Question 1

Bad debt losses from nonbusiness debts are deductible as short-term or long-term capital losses depending on how long the debt was outstanding.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Section 1221 of the Code includes a comprehensive list of assets properly classified as capital assets.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

Arguments for preferential treatment:
1.

Question 5

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

A) True 
 B)False

Question 6

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

Question 7

Tina 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 Tina sells the property for $200,000,her realized gain or loss will be

Accepted Answer

A) ($10,000)loss. 
B) ($13,000)loss. 
C) ($75,000)loss. 
D) ($78,000)loss. 
A) ($10,000)loss. 
B) ($13,000)loss. 
C) ($75,000)loss. 
D) ($78,000)loss.

Question 8

Melanie,a single taxpayer,has AGI of $220,000 which includes $160,000 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) $760. 
D) $870. 
A) $0. 
B) $2,280. 
C) $760. 
D) $870.

Question 9

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

Question 10

Which one of the following does not affect the adjusted basis of a house held as rental property?

Accepted Answer

A) depreciation deduction 
B) adding a new room to the house 
C) painting of more than 50% of the rooms in the home 
D) installation of a completely new heating system 
A) depreciation deduction 
B) adding a new room to the house 
C) painting of more than 50% of the rooms in the home 
D) installation of a completely new heating system

Question 11

Billy and Sue are married and live in Texas,a community property state.They jointly own real property with an adjusted basis of $200,000.When the property has a FMV of $450,000,Billy dies leaving all of the property to Sue.If she later sells the property for $650,000,what is Sue's gain on the sale?

Accepted Answer

A) $200,000 
B) $225,000 
C) $325,000 
D) $450,000 
A) $200,000 
B) $225,000 
C) $325,000 
D) $450,000

Question 12

Taxpayers who own mutual funds recognize their share of capital gains even if no distributions are received.

Accepted Answer

A) True 
 B)False

Question 13

If a nontaxable stock dividend is received and is not the same type of stock as that owned before the dividend,the original stock's basis is allocated to all shares

Accepted Answer

A) based on the par value of the stock. 
B) equally to all shares owned after the stock dividend. 
C) based on relative fair market values at the time of the stock dividend. 
D) none of the above. 
A) based on the par value of the stock. 
B) equally to all shares owned after the stock dividend. 
C) based on relative fair market values at the time of the stock dividend. 
D) none of the above.

Question 14

Gertie has a NSTCL of $9,000 and a NLTCG of $5,500 during the current taxable year.After gains and losses are offset,Gertie reports

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 15

Stock purchased on December 15,2015,which becomes worthless in March 2016,produces a STCL since the holding period is one year or less.

Accepted Answer

A) True 
 B)False

Question 16

To be considered a Section 1202 gain,the stock being sold must meet all of the following characteristics except

Accepted Answer

A) the stock must be issued after August 10,1993. 
B) the stock must be held more than five years. 
C) the corporation which issued the stock must be a C corporation. 
D) at least 50% of the value of the corporation's assets must be used in the active conduct of one or more qualified trades or businesses. 
A) the stock must be issued after August 10,1993. 
B) the stock must be held more than five years. 
C) the corporation which issued the stock must be a C corporation. 
D) at least 50% of the value of the corporation's assets must be used in the active conduct of one or more qualified trades or businesses.

Question 17

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

Question 18

Sachi is single and has taxable income of $33,000 without considering the sale of a capital asset in November of 2016 for $15,650.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain is

Accepted Answer

A) $0. 
B) $2,662.50. 
C) $1,597.50. 
D) $900. 
A) $0. 
B) $2,662.50. 
C) $1,597.50. 
D) $900.

Question 19

Bev has one daughter and three grandchildren.Bev owns approximately $6 million of assets primarily composed of a very valuable parcel of real estate and a savings account of $500,000.Bev can gift $56,000 in total in 2016 to her family members without creating taxable gifts.

Accepted Answer

A) True 
 B)False

Question 20

An uncle gifts a parcel of land to his niece,and he has to pay $25,000 of gift taxes.The land has appreciated substantially since he purchased it 20 year ago.The niece's basis in the land will be the uncle's cost plus the full $25,000 of gift taxes paid by the uncle.

