Question 1

Match each statement with the correct term below.
-Tangible property

Accepted Answer

A) Land and structures permanently attached to land. 
B) Property that lacks a physical existence. 
C) Property that is used by the taxpayer for purely personal purposes. 
D) Any property that has form, shape, and substance. 
E) Property with a physical existence that is not real estate.
F)A single property used in more than one category. 
A) Land and structures permanently attached to land. 
B) Property that lacks a physical existence. 
C) Property that is used by the taxpayer for purely personal purposes. 
D) Any property that has form, shape, and substance. 
E) Property with a physical existence that is not real estate.
F)A single property used in more than one category.

Question 2

Sarah gave her granddaughter,Alice,some Eli Lilly Co.stock last year when its fair market value was $25,000.Gift taxes of $4,000 were paid on this transfer.Sarah acquired the stock in 2000 at a cost of $35,000.Alice sold the Eli Lilly stock this year for $32,000.What amount of gain (loss)will Alice recognize from her sale of the stock?

Accepted Answer

A) No gain or loss is recognized. 
B) $7,000 
C) ($7,000) 
D) ($3,000) 
A) No gain or loss is recognized. 
B) $7,000 
C) ($7,000) 
D) ($3,000)

Question 3

Dustin buys 200 shares of Monroe Corporation common stock on December 1,2012,for $2,000.He buys an additional 200 shares for $1,800 on December 23,2013.On December 28,2013,Dustin sells the first 200 shares for $1,700.He sells the last 200 for $1,600 on June 15,2014.What is (are)the amount(s)and the year of recognition of losses that Dustin can recognize?
$\begin{array}{rrr}
&2013&2014\
a.&-0-&\$200\
b.&-0-&\$500\
c.&\$300&\$200\
d.&\$300&\$500
\end{array}$

Accepted Answer

The answer of Dustin buys 200 shares of Monroe Corporation...

Question 4

Samantha receives 100 shares of Burnet Corporation stock as a gift from her cousin.At the date of the gift the stock is valued at $60 per share.It cost her cousin $10 per share several years before.One month later,Samantha's uncle dies and she inherits 100 shares of Crockett Corporation stock from her uncle's estate.The stock cost her uncle $10 per share twenty-five years ago.On the date of death the stock has a value of $60 per share.Samantha needs money to invest in her business,but she does not need to sell both blocks of stock this year.Which stock would you recommend Samantha to sell?

Accepted Answer

The basis of the inherited property take

Question 5

Mary pays $25,000 and secures a mortgage note for $75,000 to purchase a vacation home.She pays $200 to her attorney for reviewing the purchase agreement and $1,500 in points to the mortgage company.Mary's initial basis in the vacation home is

Accepted Answer

A) $ - 0 - 
B) $ 25,000 
C) $ 26,700 
D) $100,200 
E) $101,700 
A) $ - 0 - 
B) $ 25,000 
C) $ 26,700 
D) $100,200 
E) $101,700

Question 6

Terri owns 1,000 shares of Borneo Corporation common stock.On March 31 of the current year,when the stock is trading at $2 per share,Borneo declares a 5% stock dividend with the option to receive $2 cash per dividend share in lieu of taking the dividend shares.The dividend is distributed on April 30.Terri elects to receive the stock shares rather than the cash dividend.What are the tax effects for Terri?
I.Terri's stock dividend is nontaxable.
II.Terri's basis in her new shares is $100.

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 7

Buffey operates a delivery service.She purchased a van in 2011 for $25,000,and she sold it in 2013 for $15,000.Buffey did not deduct any depreciation on the van from 2011 through 2013,although total allowable depreciation on the van would have been $17,000.What is the amount of Buffey 's recognized gain or loss on the sale of the van?

Accepted Answer

A) $10,000 loss 
B) $ 7,000 gain 
C) $ 8,000 gain 
D) $15,000 gain 
E) $17,000 gain 
A) $10,000 loss 
B) $ 7,000 gain 
C) $ 8,000 gain 
D) $15,000 gain 
E) $17,000 gain

Question 8

Juan and Dorothy purchase a new residence on May 1,2013.Juan and Dorothy pay the full amount of the 2013 property taxes of $7,200 on their new house when the taxes became due in December of 2013.What amount of the taxes that Juan and Dorothy pay in December 2013 can they deduct on their 2013 tax return?

Accepted Answer

A) Zero, no amount is deductible. 
B) $2,400 
C) $4,800 
D) $7,200 
A) Zero, no amount is deductible. 
B) $2,400 
C) $4,800 
D) $7,200

Question 9

When a stock dividend is nontaxable,part of the basis of the original stock must be allocated to the new stock received as a dividend.

Accepted Answer

A) True 
 B)False

Question 10

Terry gives Brenda 1,000 shares of stock he had purchased several years ago for $5,000.On the date of the gift,the stock has a fair market value of $4,000.Brenda sells the 1,000 shares for $5,500 one month after the gift,Brenda realizes a

Accepted Answer

A) $ - 0 - gain or loss 
B) $ 500 short-term capital gain 
C) $ 500 long-term capital gain 
D) $1,500 short-term capital gain 
E) $1,500 long-term capital gain 
A) $ - 0 - gain or loss 
B) $ 500 short-term capital gain 
C) $ 500 long-term capital gain 
D) $1,500 short-term capital gain 
E) $1,500 long-term capital gain

Question 11

Nanci purchases all of the assets of Michael's Security Service for $200,000.The assets are as follows:

$\begin{array}{lrr}
\text { Asset } & \text { Adjusted Basis } & \text { Fair Market Value } \
\text { Inventory } & \$ 25,000 & \$ 50,000 \
\text { Equipment } & 60,000 & 40,000 \
\text { Supplies } & 20,000 & 20,000 \
\text { Building } & 80,000 & 95,000 \
\text { Land } & 10,000 & 20,000\\hline &\$195,000&\$225,000
\end{array}$
What is Nanci's basis in the equipment?

Accepted Answer

A) $17,776 
B) $35,556 
C) $40,000 
D) $60,000 
E) $61,538 
A) $17,776 
B) $35,556 
C) $40,000 
D) $60,000 
E) $61,538

Question 12

Determine the proper classification(s)of the asset discussed in the following scenario: Victoria purchased a new show case saw for her antique business.
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 VI are correct. 
B) Statements II and III are correct. 
C) Only statement VI is correct. 
D) Statements II, III, and VI are correct. 
E) Statements II, IV and VI are correct. 
A) Statements I, III and VI are correct. 
B) Statements II and III are correct. 
C) Only statement VI is correct. 
D) Statements II, III, and VI are correct. 
E) Statements II, IV and VI are correct.

Question 13

Match each statement with the correct term below.
-Indirect purchase

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 14

Courtney is interested in purchasing The Matrix Company.Matrix's assets are:
$$\begin{array} { l r r } 
& \text { Adjusted Basis } & \text { Fair Market Value } \
\text { Cash } & \$ 2,300 & \$ 2,300 \
\text { Inventory } & 16,500 & 19,200 \
\text { Equipment } & 13,000 & 9,000 \
\text { Land } & 25,000 & 40,500 \
\text { Building } & 66,600 & \$ 129,000 \
\text { Totals } & \$ 123,400 & \$ 200,000
\end{array}$$
I.If Courtney buys the stock of The Matrix for $225,000,the total basis in the assets will be $200,000.
II.If Courtney pays Matrix $240,000 for the Matrix assets,Courtney's total basis in all of the assets of the business will be $123,400.

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 15

Larry gives Linda 300 shares of stock he had purchased several years ago for $8,000.On the date of the gift,the stock has a fair market value of $6,000.Linda sells the 300 shares for $5,500 one month after the gift,Linda realizes a

Accepted Answer

A) $ - 0 - gain or loss 
B) $ 500 short-term capital loss 
C) $ 500 long-term capital loss 
D) $2,500 short-term capital loss 
E) $2,500 long-term capital loss 
A) $ - 0 - gain or loss 
B) $ 500 short-term capital loss 
C) $ 500 long-term capital loss 
D) $2,500 short-term capital loss 
E) $2,500 long-term capital loss

Question 16

Indicate the classification of each of the following assets as personal property,real property,intangible property,personal use property or business use property.
a.A dentist purchases a sofa for the waiting room at his dental office.
b.A dentist purchases a sofa for his living room at home.
c.A dentist has a landscape architect plant shrubbery and trees around his office building.
d.A dentist pays a landscaper to grade his land and install fencing for a baseball practice field for his son.
e.A dentist obtains a patent for a procedure he developed.

Accepted Answer

a.The sofa is personal property used in

Question 17

On February 3 of the current year,Caroline converts her house to a rental property.Caroline's adjusted basis in the house is $120,000 and the fair market value is $150,000 on the date of conversion.What is Caroline's adjusted basis in the rental property for depreciation purposes?

Accepted Answer

A) $ 30,000 
B) $120,000 
C) $150,000 
D) $170,000 
E) $180,000 
A) $ 30,000 
B) $120,000 
C) $150,000 
D) $170,000 
E) $180,000

Question 18

Match each statement with the correct term below.
-Primary valuation date

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 19

Kim owns a truck that cost $35,000 several years ago.After using it personally for two years,she converts the truck to business use when the truck's fair market value is $20,000.She uses the truck in her business and appropriately deducts $5,000 in depreciation.Then,she sells the truck for $42,000.What is Kim's recognized gain or loss on the sale?

Accepted Answer

A) No gain or loss 
B) $12,000 gain 
C) $27,000 gain 
D) $32,000 gain 
E) $ 7,000 gain 
A) No gain or loss 
B) $12,000 gain 
C) $27,000 gain 
D) $32,000 gain 
E) $ 7,000 gain

Question 20

Makemore Company purchases a factory for $800,000.The purchase price is properly allocated 90% to the building and 10% to the land.In the first year,Makemore adds a storage shed to the building at a cost of $8,000.The utility company pays Makemore $1,500 for an easement to run utility lines across the land.A total depreciation of $45,000 is deducted over the 3 years.Determine the adjusted basis of the building and the land as of the end of year 3:

Accepted Answer

A) $728,000 building; $ 78,500 land 
B) $683,000 building; $ 80,000 land 
C) $683,000 building; $ 78,500 land 
D) $728,000 building; $ 80,000 land 
A) $728,000 building; $ 78,500 land 
B) $683,000 building; $ 80,000 land 
C) $683,000 building; $ 78,500 land 
D) $728,000 building; $ 80,000 land

Match each statement with the correct term below. -Tangible property

Mary pays $25,000 and secures a mortgage note for $75,000 to purchase a vacation home.She pays $200 to her attorney for reviewing the purchase agreement and $1,500 in points to the mortgage company.Mary's initial basis in the vacation home is

When a stock dividend is nontaxable,part of the basis of the original stock must be allocated to the new stock received as a dividend.

Terry gives Brenda 1,000 shares of stock he had purchased several years ago for $5,000.On the date of the gift,the stock has a fair market value of $4,000.Brenda sells the 1,000 shares for $5,500 one month after the gift,Brenda realizes a

Determine the proper classification(s)of the asset discussed in the following scenario: Victoria purchased a new show case saw for her antique business. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

Match each statement with the correct term below. -Indirect purchase

Larry gives Linda 300 shares of stock he had purchased several years ago for $8,000.On the date of the gift,the stock has a fair market value of $6,000.Linda sells the 300 shares for $5,500 one month after the gift,Linda realizes a

On February 3 of the current year,Caroline converts her house to a rental property.Caroline's adjusted basis in the house is $120,000 and the fair market value is $150,000 on the date of conversion.What is Caroline's adjusted basis in the rental property for depreciation purposes?

Match each statement with the correct term below. -Primary valuation date

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

Match each statement with the correct term below. -Tangible property

Mary pays $25,000 and secures a mortgage note for $75,000 to purchase a vacation home.She pays $200 to her attorney for reviewing the purchase agreement and $1,500 in points to the mortgage company.Mary's initial basis in the vacation home is

When a stock dividend is nontaxable,part of the basis of the original stock must be allocated to the new stock received as a dividend.

Terry gives Brenda 1,000 shares of stock he had purchased several years ago for $5,000.On the date of the gift,the stock has a fair market value of $4,000.Brenda sells the 1,000 shares for $5,500 one month after the gift,Brenda realizes a

Determine the proper classification(s)of the asset discussed in the following scenario: Victoria purchased a new show case saw for her antique business. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

Match each statement with the correct term below. -Indirect purchase

Larry gives Linda 300 shares of stock he had purchased several years ago for $8,000.On the date of the gift,the stock has a fair market value of $6,000.Linda sells the 300 shares for $5,500 one month after the gift,Linda realizes a

On February 3 of the current year,Caroline converts her house to a rental property.Caroline's adjusted basis in the house is $120,000 and the fair market value is $150,000 on the date of conversion.What is Caroline's adjusted basis in the rental property for depreciation purposes?

Match each statement with the correct term below. -Primary valuation date

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