Question 1

To be considered a Section 1202 gain,the stock being sold must meet all of the following characteristics except

Accepted Answer

A) the stock must be issued after August 10,1993. 
B) the stock must be held more than five years. 
C) the corporation which issued the stock must be a C corporation. 
D) at least 50% of the value of the corporation's assets must be used in the active conduct of one or more qualified trades or businesses. 
A) the stock must be issued after August 10,1993. 
B) the stock must be held more than five years. 
C) the corporation which issued the stock must be a C corporation. 
D) at least 50% of the value of the corporation's assets must be used in the active conduct of one or more qualified trades or businesses. D

Question 2

A taxpayer reports capital gains and losses on

Accepted Answer

A) Schedule D of Form 1040. 
B) Form 8949. 
C) Schedule D of Form 1040 and Form 8949. 
D) None of the above. 
A) Schedule D of Form 1040. 
B) Form 8949. 
C) Schedule D of Form 1040 and Form 8949. 
D) None of the above. C

Question 3

A nonbusiness bad debt is deductible only in the year in which the debt becomes totally worthless.

Accepted Answer

A) True 
 B)False  True

Question 4

Bob owns 100 shares of ACT Corporation common stock with a basis of $3,500 and a FMV of $12,000.Bob receives 10 stock rights as a nontaxable distribution,and no basis is allocated to the stock rights.With each stock right,Bob may acquire one share of stock for $25.Bob exercises all 10 stock rights.The total basis of the newly acquired stock is

Accepted Answer

A) $ 0. 
B) $ 250. 
C) $ 350. 
D) $1,200. 
A) $ 0. 
B) $ 250. 
C) $ 350. 
D) $1,200.

Question 5

Which one of the following does not affect the adjusted basis of a house held as rental property?

Accepted Answer

A) depreciation deduction 
B) adding a new room to the house 
C) painting of more than 50% of the rooms in the home 
D) installation of a completely new heating system 
A) depreciation deduction 
B) adding a new room to the house 
C) painting of more than 50% of the rooms in the home 
D) installation of a completely new heating system

Question 6

If the shares of stock sold or exchanged are not specifically identified,the FIFO (first-in,first-out)method of identification must be used.

Accepted Answer

A) True 
 B)False

Question 7

On January 31 of this year,Mallory pays $800 for an option to acquire 100 shares of Mesa Corporation common stock for $85 per share.As a result of an increase in the market value of the Mesa stock,the market price of the option increases and Mallory sells the option for $1,000 on August 4.As a result of the sale,Mallory must recognize

Accepted Answer

A) $200 STCG. 
B) $800 STCG. 
C) $200 ordinary income. 
D) $800 ordinary income. 
A) $200 STCG. 
B) $800 STCG. 
C) $200 ordinary income. 
D) $800 ordinary income.

Question 8

Mr.Dennis purchased a machine for use in his business.Mr.Dennis' costs in connection with this purchase were as follows:   What is the amount of Mr.Dennis' basis in the machine?

Accepted Answer

A) $33,000 
B) $40,400 
C) $41,900 
D) $46,100 
A) $33,000 
B) $40,400 
C) $41,900 
D) $46,100

Question 9

Dale gave property with a basis of $16,000 to Sarah when it had a FMV of $12,000.No gift taxes were due.Sarah later sold the property for $22,000 resulting in a recognized gain of

Accepted Answer

A) $0. 
B) $4,000. 
C) $6,000. 
D) $12,000. 
A) $0. 
B) $4,000. 
C) $6,000. 
D) $12,000.

Question 10

All realized gains and losses are recognized for tax purposes.

Accepted Answer

A) True 
 B)False

Question 11

For purposes of calculating depreciation,property converted from personal use to business use will take on a basis equal to the greater of its FMV or its adjusted basis on the date of the conversion.

Accepted Answer

A) True 
 B)False

Question 12

Maya expects to report about $2 million of AGI and $1.7 million of taxable income.Her AGI is composed of $1.25 million of salary,and the balance is investment income.Maya is thinking about selling some stock before year-end.She purchased the stock three years ago and expects to recognize a $500,000 gain.How much federal tax will she pay in total on the stock gain?

Accepted Answer

A) $119,000 
B) $100,000 
C) $75,000 
D) $198,000 
A) $119,000 
B) $100,000 
C) $75,000 
D) $198,000

Question 13

Expenditures which do not add to the value or prolong the life of property may be expensed in the year in which they are incurred.

Accepted Answer

A) True 
 B)False

Question 14

Unlike an individual taxpayer,the corporate taxpayer does not utilize the 25% and 28% specialty capital gain rates,but it does apply the 15% tax rate to adjusted net capital gain.

Accepted Answer

A) True 
 B)False

Question 15

The taxable portion of a gain from qualified small business stock is taxed at a top tax rate of

Accepted Answer

A) 15%. 
B) 18%. 
C) 20%. 
D) 28%. 
A) 15%. 
B) 18%. 
C) 20%. 
D) 28%.

Question 16

In the current year,ABC Corporation had the following items of income,expense,gains,and losses:   What is taxable income for the year?

Accepted Answer

A) $135,000 
B) $141,000 
C) $144,000 
D) $150,000 
A) $135,000 
B) $141,000 
C) $144,000 
D) $150,000

Question 17

Joy purchased 200 shares of HiLo Mutual Fund on July 15,2013,for $10,500,and has been reinvesting dividends.On December 15,2017,she sells 100 shares.
   What is the basis for the shares sold assuming (1)FIFO and (2)average cost method?

Accepted Answer

Assuming FIFO,the basis in the

Question 18

If a nontaxable stock dividend is received and is not the same type of stock as that owned before the dividend,the original stock's basis is allocated to all shares

Accepted Answer

A) based on the par value of the stock. 
B) equally to all shares owned after the stock dividend. 
C) based on relative fair market values at the time of the stock dividend. 
D) None of the above. 
A) based on the par value of the stock. 
B) equally to all shares owned after the stock dividend. 
C) based on relative fair market values at the time of the stock dividend. 
D) None of the above.

Question 19

In a community property state,jointly owned property left to the surviving spouse will have a basis after the estate is settled equal to

Accepted Answer

A) the decedent's basis before death. 
B) the total fair market value of the entire property at the date of death (if the alternative valuation date was not elected). 
C) half of the fair market value of the entire property at the date of death (if the alternative valuation date was not elected). 
D) half of the basis just before death,plus half of the fair market value at the date of death (if the alternative valuation date was not elected). 
A) the decedent's basis before death. 
B) the total fair market value of the entire property at the date of death (if the alternative valuation date was not elected). 
C) half of the fair market value of the entire property at the date of death (if the alternative valuation date was not elected). 
D) half of the basis just before death,plus half of the fair market value at the date of death (if the alternative valuation date was not elected).

Question 20

Will exchanges a building with a basis of $35,000,and subject to a liability of $30,000,for land with a FMV of $50,000 owned by Jane.Jane takes the land subject to the liability.The amount realized by Will is

Accepted Answer

A) $30,000. 
B) $35,000. 
C) $50,000. 
D) $80,000. 
A) $30,000. 
B) $35,000. 
C) $50,000. 
D) $80,000.

Exam 21: Property Transactions: Capital Gains and Losses

To be considered a Section 1202 gain,the stock being sold must meet all of the following characteristics except

A taxpayer reports capital gains and losses on

A nonbusiness bad debt is deductible only in the year in which the debt becomes totally worthless.

Which one of the following does not affect the adjusted basis of a house held as rental property?

If the shares of stock sold or exchanged are not specifically identified,the FIFO (first-in,first-out)method of identification must be used.

Mr.Dennis purchased a machine for use in his business.Mr.Dennis' costs in connection with this purchase were as follows: What is the amount of Mr.Dennis' basis in the machine?

Dale gave property with a basis of $16,000 to Sarah when it had a FMV of $12,000.No gift taxes were due.Sarah later sold the property for $22,000 resulting in a recognized gain of

All realized gains and losses are recognized for tax purposes.

For purposes of calculating depreciation,property converted from personal use to business use will take on a basis equal to the greater of its FMV or its adjusted basis on the date of the conversion.

Expenditures which do not add to the value or prolong the life of property may be expensed in the year in which they are incurred.

Unlike an individual taxpayer,the corporate taxpayer does not utilize the 25% and 28% specialty capital gain rates,but it does apply the 15% tax rate to adjusted net capital gain.

The taxable portion of a gain from qualified small business stock is taxed at a top tax rate of

In the current year,ABC Corporation had the following items of income,expense,gains,and losses: What is taxable income for the year?

Joy purchased 200 shares of HiLo Mutual Fund on July 15,2013,for $10,500,and has been reinvesting dividends.On December 15,2017,she sells 100 shares. What is the basis for the shares sold assuming (1)FIFO and (2)average cost method?

If a nontaxable stock dividend is received and is not the same type of stock as that owned before the dividend,the original stock's basis is allocated to all shares

In a community property state,jointly owned property left to the surviving spouse will have a basis after the estate is settled equal to

Will exchanges a building with a basis of $35,000,and subject to a liability of $30,000,for land with a FMV of $50,000 owned by Jane.Jane takes the land subject to the liability.The amount realized by Will is

Tax Research

Corporate Formations and Capital Structure

the Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Ustaxation of Foreign-Related Transactions

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters