Question 1

The basis of property acquired in a bargain purchase is its cost.

Accepted Answer

A) True 
 B)False  False

Question 2

For nontaxable stock rights where the fair market value of the rights is 15% or more of the fair market value of the stock, the taxpayer is required to allocate a portion of the stock basis to the stock rights.

Accepted Answer

A) True 
 B)False  True

Question 3

Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4, 2018, the date of the decedent's death. The executor distributes the land to Kelly on November 12, 2018, at which time the fair market value is $49,000. The fair market value on February 4, 2019, is $45,000. In filing the estate tax return, the executor elects the alternate valuation date. Kelly sells the land on June 10, 2019, for $48,000. What is her recognized gain or loss?

Accepted Answer

A)  $1,000) 
B)  $2,000) 
C)  $47,000) 
D)  $1,000 
E)  None of the above 
A)  $1,000) 
B)  $2,000) 
C)  $47,000) 
D)  $1,000 
E)  None of the above A

Question 4

Nontaxable stock dividends result in no change to the total basis of the old and new stock, but the basis per share decreases.

Accepted Answer

A) True 
 B)False

Question 5

Kevin purchased 5,000 shares of Purple Corporation stock at $10 per share. Two years later, he receives a 5% common stock dividend. At that time, the common stock of Purple Corporation had a fair market value of $12.50 per share. What is the basis of the Purple Corporation stock, the per share basis, and gain recognized upon receipt of the common stock dividend?

Accepted Answer

A)  $50,000 basis in stock, $10 basis per share for the original stock and $0 basis per share for the dividend shares, $0 recognized gain. 
B)  $50,000 basis in stock, $9.52 basis per share, $0 recognized gain. 
C)  $53,125 basis in stock, $10 basis per share for the original stock and $12.50 basis per share for the dividend shares, $3,125 recognized gain. 
D)  $53,125 basis in stock, $10.12 basis per share, $3,125 recognized gain. 
E)  None of the above. 
A)  $50,000 basis in stock, $10 basis per share for the original stock and $0 basis per share for the dividend shares, $0 recognized gain. 
B)  $50,000 basis in stock, $9.52 basis per share, $0 recognized gain. 
C)  $53,125 basis in stock, $10 basis per share for the original stock and $12.50 basis per share for the dividend shares, $3,125 recognized gain. 
D)  $53,125 basis in stock, $10.12 basis per share, $3,125 recognized gain. 
E)  None of the above.

Question 6

The basis of personal use property converted to business use is:

Accepted Answer

A)  Always the lower of its adjusted basis or fair market value on the date of conversion. 
B)  Always its adjusted basis on the date of conversion. 
C)  Always its fair market value on the date of conversion. 
D)  Always the higher of its adjusted basis or fair market value on the date of conversion. 
E)  None of the above. 
A)  Always the lower of its adjusted basis or fair market value on the date of conversion. 
B)  Always its adjusted basis on the date of conversion. 
C)  Always its fair market value on the date of conversion. 
D)  Always the higher of its adjusted basis or fair market value on the date of conversion. 
E)  None of the above.

Question 7

Neal and his wife Faye reside in Texas, a community property state. Their community property consists of real estate adjusted basis of $800,000; fair market value of $6 million) and personal property adjusted basis of $390,000; fair market value of $295,000). Neal dies first and leaves his estate to Faye. What is Faye's basis in the property after Neal's death?

Accepted Answer

A)  $800,000 real estate and $295,000 personal property. 
B)  $800,000 real estate and $390,000 personal property. 
C)  $3,400,000 real estate and $295,000 personal property. 
D)  $6,000,000 real estate and $295,000 personal property. 
E)  None of the above. 
A)  $800,000 real estate and $295,000 personal property. 
B)  $800,000 real estate and $390,000 personal property. 
C)  $3,400,000 real estate and $295,000 personal property. 
D)  $6,000,000 real estate and $295,000 personal property. 
E)  None of the above.

Question 8

Nat is a salesman for a real estate developer. His employer permits him to purchase a lot for $75,000. The employer's adjusted basis for the lot is $45,000, and its normal selling price is $90,000. What is Nat's recognized gain and his basis for the lot?
Recognized gain Basis

Accepted Answer

A)  $0 $ 75,000 
B)  $0 $ 90,000 
C)  $15,000 $ 75,000 
D)  $15,000 $ 90,000 
E)  $30,000 $105,000 
A)  $0 $ 75,000 
B)  $0 $ 90,000 
C)  $15,000 $ 75,000 
D)  $15,000 $ 90,000 
E)  $30,000 $105,000

Question 9

Milton owns a bond face value of $25,000) for which he paid $28,000. Which of the following statements is correct?

Accepted Answer

A)  If the bond is taxable, Milton must amortize the $3,000 premium over its remaining life. 
B)  The adjusted basis of the taxable bond remains at $28,000, as the amortized amount is deducted as interest. 
C)  If the bond is tax-exempt, Milton can elect to amortize the $3,000 premium over the remaining life of the bond. 
D)  The adjusted basis of the tax-exempt bond remains at $28,000, as the amortized amount cannot be deducted as interest. 
E)  None of the above is correct. 
A)  If the bond is taxable, Milton must amortize the $3,000 premium over its remaining life. 
B)  The adjusted basis of the taxable bond remains at $28,000, as the amortized amount is deducted as interest. 
C)  If the bond is tax-exempt, Milton can elect to amortize the $3,000 premium over the remaining life of the bond. 
D)  The adjusted basis of the tax-exempt bond remains at $28,000, as the amortized amount cannot be deducted as interest. 
E)  None of the above is correct.

Question 10

The fair market value of property received in a sale or other disposition is the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy.

Accepted Answer

A) True 
 B)False

Question 11

Katie sells her personal use automobile for $12,000. She purchased the car three years ago for $25,000. What is Katie's recognized gain or loss?

Accepted Answer

A)  $0 
B)  $12,000 
C)  $13,000) 
D)  $25,000) 
E)  None of the above 
A)  $0 
B)  $12,000 
C)  $13,000) 
D)  $25,000) 
E)  None of the above

Question 12

The basis for gain and loss of personal use property converted to business use is the lower of the adjusted basis or the fair market value on the date of conversion.

Accepted Answer

A) True 
 B)False

Question 13

If losses are disallowed in a related party transaction, the holding period for the buyer includes the holding period of the seller.

Accepted Answer

A) True 
 B)False

Question 14

Capital recoveries include:

Accepted Answer

A)  The cost of capital improvements. 
B)  Ordinary repair and maintenance expenditures. 
C)  Payments made on the principal of a mortgage on taxpayer's building. 
D)  Amortization of bond premium. 
E)  All of the above. 
A)  The cost of capital improvements. 
B)  Ordinary repair and maintenance expenditures. 
C)  Payments made on the principal of a mortgage on taxpayer's building. 
D)  Amortization of bond premium. 
E)  All of the above.

Question 15

Andrew acquires 2,000 shares of Eagle Corporation stock for $100,000 on March 31, 2014. On January 1, 2018, he sells 125 shares for $5,000. On January 22, 2018, he purchases 135 shares of Eagle Corporation stock for $6,075. When does Andrew's holding period begin for the 135 shares?

Accepted Answer

A)  January 22, 2018. 
B)  January 22, 2018 for 125 shares and March 31, 2014 for 10 shares. 
C)  March 31, 2014. 
D)  March 31, 2014, for 125 shares and January 22, 2018, for 10 shares. 
E)  None of the above. 
A)  January 22, 2018. 
B)  January 22, 2018 for 125 shares and March 31, 2014 for 10 shares. 
C)  March 31, 2014. 
D)  March 31, 2014, for 125 shares and January 22, 2018, for 10 shares. 
E)  None of the above.

Question 16

Lump-sum purchases of land and a building are allocated on the basis of the relative fair market values of the individual assets acquired.

Accepted Answer

A) True 
 B)False

Question 17

Under the Internal Revenue Code, the holding period for property acquired by inheritance is always:

Accepted Answer

A)  Long-term. 
B)  Short-term. 
C)  Determined by the date acquired by the individual who died. 
D)  Determined by the date of death. 
E)  None of the above. 
A)  Long-term. 
B)  Short-term. 
C)  Determined by the date acquired by the individual who died. 
D)  Determined by the date of death. 
E)  None of the above.

Question 18

The taxpayer owns stock with an adjusted basis of $15,000 and a fair market value of $8,000. If the stock or cash is going to be given to her niece, it is preferable for the taxpayer to sell the stock and give the $8,000 of cash to her niece. The same preference would exist if the recipient were a qualified charitable organization.

