Exam 16: Property Transactions: Capital Gains and Losses

Phil's father died on January 10, 2017. The father had owned stock for 20 years with a basis of $45,000 that was transferred to Phil as a gift on August 10, 2016, when the stock was worth $430,000. His father paid no gift taxes. This stock was worth $566,000 at the date of the father's death. Phil sold the stock for $545,000 net of commissions on February 23, 2017. What is the amount and nature of Phil's gain or loss from disposition of this property?

On June 10, 2017, Ebon, Inc. acquired an office building as a result of a like-kind exchange. Ebon had given up a factory building that it had owned for 26 months as part of the like-kind exchange. Which of the statements below is correct?

Carol had the following transactions during 2017: a painting held for two years and sold at a gain of $85,000; 100 shares of Gray stock held six months and sold for a loss of $6,000; 50 shares of Yellow stock held 18 months and sold for a gain of $36,000. Carol also had $264,000 of taxable income from other sources than these property transactions. What is Carol's net capital gain or loss and what is her taxable income?

Short-term capital losses are netted against long-term capital gains and long-term capital losses are netted against short-term capital gains.

Martha has both long-term and short-term 2016 capital gains and losses. The result of netting these gains and losses is a net long-term capital loss. Martha has no qualified dividend income. Also, Martha's 2016 taxable income puts her in the 28% tax bracket. Which of the following is correct?

In 2013, Aaron purchased a classic car that he planned to restore for $12,000. However, Aaron is too busy to work on the car and he gives it to his daughter Ellie in 2017. At this time, the fair market value of the car has declined to $10,000. Aaron paid no gift tax on the transaction. Ellie completes some of the restoration herself with out-of-pocket costs of $5,000. She later sells the car for $30,000. What is Ellie's recognized gain or loss on the sale of the car?

Jambo invented a new flexible cover for a popular brand of cellphone, but did not have the finances to begin production of the cover. Instead, he sold all his rights to the invention (after patenting it) for $450,000 plus $.10 for each cover sold by the company that purchased the patent. Jambo had a zero tax basis for the invention. What is the character of his gain from disposition of the patent?

Hilda lent $2,000 to a close personal friend to help the friend avoid overdrawing the friend's checking account. The friend was supposed to repay the $2,000 within a month. Instead, the friend declared personal bankruptcy and Hilda will never recover any of the $2,000. What are the tax implications of these events for Hilda?

The possible holding periods for capital assets include:

An accrual basis taxpayer accepts a note receivable from a retail customer with a weak credit rating. The taxpayer immediately sells the note to a bank for less than the note's stated value. The taxpayer has an ordinary loss.

The holding period of property given up in a like-kind exchange includes the holding period of the asset received if the property that has been exchanged is a capital asset.

Theresa and Oliver, married filing jointly, and both over 65 years of age, have no dependents. Their 2017 income tax facts are: What is their taxable income for 2017?

A franchisor licenses its mode of business operation to a franchisee.

Which of the following comparisons is correct?

In 2017, an individual taxpayer has $863,000 of taxable income that includes $48,000 of 0%/15%/20% long-term capital gain. Which of the following statements is correct?

Ryan has the following capital gains and losses for 2017: $6,000 STCL, $5,000 28% gain, $2,000 25% gain, and $6,000 0%/15%/20% gain. Which of the following is correct:

When a patent is transferred, the most common forms of payment received by the transferor are a lump sum and/or periodic payment.

In 2017, Satesh has $5,000 short-term capital loss, $13,000 0%/15%/20% long-term capital gain, and $7,000 qualified dividend income. Satesh is single and has other taxable income of $15,000. Which of the following statements is correct?

A business taxpayer sells inventory for $80,000. The adjusted basis of the property is $58,000 at the time of the sale and the inventory had been held more than one year. The taxpayer has:

Tan, Inc., sold a forklift on April 12, 2017, for $8,000 (its FMV) to its 100% shareholder, Ashley. Tan's adjusted basis for the forklift was $12,000. Ashley's holding period for the forklift: