Question 1

When a Section 1231 asset is sold,the gain can be either classified as an ordinary or capital gain.

Accepted Answer

A) True 
 B)False

Question 2

In general,the basis of property purchased is the cost of the asset including cash,debt obligations,and other property or services included in acquiring the asset.

Accepted Answer

A) True 
 B)False

Question 3

Inventory on hand at the end of the year is Section 1231 property.

Accepted Answer

A) True 
 B)False

Question 4

Patty and Rich,married filing jointly,have $385,000 in MAGI and $90,000 of net investment income NII).They will pay a surtax of:

Accepted Answer

A) $0. 
B) $3,420. 
C) $5,130. 
D) $1,710. 
A) $0. 
B) $3,420. 
C) $5,130. 
D) $1,710.

Question 5

Tamiko buys a painting from a collector for resale in her gallery for $4,500.She sold it 15 months later for $6,500.What are the nature and amount of the gain on the sale of the painting?

Accepted Answer

A) $2,000 gain subject to 28% collectibles tax rate. 
B) $2,000 Section 1231 gain. 
C) $2,000 Section 1245 gain. 
D) $2,000 ordinary income. 
A) $2,000 gain subject to 28% collectibles tax rate. 
B) $2,000 Section 1231 gain. 
C) $2,000 Section 1245 gain. 
D) $2,000 ordinary income.

Question 6

Which of the following statements is correct regarding the sale of ordinary assets?

Accepted Answer

A) the sale of business property held for more than a year is a sale of an ordinary asset. 
B) the sale of inventory for a profit is considered to be a sale of an ordinary asset. 
C) the sale of any business property regardless of holding period is a sale of an ordinary asset. 
D) the sale of an asset outside the normal course of a trade or business is a sale of an ordinary asset. 
A) the sale of business property held for more than a year is a sale of an ordinary asset. 
B) the sale of inventory for a profit is considered to be a sale of an ordinary asset. 
C) the sale of any business property regardless of holding period is a sale of an ordinary asset. 
D) the sale of an asset outside the normal course of a trade or business is a sale of an ordinary asset.

Question 7

Amal gave his sister,Dora,100 shares of stock on April 3,2015.Amal originally paid $3,100 for the stock on January 5,2015.At the date of the gift,the fair market value of the stock was $2,800.If no gift tax is paid and Dora sells the stock for $2,700 on August 31,2016,she will recognize:

Accepted Answer

A) a short term capital loss. 
B) a long-term loss. 
C) an ordinary loss. 
D) no loss on the sale of stock given as a gift. 
A) a short term capital loss. 
B) a long-term loss. 
C) an ordinary loss. 
D) no loss on the sale of stock given as a gift.

Question 8

Norman received shares of stock as a gift from his uncle in 2014.At the time of the gift,the stock had a FMV of $5,000.The uncle purchased the stock in 2012 and had a basis of $6,000.If Norman sells the stock for $7,000 in 2016,he will report a:

Accepted Answer

A) $2,000 capital gain. 
B) $2,000 ordinary gain. 
C) $1,000 capital gain. 
D) $1,000 ordinary gain. 
A) $2,000 capital gain. 
B) $2,000 ordinary gain. 
C) $1,000 capital gain. 
D) $1,000 ordinary gain.

Question 9

The taxpayer always reports a worthless security as a long-term capital loss in the year the security becomes worthless.

Accepted Answer

A) True 
 B)False

Question 10

Shanstella bought a 4-unit apartment building in July 2007 for $360,000 and sold it for $480,000 in 2016.There was $96,541 of accumulated straight-line depreciation on the apartment building.Assuming that Shanstella is in the 33% tax bracket,how much of her gain is taxed at 25%?

Accepted Answer

A) $120,000. 
B) $216,541. 
C) $96,541. 
D) $0. 
A) $120,000. 
B) $216,541. 
C) $96,541. 
D) $0.

Question 11

The amount realized from a sale or trade of property is the amount received for the asset minus the basis that will be recognized for tax purposes.

Accepted Answer

A) True 
 B)False

Question 12

Jack purchased 100 shares of Ford stock on April 22,2015.If he sells the stock on April 21,2016,what is the character of the sale?

Accepted Answer

A) If the sale produces a gain,the gain is taxed at preferential rates because the holding period requirement does not apply to stock sales. 
B) Regardless of whether the sale produces a gain or loss,the transaction qualifies for preferential treatment because the asset sold is stock. 
C) If the sale produces a loss,the entire loss can be taken only in the year of the sale because the stock was held for less than one year. 
D) Regardless of whether the sale produces a gain or loss,the transaction does not qualify for preferential treatment because the stock was not held for more than one year. 
A) If the sale produces a gain,the gain is taxed at preferential rates because the holding period requirement does not apply to stock sales. 
B) Regardless of whether the sale produces a gain or loss,the transaction qualifies for preferential treatment because the asset sold is stock. 
C) If the sale produces a loss,the entire loss can be taken only in the year of the sale because the stock was held for less than one year. 
D) Regardless of whether the sale produces a gain or loss,the transaction does not qualify for preferential treatment because the stock was not held for more than one year.

