Exam 5: Property Transactions: Capital Gains and Losses

Empire Corporation purchased an office building for $500,000 cash on April 1. Prior to renting it out to tenants on July 1, Empire spent $200,000 on materials and labor to renovate the property. It funded $50,000 of the renovation cost with its own funds and borrowed the remaining $150,000. As of July 1, $2,000 of interest had been paid to the bank, but none of the principal had been repaid. The basis of the building on July 1 is

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 2014 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

Everest Inc. is a corporation in the 35% marginal tax bracket. It sold two stockholdings this year, resulting in a long-term capital gain of $15,000 on stock A and a short-term capital loss of $5,000 on stock B. What is the extra tax that Everest will pay due to the sales of these stocks?

Normally, a security dealer reports ordinary income on the sale of securities unless it is specifically identified as a security being held for investment.

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

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

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

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.

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

All recognized gains and losses must eventually be classified either as capital or ordinary.

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

Candice owns a mutual fund that reinvests her dividends and capital gains earned during the year. The mutual fund reported to her that her share of earnings was: $500 in dividends, $1,500 in short-term net capital gains, and $1,300 in long-term net capital gains. She reported the items on her tax return and paid the appropriate tax on these earnings. If her basis in the fund was $25,000 at the beginning of the year, what is her basis at the end of the year?

This year, Lauren sold several shares of stock held for investment. The following is a summary of her capital transactions for 2014: What are the amounts of Lauren's capital gains (losses)for this year?

David gave property with a basis of $133,000 to Hannah when the property had a FMV of $100,000 and paid gift taxes of $8,000. If Hannah later sells the property for $140,000, Hannah's basis (to determine gain)in the property immediately before the sale is

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

Generally, gains resulting from the sale of collectibles such as antiques, stamps, or artwork are taxed at a maximum rate of 25%.

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

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?

During the current year, Nancy had the following transactions: What is the amount of her capital loss deduction for the current year, and what is the amount and character of her capital loss carryover?

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?