Question 1

The split basis rule for determining the basis of gifts allows for the transfer of unrealized losses from one taxpayer to another for calculation of gains.

Accepted Answer

A) True 
 B)False  True

Question 2

Determine the proper classification(s)of the asset discussed in the following scenario: "Cher receives a copyright for a new song she has written"
I.Personal use property.
IV.Intangible property.
II.Business use property.
V.Real estate.
III.Tangible property.
VI.Personal property.

Accepted Answer

A) Statements I and III are correct. 
B) Only statement IV is correct. 
C) Statements II and IV are correct. 
D) Statements II, IV, and VI are correct 
E) Statements II and VI are correct. 
A) Statements I and III are correct. 
B) Only statement IV is correct. 
C) Statements II and IV are correct. 
D) Statements II, IV, and VI are correct 
E) Statements II and VI are correct. C

Question 3

Reiko buys 200 shares of Saratoga Corporation common stock on December 10,2012,for $2,000.He buys an additional 200 shares for $1,800 on December 23,2013.On December 28,2013,Reiko sells 100 of the first 200 shares for $800.He sells the remaining 300 shares for $2,500 on November 15,2014.What is(are)the amount(s)and the year of recognition of losses that Reiko can recognize?
$\begin{array}{lrr}
&2013 & 2014 \
\text { a. }&-0- & \$ 300 \
\text { b. } & -0- & \$ 500 \
\text { c. } & \$ 200 & \$ 500 \
\text { d. } & \$ 200 & \$ 300
\end{array}$

Accepted Answer

B

Question 4

Whenever the donor's adjusted basis is used to compute a gain or loss on the donee's disposition of property received by gift,the donee's holding period is always the period of time the property was owned by the donee only.

Accepted Answer

A) True 
 B)False

Question 5

Mary inherits an interest in Laser Partnership from her Aunt Lillian during 2013.The fair market value of the interest as of the primary valuation date is $28,000.Aunt Lillian's adjusted basis was $16,000.What is Mary's initial basis and holding period in the partnership interest if she sells the interest seven months after inheriting it?

Accepted Answer

A) $16,000, short-term. 
B) $16,000, long-term. 
C) $28,000, short-term. 
D) $28,000, long-term. 
E) Both depend on whether it is sold at a gain or a loss. 
A) $16,000, short-term. 
B) $16,000, long-term. 
C) $28,000, short-term. 
D) $28,000, long-term. 
E) Both depend on whether it is sold at a gain or a loss.

Question 6

Valerie receives a painting as a gift from her aunt.The painting is valued at $6,000 on the date of the gift.Valerie's aunt's basis in the painting is $13,000.Three years later Valerie sold the painting for $8,000.What is the amount of gain or (loss)recognized by Valerie on the sale?

Accepted Answer

A) No gain or (loss) is recognized 
B) $5,000 loss 
C) $2,000 gain 
D) $7,000 loss 
E) $2,000 loss 
A) No gain or (loss) is recognized 
B) $5,000 loss 
C) $2,000 gain 
D) $7,000 loss 
E) $2,000 loss

Question 7

Adjusted basis is equal to the initial basis,plus or minus the cumulative effects of adjustments.

Accepted Answer

A) True 
 B)False

Question 8

Janet is the business manager for Greenville Auto Mart.She buys a new car from the dealership for $35,000.The basis of the car to the dealership was $30,000.The car lists for $42,00,but the dealer would sell the car for $40,000.What is Janet's basis in the new car?

