Question 1

The gain or loss on the sale of property held as an investment is recorded on which one of the following forms or schedules?

Accepted Answer

A) Form 4797 if the sale was from an asset used for investment purposes by a taxpayer who purchased it with company money as a sole proprietor. 
B) Schedule D if the sale was an asset used in a trade or business by a sole proprietor. 
C) Schedule D if the sale was an asset used for investment purposes by a taxpayer. 
D) Form 4797 regardless if the asset was purchased for investment if the taxpayer is a sole proprietor. 
A) Form 4797 if the sale was from an asset used for investment purposes by a taxpayer who purchased it with company money as a sole proprietor. 
B) Schedule D if the sale was an asset used in a trade or business by a sole proprietor. 
C) Schedule D if the sale was an asset used for investment purposes by a taxpayer. 
D) Form 4797 regardless if the asset was purchased for investment if the taxpayer is a sole proprietor.

Question 2

When a Section 1231 asset is sold,the gain can be only classified as an ordinary gain.

Accepted Answer

A) True 
 B)False

Question 3

When the buyer assumes the seller's liability,the seller includes this amount in computing the amount realized from the sale.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is a Section 1221 asset?

Accepted Answer

A) Rental property. 
B) Business inventory. 
C) Gold,silver,or other metals. 
D) An original painting created by the taxpayer after May 17,2006. 
A) Rental property. 
B) Business inventory. 
C) Gold,silver,or other metals. 
D) An original painting created by the taxpayer after May 17,2006.

Question 5

All net losses exceeding the $3,000 per year are carried over as long-term losses because they will have occurred more than one year ago.

Accepted Answer

A) True 
 B)False

Question 6

Padraic purchased 50 shares of stock as an investment for the purchase price of $2,500 in 2014.In 2017 when the fair market value of the stock was $2,500,Padraic gave the stock to his sister,Fiona.If no gift tax is paid and Fiona sells the stock for $2,750 she will recognize:

Accepted Answer

A) $250 gain. 
B) $300 gain. 
C) $500 gain. 
D) $800 gain. 
A) $250 gain. 
B) $300 gain. 
C) $500 gain. 
D) $800 gain.

Question 7

In 2008,Savannah purchased 200 shares of Hi-Style stock as an investment.The stock cost $17,000.In 2017 when the fair market value was $19,000,Savannah gave the stock to her daughter,Daniele.If no gift tax is paid and Daniele sells the stock for $20,000,she will recognize:

Accepted Answer

A) no gain or loss. 
B) a $1,000 gain. 
C) a $2,000 gain. 
D) a $3,000 gain. 
A) no gain or loss. 
B) a $1,000 gain. 
C) a $2,000 gain. 
D) a $3,000 gain.

Question 8

To figure the gain or loss from the sale of property received as a gift,the donor's adjusted basis at the time of the gift is the basis to the donee.

Accepted Answer

A) True 
 B)False

Question 9

A taxpayer purchased land in 2015 for $26,000 and sold it in 2017 for $31,000 cash.The buyer also assumed the remaining mortgage of $13,000.What is the amount recognized on the sale of the land?

Accepted Answer

A) $5,000 gain. 
B) $8,000 gain. 
C) $18,000 gain. 
D) $8,000 loss. 
A) $5,000 gain. 
B) $8,000 gain. 
C) $18,000 gain. 
D) $8,000 loss.

Question 10

The basis of inherited property to the beneficiary is the FMV at the date of death or alternate valuation date.

Accepted Answer

A) True 
 B)False

Question 11

Jess sold a piece of equipment she used in her business.The equipment cost Jess $51,500 several years ago and had accumulated depreciation taken in the amount of $20,300.Jess sold the equipment for $35,000.
a.What is her Section 1245 property gain?
b.How much of the gain is subject to recapture at the 25% tax rate?
c.How much of the gain is ordinary income?

Accepted Answer

a.$3,800
b

Question 12

On May 1,2016,Kelalani purchased land for $88,000 for use in her business.She sold it on May 1,2017,for $82,000.If there are no other sales of business or trade property,how is this loss treated for tax purposes on Kelalani's return?

