Question 1

What are arguments for and against preferential treatment of capital gains?

Accepted Answer

Arguments for preferential treatment:1.M

Question 2

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 3

Unless the alternate valuation date is elected,the basis of property received from a decedent is generally the property's fair market value at the date of decedent's death.

Accepted Answer

A) True 
 B)False

Question 4

A building used in a trade or business is a capital asset.

Accepted Answer

A) True 
 B)False

Question 5

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 6

On January 31 of the current year,Sophia pays $1,000 for an option to acquire 100 shares of Texas Corporation common stock for $105 per share at any time prior to December 31.As of December 31 Sophia had not exercised the option or sold it.Which of the following statements is correct?

Accepted Answer

A) Sophia may recognize a $1,000 STCL. 
B) Sophia may recognize a $1,000 LTCL. 
C) Sophia may recognize a $1,000 ordinary income. 
D) Sophia may not recognize a loss. 
A) Sophia may recognize a $1,000 STCL. 
B) Sophia may recognize a $1,000 LTCL. 
C) Sophia may recognize a $1,000 ordinary income. 
D) Sophia may not recognize a loss.

Question 7

Josh purchases a personal residence for $278,000 but subsequently converts the property to rental property when its FMV is $275,000.Assume depreciation of $65,000 has been deducted after conversion to rental use.If Josh sells the property for $280,000,his gain or loss will be

Accepted Answer

A) $2,000 gain. 
B) $5,000 gain. 
C) $67,000 gain. 
D) $70,000 gain. 
A) $2,000 gain. 
B) $5,000 gain. 
C) $67,000 gain. 
D) $70,000 gain.

Question 8

Capitalization of interest is required if debt is incurred to construct real property.

Accepted Answer

A) True 
 B)False

Question 9

Gina owns 100 shares of XYZ common stock with a $12,000 basis and a $25,000 FMV.She receives 100 stock rights with a total FMV of $15,000.Answer the following:
a.What is the basis of the 100 shares of stock?
b.What is the basis of the 100 stock rights?

Accepted Answer

Because the FMV of the stock rights is a

Question 10

Joycelyn gave a diamond necklace to her granddaughter Emma.Joycelyn had purchased the necklace in 1980 for $15,000.The FMV of the necklace at the time of the gift was $44,000.After deducting the annual exclusion,the amount of the gift was $30,000.Gift taxes of $10,000 were paid.What is Emma's adjusted basis in the necklace?

Accepted Answer

A) $15,000 
B) $24,667 
C) $25,000 
D) $44,000 
A) $15,000 
B) $24,667 
C) $25,000 
D) $44,000

Question 11

Mike,a dealer in securities and calendar-year taxpayer,purchased a security for inventory on November 18,2013 for $15,000.The FMV on December 31,2013 was $16,000.The security was sold on December 19,2014 for $16,500.These transactions result in

Accepted Answer

A) $0 ordinary income in 2013; $1,500 ordinary income in 2014. 
B) $0 ordinary income in 2013; $1,500 LTCG in 2014. 
C) $1,000 ordinary income in 2013; $500 LTCG in 2014. 
D) $1,000 ordinary income in 2013; $500 ordinary income in 2014. 
A) $0 ordinary income in 2013; $1,500 ordinary income in 2014. 
B) $0 ordinary income in 2013; $1,500 LTCG in 2014. 
C) $1,000 ordinary income in 2013; $500 LTCG in 2014. 
D) $1,000 ordinary income in 2013; $500 ordinary income in 2014.

Question 12

Nate sold two securities in 2014:   Nate has a 25% marginal tax rate.What is the additional tax resulting from the above sales?

Accepted Answer

A) $150 
B) $200 
C) $300 
D) $400 
A) $150 
B) $200 
C) $300 
D) $400

Question 13

Five different capital gain tax rates could apply to long-term capital assets sold by noncorporate taxpayers.

Accepted Answer

A) True 
 B)False

Question 14

In 2011 Toni purchased 100 shares of common stock in Blue Corporation for $5,280.In 2012,Blue declared a stock dividend of one share of its common stock for each 10 shares held.This year,2014,Blue's common stock split 2 for 1 at a time when the FMV was $80 a share.What is Toni's basis in each of her shares of the Blue Corporation stock if both distributions were tax-free?

Accepted Answer

A) $24 per share 
B) $48 for 110 shares and $0 for all additional shares 
C) $52.80 for 100 shares and $0 for all additional shares 
D) $80 per share 
A) $24 per share 
B) $48 for 110 shares and $0 for all additional shares 
C) $52.80 for 100 shares and $0 for all additional shares 
D) $80 per share

Question 15

Jessica owned 200 shares of OK Corporation with a basis of $12,000 and a FMV of $24,000.Jessica received 20 stock rights as a nontaxable distribution with a total FMV of $8,000.Jessica sold the stock rights for $4,000.Jessica's gain or loss on the sale was

Accepted Answer

A) $1,000. 
B) $3,000. 
C) $4,000. 
D) ($4,000). 
A) $1,000. 
B) $3,000. 
C) $4,000. 
D) ($4,000).

Question 16

Jordan paid $30,000 for equipment two years ago and has claimed total depreciation deductions of $15,600 for the two years.The cost of repairs during the same time period was $2,000 while a major overhaul which extended the life of the equipment cost $7,000.What is Jordan's adjusted basis in the equipment at the end of the two-year period?

Accepted Answer

A) $14,400 
B) $16,400 
C) $21,400 
D) $30,000 
A) $14,400 
B) $16,400 
C) $21,400 
D) $30,000

Question 17

Kathleen received land as a gift from her grandfather.At the time of the gift,the land had a FMV of $105,000 and an adjusted basis of $85,000 to Kathleen's grandfather.The grandfather did not have any gift taxes due. One year later,Kathleen sold the land for $110,000.What was her gain or (loss)on this transaction?

Accepted Answer

A) no gain or loss 
B) ($ 5,000) 
C) $20,000 
D) $25,000 
A) no gain or loss 
B) ($ 5,000) 
C) $20,000 
D) $25,000

Question 18

Edward purchased stock last year as follows:   In April of this year,Edward sells 80 shares for $250.Edward cannot specifically identify the stock sold.The basis for the 80 shares sold is

Accepted Answer

A) $160. 
B) $184. 
C) $216. 
D) $240. 
A) $160. 
B) $184. 
C) $216. 
D) $240.

Question 19

Monte inherited 1,000 shares of Corporation Zero stock from his father who died on March 4 of the current year.His father paid $30 per share for the stock on September 2,2005.The FMV of the stock on the date of death was $50 per share.On September 4 this year,the FMV of the stock was $55 per share.The executor did not elect the alternate valuation date.Monte sold the stock for $65 per share on December 3.What is the amount and nature of any gain or loss?

Accepted Answer

A) $ 10,000 LTCG 
B) $ 35,000 LTCG 
C) $ 15,000 LTCG 
D) $ 15,000 STCG 
A) $ 10,000 LTCG 
B) $ 35,000 LTCG 
C) $ 15,000 LTCG 
D) $ 15,000 STCG

Question 20

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

Exam 10: Property Transactions: Capital Gains and Losses

What are arguments for and against preferential treatment of capital gains?

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

Unless the alternate valuation date is elected,the basis of property received from a decedent is generally the property's fair market value at the date of decedent's death.

A building used in a trade or business is a capital asset.

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

On January 31 of the current year,Sophia pays $1,000 for an option to acquire 100 shares of Texas Corporation common stock for $105 per share at any time prior to December 31.As of December 31 Sophia had not exercised the option or sold it.Which of the following statements is correct?

Josh purchases a personal residence for $278,000 but subsequently converts the property to rental property when its FMV is $275,000.Assume depreciation of $65,000 has been deducted after conversion to rental use.If Josh sells the property for $280,000,his gain or loss will be

Capitalization of interest is required if debt is incurred to construct real property.

Gina owns 100 shares of XYZ common stock with a $12,000 basis and a $25,000 FMV.She receives 100 stock rights with a total FMV of $15,000.Answer the following: a.What is the basis of the 100 shares of stock? b.What is the basis of the 100 stock rights?

Mike,a dealer in securities and calendar-year taxpayer,purchased a security for inventory on November 18,2013 for $15,000.The FMV on December 31,2013 was $16,000.The security was sold on December 19,2014 for $16,500.These transactions result in

Nate sold two securities in 2014: Nate has a 25% marginal tax rate.What is the additional tax resulting from the above sales?

Five different capital gain tax rates could apply to long-term capital assets sold by noncorporate taxpayers.

Jessica owned 200 shares of OK Corporation with a basis of $12,000 and a FMV of $24,000.Jessica received 20 stock rights as a nontaxable distribution with a total FMV of $8,000.Jessica sold the stock rights for $4,000.Jessica's gain or loss on the sale was

Edward purchased stock last year as follows: In April of this year,Edward sells 80 shares for $250.Edward cannot specifically identify the stock sold.The basis for the 80 shares sold is

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.

Tax Research

an Introduction to Taxation

Corporate Formations and Capital Structure

I: Determination of Tax

The Corporate Income Tax

Gross Income: Inclusions

Corporate Nonliquidating Distributions

Gross Income: Exclusions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Deductions and Losses

Corporate Acquisitions and Reorganizations

Itemized Deductions

Consolidated Tax Returns

Losses and Bad Debts

Partnership Formation and Operation

Employee Expenses and Deferred Compensation

Special Partnership Issues

Depreciation cost Recovery amortization and Depletion

S Corporations

Accounting Periods and Methods

The Gift Tax

Property Transactions: Nontaxable Exchanges

The Estate Tax

Property Transactions: Section 1231 and Recapture

Income Taxation of Trusts and Estates

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

Administrative Procedures

Filters