Question 1

William has the following capital gains and losses for the current year:  What is William's net capital gain or loss position for the year?

Accepted Answer

The answer of William has the following capital gains and...

Question 2

Virginia and Dan each own investment realty that they would like to trade. Virginia's property is subject to mortgage debt of $2,000 and has a net of mortgage value of $6,000. Dan's property is subject to mortgage debt of $30,000 and has a net of mortgage value of $5,000. Virginia and Dan agree to exchange properties and assume each other's debt. Dan pays Virginia $1,000 cash, and the exchange is completed. What is the gross selling price of Virginia's property?

Accepted Answer

To calculate the gross selling price of Virginia's property, we need to add the net of mortgage value ($6,000) to the mortgage debt assumed by Dan ($30,000). This gives us a total of $36,000.

Since Dan paid Virginia $1,000 cash, the total amount Virginia received for her property is $37,000 ($1,000 + $36,000).

Therefore, the gross selling price of Virginia's property is $8,000 (net value + mortgage debt):

$6,000 + $30,000 = $36,000 
$36,000 + $1,000 = $37,000 
$37,000 - $2,000 (original mortgage debt) = $35,000 (equity) 
$35,000 + $2,000 (original mortgage debt) = $37,000 (total gross selling price)

Thus, the correct answer is choice C.

Question 3

Corky receives a gift of property from her Aunt Cynthia. Cynthia purchased the property 17 years ago for $375,000. On the date of the gift, the property is appraised at $500,000. What is Corky's holding period for the property if she sells it one month after the gift was completed?

Accepted Answer

Corky's holding period includes the time the property was held by Aunt Cynthia, because it was a gift and not inherited property. Since Cynthia held it for 17 years before gifting it, and Corky sells it one month after receiving it, the total holding period is over a year, making it long-term.

Question 4

All of the following are capital assets with the exception of

Accepted Answer

Office furniture used in a business is not considered a capital asset because it is used in the operation of a business and is classified as business property, which is subject to different tax treatment compared to capital assets like stocks, bonds, artworks, investment properties, and personal residences.

Question 5

A capital asset includes which of the following? I. real estate held as an investment in rental property. II. the copyright to a song held by its writer. III. real estate used in a trade or business. IV. accounts receivable.

Accepted Answer

The answer of A capital asset includes which of the...

Question 6

Melissa sells stock she purchased in 2004 for a $7,500 gain in 2014. In August 2014, she also sells land she purchased as an investment in December 2013 at a loss of $12,000. I. Melissa's tax on the $7,500 gain is $1,125. II. Melissa has a deductible capital loss of $3,000 in 2014.

Accepted Answer

The answer of Melissa sells stock she purchased in 2004...

Question 7

When her property was fully depreciated and was still encumbered by a mortgage of $6,000, Jamelle sells it subject to the mortgage to David for $1,000. What is Jamelle's realized gain or loss?

Accepted Answer

The answer of When her property was fully depreciated and...

Question 8

Terry receives investment property from her mother as a gift in 2014. Her mother paid $15,000 for the property in 2011, and it is valued at $18,000 on the date of the gift. Terry sells the property eight months later for $16,000. Terry's gain or loss is

Accepted Answer

The answer of Terry receives investment property from her mother...

Question 9

Serenity has the following capital gains and losses for the current year:  If Serenity is single and has taxable income from other sources of $75,000, what is the impact of her capital gains and losses on her income tax liability?

Accepted Answer

The answer of Serenity has the following capital gains and...

Question 10

Brenda sells stock she purchased in 2004 for a $7,500 gain in 2014. In August 2014, she also sells land she purchased as an investment in December 2013 at a loss of $9,000. I. For 2014, Brenda's tax on the $7,500 gain is $1,125. II. Brenda can deduct $3,000 of the $9,000 loss in 2014. III. For 2014, Brenda has a net long-term capital loss of $9,000. IV. Brenda can only deduct a capital loss of $1,500 in 2014.

Accepted Answer

The answer of Brenda sells stock she purchased in 2004...

Question 11

Cathy owns property subject to a mortgage of $5,000. Annual real estate taxes are $800 and are due and payable on December 31. Cathy sells her property on July 1 of the current year. The buyer assumes her $5,000 mortgage, and Cathy agrees to finance the sale by taking a mortgage note of $50,000 and property valued at $7,500. The buyer agrees to pay the seller's portion of the property taxes. What is Cathy's amount realized?

Accepted Answer

Cathy's amount realized is the net amount of cash she receives from the sale. To calculate this, we need to subtract all of Cathy's liabilities from the total amount of consideration.

Total consideration paid = assumed mortgage + mortgage note + property value 
Total consideration paid = $5,000 + $50,000 + $7,500 
Total consideration paid = $62,500

Liabilities owed by Cathy:

- Real estate taxes (half year) = $800 / 2 = $400 
- Remaining balance on the mortgage = $5,000

Total liabilities = $5,400

Therefore, the amount realized by Cathy is:

Amount realized = Total consideration paid - Liabilities 
Amount realized = $62,500 - $5,400 
Amount realized = $62,900

Therefore, the correct answer is (D) $62,900.

Question 12

Joyce receives investment property from her mother as a gift in 2014. Her mother paid $15,000 for the property in 2011, and it is valued at $18,000 on the date of the gift. Joyce sells the property eight months later for $16,000. Joyce's realized gain or loss is

Accepted Answer

Joyce's basis in the property is the same as her mother's original cost, $15,000. She sells it for $16,000, resulting in a $1,000 gain ($16,000 - $15,000).

Question 13

In July 2014, Hillary sells a stamp from her stamp collection at a gain of $500. Hillary purchased the stamp in 2010. If Hillary is in the 25% marginal tax rate bracket and has no other capital asset sales in 2014, what is her tax on the sale of the stamp?

Accepted Answer

The stamp is a collectible, subject to a maximum 28% long-term capital gains tax rate. $500 gain x 25% = $125 tax.

Question 14

In September 2014, Eduardo sells stock he purchased in October 2013 at a gain of $5,000. If Eduardo is in the 10% marginal tax rate bracket and he has no other capital asset sales in 2014, what is his tax on the sale of the stock?

Accepted Answer

Since the stock was held for more than a year, it qualifies for long-term capital gains tax treatment. For taxpayers in the 10% tax bracket, the long-term capital gains tax rate is 0%. Therefore, Eduardo's tax on the sale is $0.

Question 15

Long-term capital gain classification is advantageous to taxpayers because of which of the following? I. Long-term capital gains are generally taxed at a lower rate than ordinary income. II. Part of a long-term capital game is excluded from income.

Accepted Answer

Long-term capital gains are typically taxed at a lower rate than ordinary income, making them advantageous for taxpayers. However, there is no general exclusion of a portion of long-term capital gains from income; instead, the benefit comes from the lower tax rates applied to these gains.

Question 16

LeRoy has the following capital gains and losses for the current year:  If LeRoy is single and has taxable income from other sources of $52,000, what is the tax on his capital gains?

Accepted Answer

The answer of LeRoy has the following capital gains and...

Question 17

Courtney and Nikki each own investment realty that they would like to trade. Courtney's property is subject to mortgage debt of $10,000, and its appraised fair market value is $25,000. Nikki's property is subject to mortgage debt of $17,000, and its appraised fair market value is $25,000. Courtney and Nikki agree to exchange the properties and assume each other's debt. To complete the exchange, who pays cash and how much will that person have to pay?

Accepted Answer

The answer of Courtney and Nikki each own investment realty...

Question 18

Gabrielle has the following gains and losses for the current year:  What is Gabrielle's net capital gain or loss position for the year?
A) $7,000 net short-term capital loss.
B) $3,000 net short-term capital gain.
C) $5,000 net short-term capital loss.
D) $3,000 net short-term capital gain.

Accepted Answer

The answer of Gabrielle has the following gains and losses...

Question 19

Morgan has the following capital gains and losses for the current tax year  What is Morgan's net capital gain or loss position for the year?

Accepted Answer

The answer of Morgan has the following capital gains and...

Question 20

In July 2014, Harriet sells a stamp from her stamp collection at a gain of $500. Harriet purchased the stamp in 2009. If Harriet is in the 33% marginal tax rate bracket and has no other capital asset sales in 2014, what is her tax on the sale of the stamp?

Accepted Answer

The tax on the sale of the stamp is $140. This is because Harriet is in the 33% marginal tax rate bracket, and she has a gain of $500 on the sale of the stamp. Therefore, she will owe $500 x 0.33 = $140 in taxes on the sale.

Quiz 11: Property Dispositions

William has the following capital gains and losses for the current year: What is William's net capital gain or loss position for the year?