Question 1

All of the following are capital assets with the exception of

Accepted Answer

A) personal residence. 
B) corporate stock held for investment. 
C) equipment used in a trade or business. 
D) a Rembrandt painting held in a private collection. 
A) personal residence. 
B) corporate stock held for investment. 
C) equipment used in a trade or business. 
D) a Rembrandt painting held in a private collection.

Question 2

Brad owns 100 shares of AAA Corporation with a basis of $6,000 and a FMV of $24,000.Brad receives 15 stock rights as a nontaxable distribution with a total FMV of $6,000.Brad allows the stock rights to expire.Brad's loss recognized and the basis of the original 100 shares after expiration of the stock rights is

Accepted Answer

A) $0 and $4,800. 
B) $0 and $6,000. 
C) ($1,200)and $4,800. 
D) ($1,200)and $6,000. 
A) $0 and $4,800. 
B) $0 and $6,000. 
C) ($1,200)and $4,800. 
D) ($1,200)and $6,000.

Question 3

David gave property with a basis of $133,000 to Hannah when the property had a FMV of $100,000 and paid gift taxes of $8,000.If Hannah later sells the property for $140,000,Hannah's basis (to determine gain)in the property immediately before the sale is

Accepted Answer

A) $100,000. 
B) $108,000. 
C) $133,000. 
D) $141,000. 
A) $100,000. 
B) $108,000. 
C) $133,000. 
D) $141,000.

Question 4

If a capital asset held for one year or more is sold at a gain,the gain is classified as long-term capital gain.

Accepted Answer

A) True 
 B)False

Question 5

Sanjay is single and has taxable income of $13,000 without considering the sale of a capital asset in November of 2017 for $15,000.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain is

Accepted Answer

A) $0. 
B) $500. 
C) $1,000. 
D) $1,500. 
A) $0. 
B) $500. 
C) $1,000. 
D) $1,500.

Question 6

Coretta sold the following securities during 2017:   What is Coretta's net capital gain or loss result for the year?

Accepted Answer

A) NSTCL of $3,000 and NLTCG of $15,000 
B) $9,000 ANCG 
C) $0 
D) $12,000 ANCG 
A) NSTCL of $3,000 and NLTCG of $15,000 
B) $9,000 ANCG 
C) $0 
D) $12,000 ANCG

Question 7

Taxpayers who own mutual funds recognize their share of capital gains even if no distributions are received.

Accepted Answer

A) True 
 B)False

Question 8

Michelle purchased her home for $150,000,and subsequently added a garage costing $25,000 and a new porch costing $5,000.Repairs to the home's plumbing cost $1,000.The adjusted basis in the home is

Accepted Answer

A) $150,000. 
B) $151,000. 
C) $180,000. 
D) $181,000. 
A) $150,000. 
B) $151,000. 
C) $180,000. 
D) $181,000.

Question 9

Amanda,whose tax rate is 33%,has NSTCL of $25,000,a $30,000 LTCG from sale of a rare coin held 15 months and a $18,000 LTCG from the sale of stock held for three years.By what amount will Amanda's tax liability increase?

Accepted Answer

A) $3,450 
B) $4,100 
C) $6,440 
D) $7,340 
A) $3,450 
B) $4,100 
C) $6,440 
D) $7,340

Question 10

Donald has retired from his job as a corporate manager.He buys and sells stocks on a daily basis.He spends 8-9 hours daily studying prospective stock purchases and market news.What tax issues should Donald consider?

Accepted Answer

Is Donald an investor or deale

Question 11

If Houston Printing Co.purchases a new printing press during the current year for $30,000,pays sales taxes of $2,000,and pays $1,000 for installation,the cost basis for the printing press is $33,000.

Accepted Answer

A) True 
 B)False

Question 12

Douglas and Julie are a married couple who live in Louisiana,a community property state.They jointly own property with an adjusted basis of $140,000.On December 2 of this year,Julie died when the property had a fair market value of $160,000.Douglas's basis in the property after Julie's death is

Accepted Answer

A) $0. 
B) $140,000. 
C) $150,000. 
D) $160,000. 
A) $0. 
B) $140,000. 
C) $150,000. 
D) $160,000.

Question 13

Jack exchanged land with an adjusted basis of $65,000 subject to a liability of $22,000 for $50,000 (FMV)of stock owned by Hayden.Hayden takes the land subject to the liability.Jack incurs $500 of selling expenses.What is the amount of Jack's realized gain on the exchange?

Accepted Answer

A) ($14,000)loss 
B) ($14,500)loss 
C) $6,500 gain 
D) $7,000 gain 
A) ($14,000)loss 
B) ($14,500)loss 
C) $6,500 gain 
D) $7,000 gain

Question 14

Everest Inc.is a corporation in the 35% marginal tax bracket.It sold two stockholdings this year,resulting in a long-term capital gain of $15,000 on stock A and a short-term capital loss of $5,000 on stock B.What is the extra tax that Everest will pay due to the sales of these stocks?

Accepted Answer

A) $3,500 
B) $1,500 
C) $2,250 
D) $5,250 
A) $3,500 
B) $1,500 
C) $2,250 
D) $5,250

Question 15

A taxpayer sells an asset with a basis of $25,000 to an unrelated party for $28,000.The taxpayer has a realized gain of $3,000.

Accepted Answer

A) True 
 B)False

Question 16

The holding period of property received from a decedent is based on the actual time the property is held by the decedent.

Accepted Answer

A) True 
 B)False

Question 17

Andrea died with an unused capital loss carryover of $3,300.The carryover

Accepted Answer

A) may be carried back three years. 
B) will be fully used on Andrea's final income tax return. 
C) will be inherited by Andrea's heirs. 
D) expires with death. 
A) may be carried back three years. 
B) will be fully used on Andrea's final income tax return. 
C) will be inherited by Andrea's heirs. 
D) expires with death.

Question 18

Losses are generally deductible if incurred in carrying on a trade or business or incurred in an activity engaged in for profit.

Accepted Answer

A) True 
 B)False

Question 19

On July 25,2016,Karen gives stock with a FMV of $7,500 and a basis of $8,000 to her nephew Bill.Karen had purchased the stock on March 18,2016.Bill sold the stock on April 18,2017 for $6,000.As a result of the sale,what must Bill report on his 2016 tax return?

Accepted Answer

A) ($1,500)STCL 
B) ($1,500)LTCL 
C) ($2,000)STCL 
D) ($2,000)LTCL 
A) ($1,500)STCL 
B) ($1,500)LTCL 
C) ($2,000)STCL 
D) ($2,000)LTCL

Question 20

Rita,who has a marginal tax rate of 39.6%,is planning to make a gift to her grandson who is in the lowest tax bracket.Which of the following holdings of stock would be the most tax advantageous gift from Rita's perspective?

Accepted Answer

A)    
B)    
C)    
D) For income tax purposes,Rita will be indifferent as to choice of stock to gift. 
A)    
B)    
C)    
D) For income tax purposes,Rita will be indifferent as to choice of stock to gift.

Exam 21: Property Transactions: Capital Gains and Losses

All of the following are capital assets with the exception of

David gave property with a basis of $133,000 to Hannah when the property had a FMV of $100,000 and paid gift taxes of $8,000.If Hannah later sells the property for $140,000,Hannah's basis (to determine gain)in the property immediately before the sale is

If a capital asset held for one year or more is sold at a gain,the gain is classified as long-term capital gain.

Sanjay is single and has taxable income of $13,000 without considering the sale of a capital asset in November of 2017 for $15,000.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain is

Coretta sold the following securities during 2017: What is Coretta's net capital gain or loss result for the year?

Taxpayers who own mutual funds recognize their share of capital gains even if no distributions are received.

Michelle purchased her home for $150,000,and subsequently added a garage costing $25,000 and a new porch costing $5,000.Repairs to the home's plumbing cost $1,000.The adjusted basis in the home is

Amanda,whose tax rate is 33%,has NSTCL of $25,000,a $30,000 LTCG from sale of a rare coin held 15 months and a $18,000 LTCG from the sale of stock held for three years.By what amount will Amanda's tax liability increase?

Donald has retired from his job as a corporate manager.He buys and sells stocks on a daily basis.He spends 8-9 hours daily studying prospective stock purchases and market news.What tax issues should Donald consider?

If Houston Printing Co.purchases a new printing press during the current year for $30,000,pays sales taxes of $2,000,and pays $1,000 for installation,the cost basis for the printing press is $33,000.

Douglas and Julie are a married couple who live in Louisiana,a community property state.They jointly own property with an adjusted basis of $140,000.On December 2 of this year,Julie died when the property had a fair market value of $160,000.Douglas's basis in the property after Julie's death is

Jack exchanged land with an adjusted basis of $65,000 subject to a liability of $22,000 for $50,000 (FMV)of stock owned by Hayden.Hayden takes the land subject to the liability.Jack incurs $500 of selling expenses.What is the amount of Jack's realized gain on the exchange?

Everest Inc.is a corporation in the 35% marginal tax bracket.It sold two stockholdings this year,resulting in a long-term capital gain of $15,000 on stock A and a short-term capital loss of $5,000 on stock B.What is the extra tax that Everest will pay due to the sales of these stocks?

A taxpayer sells an asset with a basis of $25,000 to an unrelated party for $28,000.The taxpayer has a realized gain of $3,000.

The holding period of property received from a decedent is based on the actual time the property is held by the decedent.

Andrea died with an unused capital loss carryover of $3,300.The carryover

Losses are generally deductible if incurred in carrying on a trade or business or incurred in an activity engaged in for profit.

On July 25,2016,Karen gives stock with a FMV of $7,500 and a basis of $8,000 to her nephew Bill.Karen had purchased the stock on March 18,2016.Bill sold the stock on April 18,2017 for $6,000.As a result of the sale,what must Bill report on his 2016 tax return?

Rita,who has a marginal tax rate of 39.6%,is planning to make a gift to her grandson who is in the lowest tax bracket.Which of the following holdings of stock would be the most tax advantageous gift from Rita's perspective?

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