Question 1

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

In 2014, Jenny had a net short-term capital loss of $12,000, but she only deducted $3,000 as a capital loss deduction. This means she has $9,000 carried forward to 2015. In 2015, she had a $18,000 long-term capital gain. She can use her carried forward capital loss of $9,000 to offset this gain, resulting in a net capital gain of $9,000 ($18,000 - $9,000 = $9,000). Therefore, option B is the correct choice. Option A is incorrect because Jenny's net capital gain is not the full $18,000 gain she had in 2015. Option C is incorrect because Jenny's net capital loss is actually a net capital gain. Option D is incorrect because she already used her $3,000 capital loss deduction in 2014. Option E is incorrect because she cannot use her capital loss deduction in 2015 since she has a net capital gain.

Question 2

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...

Question 3

Which of the following comparisons is correct?

Accepted Answer

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

Question 4

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 5

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 IRC Section 1223(1), in like-kind exchange, the holding period of the property received in exchange includes the holding period of the property given up. Hence, the holding period of the factory building is added to the holding period of the office building received in the like-kind exchange. Therefore, the holding period of the office building includes the holding period of the factory building.

Question 6

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 answer of Sara is filing as head of household...

Question 7

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 in consideration for cancelling his lease and moving out, which is considered a capital gain. There is no indication that Marple incurred any capital loss or gain in this scenario.

Question 8

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 will be treated as an ordinary loss.

Question 9

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

The answer of Cason is filing as single and has...

Question 10

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 11

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 answer of Ryan has the following capital gains and...

Question 12

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 13

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 14

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

The answer of Martha has both long-term and short-term 2014...

Question 15

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 16

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

Accepted Answer

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

Question 17

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

The payment of $45,000 by the tenant is considered ordinary income for the lessor as it is a cancellation fee for a lease agreement. The fact that the lessor had a zero tax basis for the lease does not affect the character of the income received. Therefore, choice A is the correct answer.

Question 18

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 19

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

According to IRS rules, individuals can deduct up to $3,000 in net capital losses per year on their tax returns. In this case, Mark has a total net capital loss of $5,000 ($18,000 short-term capital loss – $7,000 28% gain – $6,000 0%/15%/20% gain = -$5,000). Since he can only deduct up to $3,000 of this loss on his tax return, the correct answer is B.

Question 20

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

Accepted Answer

A factory building used in the business and held more than one year is a § 1231 asset. Inventory, office furniture held less than one year, and accounts receivable are not § 1231 assets.

Quiz 8: Property Transactions: Capital Gains and Losses, section 1231, and Recapture Provisions