Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

Rita died on January 1, 2014 owning an asset with a FMV of $730,000 that she purchased in 2010 for $600,000. Bert inherited the asset from Rita. When Bert sells the asset for $800,000 on August 20 of this year, he must recognize a

Accepted Answer

A) STCG of $70,000. 
B) LTCG of $70,000. 
C) STCG of $200,000. 
D) LTCG of $200,000. 
A) STCG of $70,000. 
B) LTCG of $70,000. 
C) STCG of $200,000. 
D) LTCG of $200,000.

Question 4

Jade is a single taxpayer in the top tax bracket, with salary of $450,000 and investment income of $100,000. She is considering the sale of some shares of stock which will result in a $50,000. She purchased the shares three years ago. Taking all taxes into account, how much tax will she pay due to this gain?

Accepted Answer

The answer of Jade is a single taxpayer in the...

Question 5

Terra Corp. purchased a new enterprise software system and incurred the following costs:   What is Terra Corp.'s basis in the software system?

Accepted Answer

A) $800,000 
B) $805,000 
C) $811,000 
D) $820,000 
A) $800,000 
B) $805,000 
C) $811,000 
D) $820,000

Question 6

Because of the locked-in effect, high capital gains tax rates may discourage taxpayer's from selling appreciated capital assets.

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

Margaret died on September 16, 2014, 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, 2014 for $67,000. What is Caroline's reported gain on this sale?

Accepted Answer

A) $7,000 STCG 
B) $7,000 LTCG 
C) $17,000 STCG 
D) $17,000 LTCG 
A) $7,000 STCG 
B) $7,000 LTCG 
C) $17,000 STCG 
D) $17,000 LTCG

Question 9

Melody inherited 1,000 shares of Corporation Zappa stock from her mother who died on March 4 of the current year. Her mother paid $30 per share for the stock on September 2, 2005. The FMV of the stock on the date of death was $65 per share. On September 4 of the current year, the FMV of the stock was $70 per share. Melody sold the stock for $85 per share on December 3. The estate qualified for, and the executor elected, the alternate valuation method for these and other assets in the estate. An estate tax return was filed. What was Melody's basis in the stock on the date of the sale?

Accepted Answer

A) $ 30,000 
B) $ 65,000 
C) $ 70,000 
D) $ 85,000 
A) $ 30,000 
B) $ 65,000 
C) $ 70,000 
D) $ 85,000

Question 10

Arthur, age 99, holds some stock purchased many years ago for $10,000 which is now worth $100,000. He is trying to plan for the eventual disposition of this stock. Arthur's only remaining family member is his grandson. For income tax purposes, Arthur should

Accepted Answer

A) sell the stock and gift the proceeds to his grandson. 
B) gift the stock to his grandson. 
C) leave the stock to his grandson as an inheritance. 
D) All of the above will result in the same income tax consequences. 
A) sell the stock and gift the proceeds to his grandson. 
B) gift the stock to his grandson. 
C) leave the stock to his grandson as an inheritance. 
D) All of the above will result in the same income tax consequences.

Question 11

Dennis purchased a machine for use in his business. Mr. Dennis' costs in connection with this purchase were as follows:   What is the amount of Mr. Dennis' basis in the machine?

Accepted Answer

A) $33,000 
B) $40,400 
C) $41,900 
D) $46,100 
A) $33,000 
B) $40,400 
C) $41,900 
D) $46,100

Question 12

Will exchanges a building with a basis of $35,000, and subject to a liability of $30,000, for land with a FMV of $50,000 owned by Jane. Jane takes the land subject to the liability. The amount realized by Will is

Accepted Answer

A) $30,000. 
B) $35,000. 
C) $50,000. 
D) $80,000. 
A) $30,000. 
B) $35,000. 
C) $50,000. 
D) $80,000.

Question 13

Nate sold two securities in 2014:   Nate has a 25% marginal tax rate. What is the additional tax resulting from the above sales?

Accepted Answer

A) $150 
B) $200 
C) $300 
D) $400 
A) $150 
B) $200 
C) $300 
D) $400

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

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

Rita died on January 1, 2014 owning an asset with a FMV of $730,000 that she purchased in 2010 for $600,000. Bert inherited the asset from Rita. When Bert sells the asset for $800,000 on August 20 of this year, he must recognize a

Terra Corp. purchased a new enterprise software system and incurred the following costs: What is Terra Corp.'s basis in the software system?

Because of the locked-in effect, high capital gains tax rates may discourage taxpayer's from selling appreciated capital assets.

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.

Margaret died on September 16, 2014, 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, 2014 for $67,000. What is Caroline's reported gain on this sale?

Arthur, age 99, holds some stock purchased many years ago for $10,000 which is now worth $100,000. He is trying to plan for the eventual disposition of this stock. Arthur's only remaining family member is his grandson. For income tax purposes, Arthur should

Dennis purchased a machine for use in his business. Mr. Dennis' costs in connection with this purchase were as follows: What is the amount of Mr. Dennis' basis in the machine?

Will exchanges a building with a basis of $35,000, and subject to a liability of $30,000, for land with a FMV of $50,000 owned by Jane. Jane takes the land subject to the liability. The amount realized by Will is

Nate sold two securities in 2014: Nate has a 25% marginal tax rate. What is the additional tax resulting from the above sales?

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, Cost Recovery, Amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Section 1231 and Recapture

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

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters

Exam 5: Property Transactions: Capital Gains and Losses

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

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

Rita died on January 1, 2014 owning an asset with a FMV of $730,000 that she purchased in 2010 for $600,000. Bert inherited the asset from Rita. When Bert sells the asset for $800,000 on August 20 of this year, he must recognize a

Terra Corp. purchased a new enterprise software system and incurred the following costs: What is Terra Corp.'s basis in the software system?

Because of the locked-in effect, high capital gains tax rates may discourage taxpayer's from selling appreciated capital assets.

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.

Margaret died on September 16, 2014, 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, 2014 for $67,000. What is Caroline's reported gain on this sale?

Arthur, age 99, holds some stock purchased many years ago for $10,000 which is now worth $100,000. He is trying to plan for the eventual disposition of this stock. Arthur's only remaining family member is his grandson. For income tax purposes, Arthur should

Dennis purchased a machine for use in his business. Mr. Dennis' costs in connection with this purchase were as follows: What is the amount of Mr. Dennis' basis in the machine?

Will exchanges a building with a basis of $35,000, and subject to a liability of $30,000, for land with a FMV of $50,000 owned by Jane. Jane takes the land subject to the liability. The amount realized by Will is

Nate sold two securities in 2014: Nate has a 25% marginal tax rate. What is the additional tax resulting from the above sales?

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, Cost Recovery, Amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Section 1231 and Recapture

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

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters