Question 1

Match each statement with the correct term below.
-Direct purchase

Accepted Answer

A) Begins on the day after acquisition and ends on the day of disposition. 
B) The initial investment in an asset. 
C) An asset's basis transfers from one owner to another. 
D) The capital investment remaining in an asset at the date of its disposition. 
E) Sales price less expenses of disposition.
F)A purchase of all of the assets of a business.
G)Amount realized is less than adjusted basis.
H)A purchase of all of the assets of a business by buying the stock of a corporation.
I)A term used to identify a situation in which an asset has a different basis for determining gain than for determining loss.
J)The date of death used to value a decedent's estate in the absence of any special election.
K)Six months after the date of death, used to value a decedent's estate when the executor of the estate makes election.
L)Amount realized is greater than adjusted basis. 
A) Begins on the day after acquisition and ends on the day of disposition. 
B) The initial investment in an asset. 
C) An asset's basis transfers from one owner to another. 
D) The capital investment remaining in an asset at the date of its disposition. 
E) Sales price less expenses of disposition.
F)A purchase of all of the assets of a business.
G)Amount realized is less than adjusted basis.
H)A purchase of all of the assets of a business by buying the stock of a corporation.
I)A term used to identify a situation in which an asset has a different basis for determining gain than for determining loss.
J)The date of death used to value a decedent's estate in the absence of any special election.
K)Six months after the date of death, used to value a decedent's estate when the executor of the estate makes election.
L)Amount realized is greater than adjusted basis. F

Question 2

Juan and Dorothy purchase a new residence on May 1,2016.Juan and Dorothy pay the full amount of the 2016 property taxes of $7,200 on their new house when the taxes became due in December of 2016.What amount of the taxes that Juan and Dorothy pay in December 2016 can they deduct on their 2016 tax return?

Accepted Answer

A) Zero, no amount is deductible. 
B) $2,400 
C) $4,800 
D) $7,200 
A) Zero, no amount is deductible. 
B) $2,400 
C) $4,800 
D) $7,200 C

Question 3

Nanci purchases all of the assets of Michael's Security Service for $200,000.The assets are as follows:   ​
What is Nanci's basis in the equipment?

Accepted Answer

A) $17,776 
B) $35,556 
C) $40,000 
D) $60,000 
E) $61,538 
A) $17,776 
B) $35,556 
C) $40,000 
D) $60,000 
E) $61,538 B

Question 4

Kim owns a truck that cost $35,000 several years ago.After using it personally for two years,she converts the truck to business use when the truck's fair market value is $20,000.She uses the truck in her business and appropriately deducts $5,000 in depreciation.Then,she sells the truck for $42,000.What is Kim's recognized gain or loss on the sale?

Accepted Answer

A) No gain or loss 
B) $12,000 gain 
C) $27,000 gain 
D) $32,000 gain 
E) $ 7,000 gain 
A) No gain or loss 
B) $12,000 gain 
C) $27,000 gain 
D) $32,000 gain 
E) $ 7,000 gain

Question 5

Ludwig died on April 5,2016.As part of his will,he leaves land for which he paid $6,000 on December 31,2015,to his son Don.On April 5,2016,the land is worth $11,000.However,due to local real estate conditions,the land declines in value.On July 28 it is worth only $10,000; it declines further to $9,000 on October 5 and plunges to $7,000 on December 18.
I.In the absence of any special elections,Don's basis in the land is $11,000.
II.If the executor elects the alternate valuation date and distributes the land to Don on July 28,Don's basis in the land will be $9,000.
III.If the executor elects the alternate valuation date and distributes the land to Don on December 18,Don's basis will be $7,000.
IV.In the absence of any special elections,if the executor distributes the land to Don on October 5,Don's basis in the land will be $9,000.
​

Accepted Answer

A) Only I is correct. 
B) I and II are correct. 
C) I, II and IV are correct. 
D) I and IV are correct. 
E) All the statements are correct. 
A) Only I is correct. 
B) I and II are correct. 
C) I, II and IV are correct. 
D) I and IV are correct. 
E) All the statements are correct.

Question 6

Match each statement with the correct term below.
-Primary valuation date

Accepted Answer

A) Begins on the day after acquisition and ends on the day of disposition. 
B) The initial investment in an asset. 
C) An asset's basis transfers from one owner to another. 
D) The capital investment remaining in an asset at the date of its disposition. 
E) Sales price less expenses of disposition.
F)A purchase of all of the assets of a business.
G)Amount realized is less than adjusted basis.
H)A purchase of all of the assets of a business by buying the stock of a corporation.
I)A term used to identify a situation in which an asset has a different basis for determining gain than for determining loss.
J)The date of death used to value a decedent's estate in the absence of any special election.
K)Six months after the date of death, used to value a decedent's estate when the executor of the estate makes election.
L)Amount realized is greater than adjusted basis. 
A) Begins on the day after acquisition and ends on the day of disposition. 
B) The initial investment in an asset. 
C) An asset's basis transfers from one owner to another. 
D) The capital investment remaining in an asset at the date of its disposition. 
E) Sales price less expenses of disposition.
F)A purchase of all of the assets of a business.
G)Amount realized is less than adjusted basis.
H)A purchase of all of the assets of a business by buying the stock of a corporation.
I)A term used to identify a situation in which an asset has a different basis for determining gain than for determining loss.
J)The date of death used to value a decedent's estate in the absence of any special election.
K)Six months after the date of death, used to value a decedent's estate when the executor of the estate makes election.
L)Amount realized is greater than adjusted basis.

Question 7

Taxpayers who construct property for their own use must capitalize both the direct and indirect construction costs.

Accepted Answer

A) True 
 B)False

Question 8

Courtney is interested in purchasing The Matrix Company.Matrix's assets are:   ​
​
I.If Courtney buys the stock of The Matrix for $225,000,the total basis in the assets will be $200,000.
II.If Courtney pays Matrix $240,000 for the Matrix assets,Courtney's total basis in all of the assets of the business will be $123,400.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 9

Jenny purchased 1,000 shares of Hewlett Corporation preferred stock for $66,000 two years ago.During the current year,Jenny receives a 10% nontaxable stock dividend at a time when the stock has a fair market value of $40.What is Jenny's basis in the stock dividend shares?

Accepted Answer

A) $- 0 - 
B) $6,000 
C) $6,600 
D) $8,000 
E) $8,800 
A) $- 0 - 
B) $6,000 
C) $6,600 
D) $8,000 
E) $8,800

Question 10

Dana purchases an automobile for personal use for $27,000.After using it for three years,Dana converts the automobile to business use when the fair market value is $19,000.After a few months of business use,Dana sells the automobile for $18,000.What is the amount of gain or loss recognized on the sale of the automobile?

Accepted Answer

A) No gain or loss 
B) $1,000 loss 
C) $8,000 loss 
D) $9,000 loss 
E) $8,000 gain 
A) No gain or loss 
B) $1,000 loss 
C) $8,000 loss 
D) $9,000 loss 
E) $8,000 gain

Question 11

Melonie purchased 100 shares of Wake Corporation stock for $6 per share on August 3,2014.On December 18,2015,Melonie sells all 100 shares for $4 per share.On January 5,2016,Melonie purchases 50 shares of Wake stock for $5 per share.What is the basis of the 50 shares Melonie holds on January 5,2016?

Accepted Answer

A) - 0 - 
B) $50 
C) $250 
D) $450 
E) $650 
A) - 0 - 
B) $50 
C) $250 
D) $450 
E) $650

Question 12

Phyllis purchased an automobile for $3,000 down and a note for $15,000.During the year she paid interest of $1,000.Her basis is $18,000.

Accepted Answer

A) True 
 B)False

Question 13

On February 3 of the current year,Caroline converts her house to a rental property.Caroline's adjusted basis in the house is $120,000 and the fair market value is $150,000 on the date of conversion.What is Caroline's adjusted basis in the rental property for depreciation purposes?

Accepted Answer

A) $30,000 
B) $120,000 
C) $150,000 
D) $170,000 
E) $180,000 
A) $30,000 
B) $120,000 
C) $150,000 
D) $170,000 
E) $180,000

Question 14

Mitaya purchased 500 shares of Sundown Inc.,common stock on December 13,2014,at a cost of $3,600.She paid a commission of $150 on the purchase.On February 18,2015,she received 250 shares of Sundown Inc.,common stock as a tax-free dividend.Mitaya sells 600 shares for $3,700 on January 8,2016,and pays a $100 commission on the sale.Mitaya's gain (loss)on the sale is characterized as:

Accepted Answer

A) Long-term capital gain of $600. 
B) Long-term capital gain of $500; short-term capital gain of $100. 
C) Long-term capital gain of $100; short-term capital gain of $500. 
D) Short-term capital gain of $600. 
A) Long-term capital gain of $600. 
B) Long-term capital gain of $500; short-term capital gain of $100. 
C) Long-term capital gain of $100; short-term capital gain of $500. 
D) Short-term capital gain of $600.

Question 15

Mary pays $25,000 and secures a mortgage note for $75,000 to purchase a vacation home.She pays $200 to her attorney for reviewing the purchase agreement and $1,500 in points to the mortgage company.Mary's initial basis in the vacation home is

Accepted Answer

A) $- 0 - 
B) $25,000 
C) $26,700 
D) $100,200 
E) $101,700 
A) $- 0 - 
B) $25,000 
C) $26,700 
D) $100,200 
E) $101,700

Question 16

Match each statement with the correct term below.
-Mixed-use property

Accepted Answer

A) Land and structures permanently attached to land. 
B) Property that lacks a physical existence. 
C) Property that is used by the taxpayer for purely personal purposes. 
D) Any property that has form, shape, and substance. 
E) Property with a physical existence that is not real estate.
F)A single property used in more than one category. 
A) Land and structures permanently attached to land. 
B) Property that lacks a physical existence. 
C) Property that is used by the taxpayer for purely personal purposes. 
D) Any property that has form, shape, and substance. 
E) Property with a physical existence that is not real estate.
F)A single property used in more than one category.

Question 17

Tony receives an automobile from his uncle,Ned,as a graduation gift.Ned used the vehicle only for commuting to his office during the 3 years he owned it.Ned paid $20,000 for the vehicle.It is valued at $8,000 on the date of the gift.Tony will use the automobile 100% of the time for his business.Determine Tony's basis in the automobile for depreciation purposes.Explain your answer in terms of the concepts of taxation.

Accepted Answer

Since the fair market value is less than

Question 18

Intangible property lacks a physical existence; the rights exist only because of economic rights the property possesses.

Accepted Answer

A) True 
 B)False

Question 19

When a stock dividend is nontaxable,part of the basis of the original stock must be allocated to the new stock received as a dividend.

Accepted Answer

A) True 
 B)False

Question 20

Lydia purchased a sapphire bracelet for $3,000 while vacationing in Hong Kong during 2005.Lydia gives the bracelet to her daughter Amy when she graduates from college in 2016.The bracelet is appraised at $8,000 on that date.In October 2016,Amy sells the bracelet for $9,000.How is Amy's holding period for the bracelet determined?

Accepted Answer

A) It depends on whether a gift tax was paid at the time of the gift. 
B) It begins in 2005. 
C) It begins in 2015. 
D) It is irrelevant because the transfer was a gift and gifts are always considered to be held long-term. 
A) It depends on whether a gift tax was paid at the time of the gift. 
B) It begins in 2005. 
C) It begins in 2015. 
D) It is irrelevant because the transfer was a gift and gifts are always considered to be held long-term.

Match each statement with the correct term below. -Direct purchase

Nanci purchases all of the assets of Michael's Security Service for $200,000.The assets are as follows: What is Nanci's basis in the equipment?

Match each statement with the correct term below. -Primary valuation date

Taxpayers who construct property for their own use must capitalize both the direct and indirect construction costs.

Jenny purchased 1,000 shares of Hewlett Corporation preferred stock for $66,000 two years ago.During the current year,Jenny receives a 10% nontaxable stock dividend at a time when the stock has a fair market value of $40.What is Jenny's basis in the stock dividend shares?

Melonie purchased 100 shares of Wake Corporation stock for $6 per share on August 3,2014.On December 18,2015,Melonie sells all 100 shares for $4 per share.On January 5,2016,Melonie purchases 50 shares of Wake stock for $5 per share.What is the basis of the 50 shares Melonie holds on January 5,2016?

Phyllis purchased an automobile for $3,000 down and a note for $15,000.During the year she paid interest of $1,000.Her basis is $18,000.

On February 3 of the current year,Caroline converts her house to a rental property.Caroline's adjusted basis in the house is $120,000 and the fair market value is $150,000 on the date of conversion.What is Caroline's adjusted basis in the rental property for depreciation purposes?

Mary pays $25,000 and secures a mortgage note for $75,000 to purchase a vacation home.She pays $200 to her attorney for reviewing the purchase agreement and $1,500 in points to the mortgage company.Mary's initial basis in the vacation home is

Match each statement with the correct term below. -Mixed-use property

Intangible property lacks a physical existence; the rights exist only because of economic rights the property possesses.

When a stock dividend is nontaxable,part of the basis of the original stock must be allocated to the new stock received as a dividend.

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Cost Recovery on Property: Depreciation, depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Exam 9: Acquisitions of Property

Match each statement with the correct term below. -Direct purchase

Nanci purchases all of the assets of Michael's Security Service for $200,000.The assets are as follows: ​ What is Nanci's basis in the equipment?

Match each statement with the correct term below. -Primary valuation date

Taxpayers who construct property for their own use must capitalize both the direct and indirect construction costs.

Jenny purchased 1,000 shares of Hewlett Corporation preferred stock for $66,000 two years ago.During the current year,Jenny receives a 10% nontaxable stock dividend at a time when the stock has a fair market value of $40.What is Jenny's basis in the stock dividend shares?

Melonie purchased 100 shares of Wake Corporation stock for $6 per share on August 3,2014.On December 18,2015,Melonie sells all 100 shares for $4 per share.On January 5,2016,Melonie purchases 50 shares of Wake stock for $5 per share.What is the basis of the 50 shares Melonie holds on January 5,2016?

Phyllis purchased an automobile for $3,000 down and a note for $15,000.During the year she paid interest of $1,000.Her basis is $18,000.

On February 3 of the current year,Caroline converts her house to a rental property.Caroline's adjusted basis in the house is $120,000 and the fair market value is $150,000 on the date of conversion.What is Caroline's adjusted basis in the rental property for depreciation purposes?

Mary pays $25,000 and secures a mortgage note for $75,000 to purchase a vacation home.She pays $200 to her attorney for reviewing the purchase agreement and $1,500 in points to the mortgage company.Mary's initial basis in the vacation home is

Match each statement with the correct term below. -Mixed-use property

Intangible property lacks a physical existence; the rights exist only because of economic rights the property possesses.

When a stock dividend is nontaxable,part of the basis of the original stock must be allocated to the new stock received as a dividend.

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Cost Recovery on Property: Depreciation, depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Nanci purchases all of the assets of Michael's Security Service for $200,000.The assets are as follows: What is Nanci's basis in the equipment?