Deck 8: Property Dispositions

Question 1

Gain representing depreciation recapture on equipment is taxed at ordinary income rates.

Answer 1

True

Question 2

A personal residence owned by an individual is a capital asset.

Answer 2

True

Question 3

The most common ordinary income assets are receivables and inventory.

Answer 3

True

Question 4

Corporate net capital gains receive no tax-favored treatment.

Question 5

An individual's net Section 1231 gain is given the tax-favored treatment of a long-term capital asset.

Question 6

To determine the tax, a taxpayer with a $5,000 gain on the sale of a collectible and a $10,000 gain on the sale of stock, adds the gain on the stock to income after the gain on the collectible.

Question 7

The tax effect of a sale of an asset at a gain increases the cash flow from the sale.

Question 8

A mixed-use asset is an asset that is used for both personal purposes and business activities.

Question 9

Individuals can only deduct capital losses to the extent of capital gains plus $3,000.

Question 10

A taxpayer who had $250,000 of acquisition debt forgiven in 2017 on his $325,000 principal residence is required to reduce the basis of the home by the cancelled debt.

Question 11

A taxpayer's initial investment in Section 1202 stock is limited to $1 million.

Question 12

All losses on Section 1244 stock are deductible in the year realized.

Question 13

The holding period for a long-term capital asset must exceed one year for tax-favored treatment.

Question 14

Section 291 recapture only applies to a corporation.

Question 15

Section 1245 recapture is primarily applicable to realty.

Question 16

A gain must be recognized unless some tax provision allows nonrecognition or deferral.

Question 17

All assets owned by a trade or business are Section 1231 assets.

Question 18

In 2019, capital gains of individuals can be taxed at 0%, 10%, 15%, 20%, 25%, or 28%, excluding surtaxes.

Question 19

The holding period for an asset acquired by inheritance is determined by including the period
the asset was held by the decedent.

Question 20

The Section 1231 look-back rules change the character of capital losses incurred in the
previous 5 years.

Question 21

On January 4, 2019, Courtney gave his son, Brian, stock valued at $10,000 that he had purchased three years earlier for $16,000.Later in the year, Brian sold the stock for $11,000.What is the amount and type of gain or loss that Brian will report on this sale?

A)$1,000 short-term capital loss
B)$1,000 short-term capital gain
C)$1,000 long-term capital gain
D)No gain or loss

Question 22

Coley Corporation has an $800 net short-term capital loss and a $6,000 net long-term capital gain in the current year.It also has an $8,000 long-term capital loss carryover from the prior year.What is Coley's capital loss carryover to the next year?

A)$0
B)$2,000
C)$2,800
D)$8,800

Question 23

Determine the amount of the capital gain or loss in each of the following transactions and state whether the gain or loss is long-term or short-term.

A)100 shares of Bilco stock bought for $8,000 on January 22 of year 3 and sold for $10,000 on January 22 of year 4.
B)20 acres of investment land bought for $8,000 on January 31 of year 3 and sold for $7,000 on February 2 of year 4.
C)150 shares of Data stock bought for $15,000 on April 1 of year 2 and sold for $17,000 on May 28 of year 4.

Question 24

Noah sold investment land for $70,000 cash and the buyer's assumption of Noah's $30,000 mortgage on the property.Noah paid a realtor's commission of $2,800 on the sale.What is Noah's realized gain if the land has an adjusted basis of $57,000?

A)$43,000
B)$40,200
C)$13,000
D)$10,200

Question 25

Wesley sold a piece of property for $30,000 cash paying a $3,000 sales commission.The buyer assumed Wesley's $13,000 mortgage on the property.Wesley had purchased the property for $15,000 and had invested an additional $6,000 in it.What is Wesley's realized gain on the sale?

A)$6,000
B)$9,000
C)$19,000
D)$22,000

Question 26

Edna had $20,000 of ordinary income.In addition, she had a $1,500 short-term capital gain on one stock and a $4,900 long-term capital loss on another.What is her adjusted gross income?