Accepted Answer

A) True 
 B)False

Question 19

Gift property disregarding any adjustment for gift tax paid by the donor):

Accepted Answer

A)  Has no basis to the donee because he or she did not pay anything for the property. 
B)  Has the same basis to the donee as the donor's adjusted basis if the donee disposes of the property at a gain. 
C)  Has the same basis to the donee as the donor's adjusted basis if the donee disposes of the property at a loss, and the fair market value on the date of gift was less than the donor's adjusted basis. 
D)  Has no basis to the donee if the fair market value on the date of gift is less than the donor's adjusted basis. 
E)  None of the above. 
A)  Has no basis to the donee because he or she did not pay anything for the property. 
B)  Has the same basis to the donee as the donor's adjusted basis if the donee disposes of the property at a gain. 
C)  Has the same basis to the donee as the donor's adjusted basis if the donee disposes of the property at a loss, and the fair market value on the date of gift was less than the donor's adjusted basis. 
D)  Has no basis to the donee if the fair market value on the date of gift is less than the donor's adjusted basis. 
E)  None of the above.

Question 20

Identify two tax planning techniques that can be used to avoid the wash sale disallowance of loss.

Accepted Answer

One technique to avoid a wash

The basis of property acquired in a bargain purchase is its cost.

For nontaxable stock rights where the fair market value of the rights is 15% or more of the fair market value of the stock, the taxpayer is required to allocate a portion of the stock basis to the stock rights.

Nontaxable stock dividends result in no change to the total basis of the old and new stock, but the basis per share decreases.

The basis of personal use property converted to business use is:

Nat is a salesman for a real estate developer. His employer permits him to purchase a lot for $75,000. The employer's adjusted basis for the lot is $45,000, and its normal selling price is $90,000. What is Nat's recognized gain and his basis for the lot? Recognized gain Basis

Milton owns a bond face value of $25,000) for which he paid $28,000. Which of the following statements is correct?

The fair market value of property received in a sale or other disposition is the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy.

Katie sells her personal use automobile for $12,000. She purchased the car three years ago for $25,000. What is Katie's recognized gain or loss?

The basis for gain and loss of personal use property converted to business use is the lower of the adjusted basis or the fair market value on the date of conversion.

If losses are disallowed in a related party transaction, the holding period for the buyer includes the holding period of the seller.

Capital recoveries include:

Andrew acquires 2,000 shares of Eagle Corporation stock for $100,000 on March 31, 2014. On January 1, 2018, he sells 125 shares for $5,000. On January 22, 2018, he purchases 135 shares of Eagle Corporation stock for $6,075. When does Andrew's holding period begin for the 135 shares?

Lump-sum purchases of land and a building are allocated on the basis of the relative fair market values of the individual assets acquired.

Under the Internal Revenue Code, the holding period for property acquired by inheritance is always:

Gift property disregarding any adjustment for gift tax paid by the donor):

Identify two tax planning techniques that can be used to avoid the wash sale disallowance of loss.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Nontaxable Exchanges

Filters

Exam 14: Property Transactions: Determination of Gain or Loss and Basis Considerations

The basis of property acquired in a bargain purchase is its cost.

For nontaxable stock rights where the fair market value of the rights is 15% or more of the fair market value of the stock, the taxpayer is required to allocate a portion of the stock basis to the stock rights.

Nontaxable stock dividends result in no change to the total basis of the old and new stock, but the basis per share decreases.

The basis of personal use property converted to business use is:

Nat is a salesman for a real estate developer. His employer permits him to purchase a lot for $75,000. The employer's adjusted basis for the lot is $45,000, and its normal selling price is $90,000. What is Nat's recognized gain and his basis for the lot? Recognized gain Basis

Milton owns a bond face value of $25,000) for which he paid $28,000. Which of the following statements is correct?

The fair market value of property received in a sale or other disposition is the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy.

Katie sells her personal use automobile for $12,000. She purchased the car three years ago for $25,000. What is Katie's recognized gain or loss?

The basis for gain and loss of personal use property converted to business use is the lower of the adjusted basis or the fair market value on the date of conversion.

If losses are disallowed in a related party transaction, the holding period for the buyer includes the holding period of the seller.

Capital recoveries include:

Andrew acquires 2,000 shares of Eagle Corporation stock for $100,000 on March 31, 2014. On January 1, 2018, he sells 125 shares for $5,000. On January 22, 2018, he purchases 135 shares of Eagle Corporation stock for $6,075. When does Andrew's holding period begin for the 135 shares?

Lump-sum purchases of land and a building are allocated on the basis of the relative fair market values of the individual assets acquired.

Under the Internal Revenue Code, the holding period for property acquired by inheritance is always:

Gift property disregarding any adjustment for gift tax paid by the donor):

Identify two tax planning techniques that can be used to avoid the wash sale disallowance of loss.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Nontaxable Exchanges

Filters