Accepted Answer

A) $6,000 short-term capital loss. 
B) $6,000 long-term capital loss. 
C) $6,000 ordinary loss. 
D) $6,000 Section 1231 loss. 
A) $6,000 short-term capital loss. 
B) $6,000 long-term capital loss. 
C) $6,000 ordinary loss. 
D) $6,000 Section 1231 loss.

Question 13

Demetrius had a $4,000 short-term loss and a $3,000 long-term gain from a collectible,a $2,000 gain from Section 1250 unrecaptured property.What is the netting effect of these gains and losses on his 1040?

Accepted Answer

A) $4,000 short-term loss is offset against the $3,000 collectible first,then the remaining $1,000 against the Section 1250 property,with a $1,000 gain taxed at 25%. 
B) The $4,000 short-term loss is allowed to be taken in total as an ordinary loss,and the net long-term gain of $5,000 is added to his 1040 and taxed at 0%,15%,or 20% depending on his regular tax bracket. 
C) $2,000 short-term loss is offset against the Section 1250 property first,then the remaining $2,000 against the collectible gain leaving $1,000 taxed at 28%. 
D) As each of these gains and losses are taxed at different rates,there is no netting of short-term and long-term gains or losses. 
A) $4,000 short-term loss is offset against the $3,000 collectible first,then the remaining $1,000 against the Section 1250 property,with a $1,000 gain taxed at 25%. 
B) The $4,000 short-term loss is allowed to be taken in total as an ordinary loss,and the net long-term gain of $5,000 is added to his 1040 and taxed at 0%,15%,or 20% depending on his regular tax bracket. 
C) $2,000 short-term loss is offset against the Section 1250 property first,then the remaining $2,000 against the collectible gain leaving $1,000 taxed at 28%. 
D) As each of these gains and losses are taxed at different rates,there is no netting of short-term and long-term gains or losses.

Question 14

The taxpayer always reports a worthless security as a long-term capital loss in the year the security becomes worthless.

Accepted Answer

A) True 
 B)False

Question 15

Gilberto invested in a mid-size local company with gross assets of $16,000,000.Gilberto purchased 1,000 shares for $48,000 in 2000.In 2017,Gilberto sold the stock for $78,000.How is the gain treated for tax purposes?

Accepted Answer

A) $30,000 capital gain,taxed at preferential rates. 
B) $15,000 excluded from gross income under Section 1202 with the remaining gain recognized and taxed at regular tax rates. 
C) $15,000 excluded from gross income under Section 1202 and $15,000 taxed at 28%. 
D) $15,000 excluded from gross income under Section 1202 and $15,000 taxed at preferential rates. 
A) $30,000 capital gain,taxed at preferential rates. 
B) $15,000 excluded from gross income under Section 1202 with the remaining gain recognized and taxed at regular tax rates. 
C) $15,000 excluded from gross income under Section 1202 and $15,000 taxed at 28%. 
D) $15,000 excluded from gross income under Section 1202 and $15,000 taxed at preferential rates.

Question 16

For sales of Section 1231 business property,long-term gains are taxed at preferential rates while long-term losses are considered ordinary losses and have unlimited loss deductibility in the year they are incurred.

Accepted Answer

A) True 
 B)False

Question 17

Oliver purchased the following stock of Doggie Treats Inc. , $\begin{array}{ll}
2015 & 10 \text { shares@ } \$ 10 \
2016 & 10 \text { shares @ } \$ 12 \
2017 & 20 \text { shares @ } \$ 14
\end{array}$ If Oliver sold 25 shares of stock in 2017 for $265,what is the loss on the sale of the stock? Assume the shares purchased in 2015 and 2016 were held for more than one year.

