Question 1

Net long-term capital gains receive preferential tax treatment if they exceed net short-term capital losses.

Accepted Answer

A) True 
 B)False

Question 2

On January 31 of this year,Jennifer pays $700 for an option to acquire 100 shares of Lifetime Corporation common stock for $70 per share.Jennifer exercises the option on June 2.Jennifer sells the stock on April 30 of next year for $10,000.Jennifer's basis for the stock immediately before the sale is

Accepted Answer

A) $0. 
B) $700. 
C) $7,000. 
D) $7,700. 
A) $0. 
B) $700. 
C) $7,000. 
D) $7,700.

Question 3

This year,Lauren sold several shares of stock held for investment.The following is a summary of her capital transactions for 2014:   What are the amounts of Lauren's capital gains (losses)for this year?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 4

Renee is single and has taxable income of $480,000 without considering the sale of a capital asset (land held for investment)in September of 2014 for $25,000.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain (without consideration of the additional Medicare tax)is

Accepted Answer

A) $7,920. 
B) $5,600. 
C) $3,000. 
D) $4,000. 
A) $7,920. 
B) $5,600. 
C) $3,000. 
D) $4,000.

Question 5

Terrell and Michelle are married and living in New York,which is a not a community property state.They jointly own property with an adjusted basis of $240,000.On December 2 of this year,Michelle died when the property had a fair market value of $260,000.Terrell's basis in the property after Michelle's death is

Accepted Answer

A) $0. 
B) $240,000. 
C) $250,000. 
D) $260,000. 
A) $0. 
B) $240,000. 
C) $250,000. 
D) $260,000.

Question 6

What type of property should be transferred to heirs at a decedent's death and why? Should estate planning also mean that some property is transferred prior to death? Why?

Accepted Answer

Property transferred at decedent's death

Question 7

On July 25,2013,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 18,2013. Bill sold the stock on April 18,2014 for $6,000.As a result of the sale,what must Bill report on his 2014 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 8

Margaret died on September 16,2014,when she owned securities with a basis of $50,000 and a FMV of $60,000.Caroline inherited the property and sold it on December 19,2014 for $67,000.What is Caroline's reported gain on this sale?

Accepted Answer

A) $7,000 STCG 
B) $7,000 LTCG 
C) $17,000 STCG 
D) $17,000 LTCG 
A) $7,000 STCG 
B) $7,000 LTCG 
C) $17,000 STCG 
D) $17,000 LTCG

Question 9

The initial adjusted basis of property depends upon how the property is acquired.

Accepted Answer

A) True 
 B)False

Question 10

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 11

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.

Question 12

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 13

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 14

Darla sold an antique clock in 2014 for $3,000.She had purchased the clock in 2009 for $2,000.If she is otherwise in the 35% marginal tax bracket,what is the maximum tax rate on the capital gain on the sale of the clock?

Accepted Answer

A) 5% 
B) 15% 
C) 28% 
D) 20% 
A) 5% 
B) 15% 
C) 28% 
D) 20%

Question 15

Antonio is single and has taxable income of $150,000 without considering the sale of a capital asset (land held for investment)in September of 2014 for $25,000.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain (without consideration of the additional Medicare tax)is

Accepted Answer

A) $1,000. 
B) $3,000. 
C) $5,600. 
D) $7,000. 
A) $1,000. 
B) $3,000. 
C) $5,600. 
D) $7,000.

Question 16

The gain or loss on an asset purchased on March 31,2013,and sold on March 31,2014,is classified as short-term.

Accepted Answer

A) True 
 B)False

Question 17

Interest incurred during the development and manufacture of a machine must be capitalized.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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 20

Topaz Corporation had the following income and expenses during the current year:   What is Topaz's taxable income?

Accepted Answer

A) $30,000 
B) $50,000 
C) $52,000 
D) $20,000 
A) $30,000 
B) $50,000 
C) $52,000 
D) $20,000

Exam 10: Property Transactions: Capital Gains and Losses

Net long-term capital gains receive preferential tax treatment if they exceed net short-term capital losses.

This year,Lauren sold several shares of stock held for investment.The following is a summary of her capital transactions for 2014: What are the amounts of Lauren's capital gains (losses)for this year?

What type of property should be transferred to heirs at a decedent's death and why? Should estate planning also mean that some property is transferred prior to death? Why?

On July 25,2013,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 18,2013. Bill sold the stock on April 18,2014 for $6,000.As a result of the sale,what must Bill report on his 2014 tax return?

Margaret died on September 16,2014,when she owned securities with a basis of $50,000 and a FMV of $60,000.Caroline inherited the property and sold it on December 19,2014 for $67,000.What is Caroline's reported gain on this sale?

The initial adjusted basis of property depends upon how the property is acquired.

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

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

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?

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

Darla sold an antique clock in 2014 for $3,000.She had purchased the clock in 2009 for $2,000.If she is otherwise in the 35% marginal tax bracket,what is the maximum tax rate on the capital gain on the sale of the clock?

The gain or loss on an asset purchased on March 31,2013,and sold on March 31,2014,is classified as short-term.

Interest incurred during the development and manufacture of a machine must be capitalized.

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?

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

Topaz Corporation had the following income and expenses during the current year: What is Topaz's taxable income?

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