A)$21,500
B)$17,000
C)$16,600
D)$15,100

Question 27

Emma sold her home for $60,000 cash and the buyer's assumption of her mortgage of $210,000.Emma paid closing costs of $2,900 and a broker's commission of $13,000.What is the amount Emma realized on the sale?

A)$17,100
B)$20,000
C)$254,100
D)$257,000

Question 28

Which of the following is a capital asset?

A)Accounts receivable of a business
B)Personal auto
C)Land used as a movie theater parking lot
D)Business office furniture

Question 29

On March 17, a calendar-year taxpayer sells a machine used in its business for $9,500.The machine was purchased sixteen months earlier for $9,000 and depreciation deductions of $1,800 have been taken.What is the amount and type of gain recognized on the sale?

A)$2,300 Section 1231 gain
B)$2,300 ordinary income
C)$1,800 Section 1245 recapture; $500 Section 1231 gain
D)$1,800 Section 1250 recapture; $500 Section 1231 gain

Question 30

Brent sold his personal car and some household furniture during the year.He had a $3,000 gain on the car but a $5,000 loss on the furniture.What is his recognized gain or loss included in taxable income as a result of these sales?

A)0
B)$2,000 loss
C)$3,000 gain
D)$5,000 loss

Question 31

In 2019, Isabella sold several shares of different stocks held for investment.The following is a summary of her capital transactions for the year: $\begin{array}{lrrrr}\underline{\text { Stock }}&\underline{\text { Purchased }} &\underline{\text { Sold }}&\underline{ \text { Selling Price }} &\underline{\text { Cost }}\\\mathrm{ABC} &02 / 15 / 19 &07 / 15 / 19 & \$ 2,200 & \$ 1,750 \\\mathrm{DEF} & 10 / 25 / 12 & 08 / 01 / 19 & 3,500 & 2,300 \\\mathrm{GHI} & 10 / 25 / 19 & 12 / 15 / 19 & 800 & 1,000 \\\mathrm{JKL} & 12 / 28 / 13 & 12 / 18 / 19 & 750 & 900\end{array}$
What is the amount of Isabella's net capital gains or losses for 2019?

A)$1,300 long-term capital gain
B)$850 long-term capital gain and $450 short-term capital gain
C)$1,050 long-term capital loss and $250 short-term capital loss
D)$1,050 long-term capital gain and $250 short-term capital gain

Question 32

Sheldon had salary income of $40,000.In addition, he had the following gains and losses on his property transactions: Long-term capital gain = $14,000; long-term capital loss = $6,000; short-term capital gain = $4,000; short-term capital loss = $8,000.If Sheldon has no other income items, what is his total income before any deductions for the year?

A)$44,000
B)$47,000
C)$48,000
D)$52,000

Question 33

Cliff owned investment stock purchased three years ago for $16,000 and bonds purchased six months ago for $9,800.When he needed money recently, he sold the stock for $13,800 and the bonds for $10,100.What is the amount and type of net gain or loss that Cliff will include in computing his taxable income?

A)$2,200 long-term capital loss
B)$1,900 long-term capital gain
C)$1,900 long-term capital loss
D)$300 short-term capital gain

Question 34

Grill Corporation sold all of its business assets when it went out of business.Which of the following is a capital asset?

A)Inventory
B)Office equipment
C)Goodwill
D)Factory machinery

Question 35

Ginger sold stock that she had purchased five years ago for $15,000 to her brother, Carl, for $12,000.The next month, Carl sold the stock for $11,000.What is the amount and type of gain or loss included in Carl's income from this sale?

A)$1,000 short-term capital loss
B)$1,000 long-term capital loss
C)$4,000 short-term capital loss
D)$4,000 long-term capital loss

Question 36

Lopez Corporation sold equipment that it had purchased for $300,000 ($100,000 cash and a note for $200,000) four years ago..As of the date of sale, Lopez had claimed $187,500 in accumulated depreciation on this equipment and had made $50,000 in principal payments on the note.Lopez received $80,000 cash and a note for $100,000 in addition to the purchaser assuming Lopez's $150,000 note on the equipment.What is Lopez Corporation's realized gain on the sale?