Accepted Answer

A) $9.50 short-term loss and $38.00 long-term loss. 
B) $9.50 long-term loss and $38.00 short-term loss. 
C) $8.00 short-term loss and $17.00 long-term loss. 
D) $8.00 long-term loss and $17.00 short-term loss. 
A) $9.50 short-term loss and $38.00 long-term loss. 
B) $9.50 long-term loss and $38.00 short-term loss. 
C) $8.00 short-term loss and $17.00 long-term loss. 
D) $8.00 long-term loss and $17.00 short-term loss.

Question 18

In general,the basis of property purchased is the cost of the asset including cash,debt obligations,and other property or services included in acquiring the asset.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is correct regarding the sale of ordinary assets as discussed in this chapter?

Accepted Answer

A) The sale of an asset (held less than a year)outside the normal course of a trade or business is a sale of an ordinary asset. 
B) The sale of any business property regardless of holding period is a sale of an ordinary asset. 
C) The sale of inventory for a profit is considered to be a sale of an ordinary asset. 
D) The sale of business property held for more than a year is a sale of an ordinary asset. 
A) The sale of an asset (held less than a year)outside the normal course of a trade or business is a sale of an ordinary asset. 
B) The sale of any business property regardless of holding period is a sale of an ordinary asset. 
C) The sale of inventory for a profit is considered to be a sale of an ordinary asset. 
D) The sale of business property held for more than a year is a sale of an ordinary asset.

Question 20

Which one of the following is a capital asset?

Accepted Answer

A) Household furnishings. 
B) Business inventory. 
C) A non-musical copyright created by the taxpayer. 
D) Rental property. 
A) Household furnishings. 
B) Business inventory. 
C) A non-musical copyright created by the taxpayer. 
D) Rental property.

The gain or loss on the sale of property held as an investment is recorded on which one of the following forms or schedules?

When a Section 1231 asset is sold,the gain can be only classified as an ordinary gain.

When the buyer assumes the seller's liability,the seller includes this amount in computing the amount realized from the sale.

Which of the following is a Section 1221 asset?

All net losses exceeding the $3,000 per year are carried over as long-term losses because they will have occurred more than one year ago.

Padraic purchased 50 shares of stock as an investment for the purchase price of $2,500 in 2014.In 2017 when the fair market value of the stock was $2,500,Padraic gave the stock to his sister,Fiona.If no gift tax is paid and Fiona sells the stock for $2,750 she will recognize:

In 2008,Savannah purchased 200 shares of Hi-Style stock as an investment.The stock cost $17,000.In 2017 when the fair market value was $19,000,Savannah gave the stock to her daughter,Daniele.If no gift tax is paid and Daniele sells the stock for $20,000,she will recognize:

To figure the gain or loss from the sale of property received as a gift,the donor's adjusted basis at the time of the gift is the basis to the donee.

A taxpayer purchased land in 2015 for $26,000 and sold it in 2017 for $31,000 cash.The buyer also assumed the remaining mortgage of $13,000.What is the amount recognized on the sale of the land?

The basis of inherited property to the beneficiary is the FMV at the date of death or alternate valuation date.

On May 1,2016,Kelalani purchased land for $88,000 for use in her business.She sold it on May 1,2017,for $82,000.If there are no other sales of business or trade property,how is this loss treated for tax purposes on Kelalani's return?

Demetrius had a $4,000 short-term loss and a $3,000 long-term gain from a collectible,a $2,000 gain from Section 1250 unrecaptured property.What is the netting effect of these gains and losses on his 1040?

The taxpayer always reports a worthless security as a long-term capital loss in the year the security becomes worthless.

Gilberto invested in a mid-size local company with gross assets of $16,000,000.Gilberto purchased 1,000 shares for $48,000 in 2000.In 2017,Gilberto sold the stock for $78,000.How is the gain treated for tax purposes?

For sales of Section 1231 business property,long-term gains are taxed at preferential rates while long-term losses are considered ordinary losses and have unlimited loss deductibility in the year they are incurred.

Oliver purchased the following stock of Doggie Treats Inc. , 2015 10 shares@ \ 10 2016 10 shares @ \ 12 2017 20 shares @ \ 14 If Oliver sold 25 shares of stock in 2017 for $265,what is the loss on the sale of the stock? Assume the shares purchased in 2015 and 2016 were held for more than one year.

In general,the basis of property purchased is the cost of the asset including cash,debt obligations,and other property or services included in acquiring the asset.

Which of the following statements is correct regarding the sale of ordinary assets as discussed in this chapter?

Which one of the following is a capital asset?

Introduction to Taxation, the Income Tax Formula, and Form 1040EZ

Expanded Tax Formula, forms 1040A and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income Line 12 of Form 1040 and Schedule C

Rental Property, Royalties, and Income From Flow- Through Entities Line 17, form 1040, and Schedule E

Tax Credits Form 1040,lines 48 Through 54 and Lines 66A Through 73

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters

Exam 7: Capital Gains and Other Sales of Property Schedule D and Form 4797

The gain or loss on the sale of property held as an investment is recorded on which one of the following forms or schedules?

When a Section 1231 asset is sold,the gain can be only classified as an ordinary gain.

When the buyer assumes the seller's liability,the seller includes this amount in computing the amount realized from the sale.

Which of the following is a Section 1221 asset?

All net losses exceeding the $3,000 per year are carried over as long-term losses because they will have occurred more than one year ago.

Padraic purchased 50 shares of stock as an investment for the purchase price of $2,500 in 2014.In 2017 when the fair market value of the stock was $2,500,Padraic gave the stock to his sister,Fiona.If no gift tax is paid and Fiona sells the stock for $2,750 she will recognize:

In 2008,Savannah purchased 200 shares of Hi-Style stock as an investment.The stock cost $17,000.In 2017 when the fair market value was $19,000,Savannah gave the stock to her daughter,Daniele.If no gift tax is paid and Daniele sells the stock for $20,000,she will recognize:

To figure the gain or loss from the sale of property received as a gift,the donor's adjusted basis at the time of the gift is the basis to the donee.

A taxpayer purchased land in 2015 for $26,000 and sold it in 2017 for $31,000 cash.The buyer also assumed the remaining mortgage of $13,000.What is the amount recognized on the sale of the land?

The basis of inherited property to the beneficiary is the FMV at the date of death or alternate valuation date.

On May 1,2016,Kelalani purchased land for $88,000 for use in her business.She sold it on May 1,2017,for $82,000.If there are no other sales of business or trade property,how is this loss treated for tax purposes on Kelalani's return?

Demetrius had a $4,000 short-term loss and a $3,000 long-term gain from a collectible,a $2,000 gain from Section 1250 unrecaptured property.What is the netting effect of these gains and losses on his 1040?

The taxpayer always reports a worthless security as a long-term capital loss in the year the security becomes worthless.

Gilberto invested in a mid-size local company with gross assets of $16,000,000.Gilberto purchased 1,000 shares for $48,000 in 2000.In 2017,Gilberto sold the stock for $78,000.How is the gain treated for tax purposes?

For sales of Section 1231 business property,long-term gains are taxed at preferential rates while long-term losses are considered ordinary losses and have unlimited loss deductibility in the year they are incurred.

Oliver purchased the following stock of Doggie Treats Inc. , 2015 10 shares@ \ 10 2016 10 shares @ \ 12 2017 20 shares @ \ 14 If Oliver sold 25 shares of stock in 2017 for $265,what is the loss on the sale of the stock? Assume the shares purchased in 2015 and 2016 were held for more than one year.

In general,the basis of property purchased is the cost of the asset including cash,debt obligations,and other property or services included in acquiring the asset.

Which of the following statements is correct regarding the sale of ordinary assets as discussed in this chapter?

Which one of the following is a capital asset?

Introduction to Taxation, the Income Tax Formula, and Form 1040EZ

Expanded Tax Formula, forms 1040A and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income Line 12 of Form 1040 and Schedule C

Rental Property, Royalties, and Income From Flow- Through Entities Line 17, form 1040, and Schedule E

Tax Credits Form 1040,lines 48 Through 54 and Lines 66A Through 73

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters