Dallas Wildcat Drilling Co. sells an oil-drilling rig for $3,000,000. The drilling rig was purchased in 2012 for $2,000,000. Depreciation deductions of $1,200,000 have been taken up to the time of sale. What amount and character of gain will Dallas report from the sale of this asset?

Brock exchanges property with an adjusted basis of $40,000 subject to a mortgage of $20,000 for other property owned by Reese with a fair market value of $80,000. Reese assumes the mortgage. No cash or other assets were part of the trade. Brock's amount realized is

Marilyn sells 200 shares of General Motors stock for $80 per share. She pays a $100 commission on the sale and has an adjusted basis of $8,000 on the stock. I.The amount realized from the sale is $15,900. II.Marilyn has a recognized gain of $8,000. ​

Discuss the general differences between Section 1245 and Section 1250 recapture provisions.

In September 2018, Eduardo sells stock he purchased in October 2014 at a gain of $5,000. If Eduardo is in the 10% marginal tax rate bracket and he has no other capital asset sales in 2018, what is his tax on the sale of the stock?

Match each statement with the correct term below. -Qualified Small Business stock gain

Unrecaptured Section 1250 gain is the amount of gain on the sale of personal assets by individuals not otherwise treated as ordinary income.

When a security becomes worthless I.no loss can be deducted because a realization has not occurred. II.the measure of the loss is the adjusted basis of the securities.

Which of the following trade or business assets are Section 1245 properties? I.Racehorses. II.Livestock held for breeding purposes III.Manufacturing equipment. IV.Residential rental property placed in service in 2008.

Capital gain and loss planning strategies include I.the optimal action of using capital gains to reduce an individual taxpayer's net capital loss for a year to zero. II.selling enough capital assets to create a $3,000 capital loss.

Marilyn sells 200 shares of General Motors stock for $80 per share. She pays a $100 commission on the sale and has an adjusted basis of $8,000 on the stock. I.The amount realized from the sale is $15,900. II.Marilyn has a recognized gain of $8,000.