Question 13

Geraldine inherited a piece of land when her father Albert died on July 26,2015 The FMV of the land at the date of death was $40,000 and cost Albert $20,000 in 2009.Geraldine sold the land on March 29,2016 for $45,000.What are the amount and nature of the gain on the sale?

Accepted Answer

A) $25,000 ordinary gain. 
B) $25,000 capital gain. 
C) $5,000 capital gain. 
D) $5,000 ordinary gain. 
A) $25,000 ordinary gain. 
B) $25,000 capital gain. 
C) $5,000 capital gain. 
D) $5,000 ordinary gain.

Question 14

Demetrius had a $4,000 short-term loss and a $3,000 long-term gain from a collectible,a $2,000 gain from Section 1250 unrecaptured property.What is the netting effect of these gains and losses on his 1040?

Accepted Answer

A) $2,000 short-term loss is offset against the Section 1250 property first,then the remaining $2,000 against the collectible gain leaving $1,000 taxed at 28%. 
B) As each of these gains and losses are taxed at different rates,there is no netting of short-term and long-term gains or losses. 
C) $4,000 short-term loss is offset against the $3,000 collectible first,then the remaining $1,000 against the Section 1250 property,with a $1,000 gain taxed at 25%. 
D) The $4,000 short-term loss is allowed to be taken in total as an ordinary loss,and the net long-term gain of $5,000 is added to his 1040 and taxed at 0%,15%,or 20% depending on his regular tax bracket. 
A) $2,000 short-term loss is offset against the Section 1250 property first,then the remaining $2,000 against the collectible gain leaving $1,000 taxed at 28%. 
B) As each of these gains and losses are taxed at different rates,there is no netting of short-term and long-term gains or losses. 
C) $4,000 short-term loss is offset against the $3,000 collectible first,then the remaining $1,000 against the Section 1250 property,with a $1,000 gain taxed at 25%. 
D) The $4,000 short-term loss is allowed to be taken in total as an ordinary loss,and the net long-term gain of $5,000 is added to his 1040 and taxed at 0%,15%,or 20% depending on his regular tax bracket.

Question 15

A taxpayer can deduct a loss on a security when the market price of the stock is less than the basis at the end of the year.

Accepted Answer

A) True 
 B)False

Question 16

To qualify as Section 1231 property,the property must be used in a taxpayer's trade or business and must be held for more than one year.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a Section 1221 asset?

Accepted Answer

A) Rental property. 
B) An original painting created by the taxpayer after May 17,2006. 
C) Business inventory. 
D) Gold,silver,or other metals. 
A) Rental property. 
B) An original painting created by the taxpayer after May 17,2006. 
C) Business inventory. 
D) Gold,silver,or other metals.

Question 18

In 2013,Joe purchased land for $83,500 for use in his business.He sold it in 2016 for $110,000.What is the gain on the sale before any netting?

Accepted Answer

A) $26,500 Section 1231 gain. 
B) $26,500 ordinary income. 
C) $26,500 Section 1245 gain. 
D) $26,500 Section 1250 gain. 
A) $26,500 Section 1231 gain. 
B) $26,500 ordinary income. 
C) $26,500 Section 1245 gain. 
D) $26,500 Section 1250 gain.

Question 19

The top tax rates for an individual with long-term capital gains on the sale of stock and on the sales of collectibles,sold after December 31,2012 are:

Accepted Answer

A) 0%,15%. 
B) 25%,28%. 
C) 15%,25%. 
D) 20%,28%. 
A) 0%,15%. 
B) 25%,28%. 
C) 15%,25%. 
D) 20%,28%.

Question 20

All net losses exceeding the $3,000 per year are carried over as long-term losses because they will have occurred more than one year ago.

Accepted Answer

A) True 
 B)False

When a Section 1231 asset is sold,the gain can be either classified as an ordinary or capital gain.

In general,the basis of property purchased is the cost of the asset including cash,debt obligations,and other property or services included in acquiring the asset.

Inventory on hand at the end of the year is Section 1231 property.

Patty and Rich,married filing jointly,have $385,000 in MAGI and $90,000 of net investment income NII).They will pay a surtax of:

Tamiko buys a painting from a collector for resale in her gallery for $4,500.She sold it 15 months later for $6,500.What are the nature and amount of the gain on the sale of the painting?

Which of the following statements is correct regarding the sale of ordinary assets?

Amal gave his sister,Dora,100 shares of stock on April 3,2015.Amal originally paid $3,100 for the stock on January 5,2015.At the date of the gift,the fair market value of the stock was $2,800.If no gift tax is paid and Dora sells the stock for $2,700 on August 31,2016,she will recognize:

Norman received shares of stock as a gift from his uncle in 2014.At the time of the gift,the stock had a FMV of $5,000.The uncle purchased the stock in 2012 and had a basis of $6,000.If Norman sells the stock for $7,000 in 2016,he will report a:

The taxpayer always reports a worthless security as a long-term capital loss in the year the security becomes worthless.

