Exam 10: Property Transactions: Capital Gains and Losses

Normally,a security dealer reports ordinary income on the sale of securities unless it is specifically identified as a security being held for investment.

Sanjay is single and has taxable income of $13,000 without considering the sale of a capital asset in November of 2014 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

Galvin Corporation has owned all of the stock of Rialto Corporation for five years.Rialto Corporation has been actively engaged in manufacturing in Kansas,but it is now bankrupt,and the stock is worthless.Galvin Corporation will recognize a long-term capital loss.

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

Section 1221 specifically states that inventory or property held primarily for sale to customers is not classified as a capital asset of the trade or business.

With regard to taxable gifts after 1976,no gift tax is added to the basis of the property if the donor's basis is greater than the FMV of the property.

Arthur,age 99,holds some stock purchased many years ago for $10,000 which is now worth $100,000. He is trying to plan for the eventual disposition of this stock.Arthur's only remaining family member is his grandson.For income tax purposes,Arthur should

Because of the locked-in effect,high capital gains tax rates may discourage taxpayer's from selling appreciated capital assets.

Antonio owns land held for investment with a basis of $28,000.The city of Lafayette exercises the right of eminent domain and Antonio receives a payment of $48,000.What is Antonio's realized gain?

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

Joy purchased 200 shares of HiLo Mutual Fund on July 15,2009,for $10,500,and has been reinvesting dividends.On December 15,2014,she sells 100 shares. What is the basis for the shares sold assuming (1)FIFO and (2)average cost method?

If the taxpayer's net long-term capital losses exceed the net short-term capital gains,the excess may be offset against ordinary income up to $3,000 per year. Any excess losses over $3,000 may be carried over indefinitely.

DeMarcus and Brianna are married and live in a common law state.They jointly own real property with an adjusted basis of $200,000.When the property has a FMV of $450,000,DeMarcus dies leaving all of the property to Brianna.If she later sells the property for $650,000,what is Brianna's gain on the sale?