Question 1

Match each statement with the correct term below.
-Realized gain

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 2

Determine the proper classification(s)of the asset discussed in the following scenario: Victoria purchased a new show case saw for her antique business.
I. Personal use property. $ \quad $$ \quad $$ \quad $IV. Intangible property.
II. Business use property. $ \quad $$ \quad $$ \quad $V. Real estate.
III. Tangible property. $ \quad $$ \quad $$ \quad $$ \quad $VI. Personal property.

Accepted Answer

A) Statements I, III and VI are correct. 
B) Statements II and III are correct. 
C) Only statement VI is correct. 
D) Statements II, III, and VI are correct. 
E) Statements II, IV and VI are correct. 
A) Statements I, III and VI are correct. 
B) Statements II and III are correct. 
C) Only statement VI is correct. 
D) Statements II, III, and VI are correct. 
E) Statements II, IV and VI are correct.

Question 3

Sammy buys a 20% interest in Duvall Corporation paying $100,000 cash on January 1,2012.During 2012,Duvall Corporation reports a loss of $60,000 and pays cash dividends to shareholders of $5,000.For 2013,Duvall Corporation has income of $200,000 and pays cash dividends of $40,000.If Duvall Company is organized as an S Corporation,Sammy's basis in the Duvall Corporation stock at the end of 2013 is:

Accepted Answer

A) $ 88,000 
B) $ 89,000 
C) $100,000 
D) $119,000 
E) $128,000 
A) $ 88,000 
B) $ 89,000 
C) $100,000 
D) $119,000 
E) $128,000

Question 4

The split basis rules for business property prevent the deduction of the disallowed personal loss through depreciation or a loss from the sale of business property.

Accepted Answer

A) True 
 B)False

Question 5

Determine the proper classification(s)of the asset discussed in the following scenario: Jack bought a new table saw for his home.
I. Personal use property. $ \quad $$ \quad $$ \quad $IV. Intangible property.
II. Business use property. $ \quad $$ \quad $$ \quad $V. Real estate.
III. Tangible property. $ \quad $$ \quad $$ \quad $$ \quad $VI. Personal property.

Accepted Answer

A) Statements I and III are correct. 
B) Only statement VI is correct. 
C) Statements II and III are correct. 
D) Statements II, III, and VI are correct. 
E) Statements I, III, and VI are correct. 
A) Statements I and III are correct. 
B) Only statement VI is correct. 
C) Statements II and III are correct. 
D) Statements II, III, and VI are correct. 
E) Statements I, III, and VI are correct.

Question 6

Reiko buys 200 shares of Saratoga Corporation common stock on December 10,2012,for $2,000.He buys an additional 200 shares for $1,800 on December 23,2013.On December 28,2013,Reiko sells 100 of the first 200 shares for $800.He sells the remaining 300 shares for $2,500 on November 15,2014.What is(are)the amount(s)and the year of recognition of losses that Reiko can recognize?
$\begin{array}{cc}
\underline{2013} & \underline{2014} \
a.-0- & \$ 200 \
b.-0- & \$ 500 \
c.\$ 200 & \$ 500 \
d.\$ 200 & \$ 300
\end{array}$

Accepted Answer

The answer of Reiko buys 200 shares of Saratoga Corporation...

Question 7

Lu is interested in purchasing the assets of Idaho Potato Chip Company.Idaho's assets are:
$\begin{array}{lcc}
& \underline {\text { Adjusted Basis }}& \underline {\text { Fair Market Value } }\
\text { Cash } & \$ 2,300 & \$ 2,300 \
\text { Inventory } & \$ 16,500 & \$ 19,200 \
\text { Equipment } & \$ 13,000 & \$ 9,000 \
\text { Land } & \$ 10,000 & \$ 40,500 \
\text { Building } &\underline { \$ 76,600} & \underline {\$ 129,000 }\
&\underline { \$ 118,400} & \underline {\$ 200,000} \
\end{array}$
All of the following statements are correct except:

Accepted Answer

A) If Lu pays $225,000 for the assets, Lu's basis in the tangible assets will be $200,000. 
B) If Lu buys the stock of Idaho for $225,000, the basis in the assets wll be $118,400. 
C) If Lu pays $225,000 for the assets, Lu will have a basis in the building of $129,000. 
D) If Lu buys the stock of Idaho for $225,000, he will recognize goodwill, of $25,000. 
A) If Lu pays $225,000 for the assets, Lu's basis in the tangible assets will be $200,000. 
B) If Lu buys the stock of Idaho for $225,000, the basis in the assets wll be $118,400. 
C) If Lu pays $225,000 for the assets, Lu will have a basis in the building of $129,000. 
D) If Lu buys the stock of Idaho for $225,000, he will recognize goodwill, of $25,000.

