Question 1

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 2015?

Accepted Answer

The answer of Robin Corporation has ordinary income from operations...

Question 2

Which of the following comparisons is correct?

Accepted Answer

The answer of Which of the following comparisons is correct?
...

Question 3

In 2015,an individual taxpayer has $863,000 of taxable income that includes $48,000 of 0%/15%/20% long-term capital gain.Which of the following statements is correct?

Accepted Answer

The answer of In 2015,an individual taxpayer has $863,000 of...

Question 4

Gold Company signs a 13-year franchise agreement with Silver.Silver retained significant powers,rights,and a continuing interest.Gold Company (the franchisee) makes noncontingent payments of $18,000 per year for the first four years of the franchise.Gold Company also pays a contingent fee of 2% of gross sales every month.Which of the following statements is correct?

Accepted Answer

The answer of Gold Company signs a 13-year franchise agreement...

Question 5

Sara is filing as head of household and has 2015 taxable income of $57,000 which includes $3,000 of net long-tem capital gain.The net long-term capital gain is made up of $1,000 25% gain and $2,000 0%/15%/20% gain.What is the tax on her taxable income using the alternative tax method? Note: Use the tax rate schedule rather than the tax table.

Accepted Answer

The tax on ordinary income ($54,000) is calculated using the head of household tax rate schedule. The $2,000 0%/15%/20% gain is taxed at 15% since Sara's income falls within the 15% capital gains bracket. The $1,000 25% gain is taxed at 25%. The total tax is $8,373.

Question 6

Which of the following assets held by a manufacturing business is a § 1231 asset?

Accepted Answer

Only assets that are used in a trade or business and are held for more than one year are considered § 1231 assets. Inventory (A) and office furniture held less than one year (B) are not § 1231 assets. Accounts receivable (D) are not considered tangible assets and are not § 1231 assets.

Question 7

White Company acquires a new machine for $75,000 and uses it in White's manufacturing operations.A few months after White places the machine in service,it discovers that the machine is not suitable for White's business.White had fully expensed the machine in the year of acquisition using § 179.White sells the machine for $60,000 in the tax year after it was acquired,but held the machine only for a total of 10 months.What was the tax status of the machine when it was disposed of and the amount of the gain or loss?

Accepted Answer

The answer of White Company acquires a new machine for...

Question 8

Martha has both long-term and short-term 2014 capital gains and losses.The result of netting these gains and losses is a net long-term capital loss.Martha has no qualified dividend income.Also,Martha's 2014 taxable income puts her in the 28% tax bracket.Which of the following is correct?

Accepted Answer

Martha will use Parts I, II, and III of Schedule D to report her capital gains and losses. She will not benefit from the special treatment for long-term capital gains because she has a net long-term capital loss. She will have a capital loss deduction, which can offset ordinary income up to $3,000.

Question 9

In 2015,Mark has $18,000 short-term capital loss,$7,000 28% gain,and $6,000 0%/15%/20% gain.Which of the statements below is correct?

Accepted Answer

Individual taxpayers are allowed to deduct up to $3,000 of excess capital losses against ordinary income each year. In this case, Mark has a net capital loss of $18,000 - $7,000 + $6,000 = $17,000. Since the maximum deduction allowed is $3,000, Mark can deduct $3,000 of this loss against ordinary income in 2015, leaving a carryover of $14,000 to future tax years. Therefore, choice B is correct.

Question 10

Ryan has the following capital gains and losses for 2015: $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

The net capital gain is composed of $1,000 25% gain and $6,000 0%/15%/20% gain.

Question 11

On June 10,2015,Ebon,Inc.acquired an office building as a result of a like-kind exchange.Ebon had given up a factory building that it had owned for 26 months as part of the like-kind exchange.Which of the statements below is correct?

Accepted Answer

According to the tax regulations, the holding period of the acquired property (office building) includes the holding period of the relinquished property (factory building) in a like-kind exchange. Therefore, the holding period of the office building starts on the date Ebon acquired the factory building, which is the date Ebon first held the factory building. Hence, the correct statement is that the holding period of the office building includes the holding period of the factory building. Choice D is the only option that correctly reflects this rule.

Question 12

In 2014,Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction.In 2015,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?

Accepted Answer

First, we need to apply the $3,000 capital loss deduction from 2014 to Jenny's 2015 long-term capital gain. This reduces the taxable long-term capital gain to $15,000 ($18,000 - $3,000). Next, we need to net the remaining $15,000 long-term capital gain with the $12,000 short-term capital loss from 2014. The net capital gain for 2015 is then $3,000 ($15,000 - $12,000). Therefore, Jenny has a 2015 $3,000 net capital gain.

Question 13

Vertigo,Inc. ,has a 2015 net § 1231 loss of $64,000 and had a $32,000 net § 1231 gain in 2014.For 2015,Vertigo's net § 1231 loss is treated as:

Accepted Answer

Net § 1231 losses are treated as ordinary losses, so Vertigo's 2015 net § 1231 loss of $64,000 would be treated as an ordinary loss. The fact that they had a net § 1231 gain in 2014 is not relevant for determining the treatment of the 2015 loss.

Question 14

A lessor is paid $45,000 by its commercial tenant as a lease cancellation fee.The tenant wanted to get out of its lease so it could move to a different building.The lessor had held the lease for three years before it was canceled.The lessor had a zero tax basis for the lease.The lessor has received:

Accepted Answer

Lease cancellation fees are generally treated as ordinary income and taxed at the lessor's regular income tax rate. Since the lessor had a zero tax basis for the lease, they do not have any basis to offset the income from the lease cancellation fee. Therefore, the entire $45,000 would be considered ordinary income.

Question 15

Cason is filing as single and has 2015 taxable income of $36,000 which includes $34,000 of 0%/15%/20% net long-term capital gain.What is his tax on taxable income using the alternative tax method? Note: Use the tax rate schedule rather than the tax table.

Accepted Answer

Cason's taxable income includes $34,000 of long-term capital gains, which are taxed at 0% up to the 15% tax bracket threshold. The remaining $2,000 of ordinary income is taxed at the 10% rate, resulting in $200 tax.

Question 16

Virgil was leasing an apartment from Marple,Inc.Marple paid Virgil $1,000 to cancel his lease and move out so that Marple could demolish the building.As a result:

Accepted Answer

Virgil received $1,000 from Marple to cancel his lease and move out. This $1,000 is considered a capital gain for Virgil because he received money in exchange for giving up his lease.

Question 17

Which of the following is correct concerning short sales of stock?

Accepted Answer

The answer of Which of the following is correct concerning...

Question 18

Tan,Inc. ,sold a forklift on April 12,2015,for $8,000 (its FMV) to its 100% shareholder,Ashley.Tan's adjusted basis for the forklift was $12,000.Ashley's holding period for the forklift:

Accepted Answer

The answer of Tan,Inc. ,sold a forklift on April 12,2015,for...

Question 19

In 2015,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

The answer of In 2015,Satesh has $5,000 short-term capital loss,$13,000...

Question 20

Violet,Inc. ,has a 2015 $80,000 long-term capital gain included in its $285,000 taxable income.Which of the following is correct?

Accepted Answer

The answer of Violet,Inc. ,has a 2015 $80,000 long-term capital...

Quiz 14: Property Transactions: Capital Gains and Losses, section 1231 and Recapture Provisions