Question 1

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.
​

Accepted Answer

The correct statement is only statement II. When a security becomes worthless, the measure of the loss is the adjusted basis of the securities, which can be deducted as a capital loss. However, no loss can be deducted if there has been no realization of the loss.

Question 2

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

Long-term capital gains are taxed at lower rates than ordinary income. In this case, since Sidney only has $1,000 in long-term capital gain, the tax savings will be based on the difference between the long-term capital gains rate and his ordinary income tax rate. Assuming he is in the 22% tax bracket for ordinary income, his tax on the capital gain will be 15% ($1,000 x 15% = $150). Therefore, the actual tax savings he receives is $150 - $0 (if there was no special treatment for capital gains) = $150. So the correct answer is option C) $100.

Question 3

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 4

A taxable entity has the following capital gains and losses in 2016:  ​

Accepted Answer

Statement I is incorrect because capital losses can be carried forward indefinitely, not just for three years.
Statement II is correct because the taxable entity has a net capital loss of $6,000, which can be used to offset other forms of income in the current year up to a limit of $3,000. The remaining amount of the loss, in this case $3,000, can be carried forward to future tax years.

Question 5

A taxable entity has the following capital gains and losses in 2016:  ​

Accepted Answer

The answer of A taxable entity has the following capital...

Question 6

Sybil purchased 500 shares of Qualified Small Business Stock (QSB)for $25,000 on March 2,2003.On November 29,2016,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%.
​

Accepted Answer

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

Question 7

Rachael purchased 500 shares of Qualified Small Business Stock (QSB)for $900,000 on March 2,2009.On November 29,2016,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.
​

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 8

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 9

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 10

Phi Corporation had the following capital gains and losses for 2014 through 2016:  ​

Accepted Answer

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

Question 11

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.
​

Accepted Answer

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

Question 12

Cheryl purchased 500 shares of Qualified Small Business Stock (QSB)for $900,000 on March 2,2010.On November 29,2016,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...

Question 13

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 14

Sigma Corporation had the following capital gains and losses for 2012 through 2016:  ​
Sigma's net capital gain for 2016 is:

Accepted Answer

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

Question 15

Sally owns 700 shares of Fashion Styles Clothing common stock.Sally purchased the 700 shares as follows:  ​
As of December 29,2016,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 Fashion Styles Clothing common stock is not provided in the question, so it is impossible to determine the optimal tax result of selling the 400 shares. However, regardless of Sally's cost basis, selling 400 shares of Fashion Styles Clothing stock for $13 per share will result in a long-term capital loss of ($13 x 400) - (cost basis of 400 shares), which is $5,200 - (cost basis of 400 shares). Since the tuition payment is also $5,200, Sally can use the capital loss to offset the tuition payment and reduce her taxable income. Therefore, the optimal tax result of selling 400 shares is option B, a $200 long-term capital loss.

Question 16

Omicron Corporation had the following capital gains and losses for 2014 through 2016:  ​
Omicron's net capital gain for 2016 is:

Accepted Answer

To find the net capital gain for 2016, we need to add up all the capital gains and losses for 2014-2016. 
Capital gains: $40,000 + $25,000 + $30,000 = $95,000
Capital losses: $10,000 + $15,000 + $5,000 = $30,000
Net capital gain for 2016: $95,000 - $30,000 = $65,000
Therefore, the correct answer is C) $45,000.

Question 17

Santana purchased 200 shares of Neffer,Inc.Common Stock on November 13,2015,for $3,400 and paid a $200 commission.On December 28,2015,Santana received a $2 per share cash dividend from Neffer.On June 17,2016,Neffer declares and distributes a 2 for 1 stock split.On August 4,2016,Santana purchased an additional 300 shares of Neffer,Inc.Common Stock for $4,200 plus a $300 commission.On November 22,2016,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 18

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.
​

Accepted Answer

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

Question 19

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.
​

Accepted Answer

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

Question 20

Victor bought 100 shares of stock of Wabash Manufacturing Corporation from an unrelated individual paying $1 per share on December 20,2015.On April 17,2016,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

The shares became worthless in 2016, more than a year after they were purchased in 2015, making it a long-term capital loss.

Quiz 11: Property Dispositions

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.

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?

A taxable entity has the following capital gains and losses in 2016:

A taxable entity has the following capital gains and losses in 2016:

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

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

Phi Corporation had the following capital gains and losses for 2014 through 2016:

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?

Sigma Corporation had the following capital gains and losses for 2012 through 2016: Sigma's net capital gain for 2016 is:

Omicron Corporation had the following capital gains and losses for 2014 through 2016: Omicron's net capital gain for 2016 is:

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.

Quiz 11: Property Dispositions

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. ​

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?

A taxable entity has the following capital gains and losses in 2016: ​

A taxable entity has the following capital gains and losses in 2016: ​

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

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

Phi Corporation had the following capital gains and losses for 2014 through 2016: ​

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?

Sigma Corporation had the following capital gains and losses for 2012 through 2016: ​ Sigma's net capital gain for 2016 is:

Omicron Corporation had the following capital gains and losses for 2014 through 2016: ​ Omicron's net capital gain for 2016 is:

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. ​

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.

A taxable entity has the following capital gains and losses in 2016:

A taxable entity has the following capital gains and losses in 2016:

Phi Corporation had the following capital gains and losses for 2014 through 2016:

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.

Sigma Corporation had the following capital gains and losses for 2012 through 2016: Sigma's net capital gain for 2016 is:

Omicron Corporation had the following capital gains and losses for 2014 through 2016: Omicron's net capital gain for 2016 is:

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.