Question 1

Which one of the following is Section 1231 property?

Accepted Answer

A) Accounts receivable. 
B) Copyright owned by an author. 
C) Inventory. 
D) A building used in a trade or business. 
A) Accounts receivable. 
B) Copyright owned by an author. 
C) Inventory. 
D) A building used in a trade or business.

Question 2

Kwon-Lee sold 200 shares held in FNP Mutual Fund in 2017 for $22,500 and received a 1099-B to record the sale of the shares.Kwon-Lee's investment portfolio includes the following purchases of FNP Mutual Fund stock: $\begin{array}{rr}
2005 & 100 \text { shares at } \$ 100 \text { per share } \
2009 & 50 \text { shares at } \$ 110 \text { per share } \
2013 & 125 \text { shares at } \$ 130 \text { per share } \
2013 & 75 \text { shares at } \$ 125 \text { per share }
\end{array}$ Assuming Kwon-Lee uses the single category average cost method,he will recognize

Accepted Answer

A) no gain or loss. 
B) $500 gain. 
C) $1,000 loss. 
D) $3,125 loss. 
A) no gain or loss. 
B) $500 gain. 
C) $1,000 loss. 
D) $3,125 loss.

Question 3

To figure the gain or loss from the sale of property received as a gift,the donee must know the donor's adjusted basis as well as the FMV at the date of the gift.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

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

Question 5

Stephanie sold the following stock in 2016.She received a 1099-B from each of the companies to record the sale.
 $\begin{array}{lrrrr}\text { Asset }&\text { Cost }&\text { Acquired }&\text { Sale Price }&\text { Sale Date }\
\mathrm{ABC}, 200 \mathrm{sh} & \$ 168,000 & 1 / 10 / 12 & \$ 200,000 & 4 / 30 / 17 \
\mathrm{JKL}, 100 \mathrm{sh} & 35,000 & 11 / 15 / 16 & 25,000 & 1 / 28 / 17 \
 \mathrm{XYZ}, 50 \mathrm{sh} & 28,000 & 3 / 31 / 15 & 17,000 & 8 / 30 / 17
\end{array}$ a.Complete the following table:
 $\begin{array}{ll}
\text { Asset } & \text { Gain (Loss) } &\text { Short or Long Term }\
\text { ABC } & \
\text { JKL } & \
\mathrm{XYZ} &
\end{array}$ b.Calculate the short-term gain (loss)after netting.
c.Calculate the long-term gain (loss)after netting.
d.What is the resulting gain (loss)to be shown on the return?

Accepted Answer

a.
 @#IMG-DLM& 
b.($

Question 6

A computer used exclusively in a sole proprietor's business is a capital asset.

Accepted Answer

A) True 
 B)False

Question 7

The amount realized from a sale or trade of property is the amount received for the asset minus the basis that will be recognized for tax purposes.

Accepted Answer

A) True 
 B)False

Question 8

Glenn sells a piece of equipment used in his business for $31,500.The equipment was purchased on July 1,2015,at a cost of $22,000.Glenn has taken $6,600 of depreciation on the equipment.What are the amount and classification of the gain on the sale by Glenn?

Accepted Answer

A) $6,600 ordinary income under Section 1245 and $9,500 Section 1231 gain. 
B) $9,500 Section 1231 gain. 
C) $16,100 ordinary income under Section 1245. 
D) $16,100 Section 1231 gain. 
A) $6,600 ordinary income under Section 1245 and $9,500 Section 1231 gain. 
B) $9,500 Section 1231 gain. 
C) $16,100 ordinary income under Section 1245. 
D) $16,100 Section 1231 gain.

Question 9

Short-term capital losses first reduce 28% gains,then 25% gains,and if any loss remains,the 20%,15% or 0% group.

Accepted Answer

A) True 
 B)False

Question 10

Jack purchased 100 shares of Ford stock on April 22,2016.If he sells the stock on April 21,2017,what is the character of the sale?

Accepted Answer

A) If the sale produces a gain,the gain is taxed at preferential rates because the holding period requirement does not apply to stock sales. 
B) If the sale produces a loss,the entire loss can be taken only in the year of the sale because the stock was held for less than one year. 
C) Regardless of whether the sale produces a gain or loss,the transaction qualifies for preferential treatment because the asset sold is stock. 
D) Regardless of whether the sale produces a gain or loss,the transaction does not qualify for preferential treatment because the stock was not held for more than one year. 
A) If the sale produces a gain,the gain is taxed at preferential rates because the holding period requirement does not apply to stock sales. 
B) If the sale produces a loss,the entire loss can be taken only in the year of the sale because the stock was held for less than one year. 
C) Regardless of whether the sale produces a gain or loss,the transaction qualifies for preferential treatment because the asset sold is stock. 
D) Regardless of whether the sale produces a gain or loss,the transaction does not qualify for preferential treatment because the stock was not held for more than one year.

Question 11

A taxpayer can deduct a loss on a security when the market price of the stock is less than the basis at the end of the year.

Accepted Answer

A) True 
 B)False

Question 12

Capital assets are usually defined by the IRC as any asset used for personal or investment purposes and sometimes are defined by the IRC as what they are not.

Accepted Answer

A) True 
 B)False

Question 13

If the taxpayer has capital gain distributions from a mutual fund and no other capital gain transactions for the year,a Schedule D is not required to be prepared.

Accepted Answer

A) True 
 B)False

Question 14

If the taxpayer's aggregate Section 1231 gains for the year exceed aggregate Section 1231 losses for the year,all such gains and losses are considered to be ordinary.

Accepted Answer

A) True 
 B)False

Question 15

Genevieve sold 300 shares of stock on June 13,2017 for $52,400.She purchased the shares on the following dates:
 $\begin{array}{ll}
\text { December } 19,2014 & 130 \text { shares @ } \$ 90 \text { per share } \
\text { February } 13,2015 & 80 \text { shares @ } \$ 80 \text { per share } \
\text { November } 21,2016 & 140 \text { shares @ } \$ 70 \text { per share }
\end{array}$ Assume these shares of stock sold were her only net investment income for 2017.(Round your answer by 2 decimal places. )
a.Determine the amount and character of the recognized gains or losses on the sale of the stock.
b.If Genevieve is in the 33% tax bracket,what is the amount of tax assessed on the sale of the stock considered long term?
c.If Genevieve is in the 15% tax bracket,what is the amount of tax assessed on the sale of the stock considered long term?
d.If Genevieve is in the 39.6% tax bracket,what is the amount of tax assessed on the sale of the stock considered long term?

Accepted Answer

a.$18,580 long term

Question 16

A taxpayer who receives only one form 1099-B from the sales of stock can enter the transaction directly to Schedule D.

Accepted Answer

A) True 
 B)False

Question 17

Dan sold 135 shares (assume 100 are long-term)of Elite Mutual Fund on July 26,2017 for $95 per share and received a 1099-B (box 3 was not checked for basis)to record the sale of the shares.Dan's investment portfolio includes the following purchases of Elite Mutual Fund: $\begin{array}{lr}
\text { May } 20,2014 & 50 \text { shares at } \$ 100 \text { per share } \
\text { March } 29,2015 & 50 \text { shares at } \$ 95 \text { per share } \
\text { August } 21,2016 & 50 \text { shares at } \$ 85 \text { per share } \
\text { February } 22,2017 & 100 \text { shares at } \$ 75 \text { per share }
\end{array}$ In 2017,Dan will recognize:

Accepted Answer

A) no long-term gain or loss and a $333.45 short-term gain. 
B) $315 short-term gain and a $900 long-term gain. 
C) $250 long-term loss and $583.45 short-term gain. 
D) no short-term gain or loss and a $1,215 long-term gain. 
A) no long-term gain or loss and a $333.45 short-term gain. 
B) $315 short-term gain and a $900 long-term gain. 
C) $250 long-term loss and $583.45 short-term gain. 
D) no short-term gain or loss and a $1,215 long-term gain.

Question 18

A taxpayer purchased land in 2008 for $85,000 and sold it in 2017 for $75,000 cash.The buyer also assumed the mortgage of $5,000.What is the amount of gain/loss on the sale of the land?

Accepted Answer

A) $5,000 loss. 
B) $5,000 gain. 
C) $15,000 gain. 
D) $20,000 loss. 
A) $5,000 loss. 
B) $5,000 gain. 
C) $15,000 gain. 
D) $20,000 loss.

Question 19

To qualify as Section 1231 property,the property must be used in a taxpayer's trade or business and must be held for less than one year.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is incorrect regarding the gain or loss from the sale of property received as a gift?

