Question 1

Match each statement with the correct term below.
-Tangible 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. D

Question 2

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 B

Question 3

Mary inherits an interest in Laser Partnership from her Aunt Lillian during 2018. 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. D

Question 4

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 5

John purchases all of the common stock of Clarke Corporation for $280,000. The assets of the corporation are:
?
$$\begin{array} { l r r } 
\text { Asset } & \text { Adjusted Basis } & \text { Fair Market Value } \
\text { Inventory } & \$ 25,000 & \$ 50,000 \
\text { Equipment } & 60,000 & 40,000 \
\text { Supplies } & 20,000 & 20,000 \
\text { Building } & 80,000 & 95,000 \
\text { Land } & 10,000 & 20,000 \
& \$ 195,000 & \$ 225,000
\end{array}$$
What is John's basis in the common stock he acquired?

Accepted Answer

A) $195,000 
B) $215,000 
C) $225,000 
D) $250,000 
E) $280,000 
A) $195,000 
B) $215,000 
C) $225,000 
D) $250,000 
E) $280,000

Question 6

Match each statement with the correct term below.
-Alternate 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

Match each statement with the correct term below.
-Amount realized

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 8

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 9

Determine the proper classification(s) of a house owned and used by Rhonda as her insurance agency office.
I.Personal use property.
IV.Intangible property.
II.Business use property.
V.Real estate.
III.Tangible property.
VI.Personal property.
​

Accepted Answer

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

Question 10

Sarah purchased a diamond bracelet for $3,000 while vacationing in Hong Kong during 2008. Sarah gives the bracelet to her daughter Amy when she graduates from college in 2018. The bracelet is appraised at $8,000 on that date. In October 2018, 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 11

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 12

Janet is the business manager for Greenville Auto Mart. She buys a new car from the dealership for $35,000. The basis of the car to the dealership was $30,000. The car lists for $42,00, but the dealer would sell the car for $40,000. What is Janet's basis in the new car?

Accepted Answer

A) $30,000 
B) $35,000 
C) $40,000 
D) $42,000 
E) $47,000 
A) $30,000 
B) $35,000 
C) $40,000 
D) $42,000 
E) $47,000

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

Buffey operates a delivery service. She purchased a van in 2016 for $25,000, and she sold it in 2018 for $15,000. Buffey did not deduct any depreciation on the van from 2016 through 2018, although total allowable depreciation on the van would have been $17,000. What is the amount of Buffey 's recognized gain or loss on the sale of the van?

Accepted Answer

A) $10,000 loss 
B) $7,000 gain 
C) $8,000 gain 
D) $15,000 gain 
E) $17,000 gain 
A) $10,000 loss 
B) $7,000 gain 
C) $8,000 gain 
D) $15,000 gain 
E) $17,000 gain

Question 15

The general rule for determining the basis of inherited property is that the basis in the hands of the heir is its fair market value at the date of death or at the alternative valuation date.

Accepted Answer

A) True 
 B)False

Question 16

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.
IV.Intangible property.
II.Business use property.
V.Real estate.
III.Tangible property.
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 17

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 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

Which of the following is/are adjustment(s) to the basis of property after the initial basis is determined?
I.Add the costs of protecting ownership of the property.
II.Add the expenditures for painting the company name on the property.
III.Subtract the capital recovery resulting from collections for easements.
IV.Subtract the capital recovery resulting from depreciation deductions.
​

Accepted Answer

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

Question 20

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. What is Dana's basis for depreciation purposes?

Accepted Answer

A) $- 0 - 
B) $19,000 
C) $27,000 
D) The automobile cannot be depreciated. 
A) $- 0 - 
B) $19,000 
C) $27,000 
D) The automobile cannot be depreciated.

Match each statement with the correct term below. -Tangible property

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

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

Match each statement with the correct term below. -Amount realized

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

Determine the proper classification(s) of a house owned and used by Rhonda as her insurance agency office. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

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

Janet is the business manager for Greenville Auto Mart. She buys a new car from the dealership for $35,000. The basis of the car to the dealership was $30,000. The car lists for $42,00, but the dealer would sell the car for $40,000. What is Janet's basis in the new car?

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?

The general rule for determining the basis of inherited property is that the basis in the hands of the heir is its fair market value at the date of death or at the alternative valuation date.

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. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

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.

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

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. What is Dana's basis for depreciation purposes?

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. -Tangible property

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

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

Match each statement with the correct term below. -Amount realized

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

Determine the proper classification(s) of a house owned and used by Rhonda as her insurance agency office. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property. ​

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

Janet is the business manager for Greenville Auto Mart. She buys a new car from the dealership for $35,000. The basis of the car to the dealership was $30,000. The car lists for $42,00, but the dealer would sell the car for $40,000. What is Janet's basis in the new car?

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?

The general rule for determining the basis of inherited property is that the basis in the hands of the heir is its fair market value at the date of death or at the alternative valuation date.

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. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property. ​

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.

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

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. What is Dana's basis for depreciation purposes?

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

Determine the proper classification(s) of a house owned and used by Rhonda as her insurance agency office. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

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. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.