A)$217,500
B)$187,500
C)$112,500
D)$67,500

Question 37

What are the carryover provisions for unused capital losses applicable to individuals?

A)Carry back 3 years and forward 5 years
B)Carry back 2 years and forward 20 years
C)Carry forward 20 years only
D)Carry forward indefinitely

Question 38

Lopez Corporation sold equipment that it had purchased for $300,000 ($100,000 cash and a note for $200,000) four years ago.As of the date of sale, Lopez had claimed $187,500 in accumulated depreciation on this equipment and had made $50,000 in principal payments on the note.Lopez received $80,000 cash and a note for $100,000 in addition to the purchaser assuming Lopez's $150,000 note on the equipment.What is the amount realized by Lopez Corporation on this sale?

A)$80,000
B)$180,000
C)$300,000
D)$330,000

Question 39

What are the carryover provisions for unused capital losses applicable to corporations?

A)Carry back 3 years and forward 5 years
B)Carry back 2 years and forward 20 years
C)Carry forward 20 years only
D)Carry forward indefinitely

Question 40

Mason received $20,000 cash and equipment worth $10,000 in exchange for land that was encumbered by an $80,000 mortgage that the buyer assumed.Mason's basis for the land is $90,000.What is Mason's realized gain or loss on the sale?

A)$20,000 realized gain
B)$10,000 realized gain
C)$10,000 realized loss
D)no realized gain or loss

Question 41

Jason sells a piece of equipment for $43,000.The equipment was purchased four years ago for $56,000.It was depreciated using an accelerated method of depreciation.Its adjusted basis at the time of sale is $21,000.Straight-line depreciation would have been only $20,000.What is the amount and type of gain Jordan recognizes on this sale?

A)$22,000 Section 1231 gain
B)$22,000 Section 1245 gain
C)$22,000 capital gain
D)$1,000 Section 1250; $21,000 Section 1231 gain

Question 42

Bobsy Company has a $14,000 net Section 1231 gain for the current tax year from its only property transaction.In the previous year, it had a $7,000 net Section 1231 loss.For the current year, the net Section 1231 gain will be taxed as:

A)A $14,000 ordinary income
B)A $14,000 capital income
C)A $7,000 ordinary income and a $7,000 long-term capital gain
D)A $7,000 ordinary income and a $7,000 short-term capital gain

Question 43

A corporation sells a machine used in its business for 9 years for $22,000.The machine originally cost $120,000 and was fully depreciated.Its gain will be treated as:

A)Capital gain
B)Section 1231 gain
C)Section 1245 recapture
D)Section 1250 recapture

Question 44

Martone Corporation sells two machines and a warehouse it has been using for storage in the current tax year.Each of the machines cost $25,000 and has an adjusted basis of $11,000 when each was sold for $14,000.The warehouse cost $105,000, has an adjusted basis of $60,000 and is sold for $95,000.All assets were depreciated using MACRS depreciation.What is the amount and type of gain recognized by Martone on the sale of these assets?

A)$6,000 Section 1245 recapture; $35,000 Section 1231 gain
B)$6,000 Section 1245 recapture; $7,000 Section 291 recapture; $28,000 Section 1231 gain
C)$6,000 section 1245 recapture; $35,000 Section 291 recapture
D)$41,000 capital gain

Question 45

Which of the following comparisons is correct?

A)Both individual and corporate long-term capital losses carryover as short-term capital losses.
B)Individuals may only carry forward capital losses for five years; corporations may carry forward capital losses indefinitely;
C)Both individuals and corporations may use the 15% tax rate on net capital gains.
D)Corporations may carry back capital losses; individuals may not.

Question 46

Lopez Corporation sold equipment that it had purchased for $300,000 ($100,000 cash and a note for $200,000) four years ago.As of the date of sale, Lopez had claimed $187,500 in accumulated depreciation on this equipment and had made $50,000 in principal payments on the note.Lopez received $80,000 cash and a note for $100,000 in addition to the purchaser assuming Lopez's $150,000 note on the equipment.How much of Lopez Corporation's realized gain on the sale will be a net Section 1231 gain?

A)$30,000
B)$142,500
C)$212,500
D)$187,500

Question 47

Paul has a $45,000 net Section 1231 gain in the current tax year from his only property transaction.Last year he had a $12,000 net Section 1231 gain, but two years ago he had a $51,000 net Section 1231 loss.If he has no other property transactions in the current year, how will Paul treat his net Section 1231 gains this year?

A)$45,000 long-term capital gain
B)$45,000 ordinary income
C)$39,000 ordinary income; $6,000 Section 1245 gain
D)$39,000 ordinary income; $6,000 long-term capital gain

Question 48

Lopez Corporation sold equipment that it had purchased for $300,000 ($100,000 cash and a note for $200,000) four years ago.As of the date of sale, Lopez had claimed $187,500 in accumulated depreciation on this equipment and had made $50,000 in principal payments on the note.Lopez received $80,000 cash and a note for $100,000 in addition to the purchaser assuming Lopez's $150,000 note on the equipment.What percentage of Lopez Corporation's realized gain on the sale will be taxed as ordinary income due to depreciation recapture?

A)100%
B)86.2%
C)62.5%
D)0

Question 49

Alpha Corporation had income from operations of $30,000.What is the corporation's taxable income including the following property transactions: Gain on investment stock held for two years = $8,000; loss on machinery held three years = $6,000; $4,000 loss on equipment held 10 months; $4,000 gain on land used for six years for storage of trucks.

A)$25,000
B)$27,000
C)$30,000
D)$32,000

Question 50

Vero Corporation owns $200,000 of equipment used for its business and the building that the business is located in that is valued at $175,000.The business is successful and has investments in marketable securities valued at $45,000.What is the value of its capital assets?

A)$45,000
B)$75,000
C)$275,000
D)$320,000

Question 51

Angel sells the following depreciable assets from her sole proprietorship:
What should Angel report on her income tax return relative to each of these property transactions?

A)$3,800 capital loss
B)$3,100 Section 1245 recapture; $2,400 Section 1231 loss; $4,500 ordinary loss
C)$3,800 ordinary loss
D)$700 Section 1231 gain; $4,500 ordinary loss

Question 52

During the current tax year, the Jeckel Company has the following gains and losses from property transactions: $12,000 Section 1231 gain
$23,000 long-term capital gain
$21,000 Section 1231 loss
$4,000 Section 1231 gain
What is the amount and type of gain or loss reported by Jeckel for the year?

A)$21,000 Section 1231 loss; $39,000 capital gain
B)$16,000 Section 1231 gain; $21,000 Section 1231 loss; $23,000 capital gain
C)$18,000 net capital loss
D)$5,000 net Section 1231 loss; $23,000 capital gain

Question 53

Caldwell Corporation sold a factory building for $300,000 that it originally purchased for $600,000.It had an adjusted basis of $200,000 due to having taken $400,000 of depreciation.What is Caldwell's Section 1231 gain on the sale of the property?

A)$400,000
B)$300,000
C)$100,000
D)$80,000

Question 54

During the current year, Mrs.Mayhew received a used computer as a gift from her son for her personal use.The computer has a current fair market value of $350 and cost her son $850.He took $400 of depreciation deductions while it was used in his business.Mrs.Mayhew uses the computer for several years and then sells it for $200.What is the amount and type of gain or loss that Mrs.Mayhew recognizes on the sale?

A)$0 gain or loss
B)$150 Section 1245 loss
C)$150 Section 1231 loss
D)$250 Section 1231 loss

Question 55

Quidik Corporation sold a machine for $80,000 that it had acquired three years ago for $68,000.If its adjusted basis when sold was $50,000, what should Quidik report on its tax return as a result of this sale?

