Question 1

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. 
A) Long term. 
B) Short term. 
C) Determined by the date acquired by the individual who died. 
D) Determined by the date of death.

Question 2

Tobin inherited 100 acres of land on the death of his father in 2019.A Federal estate tax return was filed and the land was valued at $300,000 (its fair market value at the date of the death).The father had originally acquired the land in 1976 for $19,000 and prior to his death had made permanent improvements of $6,000.What is Tobin's basis in the land?

Accepted Answer

A) $19,000 
B) $25,000 
C) $300,000 
D) $325,000 
A) $19,000 
B) $25,000 
C) $300,000 
D) $325,000

Question 3

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 4

Nigel purchased a blending machine for $125,000 for use in his business.As to the machine, he has deducted MACRS cost recovery of $31,024, maintenance costs of $5,200, and repair costs of $4,000.Calculate Nigel's adjusted basis for the machine.

Accepted Answer

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Question 5

The amount received for a utility easement on land is included in the gross income of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

In a deductible casualty or theft, the basis of property involved is reduced by the amount of insurance proceeds received and by any resulting recognized loss.

Accepted Answer

A) True 
 B)False

Question 8

A realized gain whose recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis.

Accepted Answer

A) True 
 B)False

Question 9

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 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. 
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.

Question 10

If a husband inherits his deceased wife's share of jointly owned property in a common law state, both the husband's original share and the share inherited from the deceased wife are stepped-up or down to the fair market value at the date of the wife's death.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Albert purchased a tract of land for $140,000 in 2016 when he heard that a new highway was going to be constructed through the property and that the land would soon be worth $200,000.Highway engineers surveyed the property and indicated that he would probably get $180,000.The highway project was abandoned in 2019 and the value of the land fell to $100,000.What is the amount of loss Albert can claim in 2019?

Accepted Answer

A) $40,000 
B) $60,000 
C) $80,000 
D) $100,000 
E) None of these. 
A) $40,000 
B) $60,000 
C) $80,000 
D) $100,000 
E) None of these.

Question 13

The bank forecloses on Lisa's apartment complex.The property had been pledged as security on a nonrecourse mortgage whose principal amount at the date of foreclosure is $750,000.The adjusted basis of the property is $480,000, and the fair market value is $750,000.What is Lisa's recognized gain or loss?

Accepted Answer

A) $270,000 
B) ($750,000) 
C) $0 
D) ($480,000) 
A) $270,000 
B) ($750,000) 
C) $0 
D) ($480,000)

Question 14

In computing the amount realized when the fair market value of the property received cannot be determined, the fair market value of the property surrendered may be used.

Accepted Answer

A) True 
 B)False

Question 15

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 these. 
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 these.

Question 16

Jason owns Blue Corporation bonds (face value of $10,000), purchased on January 1, 2019, for $11,000.The bonds have an annual interest rate of 3% and a maturity date of December 31, 2028.If Jason elects to amortize the bond premium, what are his taxable interest income for 2019 and the adjusted basis for the bonds at the end of 2019 (assuming straight-line amortization is appropriate)?

Accepted Answer

A) $300 and $11,000 
B) $300 and $10,900 
C) $200 and $11,000 
D) $200 and $10,900 
A) $300 and $11,000 
B) $300 and $10,900 
C) $200 and $11,000 
D) $200 and $10,900

Question 17

Noelle received dining room furniture as a gift from her friend, Jane.Jane's adjusted basis was $9,200 and the fair market value on the date of the gift was $7,000.Noelle decided she did not need the furniture and sold it to a neighbor six months later for $6,500.What is her recognized gain or loss?

Accepted Answer

A) $0 
B) ($500) 
C) ($2,700) 
D) $6,500 
A) $0 
B) ($500) 
C) ($2,700) 
D) $6,500

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Sandra's automobile, which is used exclusively in her trade or business, was damaged in an accident.The adjusted basis prior to the accident was $11,000.The fair market value before the accident was $10,000 and the fair market value after the accident is $6,000.Insurance proceeds of $3,200 are received.What is Sandra's adjusted basis for the automobile after the casualty?

Accepted Answer

A) $0 
B) $7,000 
C) $7,800 
D) $10,200 
A) $0 
B) $7,000 
C) $7,800 
D) $10,200

Question 20

Mary sells her personal use automobile for $20,000.She purchased the car two years ago for $17,000.What is Mary's recognized gain or loss? It increased in value due to its excellent mileage plus a safe design.

Accepted Answer

A) $0 
B) $3,000 
C) $17,000 
D) $20,000 
A) $0 
B) $3,000 
C) $17,000 
D) $20,000

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

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

Nigel purchased a blending machine for $125,000 for use in his business.As to the machine, he has deducted MACRS cost recovery of $31,024, maintenance costs of $5,200, and repair costs of $4,000.Calculate Nigel's adjusted basis for the machine.

The amount received for a utility easement on land is included in the gross income of the taxpayer.

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

In a deductible casualty or theft, the basis of property involved is reduced by the amount of insurance proceeds received and by any resulting recognized loss.

A realized gain whose recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis.

If a husband inherits his deceased wife's share of jointly owned property in a common law state, both the husband's original share and the share inherited from the deceased wife are stepped-up or down to the fair market value at the date of the wife's death.

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.

In computing the amount realized when the fair market value of the property received cannot be determined, the fair market value of the property surrendered may be used.

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

Noelle received dining room furniture as a gift from her friend, Jane.Jane's adjusted basis was $9,200 and the fair market value on the date of the gift was $7,000.Noelle decided she did not need the furniture and sold it to a neighbor six months later for $6,500.What is her recognized gain or loss?

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

Mary sells her personal use automobile for $20,000.She purchased the car two years ago for $17,000.What is Mary's recognized gain or loss? It increased in value due to its excellent mileage plus a safe design.

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

Property Transactions: Capital Gains and Losses

Property Transactions: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters

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

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

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

Nigel purchased a blending machine for $125,000 for use in his business.As to the machine, he has deducted MACRS cost recovery of $31,024, maintenance costs of $5,200, and repair costs of $4,000.Calculate Nigel's adjusted basis for the machine.

The amount received for a utility easement on land is included in the gross income of the taxpayer.

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

In a deductible casualty or theft, the basis of property involved is reduced by the amount of insurance proceeds received and by any resulting recognized loss.

A realized gain whose recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis.

If a husband inherits his deceased wife's share of jointly owned property in a common law state, both the husband's original share and the share inherited from the deceased wife are stepped-up or down to the fair market value at the date of the wife's death.

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.

In computing the amount realized when the fair market value of the property received cannot be determined, the fair market value of the property surrendered may be used.

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

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

Mary sells her personal use automobile for $20,000.She purchased the car two years ago for $17,000.What is Mary's recognized gain or loss? It increased in value due to its excellent mileage plus a safe design.

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

Property Transactions: Capital Gains and Losses

Property Transactions: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters