Question 1

Sybil purchased 500 shares of Qualified Small Business Stock (QSB)for $25,000 on March 2,2003.On November 29,2017,she sells the stock for $125,000.Sybil also sells 100 shares of stock she acquired two years ago realizing a gain of $20,000.Sybil has $100,000 of other income.Which of the following statements about the stock sale is/are true?
I.The tax paid on Sybil's two stock sales is $17,000.
II.The tax rate on the $20,000 gain is 15%.
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Accepted Answer

The answer of Sybil purchased 500 shares of Qualified Small...

Question 2

Raymond,a single taxpayer,has taxable income of $155,000 from all sources except capital gains.He has a $10,000 gain from the sale of qualified small business stock he acquired in 1995.What is the total tax saving Raymond receives because of any special treatment of his $10,000 long-term capital gain on small business stock?

Accepted Answer

Qualified small business stock held for more than 5 years receives a special exclusion of 50% of the gain. Thus, Raymond will only be taxed on $5,000 of the $10,000 gain at the long-term capital gain rate of 15% (since his taxable income is above the 0% and 15% capital gains rate threshold). Therefore, his tax savings will be 15% of $5,000, which is $750. However, since the maximum amount of tax that can be saved through the exclusion is the greater of $10 million or 10 times the taxpayer's adjusted basis in the stock, we must also ensure that Raymond's $10,000 gain does not exceed his adjusted basis in the stock. If his adjusted basis is less than $1,000, he would only be able to save $1,000 in tax through the exclusion. However, if his adjusted basis is $1,000 or more, he would be able to save $750 in tax. Therefore, the total tax saving Raymond receives is $750.

Question 3

A taxable entity has the following capital gains and losses in 2017:
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Accepted Answer

Statement I is correct. The capital gain of $2,500 can be offset by the capital loss of $1,500, resulting in a net capital gain of $1,000.
Statement II is incorrect. The $10,000 capital loss cannot be used to offset ordinary income. It can only be used to offset capital gains.

Question 4

The exclusion of a percentage of the capital gain realized on the sale of qualified small business stock acquired after February 17,2009,and before September 27,2010,results in an effective tax rate on these capital gains of

Accepted Answer

The exclusion of a percentage of the capital gain realized on the sale of qualified small business stock acquired after February 17, 2009, and before September 27, 2010, allows for a 75% exclusion. Given the maximum capital gains rate of 28% for such gains, the effective tax rate is 28% of the 25% not excluded, which is 7% (0.28 * 0.25 = 0.07).

Question 5

Capital gain and loss planning strategies include
I.the optimal action of using capital gains to reduce an individual taxpayer's net capital loss for a year to zero.
II.selling enough capital assets to create a $3,000 capital loss.
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Accepted Answer

The answer of Capital gain and loss planning strategies include
I.the...

Question 6

A taxable entity has the following capital gains and losses in 2017:
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Accepted Answer

Statement I is incorrect because the net short-term capital loss is $3,000, which is the maximum amount that can be deducted against ordinary income. Any excess loss would be carried forward to future years.
Statement II is correct because the long-term capital gains are taxed at a lower rate than the short-term capital gains. In this case, the long-term capital gain of $10,000 would be taxed at a maximum rate of 20%, while the short-term capital gain of $5,000 would be taxed at the ordinary income tax rate (up to 37%).

Question 7

Santana purchased 200 shares of Neffer,Inc.Common Stock on November 13,2016,for $3,400 and paid a $200 commission.On December 28,2016,Santana received a $2 per share cash dividend from Neffer.On June 17,2017,Neffer declares and distributes a 2 for 1 stock split.On August 4,2017,Santana purchased an additional 300 shares of Neffer,Inc.Common Stock for $4,200 plus a $300 commission.On November 22,2017,Santana sells 500 shares of Neffer,Inc.stock for $6,000 and pays a $400 commission on the sale.Santana's gain (loss)on the sale is

Accepted Answer

The answer of Santana purchased 200 shares of Neffer,Inc.Common Stock...

Question 8

Sigma Corporation had the following capital gains and losses for 2013 through 2017:
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Sigma's net capital gain for 2017 is:

Accepted Answer

To find the net capital gain for 2017, we need to add up the total capital gains and losses for 2017 only. From the table, we can see that Sigma had a total capital gain of $70,000 and a total capital loss of $15,000 in 2017. Therefore, the net capital gain for 2017 is $70,000 - $15,000 = $55,000.

Question 9

When a security becomes worthless
I.no loss can be deducted because a realization has not occurred.
II.the measure of the loss is the adjusted basis of the securities.
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Accepted Answer

Statement II is correct as the measure of the loss on a worthless security is the adjusted basis of the securities. However, statement I is incorrect as a loss can actually be deducted when a security becomes worthless, even if there has been no realization. This is known as a "worthless securities deduction" and is allowed by the IRS for tax purposes.

Question 10

Victor bought 100 shares of stock of Wabash Manufacturing Corporation from an unrelated individual paying $1 per share on December 20,2016.On April 17,2017,the corporation is declared bankrupt and the shares are deemed worthless.What is the amount and character of Victor's recognized loss as a result of the bankruptcy?

Accepted Answer

Victor's recognized loss is a $100 long-term capital loss because the shares were held for more than one year before they became worthless.

Question 11

Omicron Corporation had the following capital gains and losses for 2015 through 2017:
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Omicron's net capital gain for 2017 is:

Accepted Answer

To calculate Omicron's net capital gain for 2017, we need to take the total capital gains and losses for the year and subtract any capital losses carried over from previous years. In 2017, Omicron had capital gains of $100,000 and capital losses of $55,000, for a net capital gain of $45,000 (100,000 - 55,000 = 45,000). Therefore, the best choice is C.

Question 12

Phi Corporation had the following capital gains and losses for 2015 through 2017:
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Accepted Answer

The answer of Phi Corporation had the following capital gains...

Question 13

Sidney,a single taxpayer,has taxable income of $45,000 from all sources except capital gains.He has a long-term capital gain of $1,000.What is the actual tax savings Sidney receives because of any special treatment of his $1,000 long-term capital gain?

Accepted Answer

Since the long-term capital gain is only $1,000, it falls in the 0% tax bracket for capital gains (for taxpayers with taxable income less than or equal to $40,000 in 2021). Therefore, there is no tax liability on this gain and no tax savings. However, if Sidney's total taxable income was $50,000 or higher, the long-term capital gain would be taxed at a rate of 15%, resulting in a tax savings of $150.

Question 14

When securities are sold and the securities were purchased on different dates and at different prices
I.the basis of the shares may be determined on a first-in,first-out basis.
II.the basis of the shares may be determined on a last-in,first-out basis.
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Accepted Answer

The answer of When securities are sold and the securities...

Question 15

Pamela purchased 500 shares of Qualified Small Business Stock (QSB)for $900,000 on October 2,2012.On November 29,2017,she sells the stock for $1,000,000.Pamela also sells 100 shares of stock she acquired two years ago realizing a loss of $10,000.Pamela has $100,000 of other income.Which of the following statements about the stock sale is/are true?
I.Pamela will pay no tax on the two stock sales.
II.Pamela can only deduct $3,000 of the $10,000 loss on the sale of the stock.
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Accepted Answer

Pamela will pay no tax on the QSB stock sale because it qualifies for the 100% exclusion. The loss on the sale of the other stock is limited to $3,000 because of the capital loss deduction limit.

Question 16

Dwight,a single taxpayer,has taxable income of $75,000 from all sources except capital gains.He has a collectibles gain of $1,000.What is the actual tax saving Dwight receives because of any special treatment of his $1,000 collectibles gain?

Accepted Answer

The answer of Dwight,a single taxpayer,has taxable income of $75,000...

Question 17

The exclusion of a percentage of the capital gain realized on the sale of qualified small business stock acquired after September 27,2010,results in an effective tax rate on these capital gains of

Accepted Answer

The answer of The exclusion of a percentage of the...

Question 18

Sally owns 700 shares of Fashion Styles Clothing common stock.Sally purchased the 700 shares as follows:
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As of December 29,2017,Sally has not sold any securities.She needs to send a tuition payment of $5,200 to her daughter's boarding school in Zurich before year-end.Since the Fashion Styles Clothing stock is selling for $13 per share,Sally plans to dispose of 400 shares to cover the tuition.Ignoring commissions and transaction costs,what is the optimal tax result of selling 400 shares?

Accepted Answer

Sally's cost basis in the 700 shares of Fashion Styles Clothing common stock is not given, so we cannot determine her gain or loss on the sale of 400 shares. However, since she has held the stock for over a year, the sale would be considered a long-term capital gain or loss. Since Sally plans to sell the shares at a lower price than she purchased them for, she will incur a long-term capital loss of $200 (400 shares x ($13 selling price - assumed cost basis)).

Question 19

Rachael purchased 500 shares of Qualified Small Business Stock (QSB)for $900,000 on March 2,2009.On November 29,2017,she sells the stock for $1,000,000.Rachael also sells 100 shares of stock she acquired two years ago realizing a loss of $10,000.Which of the following explain(s)tax consequences of the QSB stock sale?
I.The effective tax rate applied to the net gain on the sale of the QSB stock is 15%.
II.Rachael nets her $10,000 loss with her $100,000 gain before applying her exclusion rate.
III.Rachael is eligible for a 75% exclusion of the gain from the QSB stock sale.
IV.The QSB stock is QSB stock partly because Rachael held the stock for the required 3-year minimum.
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Accepted Answer

Rachael is eligible for a 75% exclusion of the gain from the QSB stock sale because she held the stock for more than five years. She can net her $10,000 loss with her $100,000 gain before applying the exclusion rate.

Question 20

Cheryl purchased 500 shares of Qualified Small Business Stock (QSB)for $900,000 on March 2,2010.On November 29,2017,she sells the stock for $1,000,000.Cheryl also sells 100 shares of stock she acquired two years ago realizing a loss of $10,000.Cheryl has $100,000 of other income.Which of the following statements about the stock sale is/are true?
I.The tax paid on Cheryl's two stock sales is $6,300.
II.Cheryl can only deduct $3,000 of the $10,000 loss on the sale of the stock.
​

Accepted Answer

The answer of Cheryl purchased 500 shares of Qualified Small...

Quiz 11: Property Dispositions

A taxable entity has the following capital gains and losses in 2017:

The exclusion of a percentage of the capital gain realized on the sale of qualified small business stock acquired after February 17,2009,and before September 27,2010,results in an effective tax rate on these capital gains of

Capital gain and loss planning strategies include I.the optimal action of using capital gains to reduce an individual taxpayer's net capital loss for a year to zero. II.selling enough capital assets to create a $3,000 capital loss.

A taxable entity has the following capital gains and losses in 2017:

Sigma Corporation had the following capital gains and losses for 2013 through 2017: Sigma's net capital gain for 2017 is:

When a security becomes worthless I.no loss can be deducted because a realization has not occurred. II.the measure of the loss is the adjusted basis of the securities.

Omicron Corporation had the following capital gains and losses for 2015 through 2017: Omicron's net capital gain for 2017 is:

Phi Corporation had the following capital gains and losses for 2015 through 2017:

Sidney,a single taxpayer,has taxable income of $45,000 from all sources except capital gains.He has a long-term capital gain of $1,000.What is the actual tax savings Sidney receives because of any special treatment of his $1,000 long-term capital gain?

When securities are sold and the securities were purchased on different dates and at different prices I.the basis of the shares may be determined on a first-in,first-out basis. II.the basis of the shares may be determined on a last-in,first-out basis.

Dwight,a single taxpayer,has taxable income of $75,000 from all sources except capital gains.He has a collectibles gain of $1,000.What is the actual tax saving Dwight receives because of any special treatment of his $1,000 collectibles gain?

The exclusion of a percentage of the capital gain realized on the sale of qualified small business stock acquired after September 27,2010,results in an effective tax rate on these capital gains of

Quiz 11: Property Dispositions

A taxable entity has the following capital gains and losses in 2017: ​

The exclusion of a percentage of the capital gain realized on the sale of qualified small business stock acquired after February 17,2009,and before September 27,2010,results in an effective tax rate on these capital gains of

Capital gain and loss planning strategies include I.the optimal action of using capital gains to reduce an individual taxpayer's net capital loss for a year to zero. II.selling enough capital assets to create a $3,000 capital loss. ​

A taxable entity has the following capital gains and losses in 2017: ​

Sigma Corporation had the following capital gains and losses for 2013 through 2017: ​ Sigma's net capital gain for 2017 is:

When a security becomes worthless I.no loss can be deducted because a realization has not occurred. II.the measure of the loss is the adjusted basis of the securities. ​

Omicron Corporation had the following capital gains and losses for 2015 through 2017: ​ Omicron's net capital gain for 2017 is:

Phi Corporation had the following capital gains and losses for 2015 through 2017: ​

Sidney,a single taxpayer,has taxable income of $45,000 from all sources except capital gains.He has a long-term capital gain of $1,000.What is the actual tax savings Sidney receives because of any special treatment of his $1,000 long-term capital gain?

When securities are sold and the securities were purchased on different dates and at different prices I.the basis of the shares may be determined on a first-in,first-out basis. II.the basis of the shares may be determined on a last-in,first-out basis. ​

Dwight,a single taxpayer,has taxable income of $75,000 from all sources except capital gains.He has a collectibles gain of $1,000.What is the actual tax saving Dwight receives because of any special treatment of his $1,000 collectibles gain?

The exclusion of a percentage of the capital gain realized on the sale of qualified small business stock acquired after September 27,2010,results in an effective tax rate on these capital gains of

A taxable entity has the following capital gains and losses in 2017:

Capital gain and loss planning strategies include I.the optimal action of using capital gains to reduce an individual taxpayer's net capital loss for a year to zero. II.selling enough capital assets to create a $3,000 capital loss.

A taxable entity has the following capital gains and losses in 2017:

Sigma Corporation had the following capital gains and losses for 2013 through 2017: Sigma's net capital gain for 2017 is:

When a security becomes worthless I.no loss can be deducted because a realization has not occurred. II.the measure of the loss is the adjusted basis of the securities.

Omicron Corporation had the following capital gains and losses for 2015 through 2017: Omicron's net capital gain for 2017 is:

Phi Corporation had the following capital gains and losses for 2015 through 2017:

When securities are sold and the securities were purchased on different dates and at different prices I.the basis of the shares may be determined on a first-in,first-out basis. II.the basis of the shares may be determined on a last-in,first-out basis.