Exam 10: Property Transactions: Capital Gains and Losses

For purposes of calculating depreciation,property converted from personal use to business use will take on a basis equal to the greater of its FMV or its adjusted basis on the date of the conversion.

During the current year,Tony purchased new car wash equipment for use in his service station business.Tony's costs in connection with the new equipment this year were as follows: What is Tony's basis in the car wash equipment?

If the taxpayer's net long-term capital losses exceed the net short-term capital gains,the excess may be offset against ordinary income up to $3,000 per year.Any excess losses over $3,000 may be carried over indefinitely.

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?

The gain or loss on an asset purchased on March 31,2014,and sold on March 31,2015,is classified as short-term.

Rana purchases a 5%,$100,000 corporate bond at issuance on January 1,2015 for $91,500.The bond matures in five years.In 2015 Rana will recognize interest income of

Adam purchased 1,000 shares of Airco Inc.common stock for $22,000 on February 3,2013.On April 1,2015,Adam received 100 new shares in a nontaxable stock dividend.As of April 1,the stock was trading at $25 per share.Adam sells the 100 new shares on June 15,2015 for $2,400.Due to the stock sale,Adam will recognize a

Joel has four transactions involving the sale of capital assets during the year resulting in a STCG of $5,000,a STCL of $12,000,a LTCG of $1,800 and a LTCL of $1,000.As a result of these transactions,Joel will

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

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.

Kathleen received land as a gift from her grandfather.At the time of the gift,the land had a FMV of $105,000 and an adjusted basis of $85,000 to Kathleen's grandfather.The grandfather did not have any gift taxes due.One year later,Kathleen sold the land for $110,000.What was her gain or (loss)on this transaction?

If the stock received as a nontaxable stock dividend is not the same type as the stock owned prior to the dividend,the allocation of basis is based on relative fair market values of the stock.

Monte inherited 1,000 shares of Corporation Zero stock from his father who died on March 4 of the current year.His father paid $30 per share for the stock on September 2,2005.The FMV of the stock on the date of death was $50 per share.On September 4 this year,the FMV of the stock was $55 per share.The executor did not elect the alternate valuation date.Monte sold the stock for $65 per share on December 3.What is the amount and nature of any gain or loss?

Galvin Corporation has owned all of the stock of Rialto Corporation for five years.Rialto Corporation has been actively engaged in manufacturing in Kansas,but it is now bankrupt,and the stock is worthless.Galvin Corporation will recognize a long-term capital loss.

On January 31 of this year,Mallory pays $800 for an option to acquire 100 shares of Mesa Corporation common stock for $85 per share.As a result of an increase in the market value of the Mesa stock,the market price of the option increases and Mallory sells the option for $1,000 on August 4.As a result of the sale,Mallory must recognize

Losses are generally deductible if incurred in carrying on a trade or business or incurred in an activity engaged in for profit.

If a capital asset held for one year or more is sold at a gain,the gain is classified as long-term capital gain.

Purchase of a bond at a significant discount will result in the investor recognizing a capital gain when the bond matures.

Margaret died on September 16,2015,when she owned securities with a basis of $50,000 and a FMV of $60,000.Caroline inherited the property and sold it on December 19,2015 for $67,000.What is Caroline's reported gain on this sale?

Renee is single and has taxable income of $480,000 without considering the sale of a capital asset (land held for investment)in September of 2015 for $25,000.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain (without consideration of the additional Medicare tax)is