Question 1

The initial adjusted basis of property depends upon how the property is acquired.

Accepted Answer

A) True 
 B)False

Question 2

Richard exchanges a building with a basis of $35,000,and subject to a liability of $25,000,for land with a FMV of $50,000 owned by Bill.Bill takes the building subject to the liability.What is the amount of Richard's realized gain?

Accepted Answer

A) $0 
B) $15,000 
C) $25,000 
D) $40,000 
A) $0 
B) $15,000 
C) $25,000 
D) $40,000

Question 3

Rita,who has marginal tax rate of 39.6%,is planning to make a gift to her grandson who is in the lowest tax bracket.Which of the following holdings of stock would be the most tax advantageous gift from Rita's perspective?

Accepted Answer

A)    
B)    
C)    
D) For income tax purposes,Rita will be indifferent as to choice of stock to gift. 
A)    
B)    
C)    
D) For income tax purposes,Rita will be indifferent as to choice of stock to gift.

Question 4

With regard to taxable gifts after 1976,no gift tax is added to the basis of the property if the donor's basis is greater than the FMV of the property.

Accepted Answer

A) True 
 B)False

Question 5

Douglas and Julie are a married couple who live in Louisiana,a community property state.They jointly own property with an adjusted basis of $140,000.On December 2 of this year,Julie died when the property had a fair market value of $160,000.Douglas's basis in the property after Julie's death is

Accepted Answer

A) $0. 
B) $140,000. 
C) $150,000. 
D) $160,000. 
A) $0. 
B) $140,000. 
C) $150,000. 
D) $160,000.

Question 6

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

Question 7

Joycelyn gave a diamond necklace to her granddaughter Emma.Joycelyn had purchased the necklace in 1980 for $15,000.The FMV of the necklace at the time of the gift was $44,000.After deducting the annual exclusion,the amount of the gift was $30,000.Gift taxes of $10,000 were paid.What is Emma's adjusted basis in the necklace?

Accepted Answer

A) $15,000 
B) $24,667 
C) $25,000 
D) $44,000 
A) $15,000 
B) $24,667 
C) $25,000 
D) $44,000

Question 8

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 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

On January 31 of this year,Jennifer pays $700 for an option to acquire 100 shares of Lifetime Corporation common stock for $70 per share.Jennifer exercises the option on June 2.Jennifer sells the stock on April 30 of next year for $10,000.Jennifer's basis for the stock immediately before the sale is

Accepted Answer

A) $0. 
B) $700. 
C) $7,000. 
D) $7,700. 
A) $0. 
B) $700. 
C) $7,000. 
D) $7,700.

Question 11

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 12

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

Accepted Answer

A) True 
 B)False

Question 13

The taxable portion of a gain from qualified small business stock is taxed at a top tax rate of

Accepted Answer

A) 15%. 
B) 18%. 
C) 20%. 
D) 28%. 
A) 15%. 
B) 18%. 
C) 20%. 
D) 28%.

Question 14

Jessica owned 200 shares of OK Corporation with a basis of $12,000 and a FMV of $24,000.Jessica received 20 stock rights as a nontaxable distribution with a total FMV of $8,000.Jessica sold the stock rights for $4,000.Jessica's gain or loss on the sale was

Accepted Answer

A) $1,000. 
B) $3,000. 
C) $4,000. 
D) ($4,000). 
A) $1,000. 
B) $3,000. 
C) $4,000. 
D) ($4,000).

Question 15

Interest incurred during the development and manufacture of a machine must be capitalized.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Antonio owns land held for investment with a basis of $28,000.The city of Lafayette exercises the right of eminent domain and Antonio receives a payment of $48,000.What is Antonio's realized gain?

Accepted Answer

A) $0 
B) $20,000 
C) $28,000 
D) $48,000 
A) $0 
B) $20,000 
C) $28,000 
D) $48,000

Question 18

In a common law state,jointly owned property left to the surviving spouse will have a basis after the estate is settled equal to

Accepted Answer

A) the decedent's basis before death. 
B) the total fair market value of the entire property at the date of death (the alternative valuation date was not elected). 
C) half of the fair market value of the entire property at the date of death (the alternative valuation date was not elected). 
D) half of the basis just before death,plus half of the fair market value at the date of death (the alternative valuation date was not elected). 
A) the decedent's basis before death. 
B) the total fair market value of the entire property at the date of death (the alternative valuation date was not elected). 
C) half of the fair market value of the entire property at the date of death (the alternative valuation date was not elected). 
D) half of the basis just before death,plus half of the fair market value at the date of death (the alternative valuation date was not elected).

Question 19

Which one of the following is a capital asset?

Accepted Answer

A) automobile held by car dealer for sale 
B) automobile used for personal purposes 
C) automobile used in taxpayer's trade or business 
D) B and C only 
A) automobile held by car dealer for sale 
B) automobile used for personal purposes 
C) automobile used in taxpayer's trade or business 
D) B and C only

Question 20

Distinguish between the Corn Products doctrine and the ruling in the Arkansas Best Corporation case.

Accepted Answer

The Corn Products case involved the hedg

Exam 10: Property Transactions: Capital Gains and Losses

The initial adjusted basis of property depends upon how the property is acquired.

Richard exchanges a building with a basis of $35,000,and subject to a liability of $25,000,for land with a FMV of $50,000 owned by Bill.Bill takes the building subject to the liability.What is the amount of Richard's realized gain?

Rita,who has marginal tax rate of 39.6%,is planning to make a gift to her grandson who is in the lowest tax bracket.Which of the following holdings of stock would be the most tax advantageous gift from Rita's perspective?

With regard to taxable gifts after 1976,no gift tax is added to the basis of the property if the donor's basis is greater than the FMV of the property.

Douglas and Julie are a married couple who live in Louisiana,a community property state.They jointly own property with an adjusted basis of $140,000.On December 2 of this year,Julie died when the property had a fair market value of $160,000.Douglas's basis in the property after Julie's death is

A taxpayer reports capital gains and losses on

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)?

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

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

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

The taxable portion of a gain from qualified small business stock is taxed at a top tax rate of

Jessica owned 200 shares of OK Corporation with a basis of $12,000 and a FMV of $24,000.Jessica received 20 stock rights as a nontaxable distribution with a total FMV of $8,000.Jessica sold the stock rights for $4,000.Jessica's gain or loss on the sale was

Interest incurred during the development and manufacture of a machine must be capitalized.

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.

Antonio owns land held for investment with a basis of $28,000.The city of Lafayette exercises the right of eminent domain and Antonio receives a payment of $48,000.What is Antonio's realized gain?

In a common law state,jointly owned property left to the surviving spouse will have a basis after the estate is settled equal to

Which one of the following is a capital asset?

Distinguish between the Corn Products doctrine and the ruling in the Arkansas Best Corporation case.

Tax Research

an Introduction to Taxation

Corporate Formations and Capital Structure

Determination of Tax

The Corporate Income Tax

Gross Income: Inclusions

Corporate Nonliquidating Distributions

Gross Income: Exclusions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Deductions and Losses

Corporate Acquisitions and Reorganizations

Itemized Deductions

Consolidated Tax Returns

Losses and Bad Debts

Partnership Formation and Operation

Employee Expenses and Deferred Compensation

Special Partnership Issues

Depreciation,cost Recovery,amortization,and Depletion

Corporations

Accounting Periods and Methods

The Gift Tax

Property Transactions: Nontaxable Exchanges

The Estate Tax

Property Transactions: Section 1231 and Recapture

Income Taxation of Trusts and Estates

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

Administrative Procedures

Filters