Accepted Answer

A) If the FMV is equal to or more than the donor's adjusted basis,the basis for any gain or loss on a sale is the donor's adjusted basis. 
B) If the FMV is equal to or more than the donor's adjusted basis,the basis for any gain or loss on a sale is the FMV of the asset. 
C) If the FMV is less than the donor's adjusted basis at the time of the gift,the basis for figuring the gain is the donor's basis. 
D) If the FMV is less than the donor's adjusted basis at the time of the gift,the basis for figuring the loss is the FMV of the asset. 
A) If the FMV is equal to or more than the donor's adjusted basis,the basis for any gain or loss on a sale is the donor's adjusted basis. 
B) If the FMV is equal to or more than the donor's adjusted basis,the basis for any gain or loss on a sale is the FMV of the asset. 
C) If the FMV is less than the donor's adjusted basis at the time of the gift,the basis for figuring the gain is the donor's basis. 
D) If the FMV is less than the donor's adjusted basis at the time of the gift,the basis for figuring the loss is the FMV of the asset.

Which one of the following is Section 1231 property?

To figure the gain or loss from the sale of property received as a gift,the donee must know the donor's adjusted basis as well as the FMV at the date of the gift.

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

A computer used exclusively in a sole proprietor's business is a capital asset.

The amount realized from a sale or trade of property is the amount received for the asset minus the basis that will be recognized for tax purposes.

Glenn sells a piece of equipment used in his business for $31,500.The equipment was purchased on July 1,2015,at a cost of $22,000.Glenn has taken $6,600 of depreciation on the equipment.What are the amount and classification of the gain on the sale by Glenn?

Short-term capital losses first reduce 28% gains,then 25% gains,and if any loss remains,the 20%,15% or 0% group.

Jack purchased 100 shares of Ford stock on April 22,2016.If he sells the stock on April 21,2017,what is the character of the sale?

A taxpayer can deduct a loss on a security when the market price of the stock is less than the basis at the end of the year.

Capital assets are usually defined by the IRC as any asset used for personal or investment purposes and sometimes are defined by the IRC as what they are not.

If the taxpayer has capital gain distributions from a mutual fund and no other capital gain transactions for the year,a Schedule D is not required to be prepared.

If the taxpayer's aggregate Section 1231 gains for the year exceed aggregate Section 1231 losses for the year,all such gains and losses are considered to be ordinary.

A taxpayer who receives only one form 1099-B from the sales of stock can enter the transaction directly to Schedule D.

A taxpayer purchased land in 2008 for $85,000 and sold it in 2017 for $75,000 cash.The buyer also assumed the mortgage of $5,000.What is the amount of gain/loss on the sale of the land?

To qualify as Section 1231 property,the property must be used in a taxpayer's trade or business and must be held for less than one year.

Which of the following statements is incorrect regarding the gain or loss from the sale of property received as a gift?

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

Which one of the following is Section 1231 property?

To figure the gain or loss from the sale of property received as a gift,the donee must know the donor's adjusted basis as well as the FMV at the date of the gift.

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

A computer used exclusively in a sole proprietor's business is a capital asset.

The amount realized from a sale or trade of property is the amount received for the asset minus the basis that will be recognized for tax purposes.

Glenn sells a piece of equipment used in his business for $31,500.The equipment was purchased on July 1,2015,at a cost of $22,000.Glenn has taken $6,600 of depreciation on the equipment.What are the amount and classification of the gain on the sale by Glenn?

Short-term capital losses first reduce 28% gains,then 25% gains,and if any loss remains,the 20%,15% or 0% group.

Jack purchased 100 shares of Ford stock on April 22,2016.If he sells the stock on April 21,2017,what is the character of the sale?

A taxpayer can deduct a loss on a security when the market price of the stock is less than the basis at the end of the year.

Capital assets are usually defined by the IRC as any asset used for personal or investment purposes and sometimes are defined by the IRC as what they are not.

If the taxpayer has capital gain distributions from a mutual fund and no other capital gain transactions for the year,a Schedule D is not required to be prepared.

If the taxpayer's aggregate Section 1231 gains for the year exceed aggregate Section 1231 losses for the year,all such gains and losses are considered to be ordinary.

A taxpayer who receives only one form 1099-B from the sales of stock can enter the transaction directly to Schedule D.

A taxpayer purchased land in 2008 for $85,000 and sold it in 2017 for $75,000 cash.The buyer also assumed the mortgage of $5,000.What is the amount of gain/loss on the sale of the land?

To qualify as Section 1231 property,the property must be used in a taxpayer's trade or business and must be held for less than one year.

Which of the following statements is incorrect regarding the gain or loss from the sale of property received as a gift?

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