Question 8

During 2001,Charles purchased 1,000 shares of Ryan Corporation stock for $12,000.On February 22,2013,he sells all the shares for $9,000.On March 15,2013,he repurchases 1,000 shares of Ryan for $8,000 and holds them until May 29,2013,when he sells them for $10,000.What is Charles' recognized gain or loss on the May 29,2013,sale?

Accepted Answer

A) $1,000 loss. 
B) $2,000 gain. 
C) $2,000 loss. 
D) $1,000 gain. 
E) No gain or (loss) recognized 
A) $1,000 loss. 
B) $2,000 gain. 
C) $2,000 loss. 
D) $1,000 gain. 
E) No gain or (loss) recognized

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

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

Accepted Answer

A) True 
 B)False

Question 11

Personal property consists of any property that is held by an individual.

Accepted Answer

A) True 
 B)False

Question 12

Match each statement with the correct term below.
-Realized loss

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 13

Match each statement with the correct term below.
-Adjusted basis

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 14

Terri owns 1,000 shares of Borneo Corporation common stock.On March 31 of the current year,when the stock is trading at $2 per share,Borneo declares a 5% stock dividend with the option to receive $2 cash per dividend share in lieu of taking the dividend shares.The dividend is distributed on April 30.Terri elects to receive the stock shares rather than the cash dividend.What are the tax effects for Terri?
I.Terri's stock dividend is nontaxable.
II.Terri's basis in her new shares is $100.

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 15

On June 10,2012,Akira receives a gift of a rare marble statue with a fair market value of $9,000.The marble statue had an adjusted basis of $12,000 to the donor and was purchased in 2011.Akira sells the marble statue July 5,2013,for $8,000.When does Akira's holding period for the rare marble statue begin?

Accepted Answer

A) It begins in 2011. 
B) It begins in 2013. 
C) It is irrelevant because the transfer was a gift and gifts are always considered to be held long-term. 
D) It depends on whether a gift tax was paid at the time of the gift. 
E) It begins in 2012. 
A) It begins in 2011. 
B) It begins in 2013. 
C) It is irrelevant because the transfer was a gift and gifts are always considered to be held long-term. 
D) It depends on whether a gift tax was paid at the time of the gift. 
E) It begins in 2012.

Question 16

Sanford gives Mitchell 100 shares of stock that cost Sanford $5,000 several years ago.On the date of the gift,the stock is valued at $3,000.Mitchell holds the stock until the value increases and sells it for $4,000.What is Mitchell's recognized gain or loss on the sale?

Accepted Answer

A) No gain or (loss) is recognized 
B) $1,000 loss 
C) $1,000 gain 
D) $2,000 loss 
E) $4,000 gain 
A) No gain or (loss) is recognized 
B) $1,000 loss 
C) $1,000 gain 
D) $2,000 loss 
E) $4,000 gain

Question 17

Valerie receives a painting as a gift from her aunt.The painting is valued at $6,000 on the date of the gift.Valerie's aunt's basis in the painting is $13,000.Three years later Valerie sold the painting for $8,000.What is the amount of gain or (loss)recognized by Valerie on the sale?

Accepted Answer

A) No gain or (loss) is recognized 
B) $5,000 loss 
C) $2,000 gain 
D) $7,000 loss 
E) $2,000 loss 
A) No gain or (loss) is recognized 
B) $5,000 loss 
C) $2,000 gain 
D) $7,000 loss 
E) $2,000 loss

Question 18

Mary inherits an interest in Laser Partnership from her Aunt Lillian during 2013.The fair market value of the interest as of the primary valuation date is $28,000.Aunt Lillian's adjusted basis was $16,000.What is Mary's initial basis and holding period in the partnership interest if she sells the interest seven months after inheriting it?

Accepted Answer

A) $16,000, short-term. 
B) $16,000, long-term. 
C) $28,000, short-term. 
D) $28,000, long-term. 
E) Both depend on whether it is sold at a gain or a loss. 
A) $16,000, short-term. 
B) $16,000, long-term. 
C) $28,000, short-term. 
D) $28,000, long-term. 
E) Both depend on whether it is sold at a gain or a loss.

Question 19

Sarah purchased a diamond bracelet for $3,000 while vacationing in Hong Kong during 2005.Sarah gives the bracelet to her daughter Amy when she graduates from college in 2013.The bracelet is appraised at $8,000 on that date.In October 2013,Amy sells the bracelet for $9,000.What is the amount of gain Amy should recognize on the sale?

Accepted Answer

A) No gain or (loss) is recognized 
B) $1,000 
C) $4,000 
D) $5,000 
E) $6,000 
A) No gain or (loss) is recognized 
B) $1,000 
C) $4,000 
D) $5,000 
E) $6,000

Question 20

Hector receives a gift of rare books valued at $7,000.The books have an adjusted basis of $11,000 to the donor.Several months later,Hector sells the books to a professional collector for $8,000.What is Hector's gain or (loss)on the sale?

Accepted Answer

A) $1,000 gain 
B) $4,000 gain 
C) No gain or loss is recognized 
D) $1,000 loss 
E) $3,000 loss 
A) $1,000 gain 
B) $4,000 gain 
C) No gain or loss is recognized 
D) $1,000 loss 
E) $3,000 loss

Match each statement with the correct term below. -Realized gain

The split basis rules for business property prevent the deduction of the disallowed personal loss through depreciation or a loss from the sale of business property.

Lu is interested in purchasing the assets of Idaho Potato Chip Company.Idaho's assets are: Cash \ 2,300 \ 2,300 Inventory \ 16,500 \ 19,200 Equipment \ 13,000 \ 9,000 Land \ 10,000 \ 40,500 Building All of the following statements are correct except:

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?

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

Personal property consists of any property that is held by an individual.

Match each statement with the correct term below. -Realized loss

Match each statement with the correct term below. -Adjusted basis

Sanford gives Mitchell 100 shares of stock that cost Sanford $5,000 several years ago.On the date of the gift,the stock is valued at $3,000.Mitchell holds the stock until the value increases and sells it for $4,000.What is Mitchell's recognized gain or loss on the sale?

Valerie receives a painting as a gift from her aunt.The painting is valued at $6,000 on the date of the gift.Valerie's aunt's basis in the painting is $13,000.Three years later Valerie sold the painting for $8,000.What is the amount of gain or (loss)recognized by Valerie on the sale?

Hector receives a gift of rare books valued at $7,000.The books have an adjusted basis of $11,000 to the donor.Several months later,Hector sells the books to a professional collector for $8,000.What is Hector's gain or (loss)on the sale?

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

Nonrecognition 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

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Exam 9: Acquisitions of Property

Match each statement with the correct term below. -Realized gain

The split basis rules for business property prevent the deduction of the disallowed personal loss through depreciation or a loss from the sale of business property.

Lu is interested in purchasing the assets of Idaho Potato Chip Company.Idaho's assets are: Cash \ 2,300 \ 2,300 Inventory \ 16,500 \ 19,200 Equipment \ 13,000 \ 9,000 Land \ 10,000 \ 40,500 Building All of the following statements are correct except:

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?

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

Personal property consists of any property that is held by an individual.

Match each statement with the correct term below. -Realized loss

Match each statement with the correct term below. -Adjusted basis

Sanford gives Mitchell 100 shares of stock that cost Sanford $5,000 several years ago.On the date of the gift,the stock is valued at $3,000.Mitchell holds the stock until the value increases and sells it for $4,000.What is Mitchell's recognized gain or loss on the sale?

Valerie receives a painting as a gift from her aunt.The painting is valued at $6,000 on the date of the gift.Valerie's aunt's basis in the painting is $13,000.Three years later Valerie sold the painting for $8,000.What is the amount of gain or (loss)recognized by Valerie on the sale?

Hector receives a gift of rare books valued at $7,000.The books have an adjusted basis of $11,000 to the donor.Several months later,Hector sells the books to a professional collector for $8,000.What is Hector's gain or (loss)on the sale?

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

Nonrecognition 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