Question 1

Which one of the following does not affect the adjusted basis of a house held as rental property?

Accepted Answer

A)  depreciation deduction 
B)  adding a new room to the house 
C)  painting of more than 50% of the rooms in the home 
D)  installation of a completely new heating system 
A)  depreciation deduction 
B)  adding a new room to the house 
C)  painting of more than 50% of the rooms in the home 
D)  installation of a completely new heating system

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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 2013. Unable to sell her home, she rented it in November 2013, at which time its fair market value was $240,000. In June, 2015, she sold the home for $230,000. What tax issues should Regina consider?

Accepted Answer

Is the home a capital asset since she ha

Question 4

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 5

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?

Accepted Answer

A)  $25,000 
B)  $25,500 
C)  $27,000 
D)  $28,300 
A)  $25,000 
B)  $25,500 
C)  $27,000 
D)  $28,300

Question 6

Mike sold the following shares of stock in 2015:   What are the tax consequences of these transactions, assuming his marginal tax rate is (a) 33% and (b) 39.6%? Ignore the medicare tax on net investment income.

Accepted Answer

The answer of Mike sold the following shares of stock...

Question 7

Distinguish between the Corn Products doctrine and the ruling in the Arkansas Best Corporation case.

Accepted Answer

The Corn Products case involved the hedg

Question 8

Section 1221 of the Code includes a comprehensive list of assets properly classified as capital assets.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)  ($10,000) loss. 
B)  ($13,000) loss. 
C)  ($75,000) loss. 
D)  ($78,000) loss. 
A)  ($10,000) loss. 
B)  ($13,000) loss. 
C)  ($75,000) loss. 
D)  ($78,000) loss.

Question 11

If stock sold or exchanged is not specifically identified, the FIFO (first-in, first-out) method of identification must be used.

Accepted Answer

A) True 
 B)False

Question 12

On January 31 of this year, Jennifer pays $700 for an option to acquire 100 shares of Lifetime Corporation common stock for $70 per share. Jennifer exercises the option on June 2. Jennifer sells the stock on April 30 of next year for $10,000. Jennifer's basis for the stock immediately before the sale is

Accepted Answer

A)  $0. 
B)  $700. 
C)  $7,000. 
D)  $7,700. 
A)  $0. 
B)  $700. 
C)  $7,000. 
D)  $7,700.

Question 13

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 14

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.

Accepted Answer

A) True 
 B)False

Question 15

Stella has two transactions involving the sale of capital assets during the year resulting in a STCL of $5,200 and LTCL of $2,400. As a result, Stella can offset

Accepted Answer

A)  $5,200 of ordinary income and have a LTCL carryforward of $2,400. 
B)  $3,000 of ordinary income and have a $4,600 STCL carryforward. 
C)  $3,000 of ordinary income and have a $2,200 STCL carryforward and $2,400 LTCL carryforward. 
D)  $7,600 of ordinary income. 
A)  $5,200 of ordinary income and have a LTCL carryforward of $2,400. 
B)  $3,000 of ordinary income and have a $4,600 STCL carryforward. 
C)  $3,000 of ordinary income and have a $2,200 STCL carryforward and $2,400 LTCL carryforward. 
D)  $7,600 of ordinary income.

Question 16

Armanti received a football championship ring in college. During difficult economic times, Armanti sold the ring at a pawn shop. What are the tax issues of the sale to Armanti?

Accepted Answer

Will Armanti have capital gain

Question 17

All of the following are capital assets with the exception of

Accepted Answer

A)  personal residence. 
B)  corporate stock held for investment. 
C)  equipment used in a trade or business. 
D)  a Rembrandt painting held in a private collection. 
A)  personal residence. 
B)  corporate stock held for investment. 
C)  equipment used in a trade or business. 
D)  a Rembrandt painting held in a private collection.

Question 18

Sanjay is single and has taxable income of $13,000 without considering the sale of a capital asset in November of 2015 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

Accepted Answer

A)  $0. 
B)  $500. 
C)  $1,000. 
D)  $1,500. 
A)  $0. 
B)  $500. 
C)  $1,000. 
D)  $1,500.

Question 19

Douglas and Julie are a married couple who live in Louisiana, a community property state. They jointly own property with an adjusted basis of $140,000. On December 2 of this year, Julie died when the property had a fair market value of $160,000. Douglas's basis in the property after Julie's death is

Accepted Answer

A)  $0. 
B)  $140,000. 
C)  $150,000. 
D)  $160,000. 
A)  $0. 
B)  $140,000. 
C)  $150,000. 
D)  $160,000.

Question 20

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.

Accepted Answer

A) True 
 B)False

Which one of the following does not affect the adjusted basis of a house held as rental property?

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

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

Mike sold the following shares of stock in 2015: What are the tax consequences of these transactions, assuming his marginal tax rate is (a) 33% and (b) 39.6%? Ignore the medicare tax on net investment income.

Distinguish between the Corn Products doctrine and the ruling in the Arkansas Best Corporation case.

Section 1221 of the Code includes a comprehensive list of assets properly classified as capital assets.

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

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

If stock sold or exchanged is not specifically identified, the FIFO (first-in, first-out) method of identification must be used.

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

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.

Stella has two transactions involving the sale of capital assets during the year resulting in a STCL of $5,200 and LTCL of $2,400. As a result, Stella can offset

Armanti received a football championship ring in college. During difficult economic times, Armanti sold the ring at a pawn shop. What are the tax issues of the sale to Armanti?

All of the following are capital assets with the exception of

Sanjay is single and has taxable income of $13,000 without considering the sale of a capital asset in November of 2015 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

Douglas and Julie are a married couple who live in Louisiana, a community property state. They jointly own property with an adjusted basis of $140,000. On December 2 of this year, Julie died when the property had a fair market value of $160,000. Douglas's basis in the property after Julie's death is

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.

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

Filters

Exam 5: Property Transactions: Capital Gains and Losses

Which one of the following does not affect the adjusted basis of a house held as rental property?

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

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

Mike sold the following shares of stock in 2015: What are the tax consequences of these transactions, assuming his marginal tax rate is (a) 33% and (b) 39.6%? Ignore the medicare tax on net investment income.

Distinguish between the Corn Products doctrine and the ruling in the Arkansas Best Corporation case.

Section 1221 of the Code includes a comprehensive list of assets properly classified as capital assets.

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

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

If stock sold or exchanged is not specifically identified, the FIFO (first-in, first-out) method of identification must be used.

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

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.

Stella has two transactions involving the sale of capital assets during the year resulting in a STCL of $5,200 and LTCL of $2,400. As a result, Stella can offset

Armanti received a football championship ring in college. During difficult economic times, Armanti sold the ring at a pawn shop. What are the tax issues of the sale to Armanti?

All of the following are capital assets with the exception of

Sanjay is single and has taxable income of $13,000 without considering the sale of a capital asset in November of 2015 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

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.

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

Filters