Question 1

In July 2018, Hillary sells a stamp from her stamp collection at a gain of $500. Hillary purchased the stamp in 2011. If Hillary is in the 22% marginal tax rate bracket and has no other capital asset sales in 2018, what is her tax on the sale of the stamp?

Accepted Answer

A) $- 0 - 
B) $25 
C) $50 
D) $75 
E) $110

Question 2

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's construction company completed 5 homes during February 2017. He sells one of the homes in March 2018 at a $37,000 gain.

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 3

Davidson Corporation has the following gains and losses from Section 1231 property during 2018:
?
$$\begin{array} { l c } 
\text { Casualty losses } & \$ ( 6,000 ) \
\text { Casualty gains } & 7,000 \
\text { Section } 1231 \text { gains } & 6,000 \
\text { Section } 1231 \text { losses } & ( 9,000 )
\end{array}$$
No net Section 1231 losses have been deducted as ordinary losses in prior years. How much of the 2018 Section 1231 gains and losses are recognized as long-term capital gains?

Accepted Answer

A) $- 0 - 
B) $1,000 
C) $2,000 
D) $3,000 
E) $6,000

Question 4

William has the following capital gains and losses for the current year:
?
$\begin{array}{lr}
\text { Short-term capital gain } & \$ 10,000 \
\text { Short-term capital loss } & (3,000) \
\text { Long-term capital gain } & 5,000
\end{array}$
What is William's net capital gain or loss position for the year?

Accepted Answer

A) Short-term capital gain $7,000; Long-term capital gain $5,000. 
B) Short-term capital gain $10,000; Long-term capital gain $2,000. 
C) Short-term capital gain $7,000; Long-term capital gain $2,000. 
D) Short-term capital gain $10,000; Long-term capital gain $5,000

Question 5

Victor bought 100 shares of stock of Wabash Manufacturing Corporation from an unrelated individual paying $1 per share on December 20, 2017. On April 17, 2018, the corporation is declared bankrupt and the shares are deemed worthless. What is the amount and character of Victor's recognized loss as a result of the bankruptcy?

Accepted Answer

A) $100 short-term capital loss. 
B) $100 long-term capital loss. 
C) $100 ordinary loss. 
D) No gain or loss until the stock is sold. 
E) The amount is $100, but the character is indeterminable from the information given.

Question 6

During 2018, Thomas has a net Section 1231 gain of $57,000. In 2018, Thomas reported a net Section 1231 loss of $60,000. What is the character of the 2018 gain?

Accepted Answer

A) $60,000 long-term capital gain. 
B) $60,000 ordinary gain. 
C) $57,000 ordinary gain. 
D) $57,000 long-term capital loss. 
E) $57,000 long-term capital gain.

Question 7

Fillmore's net Section 1231 gains and losses reported for the past five years is presented below.
?
$$\begin{array} { r r } 
2013 & \$ 15,000 \
2014 & 12,000 \
2015 & 5,000 \
2016 & ( 28,000 ) \
2017 & ( 13,000 )
\end{array}$$
In 2018, Fillmore has a $15,000 net Section 1231 gain. What amounts and character of income will Fillmore ultimately report in 2018 as a result of this net Section 1231 gain?

Accepted Answer

A) $6,000 LTCG; $9,000 ordinary income 
B) $15,000 ordinary income 
C) $15,000 Section 1231 gain 
D) $9,000 LTCG; $6,000 ordinary income 
E) None of the above.

Question 8

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

Accepted Answer

A) 0% 
B) 7.0% 
C) 14.0% 
D) 15.0% 
E) 28.0%

Question 9

A buyer's assumption of the seller's debt increases the gross sales price and any debt of the buyer assumed by the seller in the transaction also increases the gross sales price.

Accepted Answer

A) True 
 B)False

Question 10

Troy Company purchased a printing press on April 13, 2015 at a cost of $30,000. Troy sells the printing press on January 3, 2018 for $16,000. Regular MACRS depreciation on the printing press would be $18,500, while straight-line MACRS depreciation would total $12,000.
I.If Troy used straight-line depreciation, it would have a Section 1231 loss of $2,000.
II.If Troy used regular MACRS depreciation, it would have Section 1245 ordinary income of $4,500.
​

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 11

Gabrielle has the following gains and losses for the current year:
?
$$\begin{array} { l r } 
\text { Short-term capital loss } & \$ ( 8,000 ) \
\text { Long-term capital gain } & 3,000 \
\text { Section } 1231 \text { gain } & 3,000 \
\text { Section } 1231 \text { loss } & ( 5,000 )
\end{array}$$
What is Gabrielle's net capital gain or loss position for the year?

Accepted Answer

A) $7,000 net short-term capital loss. 
B) $3,000 net short-term capital gain. 
C) $5,000 net short-term capital loss. 
D) $3,000 net short-term capital gain

Question 12

Depreciation recapture provisions
I.are reclassification provisions.
II.apply to depreciable assets sold at a gain.
​

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

Wilshire Corporation purchased a commercial building in 2005 for $975,000. During 2018, the building is sold for $775,000. The actual depreciation on the building as of the sale date was $300,000. What is the amount and character of the gain recognized on the sale?

Accepted Answer

A) $100,000 Section 1250 ordinary income. 
B) $100,000 Section 1231 gain. 
C) $100,000 Unrecaptured Section 1250 gain. 
D) $100,000 Section 1245 gain.

Question 14

Sidney, a single taxpayer, has taxable income of $45,000 from all sources except capital gains. He has a long-term capital gain of $1,000. What is the actual tax savings Sidney receives because of any special treatment of his $1,000 long-term capital gain?

Accepted Answer

A) $-0- 
B) $20 
C) $70 
D) $150 
E) $220

Question 15

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's wife sells stock she purchased 10 months ago at a gain of $212.

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 16

Phillip owns rental real estate with an adjusted basis of $200,000. During the current year, he sells the property for $170,000.
I.If Phillip's rental activity is a trade or business, the loss is a Section 1231 loss.
II.If Phillip's rental activity is a production-of-income (investment) activity, the loss is a 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 17

Stan sells a piece of land he used in his auto repair business at a gain of $13,000 in 2018. In addition, Stan sells equipment he purchased in 2013 for $8,000. He paid $20,000 for the equipment that had an adjusted basis of $12,000 when it was sold. He also sells some stock in 2018 at a loss of $11,000. No losses on the disposition of assets were recognized in prior years. The effect of these transactions on Stan's 2018 taxable income is:

Accepted Answer

A) Decrease of $2,000. 
B) Decrease of $3,000. 
C) Increase of $6,000. 
D) Increase of $10,000.

Question 18

Rosalee has the following capital gains and losses during the current year:
?
$\begin{array}{lc}
\text { Short-term capital loss } & \$(4,000) \
\text { Long-term capital gain } & 3,000 \
\text { Unrecaptured Section } 1250 \text { gain } & 6,000
\end{array}$

If Rosalee is in the 32% marginal tax rate bracket before considering her capital gains and losses, how much tax does she pay on her capital gains?

Accepted Answer

A) $ 750 
B) $ 950 
C) $ 1,250 
D) $ 1,600

Question 19

Section 1231 assets include

Accepted Answer

A) Inventory. 
B) Stocks and bonds. 
C) Personal residence. 
D) Business-use realty. 
E) Personal automobile.

Exam 11: Property Dispositions

In July 2018, Hillary sells a stamp from her stamp collection at a gain of $500. Hillary purchased the stamp in 2011. If Hillary is in the 22% marginal tax rate bracket and has no other capital asset sales in 2018, what is her tax on the sale of the stamp?

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's construction company completed 5 homes during February 2017. He sells one of the homes in March 2018 at a $37,000 gain.

During 2018, Thomas has a net Section 1231 gain of $57,000. In 2018, Thomas reported a net Section 1231 loss of $60,000. What is the character of the 2018 gain?

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

A buyer's assumption of the seller's debt increases the gross sales price and any debt of the buyer assumed by the seller in the transaction also increases the gross sales price.

Depreciation recapture provisions I.are reclassification provisions. II.apply to depreciable assets sold at a gain. ​

Wilshire Corporation purchased a commercial building in 2005 for $975,000. During 2018, the building is sold for $775,000. The actual depreciation on the building as of the sale date was $300,000. What is the amount and character of the gain recognized on the sale?

Sidney, a single taxpayer, has taxable income of $45,000 from all sources except capital gains. He has a long-term capital gain of $1,000. What is the actual tax savings Sidney receives because of any special treatment of his $1,000 long-term capital gain?

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's wife sells stock she purchased 10 months ago at a gain of $212.

Section 1231 assets include

Depreciation recapture provisions I.are reclassification provisions. II.apply to depreciable assets sold at a gain.