Accepted Answer

A) True 
 B)False

Bad debt losses from nonbusiness debts are deductible as short-term or long-term capital losses depending on how long the debt was outstanding.

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

Section 1221 of the Code includes a comprehensive list of assets properly classified as capital assets.

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

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.

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

Tina 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 Tina sells the property for $200,000,her realized gain or loss will be

Melanie,a single taxpayer,has AGI of $220,000 which includes $160,000 of salary and $60,000 of investment income.She will pay Medicare tax on the $60,000 of investment income of

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

Which one of the following does not affect the adjusted basis of a house held as rental property?

Billy and Sue are married and live in Texas,a community property state.They jointly own real property with an adjusted basis of $200,000.When the property has a FMV of $450,000,Billy dies leaving all of the property to Sue.If she later sells the property for $650,000,what is Sue's gain on the sale?

Taxpayers who own mutual funds recognize their share of capital gains even if no distributions are received.

If a nontaxable stock dividend is received and is not the same type of stock as that owned before the dividend,the original stock's basis is allocated to all shares

Gertie has a NSTCL of $9,000 and a NLTCG of $5,500 during the current taxable year.After gains and losses are offset,Gertie reports

Stock purchased on December 15,2015,which becomes worthless in March 2016,produces a STCL since the holding period is one year or less.

To be considered a Section 1202 gain,the stock being sold must meet all of the following characteristics except

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

Sachi is single and has taxable income of $33,000 without considering the sale of a capital asset in November of 2016 for $15,650.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain is

Bev has one daughter and three grandchildren.Bev owns approximately $6 million of assets primarily composed of a very valuable parcel of real estate and a savings account of $500,000.Bev can gift $56,000 in total in 2016 to her family members without creating taxable gifts.

An uncle gifts a parcel of land to his niece,and he has to pay $25,000 of gift taxes.The land has appreciated substantially since he purchased it 20 year ago.The niece's basis in the land will be the uncle's cost plus the full $25,000 of gift taxes paid by the uncle.

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Section 1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters

Exam 5: Property Transactions: Capital Gains and Losses

Bad debt losses from nonbusiness debts are deductible as short-term or long-term capital losses depending on how long the debt was outstanding.

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

Section 1221 of the Code includes a comprehensive list of assets properly classified as capital assets.

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

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.

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

Tina 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 Tina sells the property for $200,000,her realized gain or loss will be

Melanie,a single taxpayer,has AGI of $220,000 which includes $160,000 of salary and $60,000 of investment income.She will pay Medicare tax on the $60,000 of investment income of

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

Which one of the following does not affect the adjusted basis of a house held as rental property?

Billy and Sue are married and live in Texas,a community property state.They jointly own real property with an adjusted basis of $200,000.When the property has a FMV of $450,000,Billy dies leaving all of the property to Sue.If she later sells the property for $650,000,what is Sue's gain on the sale?

Taxpayers who own mutual funds recognize their share of capital gains even if no distributions are received.

If a nontaxable stock dividend is received and is not the same type of stock as that owned before the dividend,the original stock's basis is allocated to all shares

Gertie has a NSTCL of $9,000 and a NLTCG of $5,500 during the current taxable year.After gains and losses are offset,Gertie reports

Stock purchased on December 15,2015,which becomes worthless in March 2016,produces a STCL since the holding period is one year or less.

To be considered a Section 1202 gain,the stock being sold must meet all of the following characteristics except

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

Sachi is single and has taxable income of $33,000 without considering the sale of a capital asset in November of 2016 for $15,650.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain is

Bev has one daughter and three grandchildren.Bev owns approximately $6 million of assets primarily composed of a very valuable parcel of real estate and a savings account of $500,000.Bev can gift $56,000 in total in 2016 to her family members without creating taxable gifts.

An uncle gifts a parcel of land to his niece,and he has to pay $25,000 of gift taxes.The land has appreciated substantially since he purchased it 20 year ago.The niece's basis in the land will be the uncle's cost plus the full $25,000 of gift taxes paid by the uncle.

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Section 1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters