Question 1

Diane gifted 100 shares of Runners Link common stock with a FMV of $8,000 to her brother,Sean.The stock originally cost Diane $11,000.Sean later sells the stock on the open market for $9,000.Sean recognizes:

Accepted Answer

The answer of Diane gifted 100 shares of Runners Link...

Question 2

Josephine gave her son,Shane 700 shares of Creative Marketing,Inc.common stock on May 26,2013.Josephine originally paid $9,000 for the stock on April 15,2013.At the date of the gift,the fair market value of the stock was $8,500.If no gift tax is paid and Shane sells the stock for $5,500 on May 26,2014,he will recognize:

Accepted Answer

Shane's basis in the stock is the same as Josephine's original cost basis of $9,000 because the fair market value at the time of the gift was less than the donor's basis and no gift tax was paid. Since Shane sold the stock for $5,500, he recognizes a short-term capital loss of $3,500 ($9,000 - $5,500) because he held the stock for less than a year.

Question 3

Which one of the following is a capital asset?

Accepted Answer

The answer of Which one of the following is a...

Question 4

Which of the following statements is incorrect regarding the gain or loss from the sale of property received as a gift?

Accepted Answer

The answer of Which of the following statements is incorrect...

Question 5

In 2005,Savannah purchased 200 shares of Hi-Style stock as an investment.The stock cost $12,000.In 2014 when the fair market value was $14,000,Savannah gave the stock to her daughter,Daniele.If no gift tax is paid and Daniele sells the stock for $15,000,she will recognize:

Accepted Answer

The answer of In 2005,Savannah purchased 200 shares of Hi-Style...

Question 6

Dan sold 135 shares (assume 100 are long-term)of Elite Mutual Fund on July 26,2014 for $95 per share and received a 1099-B (box 3 was not checked for basis)to record the sale of the shares.Dan's investment portfolio includes the following purchases of Elite Mutual Fund:  In 2014,Dan will recognize:

Accepted Answer

The answer of Dan sold 135 shares (assume 100 are...

Question 7

Anike received property as part of an inheritance from her father who passed away on March 10,2014.The property was purchased by her father on July 3,2013,for $146,000.Anike sold the property on June 30,2014,for $158,000.At the date of his death the property had a FMV of $144,000.What gain,if any,will Anike pick up on her return for 2014?

Accepted Answer

Anike acquired the property through inheritance, so the property's basis is "stepped-up" to its fair market value (FMV) on the date of her father's death, which was $144,000. Since she sold the property for $158,000, the recognized gain will be the difference between the FMV at the date of death and the selling price ($158,000 - $144,000 = $14,000). Since Anike inherited the property and held it for more than one year before selling it, the gain will be classified as a long-term capital gain. Therefore, the correct answer is D, $14,000 long-term gain.

Question 8

Francisco sells a parcel of land for $90,000 cash and the buyer also assumes Francisco's liability of $10,000.The basis of his land is $60,000.What is the gain or loss realized on the sale?

Accepted Answer

The answer of Francisco sells a parcel of land for...

Question 9

Which of the following is Section 1231 property?

Accepted Answer

Section 1231 property includes depreciable or real property used in a trade or business and held for more than one year, such as buildings, machinery, and land.

Question 10

A taxpayer purchased land in 2012 for $26,000 and sold it in 2014 for $31,000 cash.The buyer also assumed the remaining mortgage of $13,000.What is the amount recognized on the sale of the land?

Accepted Answer

The answer of A taxpayer purchased land in 2012 for...

Question 11

Joe received a parcel of land as a gift from his sister,Lisa,in 2009.At the time of the gift,the land had a FMV of $10,000.Lisa purchased the land in 2005 for $13,000.If Joe sells the land in 2014 for $22,450,he will report a

Accepted Answer

When Joe sells the land, he will report a capital gain. The basis of the land for Joe is the same as it was for Lisa, which is $13,000. Since Joe received the land as a gift, his basis is equal to Lisa's basis at the time of the gift, or $10,000. When Joe sells the land for $22,450, he will have a capital gain of $12,450 ($22,450 - $10,000). Therefore, the correct answer is B.

Question 12

Kwon-Lee sold 200 shares held in FNP Mutual Fund in 2014 for $22,500 and received a 1099-B to record the sale of the shares.Kwon-Lee's investment portfolio includes the following purchases of FNP Mutual Fund stock:  Assuming Kwon-Lee uses the single category average cost method,he will recognize

Accepted Answer

The answer of Kwon-Lee sold 200 shares held in FNP...

Question 13

Elandra purchased 500 shares in Prompt Messenger Services for $12,000 on November 21,2013.The company went bankrupt on June 13,2014,with no hope of recovery for the shareholders.On what date is the stock deemed to be worthless and what is the nature of the loss?

Accepted Answer

The stock is deemed worthless at the end of the year in which it becomes worthless, which is December 31, 2014. Since Elandra held the stock for more than a year, it is a long-term loss.

Question 14

The gain or loss on the sale of property held as an investment is recorded on which one of the following forms or schedules?

Accepted Answer

According to the IRS, gain or loss from the sale of property held as an investment is recorded on Schedule D. This is true for individuals, partnerships, and corporations. Form 4797 is used for the sale of property used in a trade or business, not for investment purposes.

Question 15

The following is true if land is sold except:

Accepted Answer

The gain on the sale of land appears on the Form 1040 under the heading "other income" is not true. The gain on the sale of land used in a business is recorded on Form 4797 or Schedule D, and if the owner is a sole proprietor, it may appear on a Schedule C as ordinary income.

Question 16

All of the following statements regarding Section 1231 are incorrect except:

Accepted Answer

The answer of All of the following statements regarding Section...

Question 17

On May 1,2013,Kelalani purchased land for $98,000 for use in her business.She sold it on May 2,2014,for $92,000.If there are no other sales of business or trade property,how is this loss treated for tax purposes on Kelalani's return?

Accepted Answer

The answer of On May 1,2013,Kelalani purchased land for $98,000...

Question 18

In 2008,Naila purchased land for $77,000 for use in her landscape business.She sold it in 2014 for $83,000.If Naila has no other sales of business or trade property,how will this gain be taxed?

Accepted Answer

The gain from the sale of the land will be treated as a capital gain because it was held for more than one year. As Naila held the land for six years, this will be a long-term capital gain. The basis of the property was $77,000 and the sale price was $83,000, resulting in a gain of $6,000. Therefore, the gain will be taxed as a long-term capital gain.

Question 19

Sylvio purchased an apartment building as an investment in January 2008 for $383,500 and sold it for $475,000 in 2014.He reported $68,436 of allowed accumulated straight-line depreciation.If Sylvio is in the highest tax bracket for ordinary income,how much of his gain qualifies for preferential tax treatment?

Accepted Answer

The total gain is $91,500 ($475,000 - $383,500). The gain attributable to depreciation ($68,436) is taxed at a maximum rate of 25%, while the remaining gain ($91,500 - $68,436 = $23,064) qualifies for preferential long-term capital gains tax rates.

Question 20

Keisha sold 200 shares of Chic-Chic stock in 2014 for $22,500 and received a 1099-B to record the sale of the shares.Keisha's investment portfolio includes the following purchases of Chic-Chic's stock:  Assuming Keisha does not identify which shares she sold,she will recognize

Accepted Answer

The answer of Keisha sold 200 shares of Chic-Chic stock...

Quiz 7: Capital Gains and Other Sales of Property