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 split basis rule is a tax provision that allows individuals to use different bases for calculating gains and losses on gift property. It is true that this rule allows for one basis for losses and another for gains.

Question 2

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.
​
A)Statements I, III and VI are correct.
B)Statements II and III are correct.
C)Only statement VI is correct.
D)Statements II, III, and VI are correct.
E)Statements II, IV and VI are correct.

Accepted Answer

The asset mentioned in the scenario is being used for Victoria's antique business, so it is a business use property, making statement II correct. Since it is a physical item (a saw), it is also tangible property, making statement III correct. Lastly, it belongs to Victoria personally and not to the business (assuming she purchased it with personal funds), so it is also personal property, making statement VI correct. Statements I, IV, and V are not applicable in this scenario.

Question 3

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. This means that any disallowed personal losses cannot be offset by depreciation or losses from the sale of business property.

Question 4

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, the basis of the original stock must be allocated to the new stock received as a dividend. This is because the stock dividend is essentially a transfer of value from the corporation to the shareholder, rather than a realization of gain or income. Allocating basis to the new stock helps to ensure that the shareholder's overall basis in the stock does not change due to the dividend distribution.

Question 5

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 6

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 7

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 8

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 starts the day after the asset is acquired and ends on the day it is disposed of.

Question 9

General Telelpnone 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

An easement is a non-possessory right to use someone else's land for a specified purpose. The payment received for granting an easement is typically considered a return of capital, not a gain or loss, unless it exceeds the property's basis.

Question 10

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

Accepted Answer

This is in accordance with the Internal Revenue Service's guidelines for capitalization of costs related to property construction. Direct costs include labor, materials, and equipment used specifically for the construction, while indirect costs include those that are necessary for the construction process but do not have a direct correlation to it, such as permits, legal fees, and insurance.

Question 11

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 statement is true. According to IRS rules, a wash sale occurs when a taxpayer sells a security at a loss and then purchases a substantially identical security within 30 days before or after the sale date. In such cases, the loss is disallowed and cannot be claimed on their tax return.

Question 12

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, which is $18,000 ($3,000 down + $15,000 note). The interest she paid is not included in her basis calculation.

Question 13

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 14

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.
​
A)Statements I and III are correct.
B)Only statement VI is correct.
C)Statements II and III are correct.
D)Statements II, III, and VI are correct.
E)Statements I, III and VI are correct.

Accepted Answer

The asset, a gold-trimmed gavel, is a tangible personal property that is intended for personal use as decoration in Judge Marshall's living room. Therefore, statement I is correct. The fact that it is a physical object that can be touched and possessed qualifies it as tangible property, making statement III also correct. Finally, since the asset was not purchased with the intention of using it for business purposes, statement VI is also correct.

Question 15

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.
​
A)Statements I and III are correct.
B)Only statement VI is correct.
C)Statements II and III are correct.
D)Statements II, III, and VI are correct.
E)Statements II and VI are correct.

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 16

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 is the basic rule for determining the basis of inherited property according to the IRS.

Question 17

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.
​
A)Statements I and III are correct.
B)Only statement VI is correct.
C)Statements II and III are correct.
D)Statements II, III, and VI are correct.
E)Statements I, III, and VI are correct.

Accepted Answer

The asset, a table saw, can be classified as personal property because Jack bought it for his home (statement I). It is also tangible property because it is a physical asset that can be touched and felt (statement III). Finally, as Jack bought it for personal use, it falls under the category of personal property (statement VI). Therefore, statements I, III, and VI are all correct, making option E the best choice.

Question 18

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.
​
A)Statements I and III are correct.
B)Only statement IV is correct.
C)Statements II and IV are correct.
D)Statements II, IV, and VI are correct
E)Statements II and VI are correct.

Accepted Answer

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

Question 19

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

Accepted Answer

Intangible property includes things like intellectual property, patents, copyrights, and trademarks, which are protected under economic laws and have value because of their economic rights, rather than any physical presence or tangible attribute.

Question 20

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

Accepted Answer

Adjusted basis takes into account any changes or adjustments made to the initial basis over time. This can include deductions for depreciation, improvements or additions made to the property, or any other changes that affect the value of the asset. The adjusted basis is calculated by starting with the initial basis and then adding or subtracting the cumulative effects of these adjustments.

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.

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.

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.

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.

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

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.

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.

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

General Telelpnone 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.

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.

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.

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.

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.

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.

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: "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.

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

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

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.

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. ​

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.

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.

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

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.

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.

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

General Telelpnone 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.

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.

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.

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.

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. ​

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.

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: "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. ​

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

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

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.

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: 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: "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.