A)Section 1245 recapture of $18,000; Section 1231 gain of $30,000;
B)Ordinary income of $12,000 and Section 1231 gain of $18,000
C)Section 1245 recapture of $18,000 and Section 1231 gain of $12,000;
D)Section 1231 gain of $38,000

Question 56

Kevin owns a rental apartment building that he purchased several years ago for $100,000.He has claimed accumulated depreciation of $60,000 on this building.In 2019 he sells the building for $110,000.If Kevin is in the 32% marginal tax bracket and has no other property transactions this year, what tax rate or rates apply to his gain from the sale of this building?

A)32% and 25%
B)32% and 15%
C)25% and 15%
D)15% only

Question 57

The Walford Partnership (owned by two individuals) sold an apartment building for $300,000 that it purchased for $280,000 ten years ago.The partnership took $80,000 of depreciation deductions on the building.What is the amount and type of gain realized by the partnership on the sale and taxed to the individual partners?

A)$16,000 Section 1250 unrecaptured gain; $84,000 Section 1231 gain
B)$80,000 Section 1245 recapture; $20,000 Section 1231 gain
C)$80,000 Section 1250 unrecaptured gain; $20,000 Section 1231 gain
D)$100,000 Section 1231 gain

Question 58

Which of the following is correct?

A)The Section 1231 lookback rule converts potential long-term capital gain into ordinary income.
B)The Section 1231 lookback rule converts ordinary gain into ordinary loss.
C)The Section 1231 lookback rule converts casualty gain into long-term capital gain.
D)The Section 1231 lookback rule applies only to realty.

Question 59

Ethan, a sole proprietor, sold the following assets in 2019: $\begin{array}{llrr}\underline{\text { Asset } }& \underline{\text { Cost }}&\underline{\text { Accumulated Depreciation}}&\underline{\text { Sales Price }}\\\text { Equipment } & \$ 30,000 & \$ 5,000 & \$ 36,000 \\\text { XYZ stock } & \$ 12,000 && \$ 9.000\end{array}$
The equipment was purchased several years ago but the XYZ stock was purchased as an investment on 3/9/19 and was sold on 11/15/19.Ethan is in the 32% marginal tax bracket for 2019.At the beginning of 2019, he had $2,000 of unrecaptured Section 1231 losses from 2 years ago.How much additional tax will Ethan pay as a result of these transactions?

A)$1,200
B)$1,650
C)$2,390
D)$2,640

Question 60

During the current year, Zach had taxable income of $100,000 before considering the following property transactions: $\begin{array} { l l } \text { Short-term \quad capital gain } & \$ 2,000 \\\text { Short-term \quad capital loss } & 8,000 \\\text { Long-tem \quad capital gain } & 3,000 \\\text { Long-term \quad capital loss } & 2,000 \\\text { Section 1231 gain } & 8,000 \\\text { Secton 1231 loss } & 7,000\end{array}$ Two years ago Zach had a $4,000 gain from the sale of a Section 1231 asset but last year Zach had no capital or Section 1231 gains or losses.What effect will the above property transactions have on Zach current taxable income and will there be any carryforward or carryback of gains or losses?

A)Reduces Zach's current taxable income by $4,000
B)Reduces Zach's current taxable income by $3,000 and he will carry $1,000 loss forward
C)Zach has $1,000 additional ordinary income this year due to recapture and he can carry the remaining losses forward
D)Zach has $1,000 additional ordinary income this year due to recapture, he can deduct $3,000 loss this year, and can carry any remaining losses forward

Question 61

William purchased his personal residence in 2011 for $285,000.In early 2017, he lost his job and was unable to make payments on the mortgage.In December 2017, William worked out a new repayment schedule with his bank after he obtained a new job that reduced his mortgage from $235,000 to $120,000.Which of the following statements is true regarding this mortgage reduction?

A)William was required to include the debt in income because he continued to own the home.
B)William has to include any forgiveness of debt income only if he sells the house for more than $285,000.
C)The basis of the home for any future sale is $120,000.
D)The basis of the home on any future sale is $170,000.

Question 62

Justin, who is single, sells his principal residence that he has owned and occupied for the past five years.His adjusted basis for the residence is $90,000.He incurred selling expenses of $10,000.How much gain must Justin recognize if sells the residence for $390,000?

A)0
B)$40,000
C)$50,000
D)$290,000

Question 63

Which of the following statements concerning the exclusion available under Section 121 for the sale of a personal residence is correct?

A)This provision allows 50% of the gain from sale of any residence to be excluded from income.
B)A vacation home used as a residence for at least five months of the year will qualify for this exclusion.
C)It is possible for taxpayers to sell their home and qualify for this exclusion every two years.
D)The gain on the sale can be deferred and rolled over into another residence instead of electing the exclusion.

Question 64

Bennett, who is single, owns all of the outstanding stock of Bennett Company.In 2019 Bennett sells all of his stock in the company for $30,000.If the stock qualifies as Section 1244 and his basis in the stock is $140,000, how is his loss on the sale classified for tax purposes?

A)$110,000 capital loss
B)$110,000 ordinary loss
C)$60,000 capital loss; $50,000 ordinary loss
D)$100,000 ordinary loss; $10,000 capital loss
E)None of the above

Question 65

Tina is single and one of the founding shareholders of Exacta Corporation.She acquired her Exacta Section 1244 stock four years ago for $123,000.During the current year, Tina sold all of her Exacta stock to an unrelated party for $40,000.Tina had no other capital gains or losses during the year.What is the maximum amount of loss Tina can deduct in the current year for the Exacta stock?

A)$83,000
B)$53,000
C)$50,000
D)$3,000

Question 66

An individual taxpayer has the following property transactions during the current year:

How do these transactions affect the individual's AGI?

A)AGI is increased by $2,900
B)AGI is decreased by $1,100
C)AGI is increased by $9,100
D)AGI is decreased by $2,900

Question 67

Liam used his auto 70 percent for business and 30 percent for personal use.He purchased it for $15,000 and has taken $5,460 of depreciation on it.What is his recognized gain on a sale for $12,000 and what is its character?

A)$2,940 Section 1231 gain
B)$3,360 Section 1245 ordinary income
C)$5,460 Section 1245 ordinary income
D)$6,540 Section 1231 gain

Question 68

Shawn, a single taxpayer, sold the house he lived in for seven years for $700,000.He purchased the house for $285,000.He made improvements at a cost of $125,000 and paid a $30,000 commission on the sale.What are Shawn's realized and recognized gains on the sale?

A)$260,000 realized and recognized
B)$290,000 realized and recognized
C)$260,000 realized and $10,000 recognized
D)$260,000 realized and no gain recognized

Question 69

Which of the following is not a requirement for the stock of a corporation to be considered Section 1244 stock?

A)The stock must be voting stock
B)The corporation must qualify as a small business corporation
C)The corporation must be a domestic corporation
D)The stock must be issued for money or property

Question 70

Sophia, a single taxpayer, is one of the founding shareholders of Davis Corporation.She acquired her Davis Corporation Section 1244 stock four years ago for $163,000.During the current year, Sophia sold all of her Davis stock to an unrelated party for $40,000.There were no other capital gains or losses reported on her tax return for the year.What is the maximum amount of loss that can be deducted on Sophia's current year tax return for the Davis stock?

A)$3,000
B)$50,000
C)$53,000
D)$123,000

Question 71

Clem and Chloe, a married couple, sell their principal residence that they have owned and occupied for the past twenty years.The adjusted basis for the residence is $324,000.They incurred selling expenses of $30,000.How much gain must they recognize if they sell the residence for $904,000?

