Exam 5: Property Transactions: Capital Gains and Losses

Darla sold an antique clock in 2014 for $3,000. She had purchased the clock in 2009 for $2,000. If she is otherwise in the 35% marginal tax bracket, what is the maximum tax rate on the capital gain on the sale of the clock?

A taxpayer purchased an asset for $50,000 several years ago. He is now planning to sell it. Under the recovery of basis doctrine the taxpayer will not recognize any gain or pay any related taxes unless he sells the asset for more than $50,000.

Brad owns 100 shares of AAA Corporation with a basis of $6,000 and a FMV of $24,000. Brad receives 15 stock rights as a nontaxable distribution with a total FMV of $6,000. Brad allows the stock rights to expire. Brad's loss recognized and the basis of the original 100 shares after expiration of the stock rights is

Niral is single and provides you with the following tax information for 2014: Compute her tax liability. [Show all calculations in good form.]

Mike, a dealer in securities and calendar-year taxpayer, purchased a security for inventory on November 18, 2013 for $15,000. The FMV on December 31, 2013 was $16,000. The security was sold on December 19, 2014 for $16,500. These transactions result in

Gains and losses are recognized when property is disposed of by gift or bequest.

Dustin purchased 50 shares of Short Corporation for $500. During the current year, Short declared a 10% stock dividend. What is the basis per share before and after the stock dividend is distributed?

Kate subdivides land held as an investment and Section 1237 is satisfied. The lots sell for $30,000 per lot (basis $10,000). Kate sells five lots in the first year. Kate's ordinary income is

Stock purchased on December 15, 2013, which becomes worthless in March 2014 produces a STCL since the holding period is one year or less.

Section 1221 specifically states that inventory or property held primarily for sale to customers is not classified as a capital asset of the trade or business.

Kendrick, who has a 35% marginal tax rate, had the following results from transactions during the year: After offsetting the STCL, what is (are)the resulting gain(s)?

Donald has retired from his job as a corporate manager. He buys and sells stocks on a daily basis. He spends 8-9 hours daily studying prospective stock purchases and market news. What tax issues should Donald consider?

A nonbusiness bad debt is deductible only in the year in which the debt becomes totally worthless.

Antonio is single and has taxable income of $150,000 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

Sari is single and has taxable income of $33,000 without considering the sale of a capital asset in November of 2014 for $15,000. That asset was purchased six years earlier and has a tax basis of $5,000. The tax liability applicable to only the capital gain is

If Houston Printing Co. purchases a new printing press during the current year for $30,000, pays sales taxes of $2,000, and pays $1,000 for installation, the cost basis for the printing press is $33,000.

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.

Trista, a taxpayer in the 33% marginal tax bracket sold the following capital assets this year: What is the amount of and nature of (LT or ST)capital gain or loss? Be specific as to the rates at which gains, if any, are taxed.

On January 31 of the current year, Sophia pays $1,000 for an option to acquire 100 shares of Texas Corporation common stock for $105 per share at any time prior to December 31. As of December 31 Sophia had not exercised the option or sold it. Which of the following statements is correct?

Adjusted net capital gain is taxed at 15% for taxpayers with marginal tax rates of 15% or higher, but less than 39.6%.