Question 1

The split basis rule for determining the basis of gifts allows for one basis for determining losses and another for calculation of gains.

Accepted Answer

The statement is true. The split basis rule allows for one basis for determining losses and another for calculation of gains. This is because the basis of a gift is usually different from the fair market value at the time of the gift, which affects the amount of gain or loss realized upon its sale or disposition.

Question 2

Pedro purchased all of the stock of Regis Corporation.Since he purchased all of the stock the basis in all of the corporation's assets must be restated to fair market value.

Accepted Answer

Purchasing all of the stock of a corporation does not trigger a revaluation of the corporation's assets to fair market value; the basis of the assets remains unchanged unless a specific election or transaction, such as an asset purchase agreement, is made to step up the basis.

Question 3

When a stock dividend is nontaxable,part of the basis of the original stock must be allocated to the new stock received as a dividend.

Accepted Answer

When a stock dividend is nontaxable, a portion of the basis of the original stock is allocated to the new stock received as a dividend. This is because the stock dividend does not increase the overall investment value, but rather divides it into a larger number of shares. As a result, the new shares receive a portion of the original basis of the stock.

Question 4

Intangible property lacks a physical existence;the rights exist only because of economic rights the property possesses.

Accepted Answer

Intangible property, such as patents, trademarks, and copyrights, do not have a physical existence but are recognized by law as possessing economic value and therefore rights.

Question 5

Whenever the donor's adjusted basis is used to compute a gain or loss on the donee's disposition of property received by gift,the donee's holding period is always the period of time the property was owned by the donee only.

Accepted Answer

When the donor's adjusted basis is used for determining gain or loss, the donee's holding period includes the time the property was held by the donor, effectively tacking the donor's holding period onto the donee's.

Question 6

Determine the proper classification(s)of the asset discussed in the following scenario: Judge Ruiz purchased a new brass-trimmed gavel to use in her courtroom.
I.Personal use property.
IV.Intangible property.
II.Business use property.
V.Real estate.
III.Tangible property.
VI.Personal property.
​

Accepted Answer

The gavel is a business use property because it is used in Judge Ruiz's professional capacity in the courtroom, making statement II correct. It is tangible because it is a physical object that can be touched, making statement III correct. It is also personal property because it is movable and not attached to land, making statement VI correct.

Question 7

Determine the proper classification(s)of the asset discussed in the following scenario: "Cher receives a copyright for a new song she has written"
I.Personal use property.
IV.Intangible property.
II.Business use property.
V.Real estate.
III.Tangible property.
VI.Personal property.
​

Accepted Answer

The answer of Determine the proper classification(s)of the asset discussed...

Question 8

Determine the proper classification(s)of the asset discussed in the following scenario: Jack bought a new table saw for his home.
I.Personal use property.
IV.Intangible property.
II.Business use property.
V.Real estate.
III.Tangible property.
VI.Personal property.
​

Accepted Answer

The asset in question is a tangible and personal property because it is a physical item that is intended for personal use. Additionally, it is not being used for any business purposes or in connection with any real estate, and it is not an intangible asset such as a patent or trademark. Therefore, statements I, III, and VI are correct.

Question 9

When a security is sold at a loss and and a substantially identical security has been purchased within 30 days before the sale date the loss is disallowed because it is classified as a wash sale.

Accepted Answer

This is a rule under the IRS wash sale rules. If an investor sells a security at a loss and within 30 days before or after the sale date, purchases a substantially identical security, the loss is disallowed for tax purposes. This is to prevent investors from selling securities for tax losses and immediately repurchasing them to continue holding. The disallowed loss is added to the cost basis of the new security purchased.

Question 10

An asset's holding period normally begins on the day after it is acquired and ends on the day of its disposition.

Accepted Answer

This statement is true. The holding period of an asset begins on the day after it is acquired and it ends on the day it is disposed of.

Question 11

The general rule for determining the basis of inherited property is that the basis in the hands of the heir is its fair market value at the date of death or at the alternative valuation date.

Accepted Answer

This statement is true according to the Internal Revenue Service (IRS). The basis of inherited property is generally the fair market value at the date of death or the alternative valuation date, which is six months after the date of death. This is known as a "step-up" in basis, which means that the heir's basis is higher than the decedent's basis, potentially lowering the amount of capital gains tax owed upon sale of the inherited property.

Question 12

The split basis rules for business property prevent the deduction of the disallowed personal loss through depreciation or a loss from the sale of business property.

Accepted Answer

The split basis rules for business property prevent the deduction of the disallowed personal loss through depreciation or a loss from the sale of business property.

Question 13

Adjusted basis is equal to the initial basis,plus or minus the cumulative effects of adjustments.

Accepted Answer

Adjusted basis is the initial basis of a property that is adjusted by adding or subtracting certain amounts to determine the property's cost for tax purposes. These adjustments include improvements made to the property, depreciation taken on the property, and any casualty losses incurred. The adjusted basis is used to calculate the gain or loss when the property is sold.

Question 14

General Telephone gave Wynonna $2,000 for an easement for power lines across her property.She must realize the gain or loss on the receipt of cash.

Accepted Answer

The answer of General Telephone gave Wynonna $2,000 for an...

Question 15

Taxpayers who construct property for their own use must capitalize both the direct and indirect construction costs.

Accepted Answer

According to the IRS regulations, taxpayers who construct property for their own use must capitalize both the direct and indirect construction costs. This means that the costs cannot be deducted from the taxpayer's income immediately, but must be depreciated over the useful life of the property.

Question 16

Brad,an engineering consultant,was given stock valued at $3,000 for services rendered.His basis in the stock he received for the services is zero since he received no cash.

Accepted Answer

Brad's basis in the stock is not zero; it is the fair market value of the services he provided, which in this case is $3,000, the value of the stock he received.

Question 17

Phyllis purchased an automobile for $3,000 down and a note for $15,000.During the year she paid interest of $1,000.Her basis is $18,000.

Accepted Answer

Phyllis's basis is the total amount she paid for the automobile which includes the down payment, note, and interest. Therefore, her basis is $3,000 + $15,000 + $1,000 = $18,000.

Question 18

Determine the proper classification(s)of the asset discussed in the following scenario: Victoria purchased a new show case saw for her antique business.
I.Personal use property.
IV.Intangible property.
II.Business use property.
V.Real estate.
III.Tangible property.
VI.Personal property.
​

Accepted Answer

The asset discussed in the scenario is a show case saw purchased for Victoria's antique business, making it business use property, which is statement II. It is also a tangible asset, making statement III correct. As it was purchased for the antique business, it is considered personal property, as opposed to real estate, making statement VI correct. Therefore, statements II, III, and VI are all correct, making option D the best choice.

Question 19

Personal property consists of any property that is held by an individual.

Accepted Answer

Personal property refers to movable property owned by an individual or entity, not to all property held by an individual, which could include real property (immovable property like land and buildings).

Question 20

Determine the proper classification(s)of the asset discussed in the following scenario: Judge Marshall purchased a new gold-trimmed gavel to decorate his living room.
I.Personal use property.
IV.Intangible property.
II.Business use property.
V.Real estate.
III.Tangible property.
VI.Personal property.
​

Accepted Answer

The asset in question is being used for personal use (statement I), is tangible (statement III), and is considered personal property (statement VI). Therefore, statements I, III, and VI are all correct classifications for this asset.

Quiz 9: Acquisitions of Property

The split basis rule for determining the basis of gifts allows for one basis for determining losses and another for calculation of gains.

Pedro purchased all of the stock of Regis Corporation.Since he purchased all of the stock the basis in all of the corporation's assets must be restated to fair market value.

When a stock dividend is nontaxable,part of the basis of the original stock must be allocated to the new stock received as a dividend.

Intangible property lacks a physical existence;the rights exist only because of economic rights the property possesses.

Whenever the donor's adjusted basis is used to compute a gain or loss on the donee's disposition of property received by gift,the donee's holding period is always the period of time the property was owned by the donee only.

Determine the proper classification(s) of the asset discussed in the following scenario: Judge Ruiz purchased a new brass-trimmed gavel to use in her courtroom. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

Determine the proper classification(s) of the asset discussed in the following scenario: "Cher receives a copyright for a new song she has written" I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

Determine the proper classification(s) of the asset discussed in the following scenario: Jack bought a new table saw for his home. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

When a security is sold at a loss and and a substantially identical security has been purchased within 30 days before the sale date the loss is disallowed because it is classified as a wash sale.

An asset's holding period normally begins on the day after it is acquired and ends on the day of its disposition.

The general rule for determining the basis of inherited property is that the basis in the hands of the heir is its fair market value at the date of death or at the alternative valuation date.

The split basis rules for business property prevent the deduction of the disallowed personal loss through depreciation or a loss from the sale of business property.

Adjusted basis is equal to the initial basis,plus or minus the cumulative effects of adjustments.

General Telephone gave Wynonna $2,000 for an easement for power lines across her property.She must realize the gain or loss on the receipt of cash.

Taxpayers who construct property for their own use must capitalize both the direct and indirect construction costs.

Brad,an engineering consultant,was given stock valued at $3,000 for services rendered.His basis in the stock he received for the services is zero since he received no cash.

Phyllis purchased an automobile for $3,000 down and a note for $15,000.During the year she paid interest of $1,000.Her basis is $18,000.

Determine the proper classification(s) of the asset discussed in the following scenario: Victoria purchased a new show case saw for her antique business. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

Personal property consists of any property that is held by an individual.

Quiz 9: Acquisitions of Property

The split basis rule for determining the basis of gifts allows for one basis for determining losses and another for calculation of gains.

Pedro purchased all of the stock of Regis Corporation.Since he purchased all of the stock the basis in all of the corporation's assets must be restated to fair market value.

When a stock dividend is nontaxable,part of the basis of the original stock must be allocated to the new stock received as a dividend.

Intangible property lacks a physical existence;the rights exist only because of economic rights the property possesses.

Whenever the donor's adjusted basis is used to compute a gain or loss on the donee's disposition of property received by gift,the donee's holding period is always the period of time the property was owned by the donee only.

Determine the proper classification(s) of the asset discussed in the following scenario: Judge Ruiz purchased a new brass-trimmed gavel to use in her courtroom. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property. ​

Determine the proper classification(s) of the asset discussed in the following scenario: "Cher receives a copyright for a new song she has written" I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property. ​

Determine the proper classification(s) of the asset discussed in the following scenario: Jack bought a new table saw for his home. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property. ​

When a security is sold at a loss and and a substantially identical security has been purchased within 30 days before the sale date the loss is disallowed because it is classified as a wash sale.

An asset's holding period normally begins on the day after it is acquired and ends on the day of its disposition.

The general rule for determining the basis of inherited property is that the basis in the hands of the heir is its fair market value at the date of death or at the alternative valuation date.

The split basis rules for business property prevent the deduction of the disallowed personal loss through depreciation or a loss from the sale of business property.

Adjusted basis is equal to the initial basis,plus or minus the cumulative effects of adjustments.

General Telephone gave Wynonna $2,000 for an easement for power lines across her property.She must realize the gain or loss on the receipt of cash.

Taxpayers who construct property for their own use must capitalize both the direct and indirect construction costs.

Brad,an engineering consultant,was given stock valued at $3,000 for services rendered.His basis in the stock he received for the services is zero since he received no cash.

Phyllis purchased an automobile for $3,000 down and a note for $15,000.During the year she paid interest of $1,000.Her basis is $18,000.

Determine the proper classification(s) of the asset discussed in the following scenario: Victoria purchased a new show case saw for her antique business. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property. ​

Personal property consists of any property that is held by an individual.

Determine the proper classification(s) of the asset discussed in the following scenario: Judge Ruiz purchased a new brass-trimmed gavel to use in her courtroom. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

Determine the proper classification(s) of the asset discussed in the following scenario: "Cher receives a copyright for a new song she has written" I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

Determine the proper classification(s) of the asset discussed in the following scenario: Jack bought a new table saw for his home. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.

Determine the proper classification(s) of the asset discussed in the following scenario: Victoria purchased a new show case saw for her antique business. I.Personal use property. IV.Intangible property. II.Business use property. V.Real estate. III.Tangible property. VI.Personal property.