Accepted Answer

A) $30,000 
B) $35,000 
C) $40,000 
D) $42,000 
E) $47,000 
A) $30,000 
B) $35,000 
C) $40,000 
D) $42,000 
E) $47,000

Question 9

Jose is exploring his options to minimize his tax liability for this year.Earlier in the year Jose sold a substantial number of his securities and recognized a $15,000 gain.He would like to mitigate the tax effects of that gain.The remainder of Jose's portfolio consists of 1,000 shares of Garfield Corporation stock.Jose has not sold it because it has a history of paying large dividends.Jose paid $20,000 for the stock,but it is currently trading for $5 per share.Jose is considering selling all of his Garfield stock,realizing the loss,netting it against his capital gains,and then repurchasing 1,000 shares a few days later.He knows he will lose some money due to transaction and brokerage costs,but he feels it may be worth it.Discuss Jose's plan.Relate your analysis to the basic tax concepts that help drive your position.

Accepted Answer

The plan will not work.The plan is a was

Question 10

Kevin buys one share of Mink,Inc.,common stock for $100.On February 3 of the current year,the corporation makes a nontaxable distribution of one share of preferred stock to all holders of record of common stock.On the distribution date,the common stock is trading at $250 and the preferred stock is trading at $50.After the distribution,Kevin's bases in the two shares of stock are:
$\begin{array}{lr}
&\text { Common } & \text { Freferred } \
\text { a. } &\$ 50.00 & \$ 50.00 \
\text { b. }& \$ 100.00 & \$-0- \
\text { c. } &\$ 83.33 & \$ 16.67 \
\text { d. } &\$ 250.00 & \$ 50.00 \
\text { e. } &\$ 80.00 & \$ 20.00
\end{array}$

Accepted Answer

The answer of Kevin buys one share of Mink,Inc.,common stock...

Question 11

Match each statement with the correct term below.
-Realized loss

Accepted Answer

A) Begins on the day after acquisition and ends on the day of disposition. 
B) The initial investment in an asset. 
C) An asset's basis transfers from one owner to another. 
D) The capital investment remaining in an asset at the date of its disposition. 
E) Sales price less expenses of disposition.
F)A purchase of all of the assets of a business.
G)Amount realized is less than adjusted basis.
H)A purchase of all of the assets of a business by buying the stock of a corporation.
I)A term used to identify a situation in which an asset has a different basis for determining gain than for determining loss.
J)The date of death used to value a decedent's estate in the absence of any special election.
K)Six months after the date of death, used to value a decedent's estate when the executor of the estate makes election.
L)Amount realized is greater than adjusted basis. 
A) Begins on the day after acquisition and ends on the day of disposition. 
B) The initial investment in an asset. 
C) An asset's basis transfers from one owner to another. 
D) The capital investment remaining in an asset at the date of its disposition. 
E) Sales price less expenses of disposition.
F)A purchase of all of the assets of a business.
G)Amount realized is less than adjusted basis.
H)A purchase of all of the assets of a business by buying the stock of a corporation.
I)A term used to identify a situation in which an asset has a different basis for determining gain than for determining loss.
J)The date of death used to value a decedent's estate in the absence of any special election.
K)Six months after the date of death, used to value a decedent's estate when the executor of the estate makes election.
L)Amount realized is greater than adjusted basis.

Question 12

Sandi sells 100 shares of Gray Corporation stock on December 4,2013.She inherited the stock from Christine,who died on January 30,2013.The executor of the estate used the primary valuation date.Sandi's holding period for the stock is

Accepted Answer

A) Long-term. 
B) Short-term. 
C) Long-term if sold at a gain; short-term if sold at a loss. 
D) Short-term if sold at a gain; long-term if sold at a loss. 
A) Long-term. 
B) Short-term. 
C) Long-term if sold at a gain; short-term if sold at a loss. 
D) Short-term if sold at a gain; long-term if sold at a loss.

Question 13

Determine the proper classification(s)of a house owned and used by John as his principal residence.
I.Personal use property.
IV.Intangible property.
II.Business use property.
V.Real estate.
III.Tangible property.
VI.Personal property.

Accepted Answer

A) Statements I, III, and V are correct. 
B) Statements I, III, and VI are correct. 
C) Only statement I and V are correct. 
D) Only statement V is correct. 
E) Only statement I is correct. 
A) Statements I, III, and V are correct. 
B) Statements I, III, and VI are correct. 
C) Only statement I and V are correct. 
D) Only statement V is correct. 
E) Only statement I is correct.

Question 14

Pedro purchased all of the stock of Regis Corporation.Since he purchased all of the stock the basis in all of the corporation's assets must be restated to fair market value.

Accepted Answer

A) True 
 B)False

Question 15

On February 3 of the current year,Samantha converts her house to a rental property.Samantha's adjusted basis in the house is $150,000 and the fair market value is $120,000 on the date of conversion.Samantha uses the rental for 3 years and properly deducts depreciation totaling $12,000.Then,she sells the house for $130,000.What is the amount of the gain or (loss)recognized on the sale?

Accepted Answer

A) No gain or loss 
B) $ 8,000 gain 
C) $20,000 loss 
D) $22,000 gain 
E) $ 8,000 loss 
A) No gain or loss 
B) $ 8,000 gain 
C) $20,000 loss 
D) $22,000 gain 
E) $ 8,000 loss

Question 16

The split basis rules for business property prevent the deduction of the disallowed personal loss through depreciation or a loss from the sale of business property.

Accepted Answer

A) True 
 B)False

Question 17

Sonya inherits 1,000 shares of Big Red Airline Corporation stock from the estate of her Uncle Tony.Tony died on August 4,2013.The stock's value on August 4,2013,is $2,000.Tony purchased the stock for $3,000 several years ago.Sonya sells the 1,000 shares for $2,300 on December 8,2013.What is Sonya's holding period of the stock?

Accepted Answer

A) Short-term. 
B) Long-term. 
C) Depends on which value is used. 
D) Depends on whether an estate tax was paid. 
A) Short-term. 
B) Long-term. 
C) Depends on which value is used. 
D) Depends on whether an estate tax was paid.

Question 18

Perry inherits stock from his Aunt Margaret that had a basis of $40,000 to Margaret and a fair market value of $54,000 on May 20,2013,the date of her death.Paul sells the stock on June 21,2013 for $65,000.What is the amount and character of the gain or loss on the sale?

Accepted Answer

$11,000 ($65,000 - $54,000)lon

Question 19

Personal property consists of any property that is held by an individual.

Accepted Answer

A) True 
 B)False

Question 20

Ludwig died on April 5,2013.As part of his will,he leaves land for which he paid $6,000 on December 31,2012,to his son Don.On April 5,2013,the land is worth $11,000.However,due to local real estate conditions,the land declines in value.On July 28 it is worth only $10,000; it declines further to $9,000 on October 5 and plunges to $7,000 on December 18.
I.In the absence of any special elections,Don's basis in the land is $11,000.
II.If the executor elects the alternate valuation date and distributes the land to Don on July 28,Don's basis in the land will be $9,000.
III.If the executor elects the alternate valuation date and distributes the land to Don on December 18,Don's basis will be $7,000.
IV.In the absence of any special elections,if the executor distributes the land to Don on October 5,Don's basis in the land will be $9,000.

Accepted Answer

A) Only I is correct. 
B) I and II are correct. 
C) I, II and IV are correct. 
D) I and IV are correct. 
E) All the statements are correct. 
A) Only I is correct. 
B) I and II are correct. 
C) I, II and IV are correct. 
D) I and IV are correct. 
E) All the statements are correct.

The split basis rule for determining the basis of gifts allows for the transfer of unrealized losses from one taxpayer to another for calculation of gains.

Determine the proper classification(s)of the asset discussed in the following scenario: "Cher receives a copyright for a new song she has written" I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

Whenever the donor's adjusted basis is used to compute a gain or loss on the donee's disposition of property received by gift,the donee's holding period is always the period of time the property was owned by the donee only.

Valerie receives a painting as a gift from her aunt.The painting is valued at $6,000 on the date of the gift.Valerie's aunt's basis in the painting is $13,000.Three years later Valerie sold the painting for $8,000.What is the amount of gain or (loss)recognized by Valerie on the sale?

Adjusted basis is equal to the initial basis,plus or minus the cumulative effects of adjustments.

Janet is the business manager for Greenville Auto Mart.She buys a new car from the dealership for $35,000.The basis of the car to the dealership was $30,000.The car lists for $42,00,but the dealer would sell the car for $40,000.What is Janet's basis in the new car?

Match each statement with the correct term below. -Realized loss

Sandi sells 100 shares of Gray Corporation stock on December 4,2013.She inherited the stock from Christine,who died on January 30,2013.The executor of the estate used the primary valuation date.Sandi's holding period for the stock is

Determine the proper classification(s)of a house owned and used by John as his principal residence. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

Pedro purchased all of the stock of Regis Corporation.Since he purchased all of the stock the basis in all of the corporation's assets must be restated to fair market value.

The split basis rules for business property prevent the deduction of the disallowed personal loss through depreciation or a loss from the sale of business property.

Perry inherits stock from his Aunt Margaret that had a basis of $40,000 to Margaret and a fair market value of $54,000 on May 20,2013,the date of her death.Paul sells the stock on June 21,2013 for $65,000.What is the amount and character of the gain or loss on the sale?

Personal property consists of any property that is held by an individual.

Federal Income Taxation - an Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses: Deductions and Limitations

Taxation of Individuals

Cost Recovery on Property: Depreciation,depletion,and Amortization

Property Dispositions

Nonrecognition Transactions

Choice of Business Entity - General Tax and Nontax Factorsformation

Choice of Business Entity - Operations and Distributions

Choice of Business Entity - Other Considerations

Tax Research

Filters

Exam 9: Acquisitions of Property

The split basis rule for determining the basis of gifts allows for the transfer of unrealized losses from one taxpayer to another for calculation of gains.

Determine the proper classification(s)of the asset discussed in the following scenario: "Cher receives a copyright for a new song she has written" I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

Whenever the donor's adjusted basis is used to compute a gain or loss on the donee's disposition of property received by gift,the donee's holding period is always the period of time the property was owned by the donee only.

Valerie receives a painting as a gift from her aunt.The painting is valued at $6,000 on the date of the gift.Valerie's aunt's basis in the painting is $13,000.Three years later Valerie sold the painting for $8,000.What is the amount of gain or (loss)recognized by Valerie on the sale?

Adjusted basis is equal to the initial basis,plus or minus the cumulative effects of adjustments.

Janet is the business manager for Greenville Auto Mart.She buys a new car from the dealership for $35,000.The basis of the car to the dealership was $30,000.The car lists for $42,00,but the dealer would sell the car for $40,000.What is Janet's basis in the new car?

Match each statement with the correct term below. -Realized loss

Sandi sells 100 shares of Gray Corporation stock on December 4,2013.She inherited the stock from Christine,who died on January 30,2013.The executor of the estate used the primary valuation date.Sandi's holding period for the stock is

Determine the proper classification(s)of a house owned and used by John as his principal residence. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

Pedro purchased all of the stock of Regis Corporation.Since he purchased all of the stock the basis in all of the corporation's assets must be restated to fair market value.

The split basis rules for business property prevent the deduction of the disallowed personal loss through depreciation or a loss from the sale of business property.

Perry inherits stock from his Aunt Margaret that had a basis of $40,000 to Margaret and a fair market value of $54,000 on May 20,2013,the date of her death.Paul sells the stock on June 21,2013 for $65,000.What is the amount and character of the gain or loss on the sale?

Personal property consists of any property that is held by an individual.

Federal Income Taxation - an Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses: Deductions and Limitations

Taxation of Individuals

Cost Recovery on Property: Depreciation,depletion,and Amortization

Property Dispositions

Nonrecognition Transactions

Choice of Business Entity - General Tax and Nontax Factorsformation

Choice of Business Entity - Operations and Distributions

Choice of Business Entity - Other Considerations

Tax Research

Filters