Question 1

Theresa and Oliver, married filing jointly, and both over 65 years of age, have no dependents. Their 2018 income tax facts are:
  
What is their taxable income for 2018?

Accepted Answer

The answer of Theresa and Oliver, married filing jointly, and...

Question 2

Janet received stock worth $4,000 at the time it was gifted to her by her father. The father had acquired the stock several years earlier for $2,200. The father paid no gift tax on the transfer to Janet. Janet sells the stock for $6,600 two months after receiving it. What is the nature and amount of Janet's gain or loss?

Accepted Answer

The answer of Janet received stock worth $4,000 at the...

Question 3

When a patent is transferred, the most common forms of payment received by the transferor are a lump sum and/or periodic payment.

Accepted Answer

A) True 
 B)False

Question 4

A corporation has a $50,000 short-term capital loss for the year. The corporation has $1,200,000 of taxable income from other sources. The taxable income for the year is $1,200,000.

Accepted Answer

A) True 
 B)False

Question 5

Ryan has the following capital gains and losses for 2018: $6,000 STCL, $5,000 28% gain, $2,000 25% gain, and $6,000 0%/15%/20% gain. Which of the following is correct:

Accepted Answer

A)  The net capital gain is composed of $1,000 25% gain and $6,000 0%/15%/20% gain. 
B)  The net capital gain is composed of $5,000 28% gain and $2,000 0%/15%/20% gain. 
C)  The net capital gain is composed of $3,000 28% gain, $2,000 25% gain, and $2,000 0%/15%/20% gain. 
D)  The net capital gain is composed of $1,000 28% gain and $6,000 0%/15%/20% gain. 
E)  None of the above.

Question 6

Violet, Inc., has a 2018 $80,000 long-term capital gain included in its $285,000 taxable income. Which of the following is correct?

Accepted Answer

A)  Violet will benefit from an alternative tax on net capital gains computation. 
B)  Violet's regular tax on taxable income is computed because there is no corporate alternative tax on net capital gains approach. 
C)  Violet's $80,000 net capital gain is not taxable. 
D)  Violet's regular tax on taxable income will be greater than its tax using an alternative tax on net capital gain approach. 
E)  None of the above.

Question 7

To compute the holding period, start counting on the day after the property was acquired and include the day of disposition.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following would be included in the netting of § 1231 gains and losses?

Accepted Answer

A)  Personal use property net casualty gain. 
B)  Section 1231 loss. 
C)  Section 1231 gain. 
D)  All of the above. 
E)  b. and c.

Question 9

On January 18, 2017, Martha purchased 200 shares of Blue Corporation stock for $2,000. On November 11, 2018, she sold short 200 shares of Blue Corporation stock which she borrowed from her broker for $2,300. On February 10, 2019, Martha closed the short sale by delivering the 200 shares of Blue Corporation stock which she had acquired in 2017. On that date, Blue Corporation stock had a market price of $4 per share. What is Martha's recognized gain or loss and its character in 2018? In 2019?

Accepted Answer

The answer of On January 18, 2017, Martha purchased 200...

Question 10

The § 1245 depreciation recapture potential does not reduce the amount of the charitable contribution deduction under § 170.

Accepted Answer

A) True 
 B)False

Question 11

Nonrecaptured § 1231 losses from the six prior tax years may cause current year net § 1231 gain to be treated as ordinary income.

Accepted Answer

A) True 
 B)False

Question 12

Individuals who are not professional real estate developers may get capital gain treatment for sale of their real property if they engage only in limited development activities.

Accepted Answer

A) True 
 B)False

Question 13

Section 1231 property generally does not include accounts receivables arising in the ordinary course of business.

Accepted Answer

A) True 
 B)False

Question 14

In 2018, Satesh has $5,000 short-term capital loss, $13,000 0%/15%/20% long-term capital gain, and $7,000 qualified dividend income. Satesh is single and has other taxable income of $15,000. Which of the following statements is correct?

Accepted Answer

A)  No more than $13,000 of Satesh's taxable income is taxed at 0%. 
B)  No more than $7,000 of Satesh's taxable income is taxed at 0%. 
C)  No more than $15,000 of Satesh's taxable income is taxed at 0%. 
D)  None of Satesh's taxable income is taxed at 0%. 
E)  All of Satesh's taxable income is taxed at 0%.

Question 15

Robin Corporation has ordinary income from operations of $30,000, net long-term capital gain of $10,000, and net short-term capital loss of $15,000. What is the taxable income for 2018?

Accepted Answer

A)  $25,000 
B)  $27,000 
C)  $28,500 
D)  $30,000 
E)  None of the above

Question 16

The chart below describes the § 1231 assets sold by the Tan Company (a sole proprietorship) this year. Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year. Assume there is a § 1231 lookback loss of $14,000.

Accepted Answer

The answer of The chart below describes the § 1231...

Question 17

Willie is the owner of vacant land that he purchased in 2014 for $1,400,000 and held for investment. On January 22, 2017, he was paid $145,000 for a thirteen-month option on the land by Susan. Susan could buy the land for an additional $1,200,000 by exercising the option. Susan had hoped to build a luxury home on the land, but was unable to get approval to build a big enough home to satisfy her needs. Consequently, Susan did not exercise her option and the option expired on February 22, 2018. (1) What is Willie's basis, gain or loss, and type of gain or loss from these events? (2) What is Susan's basis, gain or loss, and type of gain or loss from these events?

Accepted Answer

The answer of Willie is the owner of vacant land...

Question 18

In 2017, Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction. In 2018, Jenny has a $18,000 0%/15%/20% long-term capital gain and no other capital gain or loss transactions. Which of the statements below is correct for 2018?

Accepted Answer

A)  Jenny has a $18,000 net capital gain. 
B)  Jenny has a $9,000 net capital gain. 
C)  Jenny has a $9,000 net capital loss. 
D)  Jenny has a $3,000 capital loss deduction. 
E)  Jenny has a $9,000 capital loss deduction.

Question 19

An individual taxpayer has a $2,500 short-term capital loss for the year. The taxpayer could sell stock and generate a $2,500 long-term capital gain. The taxpayer has significant taxable income from other sources. Explain the impact on the taxpayer's taxable income if he did or did not sell the stock.

Accepted Answer

The answer of An individual taxpayer has a $2,500 short-term...

Question 20

Section 1239 (relating to the sale of certain property between related taxpayers) does not apply unless the property:

Accepted Answer

A)  Was depreciated by the transferor. 
B)  Is depreciable in the hands of the transferee. 
C)  Is a capital asset. 
D)  Is real property. 
E)  None of the above.

Exam 14: Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Theresa and Oliver, married filing jointly, and both over 65 years of age, have no dependents. Their 2018 income tax facts are: What is their taxable income for 2018?

When a patent is transferred, the most common forms of payment received by the transferor are a lump sum and/or periodic payment.

A corporation has a $50,000 short-term capital loss for the year. The corporation has $1,200,000 of taxable income from other sources. The taxable income for the year is $1,200,000.

Ryan has the following capital gains and losses for 2018: $6,000 STCL, $5,000 28% gain, $2,000 25% gain, and $6,000 0%/15%/20% gain. Which of the following is correct:

Violet, Inc., has a 2018 $80,000 long-term capital gain included in its $285,000 taxable income. Which of the following is correct?

To compute the holding period, start counting on the day after the property was acquired and include the day of disposition.

Which of the following would be included in the netting of § 1231 gains and losses?

The § 1245 depreciation recapture potential does not reduce the amount of the charitable contribution deduction under § 170.

Nonrecaptured § 1231 losses from the six prior tax years may cause current year net § 1231 gain to be treated as ordinary income.

Individuals who are not professional real estate developers may get capital gain treatment for sale of their real property if they engage only in limited development activities.

Section 1231 property generally does not include accounts receivables arising in the ordinary course of business.

In 2018, Satesh has $5,000 short-term capital loss, $13,000 0%/15%/20% long-term capital gain, and $7,000 qualified dividend income. Satesh is single and has other taxable income of $15,000. Which of the following statements is correct?

Robin Corporation has ordinary income from operations of $30,000, net long-term capital gain of $10,000, and net short-term capital loss of $15,000. What is the taxable income for 2018?

The chart below describes the § 1231 assets sold by the Tan Company (a sole proprietorship) this year. Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year. Assume there is a § 1231 lookback loss of $14,000.

In 2017, Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction. In 2018, Jenny has a $18,000 0%/15%/20% long-term capital gain and no other capital gain or loss transactions. Which of the statements below is correct for 2018?

Section 1239 (relating to the sale of certain property between related taxpayers) does not apply unless the property: