Question 1

In general, the amount realized from a sale of property does not include any liability assumed by the buyer.

Accepted Answer

A) True 
 B)False

Question 2

If insurance proceeds are received for property used in a trade or business, a casualty transaction can result in recognized gain, but cannot result in a recognized loss.

Accepted Answer

A) True 
 B)False

Question 3

Taylor inherited 100 acres of land on the death of his father in 2018. A Federal estate tax return was filed and this land was valued therein at $650,000, its fair market value at the date of the father's death. The father had originally acquired the land in 1972 for $112,000 and prior to his death he had expended $20,000 on permanent improvements. Determine Taylor's holding period for the land.

Accepted Answer

A)  Will begin with the date his father acquired the property. 
B)  Will automatically be long-term. 
C)  Will begin with the date of his father's death. 
D)  Will begin with the date the property is distributed to him. 
E)  None of the above. 
A)  Will begin with the date his father acquired the property. 
B)  Will automatically be long-term. 
C)  Will begin with the date of his father's death. 
D)  Will begin with the date the property is distributed to him. 
E)  None of the above.

Question 4

Nancy gives her niece a crane to use in her business with a fair market value of $61,000 and a basis in Nancy's hands of $80,000. No gift tax was paid. What is the niece's basis for depreciation cost recovery)?

Accepted Answer

A)  $0 
B)  $19,000 
C)  $61,000 
D)  $80,000 
E)  None of the above 
A)  $0 
B)  $19,000 
C)  $61,000 
D)  $80,000 
E)  None of the above

Question 5

In addition to other gifts, Megan made a gift of stock to Jeri in 1976. Megan had purchased the stock in 1974 for $7,500. At the time of the gift, the stock was worth $20,000. If Megan paid $850 of gift tax on the transaction in 1976, what is Jeri's gain basis for the stock?

Accepted Answer

A)  $7,500 
B)  $8,350 
C)  $9,017 
D)  $20,000 
E)  None of the above 
A)  $7,500 
B)  $8,350 
C)  $9,017 
D)  $20,000 
E)  None of the above

Question 6

Purchased goodwill is assigned a basis equal to cost, which is calculated using the residual method associated with the purchase of a business.

Accepted Answer

A) True 
 B)False

Question 7

The terms "realized gain" and "recognized gain" can be used interchangeably; they mean the same thing.

Accepted Answer

A) True 
 B)False

Question 8

What is the easiest way for a taxpayer who is going to sell property that has declined in value to avoid the § 267 loss disallowance provision?

Accepted Answer

In this circumstance, the easiest way fo

Question 9

Alice owns land with an adjusted basis of $305,000, subject to a mortgage of $175,000. On April 1, 2018, Alice sells her land subject to the mortgage for $325,000 in cash, a note for $300,000, and property with a fair market value of $60,000. What is Alice's amount realized on this sale?

Accepted Answer

A)  $685,000. 
B)  $800,000. 
C)  $840,000. 
D)  $860,000. 
E)  None of the above. 
A)  $685,000. 
B)  $800,000. 
C)  $840,000. 
D)  $860,000. 
E)  None of the above.

Question 10

If a taxpayer purchases a business and the price exceeds the fair market value of the listed assets, how is the excess allocated among the purchased assets?

Accepted Answer

The excess is not al

Question 11

On January 2, 2018, Todd converts his house into a rental property. Todd's basis in the house is $400,000 and its fair market value on the date of conversion is $376,000. What is Todd's basis for purposes of MACRS cost recovery?

Accepted Answer

A)  $0; because it was converted from personal use, it cannot be depreciated. 
B)  $376,000. 
C)  $388,000. 
D)  $400,000. 
E)  None of the above. 
A)  $0; because it was converted from personal use, it cannot be depreciated. 
B)  $376,000. 
C)  $388,000. 
D)  $400,000. 
E)  None of the above.

Question 12

If property that has been converted from personal use to business use has appreciated in value, its basis for gain will be the same as the basis for loss.

Accepted Answer

A) True 
 B)False

Question 13

Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property's adjusted basis whereas capital expenditures are added to the original basis.

Accepted Answer

A) True 
 B)False

Question 14

Shontelle received a gift of income-producing property with an adjusted basis of $49,000 to the donor and fair market value of $35,000 on the date of gift. No gift tax was paid by the donor. Shontelle subsequently sold the property for $31,000. What is the recognized gain or loss?

Accepted Answer

A)  $0 
B)  $4,000) 
C)  $10,000) 
D)  $18,000) 
E)  None of the above 
A)  $0 
B)  $4,000) 
C)  $10,000) 
D)  $18,000) 
E)  None of the above

Question 15

Which of the following statements is false?

Accepted Answer

A)  A realized gain that is never recognized results in the temporary recovery of more than the taxpayer's cost or other basis for tax purposes. 
B)  A realized gain on which recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis for tax purposes. 
C)  A realized loss that is never recognized results in the permanent recovery of less than the taxpayer's cost or other basis for tax purposes. 
D)  A realized loss on which recognition is postponed results in the temporary recovery of less than the taxpayer's cost or other basis for tax purposes. 
E)  All of the above. 
A)  A realized gain that is never recognized results in the temporary recovery of more than the taxpayer's cost or other basis for tax purposes. 
B)  A realized gain on which recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis for tax purposes. 
C)  A realized loss that is never recognized results in the permanent recovery of less than the taxpayer's cost or other basis for tax purposes. 
D)  A realized loss on which recognition is postponed results in the temporary recovery of less than the taxpayer's cost or other basis for tax purposes. 
E)  All of the above.

Question 16

Realized losses from the sale or exchange of stock are disallowed if within 30 days before or 30 days after the sale or exchange, the taxpayer acquires substantially identical stock.

Accepted Answer

A) True 
 B)False

Question 17

What is the difference between the depreciation or cost recovery) allowed and the depreciation or cost recovery) allowable and what effect does each have on the adjusted basis of property?

Accepted Answer

Normally, there is no difference between

Question 18

Parker bought a brand new Ferrari on January 1, 2018, for $125,000. Parker was fatally injured in an auto accident on June 23, 2018, when the fair market value of the car was $105,000. Parker was driving a loaner car from the Ferrari dealership while his car was being serviced. In his will, Parker left the Ferrari to his best friend, Ryan. Ryan's holding period for the Ferrari begins on January 1, 2018.

Accepted Answer

A) True 
 B)False

Question 19

Joyce's office building was destroyed in a fire adjusted basis of $350,000; fair market value of $400,000). Of the insurance proceeds of $360,000 she receives, Joyce uses $310,000 to purchase additional inventory and invests the remaining $50,000 in short-term certificates of deposit. She received only $360,000 because of a co-insurance clause in her insurance policy. What is Joyce's recognized gain or loss?

Accepted Answer

A)  $0 
B)  $10,000 loss 
C)  $10,000 gain 
D)  $40,000 gain 
E)  None of the above 
A)  $0 
B)  $10,000 loss 
C)  $10,000 gain 
D)  $40,000 gain 
E)  None of the above

Question 20

In 1973, Fran received a birthday gift of stock worth $75,000 from her aunt. The aunt had owned the stock adjusted basis $50,000) for 10 years and paid gift tax of $27,000 on the transfer. Fran's basis in the stock is $75,000-the lesser of $77,000 $50,000 + $27,000) or $75,000.

Accepted Answer

A) True 
 B)False

In general, the amount realized from a sale of property does not include any liability assumed by the buyer.

If insurance proceeds are received for property used in a trade or business, a casualty transaction can result in recognized gain, but cannot result in a recognized loss.

Nancy gives her niece a crane to use in her business with a fair market value of $61,000 and a basis in Nancy's hands of $80,000. No gift tax was paid. What is the niece's basis for depreciation cost recovery)?

In addition to other gifts, Megan made a gift of stock to Jeri in 1976. Megan had purchased the stock in 1974 for $7,500. At the time of the gift, the stock was worth $20,000. If Megan paid $850 of gift tax on the transaction in 1976, what is Jeri's gain basis for the stock?

Purchased goodwill is assigned a basis equal to cost, which is calculated using the residual method associated with the purchase of a business.

The terms "realized gain" and "recognized gain" can be used interchangeably; they mean the same thing.

What is the easiest way for a taxpayer who is going to sell property that has declined in value to avoid the § 267 loss disallowance provision?

Alice owns land with an adjusted basis of $305,000, subject to a mortgage of $175,000. On April 1, 2018, Alice sells her land subject to the mortgage for $325,000 in cash, a note for $300,000, and property with a fair market value of $60,000. What is Alice's amount realized on this sale?

If a taxpayer purchases a business and the price exceeds the fair market value of the listed assets, how is the excess allocated among the purchased assets?

On January 2, 2018, Todd converts his house into a rental property. Todd's basis in the house is $400,000 and its fair market value on the date of conversion is $376,000. What is Todd's basis for purposes of MACRS cost recovery?

If property that has been converted from personal use to business use has appreciated in value, its basis for gain will be the same as the basis for loss.

Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property's adjusted basis whereas capital expenditures are added to the original basis.

Shontelle received a gift of income-producing property with an adjusted basis of $49,000 to the donor and fair market value of $35,000 on the date of gift. No gift tax was paid by the donor. Shontelle subsequently sold the property for $31,000. What is the recognized gain or loss?

Which of the following statements is false?

Realized losses from the sale or exchange of stock are disallowed if within 30 days before or 30 days after the sale or exchange, the taxpayer acquires substantially identical stock.

What is the difference between the depreciation or cost recovery) allowed and the depreciation or cost recovery) allowable and what effect does each have on the adjusted basis of property?

In 1973, Fran received a birthday gift of stock worth $75,000 from her aunt. The aunt had owned the stock adjusted basis $50,000) for 10 years and paid gift tax of $27,000 on the transfer. Fran's basis in the stock is $75,000-the lesser of $77,000 $50,000 + $27,000) or $75,000.

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

In general, the amount realized from a sale of property does not include any liability assumed by the buyer.

If insurance proceeds are received for property used in a trade or business, a casualty transaction can result in recognized gain, but cannot result in a recognized loss.

Nancy gives her niece a crane to use in her business with a fair market value of $61,000 and a basis in Nancy's hands of $80,000. No gift tax was paid. What is the niece's basis for depreciation cost recovery)?

In addition to other gifts, Megan made a gift of stock to Jeri in 1976. Megan had purchased the stock in 1974 for $7,500. At the time of the gift, the stock was worth $20,000. If Megan paid $850 of gift tax on the transaction in 1976, what is Jeri's gain basis for the stock?

Purchased goodwill is assigned a basis equal to cost, which is calculated using the residual method associated with the purchase of a business.

The terms "realized gain" and "recognized gain" can be used interchangeably; they mean the same thing.

What is the easiest way for a taxpayer who is going to sell property that has declined in value to avoid the § 267 loss disallowance provision?

Alice owns land with an adjusted basis of $305,000, subject to a mortgage of $175,000. On April 1, 2018, Alice sells her land subject to the mortgage for $325,000 in cash, a note for $300,000, and property with a fair market value of $60,000. What is Alice's amount realized on this sale?

If a taxpayer purchases a business and the price exceeds the fair market value of the listed assets, how is the excess allocated among the purchased assets?

On January 2, 2018, Todd converts his house into a rental property. Todd's basis in the house is $400,000 and its fair market value on the date of conversion is $376,000. What is Todd's basis for purposes of MACRS cost recovery?

If property that has been converted from personal use to business use has appreciated in value, its basis for gain will be the same as the basis for loss.

Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property's adjusted basis whereas capital expenditures are added to the original basis.

Shontelle received a gift of income-producing property with an adjusted basis of $49,000 to the donor and fair market value of $35,000 on the date of gift. No gift tax was paid by the donor. Shontelle subsequently sold the property for $31,000. What is the recognized gain or loss?

Which of the following statements is false?

Realized losses from the sale or exchange of stock are disallowed if within 30 days before or 30 days after the sale or exchange, the taxpayer acquires substantially identical stock.

What is the difference between the depreciation or cost recovery) allowed and the depreciation or cost recovery) allowable and what effect does each have on the adjusted basis of property?

In 1973, Fran received a birthday gift of stock worth $75,000 from her aunt. The aunt had owned the stock adjusted basis $50,000) for 10 years and paid gift tax of $27,000 on the transfer. Fran's basis in the stock is $75,000-the lesser of $77,000 $50,000 + $27,000) or $75,000.

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