Question 1

Gina owns 100 shares of XYZ common stock with a $12,000 basis and a $25,000 FMV.She receives 100 stock rights with a total FMV of $15,000.Answer the following:
a.What is the basis of the 100 shares of stock?
b.What is the basis of the 100 stock rights?

Accepted Answer

The answer of Gina owns 100 shares of XYZ common...

Question 2

Bad debt losses from nonbusiness debts are deductible as short-term or long-term capital losses depending on how long the debt was outstanding.

Accepted Answer

The answer of Bad debt losses from nonbusiness debts are...

Question 3

Normally,a security dealer reports ordinary income on the sale of securities unless it is specifically identified as a security being held for investment.

Accepted Answer

This is correct. According to the IRS, securities held for investment may be subject to capital gains tax rates, while securities held for trading (i.e. bought and sold frequently) are usually reported as ordinary income. If the security being sold is specifically identified as being held for investment, it may qualify for capital gains treatment.

Question 4

Mike,a dealer in securities and calendar-year taxpayer,purchased a security for inventory on November 18,2015 for $15,000.The FMV on December 31,2015 was $16,000.The security was sold on December 19,2016 for $16,500.These transactions result in

Accepted Answer

The answer of Mike,a dealer in securities and calendar-year taxpayer,purchased...

Question 5

A nonbusiness bad debt is deductible only in the year in which the debt becomes totally worthless.

Accepted Answer

According to the IRS, a nonbusiness bad debt is deductible only in the year in which the debt becomes totally worthless. This means that the taxpayer cannot claim a deduction for the year during which the debt was determined to be partially worthless, but only for the year in which it was determined to be completely worthless.

Question 6

Armanti received a football championship ring in college.During difficult economic times,Armanti sold the ring at a pawn shop.What are the tax issues of the sale to Armanti?

Accepted Answer

The answer of Armanti received a football championship ring in...

Question 7

Section 1221 specifically states that inventory or property held primarily for sale to customers is not classified as a capital asset of the trade or business.

Accepted Answer

This is stated clearly in the language of Section 1221: "The term ‘capital asset’ does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business."

Question 8

An individual taxpayer who is not a dealer in real estate plans to subdivide a parcel of land into four lots and sell them at a substantial gain.The parcel of land had been held six years.In order to qualfiy for capital gain treatment,the individual must satisfy all of the requirements except

Accepted Answer

All of the criteria listed must be satisfied to qualify for capital gain treatment, so the statement that all must be satisfied is incorrect.

Question 9

All of the following are capital assets with the exception of

Accepted Answer

The answer of All of the following are capital assets...

Question 10

Section 1221 of the Code includes a comprehensive list of assets properly classified as capital assets.

Accepted Answer

The answer of Section 1221 of the Code includes a...

Question 11

Kate subdivides land held as an investment and Section 1237 is satisfied.The lots sell for $30,000 per lot (basis $10,000).Kate sells five lots in the first year.Kate's ordinary income is

Accepted Answer

The answer of Kate subdivides land held as an investment...

Question 12

In 2011,Regina purchased a home in Las Vegas which cost $280,000.Due to increase in the market value of the home,she refinanced her mortgage and her debt on the home totaled $300,000 at the end of 2013.Regina accepted a new job in Dallas in April 2014.Unable to sell her home,she rented it in November 2014,at which time its fair market value was $240,000.In June 2016,she sold the home for $230,000.What tax issues should Regina consider?

Accepted Answer

The answer of In 2011,Regina purchased a home in Las...

Question 13

Joy purchased 200 shares of HiLo Mutual Fund on July 15,2012,for $10,500,and has been reinvesting dividends.On December 15,2016,she sells 100 shares.
  What is the basis for the shares sold assuming (1)FIFO and (2)average cost method?

Accepted Answer

The answer of Joy purchased 200 shares of HiLo Mutual...

Question 14

If a capital asset held for one year or more is sold at a gain,the gain is classified as long-term capital gain.

Accepted Answer

The answer of If a capital asset held for one...

Question 15

Which one of the following is a capital asset?

Accepted Answer

The answer of Which one of the following is a...

Question 16

Net long-term capital gains receive preferential tax treatment if they exceed net short-term capital losses.

Accepted Answer

This statement is true. Net long-term capital gains are taxed at a lower rate than ordinary income, while net short-term capital gains (or losses) are taxed at the same rate as ordinary income. If the net long-term capital gains exceed the net short-term capital losses, the excess amount is subject to the preferential tax rate.

Question 17

Donald has retired from his job as a corporate manager.He buys and sells stocks on a daily basis.He spends 8-9 hours daily studying prospective stock purchases and market news.What tax issues should Donald consider?

Accepted Answer

The answer of Donald has retired from his job as...

Question 18

Distinguish between the Corn Products doctrine and the ruling in the Arkansas Best Corporation case.

Accepted Answer

The answer of Distinguish between the Corn Products doctrine and...

Question 19

Emma Grace acquires three machines for $80,000,which have FMVs of $32,000,$28,000,and $20,000 respectively.The delivery cost is $500,and installation costs amount to $2,500.What is the basis of each machine?

Accepted Answer

The answer of Emma Grace acquires three machines for $80,000,which...

Question 20

A building used in a trade or business is a capital asset.

Accepted Answer

The answer of A building used in a trade or...

Quiz 5: Property Transactions: Capital Gains and Losses

Gina owns 100 shares of XYZ common stock with a $12,000 basis and a $25,000 FMV.She receives 100 stock rights with a total FMV of $15,000.Answer the following: a.What is the basis of the 100 shares of stock? b.What is the basis of the 100 stock rights?