Exam 5: Property Transactions: Capital Gains and Losses

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

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

Bob owns 100 shares of ACT Corporation common stock with a basis of $3,500 and a FMV of $12,000. Bob receives 10 stock rights as a nontaxable distribution, and no basis is allocated to the stock rights. With each stock right, Bob may acquire one share of stock for $25. Bob exercises all 10 stock rights. The total basis of the newly acquired stock is

Gain on sale of a patent by an inventor generally is ordinary income.

What type of property should be transferred to heirs at a decedent's death and why? Should estate planning also mean that some property is transferred prior to death? Why?

All of the following are capital assets with the exception of

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?

A taxpayer sells an asset with a basis of $25,000 to an unrelated party for $28,000. The taxpayer has a realized gain of $3,000.

In a basket purchase, the total cost is apportioned among the assets purchased according to the relative adjusted basis of the assets.

Five different capital gain tax rates could apply to long-term capital assets sold by noncorporate taxpayers.

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?

All realized gains and losses are recognized for tax purposes.

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

In 2006, Regina purchased a home in Las Vegas which cost $280,000. Due to increase in the market value of the home, she refinanced her mortgage and her debt on the home totaled $300,000 at the end of 2007. Regina accepted a new job in Dallas in April 2012. Unable to sell her home, she rented it in November 2012, at which time its fair market value was $240,000. In June, 2014, she sold the home for $230,000. What tax issues should Regina consider?

During the current year, Don's aunt Natalie gave him a house. At the time of the gift, the house had a FMV of $144,000 and his aunt's adjusted basis was $133,000. After deducting the annual exclusion, the amount of the gift was $130,000. His aunt paid a gift tax of $20,000 on the house. What is Don's basis in the house for purposes of determining gain?

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?

The gain or loss on an asset purchased on March 31, 2013, and sold on March 31, 2014, is classified as short-term.

Unless the alternate valuation date is elected, the basis of property received from a decedent is generally the property's fair market value at the date of decedent's death.

Chen had the following capital asset transactions during 2014: What is the adjusted net capital gain or loss and the related tax due to the above transactions, assuming Chen has a 25% marginal tax rate?

When a taxpayer has NSTCL and NLTCG, the loss is offset against NLTCG from the 28% group, then NLTCG from the 25% group, and finally against NLTCG from the 15% or 20% group.