A)$40,000
B)$50,000
C)$290,000
D)$300,000

Question 72

Melody works in her home using a computer she purchased two years ago for $2,500.The total adjusted basis for the computer is now $1,000.Her husband and children used the computer 20 percent of the time to play computer games and for personal correspondence.She sells the computer for $1,200.How much and what kind of gain does Melody recognize?

A)$200 capital gain
B)$200 Section 1245 recapture
C)$200 Section 1231gain
D)$460 Section 1245 recapture

Question 73

Donza Company has unrecaptured Section 1231 losses from the two previous years totaling $25,000 and a $32,000 Section 1231 gain in the current year.Based on this information, all of the following statements concerning Donza's taxable income for the current year are correct except:

A)Taxable ordinary income is $25,000
B)Taxable capital gain is $7,000
C)The amount taxable as ordinary income is the lesser of the unrecaptured losses or the current Section 1231 gain
D)Unrecaptured Section 1231 losses are taxable as capital gain

Question 74

Carol used her auto 60 percent for business and 40 percent for personal use.She purchased it for $10,800 and has taken $3,992 of depreciation on it.What is her recognized gain on a sale for $7,800 and what is it character?

A)$6,808 Section 1231 gain
B)$3,808 Section 1245 recapture
C)$2,192 Section 1245 recapture
D)$992 Section 1231 gain

Question 75

Margo purchased 2,000 shares of qualifying Section 1202 stock six years ago for $200,000.In the current year, she sold the stock for $2,000,000.How much gain can she exclude from her income?

A)$2,000,000
B)$1,800,000
C)$900,000
D)$200,000

Question 76

Kelly, a single individual, has $15,000 of taxable income before a long-term capital gain of $5,000 on the sale of some stock owned for two years that she sold in 2018.What is the tax rate applied to this gain?

A)0 percent
B)10 percent
C)15 percent
D)20 percent

Question 77

Abby has a $10,000 loss on some collectibles, a $5,000 Sec.1202 gain, and an $11,000 gain on some securities.If all gains and losses are long-term and Abby is in the 24 percent tax bracket, how is her net gain taxed?

A)$5,000 at 25%; $1,000 at 15%
B)$6,000 at 15%
C)$5,000 at 28%; $1,000 at 15%
D)$6,000 at 28%

Question 78

Wally (who is in the 24 percent tax bracket) has a $5,000 short-term capital loss on some bonds, a $6,000 long-term capital loss on collectibles, a $15,000 Section 1202 gain, and a net $4,000 long-term capital gain from an investment.What is amount and type of gain(s) and tax rate(s) applied?

A)$8,000 gain at 28%
B)$8,000 long-term capital gain at 15%
C)$4,000 gain at 28%; $4,000 long-term capital gain at 15%
D)$4,000 gain at 24%; $4,000 long-term capital gain at 15%

Question 79

Becky bought a home with her husband, Ken, in 2004 for $125,000.They were divorced in 2013 and Becky became sole owner of the home under the divorce decree.On January 5, 2018, Becky married Michael.Michael and Becky have been living in the house since their marriage but they are planning now to move.If Michael and Becky sell their home on December 15, 2019 for $500,000, how much taxable gain must they report on their 2019 joint tax return?

A)zero
B)$125,000
C)$250,000
D)$375,000

Question 80

Ian and Mia married in early 2019 and purchased a new home together.Each owned and lived in separate residences prior to the marriage.Ian purchased his residence 5 years ago for $190,000 and he added a master bedroom and bathroom addition at a cost of $40,000.Mia purchased her home three years ago for $135,000.In late 2019, Ian sold his residence for $510,000 and paid a sales commission of $8,000.After paying off his $80,000 mortgage balance, he received the remaining cash proceeds of $422,000.In late 2019 Mia sold her residence for $190,000 and paid a sales commission of $2,000.She had paid off her mortgage so she received $188,000 cash from the sale.If Ian and Mia file a joint tax return for 2019, how much gain do they recognize on their 2019 joint tax return from the sales of their previous homes?

A)0
B)$22,000
C)$53,000
D)$84,000