Question 1

Gabriella,a single taxpayer,has wage income of $160,000.In addition,she has $7,000 in long-term capital losses,$1,000 in long-term capital gains,$3,000 in short-term capital gains,and
$1,000 in short-term losses.What is Gabriella's AGI for 2016?

Accepted Answer

A) $161,000. 
B) $157,000. 
C) $156,000. 
D) $160,000.

Question 2

Currently,the maximum capital gain rate applied to a taxpayer in the 15% regular tax bracket is 0%.

Accepted Answer

A) True 
 B)False

Question 3

A taxpayer has 6 separate capital gain transactions.Four of them are long-term and two are short-term transactions.Two of the long-term transactions have box 3 from Form 1099-B checked,one does not have box 3 from Form 1099-B checked,and there was no 1099-B received for one of the long-term transactions.One short-term transaction has box 3 from a 1099-B checked and the other transaction does not have box 3 from a 1099-B checked.How many Form 8949 must the taxpayer complete?

Accepted Answer

A) 1) 
B) 2) 
C) 3) 
D) 4)

Question 4

Which one of the following is a capital asset?

Accepted Answer

A) Rental property. 
B) A computer used for investments. 
C) Business inventory. 
D) A non-musical copyright created by the taxpayer.

Question 5

Heidi invested in a mid-sized local company with gross assets of $17,000,000.Heidi purchased 2,000 shares for $44,000 in 2000.In 2016,Heidi sold the stock for $84,000.How is the gain treated for tax purposes?

Accepted Answer

A) $40,000 capital gain and taxed at preferential rates. 
B) $20,000 excluded from gross income under Section 1202 and $20,000 taxed at 28%. 
C) $20,000 excluded from gross income under Section 1202 with the remaining gain recognized and taxed at regular rates. 
D) $20,000 excluded from gross income under Section 1202 and $20,000 taxed at preferential capital gains rates.

Question 6

A capital asset includes all of the following except:

Accepted Answer

A) Inherited property. 
B) Real estate used in the taxpayer's trade or business. 
C) A taxpayer's home. 
D) Real estate held for investment.

Question 7

Jeannie purchased 1,000 shares in Course Developers for $10,000 on August 11,2015.The company went bankrupt on May 11,2016 with no hope of recovery for the shareholders.On what date is the stock deemed to be worthless and what is the nature of the loss?

Accepted Answer

A) May 11,2016,short-term loss in 2016. 
B) December 31,2016,short-term loss in 2016. 
C) December 31,2016,long-term loss in 2016. 
D) December 31,2015 short-term loss in 2015.

Question 8

A taxpayer purchased land in 2008 for $85,000 and sold it in 2016 for $75,000 cash.The buyer also assumed the mortgage of $5,000.What is the amount of gain/loss on the sale of the land?

Accepted Answer

A) $5,000 gain. 
B) $15,000 gain. 
C) $20,000 loss. 
D) $5,000 loss.

Question 9

Which of the following statements is incorrect regarding the gain or loss from the sale of property received as a gift?

Accepted Answer

A) If the FMV is less than the donor's adjusted basis at the time of the gift,the basis for figuring the gain is the donor's basis. 
B) If the FMV is less than the donor's adjusted basis at the time of the gift,the basis for figuring the loss is the FMV of the asset. 
C) If the FMV is equal to or more than the donor's adjusted basis,the basis for any gain or loss on a sale is the donor's adjusted basis. 
D) If the FMV is equal to or more than the donor's adjusted basis,the basis for any gain or loss on a sale is the FMV of the asset.

Question 10

On May 1,2015,Kelalani purchased land for $88,000 for use in her business.She sold it on May 1,2016,for $82,000.If there are no other sales of business or trade property,how is this loss treated for tax purposes on Kelalani's return?

Accepted Answer

A) $6,000 long-term capital loss. 
B) $6,000 Section 1231 loss. 
C) $6,000 short-term capital loss. 
D) $6,000 ordinary loss.

Question 11

The donee's basis in depreciated property when the FMV at the time of the gift is less than the donor's basis)is FMV at the time of the gift.

Accepted Answer

A) True 
 B)False

Question 12

Dancing Feet Company,a sole proprietorship,acquired a building for use in the business on April 15,2014,for $475,000.Straight-line depreciation allowed was $25,386.Dancing Feet Company sold the building for $380,000 on May 1,2016:
a.What is the adjusted basis of the property at the time of the sale?
b.What is the amount of the gain loss)upon the sale of the building?
c.What is the nature of the gain loss)?

Accepted Answer

The answer of Dancing Feet Company,a sole proprietorship,acquired a building...

Question 13

Which of the following statements is correct regarding the sale of ordinary assets as discussed in this chapter?

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 an asset held less than a year)outside the normal course of a trade or business is 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 inventory for a profit is considered to be a sale of an ordinary asset.

Question 14

Padraic purchased 50 shares of stock as an investment for the purchase price of $2,500 in 2013.In 2016 when the fair market value of the stock was $2,500,Padraic gave the stock to his sister,Fiona.If no gift tax is paid and Fiona sells the stock for $2,750 she will recognize:

Accepted Answer

A) $300 gain. 
B) $500 gain. 
C) $250 gain. 
D) $800 gain.

Question 15

Patrice sells a parcel of land for $50,000 cash and the buyer assumes Patrice's liability of $7,000 on the land.Patrice's basis in the land is $40,000.What is the gain or loss she will recognize on the sale?

Accepted Answer

A) $17,000 loss. 
B) $3,000 gain. 
C) $10,000 gain. 
D) $17,000 gain.

Question 16

Aneta sold an apartment building for $713,470 in 2016.She purchased the building in 2010 for $600,000 and has taken $151,806 in depreciation on the building.Assuming Aneta is in the 33% tax bracket,how is her gain taxed?

Accepted Answer

A) $151,806 at 28% and $113,470 at 15%. 
B) $113,470 at 0% and $151,806 at 28%. 
C) $151,806 at 25% and $113,470 at 15%. 
D) $113,470 at 25% and $151,806 at 15%.

Question 17

Section 1221 assets are any asset used in a trade or business.

Accepted Answer

A) True 
 B)False

Question 18

Any Section 1245 gain is recognized as "ordinary" to the extent of the depreciation taken.

Accepted Answer

A) True 
 B)False

Question 19

Hiroko,a single taxpayer,has wage income of $80,000.In addition,she has $5,000 in long-term capital losses,$4,000 in long-term capital gains,and $4,000 in short-term capital gains.What is Hiroko's AGI for 2016?

Accepted Answer

A) $73,000. 
B) $88,000. 
C) $83,000. 
D) $72,000.

Question 20

Ordinary gains or losses produced outside the normal course of business relate to the sale of business property held less than one year and do not include the sale of accounts receivable.

Accepted Answer

A) True 
 B)False

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

Gabriella,a single taxpayer,has wage income of $160,000.In addition,she has $7,000 in long-term capital losses,$1,000 in long-term capital gains,$3,000 in short-term capital gains,and $1,000 in short-term losses.What is Gabriella's AGI for 2016?

Currently,the maximum capital gain rate applied to a taxpayer in the 15% regular tax bracket is 0%.

Which one of the following is a capital asset?

Heidi invested in a mid-sized local company with gross assets of $17,000,000.Heidi purchased 2,000 shares for $44,000 in 2000.In 2016,Heidi sold the stock for $84,000.How is the gain treated for tax purposes?

A capital asset includes all of the following except:

Jeannie purchased 1,000 shares in Course Developers for $10,000 on August 11,2015.The company went bankrupt on May 11,2016 with no hope of recovery for the shareholders.On what date is the stock deemed to be worthless and what is the nature of the loss?

A taxpayer purchased land in 2008 for $85,000 and sold it in 2016 for $75,000 cash.The buyer also assumed the mortgage of $5,000.What is the amount of gain/loss on the sale of the land?

Which of the following statements is incorrect regarding the gain or loss from the sale of property received as a gift?

On May 1,2015,Kelalani purchased land for $88,000 for use in her business.She sold it on May 1,2016,for $82,000.If there are no other sales of business or trade property,how is this loss treated for tax purposes on Kelalani's return?

The donee's basis in depreciated property when the FMV at the time of the gift is less than the donor's basis)is FMV at the time of the gift.

Which of the following statements is correct regarding the sale of ordinary assets as discussed in this chapter?

Padraic purchased 50 shares of stock as an investment for the purchase price of $2,500 in 2013.In 2016 when the fair market value of the stock was $2,500,Padraic gave the stock to his sister,Fiona.If no gift tax is paid and Fiona sells the stock for $2,750 she will recognize:

Patrice sells a parcel of land for $50,000 cash and the buyer assumes Patrice's liability of $7,000 on the land.Patrice's basis in the land is $40,000.What is the gain or loss she will recognize on the sale?

Aneta sold an apartment building for $713,470 in 2016.She purchased the building in 2010 for $600,000 and has taken $151,806 in depreciation on the building.Assuming Aneta is in the 33% tax bracket,how is her gain taxed?

Section 1221 assets are any asset used in a trade or business.

Any Section 1245 gain is recognized as "ordinary" to the extent of the depreciation taken.

Hiroko,a single taxpayer,has wage income of $80,000.In addition,she has $5,000 in long-term capital losses,$4,000 in long-term capital gains,and $4,000 in short-term capital gains.What is Hiroko's AGI for 2016?

Ordinary gains or losses produced outside the normal course of business relate to the sale of business property held less than one year and do not include the sale of accounts receivable.