Exam 16: Property Transactions: Capital Gains and Losses

A lessor is paid $45,000 by its commercial tenant as a lease cancellation fee.The tenant wanted to get out of its lease so it could move to a different building.The lessor had held the lease for three years before it was canceled.The lessor had a zero tax basis for the lease.The lessor has received:

Sara is filing as head of household and has 2018 taxable income of $57,000, which includes $3,000 of net long-tem capital gain.The net long-term capital gain is made up of $1,000 25% gain and $2,000 0%/15%/20% gain.What is the tax on her taxable income using the alternative tax method? Note: Use the tax rate schedule rather than the tax table.

An individual taxpayer received a valuable painting from his uncle, a famous artist who painted it.After the taxpayer held the painting for two years, he sold it for a $400,000 gain.The gain is a long-term capital gain.

In order to be long term, the holding period must include at least parts of two tax years.

All short-term gain from collectibles is subject to a potential alternative tax rate of 28%.

A lease cancellation payment received by a lessee is generally treated as an exchange because the lease extinguished is usually a capital asset.

Sharon has the following results of netting her short-term and long-term capital gains and losses for 2019: $56,000 short-term capital loss and $82,000 net long-term capital gain ($21,000 0%/15%/20% long-term capital gain and $61,000 25% long-term capital gain). a.What is her net capital gain or loss for 2019? b.If there is a net capital loss, how much and what type of the loss carries over to 2020? c.If there is a net long-term capital gain, what is it made up of?

In 2015, Aaron purchased a classic car for $12,000 that he planned to restore.However, Aaron is too busy to work on the car and gives it to his daughter Ellie in 2019.At this time, the fair market value of the car has declined to $10,000.Aaron paid no gift tax on the transaction.Ellie completes some of the restoration herself with out-of-pocket costs of $5,000.She later sells the car for $30,000.What is Ellie's recognized gain or loss on the sale of the car?

Thoren has the following items for the year: $4,000 of short-term capital gain, $5,000 of 0%/15%/20% long-term capital gain, and $1,500 of 28% capital loss.Which of the following is correct?

The tax status of an asset refers to whether the asset is a capital asset, a § 1231 asset, or an ordinary asset.

Stella purchased vacant land in 2012 that she subdivided for resale as lots.All 10 of the lots were sold during 2019. Each lot had a tax basis of $12,000 and sold for $35,000.Stella made no substantial improvements to the lots.She acted as her own real estate broker; so there were no sales expenses for selling the lots.Which of the following statements is correct?

A franchisor licenses its mode of business operation to a franchisee.

Mike is a self-employed TV technician.He is usually paid as soon as he completes repairs but occasionally bills a customer with payment expected within 30 days.At the end of the year, he has $2,500 of receivables outstanding.He expects to collect $1,200 of this and write off the remainder.Mike is a cash basis taxpayer and had net earnings from his business (not including the effect of the items above) of $55,000.He also had $3,500 interest income and $200 gambling winnings, and he sold corporate stock for $7,000.The stock had been purchased in 2015 for $8,200.Mike is single and claims the standard deduction.What is his 2019 taxable income? (Ignore the self-employment tax deduction.)

Since the Code section that defines capital asset says what is not a capital asset, other Code sections have to help determine what is and what is not a capital gain or loss.

A net short-term capital loss first offsets any 28% net long-term capital gain before it offsets either 25% of net long- term capital gain or 0%/15%/20% of net long-term capital gain.

Which of the following comparisons is correct?

On June 10, 2018, Ebon, Inc.acquired an office building as a result of a like-kind exchange.Ebon had given up a factory building that it had owned for 26 months as part of the like-kind exchange.Which of the following statements is correct?

Tan, Inc., sold a forklift on April 12, 2019, for $8,000 (its FMV) to its 100% shareholder, Ashley.Tan's adjusted basis for the forklift was $12,000.Ashley's holding period for the forklift:

In early 2018, Wanda paid $33,000 for an option on a parcel of land she intended to hold as an investment.After a survey of the land (paid for by the grantor) determined that the parcel was much smaller than the grantor said it was, she let the option lapse when it expired in 2019 after 14 months.How should Wanda treat these events in 2018? 2019?

Individuals who are not professional real estate developers may get capital gain treatment for the sale of their real property if they engage only in limited development activities.