Shanstella bought a 4-unit apartment building in July 2007 for $360,000 and sold it for $480,000 in 2016.There was $96,541 of accumulated straight-line depreciation on the apartment building.Assuming that Shanstella is in the 33% tax bracket,how much of her gain is taxed at 25%?

The amount realized from a sale or trade of property is the amount received for the asset minus the basis that will be recognized for tax purposes.

Jack purchased 100 shares of Ford stock on April 22,2015.If he sells the stock on April 21,2016,what is the character of the sale?

Geraldine inherited a piece of land when her father Albert died on July 26,2015 The FMV of the land at the date of death was $40,000 and cost Albert $20,000 in 2009.Geraldine sold the land on March 29,2016 for $45,000.What are the amount and nature of the gain on the sale?

Demetrius had a $4,000 short-term loss and a $3,000 long-term gain from a collectible,a $2,000 gain from Section 1250 unrecaptured property.What is the netting effect of these gains and losses on his 1040?

A taxpayer can deduct a loss on a security when the market price of the stock is less than the basis at the end of the year.

To qualify as Section 1231 property,the property must be used in a taxpayer's trade or business and must be held for more than one year.

Which of the following is a Section 1221 asset?

In 2013,Joe purchased land for $83,500 for use in his business.He sold it in 2016 for $110,000.What is the gain on the sale before any netting?

The top tax rates for an individual with long-term capital gains on the sale of stock and on the sales of collectibles,sold after December 31,2012 are:

All net losses exceeding the $3,000 per year are carried over as long-term losses because they will have occurred more than one year ago.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income Line 12 of Form 1040 and Schedule C

Rental Property, royalties, and Income From Flow-Through Entities Line 17, form 1040, and Schedule E

Tax Credits Form 1040, lines 46 Through 54 and Lines 66a Through 73

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters

Exam 7: Capital Gains and Other Sales of Property Schedule D and Form 4797

When a Section 1231 asset is sold,the gain can be either classified as an ordinary or capital gain.

In general,the basis of property purchased is the cost of the asset including cash,debt obligations,and other property or services included in acquiring the asset.

Inventory on hand at the end of the year is Section 1231 property.

Patty and Rich,married filing jointly,have $385,000 in MAGI and $90,000 of net investment income NII).They will pay a surtax of:

Tamiko buys a painting from a collector for resale in her gallery for $4,500.She sold it 15 months later for $6,500.What are the nature and amount of the gain on the sale of the painting?

Which of the following statements is correct regarding the sale of ordinary assets?

Amal gave his sister,Dora,100 shares of stock on April 3,2015.Amal originally paid $3,100 for the stock on January 5,2015.At the date of the gift,the fair market value of the stock was $2,800.If no gift tax is paid and Dora sells the stock for $2,700 on August 31,2016,she will recognize:

Norman received shares of stock as a gift from his uncle in 2014.At the time of the gift,the stock had a FMV of $5,000.The uncle purchased the stock in 2012 and had a basis of $6,000.If Norman sells the stock for $7,000 in 2016,he will report a:

The taxpayer always reports a worthless security as a long-term capital loss in the year the security becomes worthless.

Shanstella bought a 4-unit apartment building in July 2007 for $360,000 and sold it for $480,000 in 2016.There was $96,541 of accumulated straight-line depreciation on the apartment building.Assuming that Shanstella is in the 33% tax bracket,how much of her gain is taxed at 25%?

The amount realized from a sale or trade of property is the amount received for the asset minus the basis that will be recognized for tax purposes.

Jack purchased 100 shares of Ford stock on April 22,2015.If he sells the stock on April 21,2016,what is the character of the sale?

Geraldine inherited a piece of land when her father Albert died on July 26,2015 The FMV of the land at the date of death was $40,000 and cost Albert $20,000 in 2009.Geraldine sold the land on March 29,2016 for $45,000.What are the amount and nature of the gain on the sale?

Demetrius had a $4,000 short-term loss and a $3,000 long-term gain from a collectible,a $2,000 gain from Section 1250 unrecaptured property.What is the netting effect of these gains and losses on his 1040?

A taxpayer can deduct a loss on a security when the market price of the stock is less than the basis at the end of the year.

To qualify as Section 1231 property,the property must be used in a taxpayer's trade or business and must be held for more than one year.

Which of the following is a Section 1221 asset?

In 2013,Joe purchased land for $83,500 for use in his business.He sold it in 2016 for $110,000.What is the gain on the sale before any netting?

The top tax rates for an individual with long-term capital gains on the sale of stock and on the sales of collectibles,sold after December 31,2012 are:

All net losses exceeding the $3,000 per year are carried over as long-term losses because they will have occurred more than one year ago.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income Line 12 of Form 1040 and Schedule C

Rental Property, royalties, and Income From Flow-Through Entities Line 17, form 1040, and Schedule E

Tax Credits Form 1040, lines 46 Through 54 and Lines 66a Through 73

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters