Question 1

The top tax rates for an individual with long-term capital gains on the sale of stock and on the sales of collectibles,sold after December 31,2012 are:

Accepted Answer

The top tax rate for long-term capital gains on the sale of stock is 20% for individuals with taxable income over $496,600 ($441,450 for single filers). The top tax rate for the sale of collectibles is also 28%. Therefore, choice D, with options of 20% and 28%, is the best choice.

Question 2

The gain or loss on land sold within one year of purchase is recorded on which one of the following forms or schedules?

Accepted Answer

Form 4797 is used to report the sale of assets used in a trade or business, including land. Since the land was used in a trade or business by a sole proprietor, the gain or loss on the sale should be reported on Form 4797. Schedule C is used to report income and expenses from a sole proprietorship's trade or business but is not used to report the sale of assets. Schedule D is used to report capital gains and losses, including those from the sale of assets held for investment purposes, but is not typically used to report gains or losses from the sale of assets used in a trade or business.

Question 3

Gilberto invested in a mid-size local company with gross assets of $16,000,000.Gilberto purchased 1,000 shares for $48,000 in 2000.In 2016,Gilberto sold the stock for $78,000.How is the gain treated for tax purposes?

Accepted Answer

The answer of Gilberto invested in a mid-size local company...

Question 4

Before the tax implications of asset sales can be determined,which of the following must be determined?

Accepted Answer

All of these factors are important in determining the tax implications of asset sales. The length of time the taxpayer owned the property will impact whether the sale qualifies for long-term capital gains treatment. An asset's classification as personal, trade or business, or investment will impact the tax rate applied to the sale. Whether the asset is subject to depreciation will have an impact on the amount of gain or loss recognized on the sale. Therefore, all three factors must be considered to determine the tax implications of asset sales.

Question 5

What is the basis of artistic works that have been gifted to another by the creator?

Accepted Answer

According to IRS regulations, artistic works that are given as gifts are not considered capital assets for either the creator or the recipient. This means that neither party will have to pay capital gains tax if the artwork is sold in the future. However, the recipient will need to pay tax on any income generated from the sale or use of the artwork.

Question 6

Glenn sells a piece of equipment used in his business for $31,500.The equipment was purchased on July 1,2014,at a cost of $22,000.Glenn has taken $6,600 of depreciation on the equipment.What are the amount and classification of the gain on the sale by Glenn?

Accepted Answer

The total gain is $9,500 ($31,500 sale price - $22,000 cost + $6,600 depreciation). The $6,600 depreciation is recaptured as ordinary income under Section 1245, and the remaining $9,500 is a Section 1231 gain.

Question 7

Which of the following statements is correct regarding the sale of ordinary assets?

Accepted Answer

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

Question 8

A taxpayer has 6 separate capital gain transactions.Four of them are long-term and two are short-term transactions.Two of the long-term transactions have box 3 from Form 1099-B checked,one does not have box 3 from Form 1099-B checked,and there was no 1099-B received for one of the long-term transactions.One short-term transaction has box 3 from a 1099-B checked and the other transaction does not have box 3 from a 1099-B checked.How many Form 8949 must the taxpayer complete?

Accepted Answer

The taxpayer has 6 separate capital gain transactions, and must report each of them on Form 8949. The fact that 4 of them are long-term and 2 are short-term is relevant only for the purpose of calculating the taxpayer's net capital gain or loss on Schedule D. However, the fact that some of the long-term transactions have box 3 from Form 1099-B checked, while others do not, is important for determining the appropriate part of Form 8949 to use. Specifically, if box 3 is checked, the taxpayer should report the transaction on Part II of Form 8949. If box 3 is not checked, the transaction should be reported on Part I of Form 8949. If the taxpayer did not receive a 1099-B for the transaction, it should be reported on Part I as well. For the short-term transactions, the same rules apply, except that they will be reported on either Part I or Part II of Form 8949, depending on whether box 3 is checked. Therefore, the taxpayer needs to complete 3 separate parts of Form 8949, one for each combination of box 3 checked/not checked and 1099-B received/not received.

Question 9

Marquez purchased some equipment for $58,750 on August 15,2015.He decided he did not need the equipment so he sold it on June 13,2016 for $56,500.The equipment was subject to depreciation of $6,964 for 2015 and 2016.What gain or loss will Marquez recognize on the sale of the equipment?

Accepted Answer

The answer of Marquez purchased some equipment for $58,750 on...

Question 10

A taxpayer purchased land in 2008 for $85,000 and sold it in 2016 for $75,000 cash.The buyer also assumed the mortgage of $5,000.What is the amount of gain/loss on the sale of the land?

Accepted Answer

The total amount realized from the sale is $75,000 (cash) + $5,000 (mortgage assumed) = $80,000. The original purchase price was $85,000. Therefore, the loss is $85,000 - $80,000 = $5,000.

Question 11

On which form or schedule is the selling of inventory related to the course of business recorded for a sole proprietor?

Accepted Answer

The selling of inventory related to the course of business for a sole proprietor is recorded on Schedule C - Profit or Loss from Business.

Question 12

Section 1231 property is:

Accepted Answer

The answer of Section 1231 property is:
...

Question 13

Patrice sells a parcel of land for $50,000 cash and the buyer assumes Patrice's liability of $7,000 on the land.Patrice's basis in the land is $40,000.What is the gain or loss she will recognize on the sale?

Accepted Answer

To calculate the gain or loss recognized on the sale, we need to first calculate the amount realized, which is the cash received plus the assumed liability:
Amount realized = $50,000 + $7,000 = $57,000

Next, we need to calculate the adjusted basis, which is the original basis plus any improvements or adjustments made to the property, minus any depreciation taken:
Adjusted basis = $40,000

Finally, we can calculate the gain or loss recognized by subtracting the adjusted basis from the amount realized:
Gain or loss = Amount realized - Adjusted basis
Gain or loss = $57,000 - $40,000
Gain or loss = $17,000

Since the amount realized is higher than the adjusted basis, Patrice will recognize a gain of $17,000 on the sale (option D).

Question 14

Juanita is a sole proprietor who has some outstanding receivables she wishes to sell.The receivables have a $16,000 FMV and a basis of $10,000.Juanita sells the receivables for $12,500.What gain or loss does Juanita recognize on the sale?

Accepted Answer

Juanita recognizes a $2,500 ordinary gain, calculated as the difference between the sale price ($12,500) and the basis ($10,000) of the receivables. Receivables are considered ordinary income property, so the gain is ordinary, not capital.

Question 15

Which one of the following is Section 1231 property?

Accepted Answer

Section 1231 property includes tangible property (e.g. buildings) used in a trade or business, as well as certain intangible property such as patents and licenses. Copyright (A) would be considered a capital asset unless it is held by the author as part of their business, in which case it could be considered Section 1231 property. Accounts receivable (B) and inventory (D) would be considered ordinary income assets.

Question 16

Patty and Rich,married filing jointly,have $385,000 in MAGI and $90,000 of net investment income NII).They will pay a surtax of:

Accepted Answer

The surtax is 3.8% of the lesser of NII or the excess of MAGI over $250,000. The lesser of NII or the excess of MAGI over $250,000 is $90,000. The surtax is 3.8% of $90,000, which is $3,420.

Question 17

Which one of the following is a capital asset?

Accepted Answer

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

Question 18

Lourdes,a sole proprietor,collected $8,650 on November 21,2016 on some of her outstanding receivables.Her basis in these receivables was $0.What is the gain or loss Lourdes recognizes for 2016?

Accepted Answer

Since Lourdes is collecting on receivables in the normal course of her business, she recognizes no gain or loss. The collection of receivables is a regular business activity and does not result in a gain or loss.

Question 19

Caesar,a single taxpayer,has wage income of $75,000.He also has a short-term capital loss of $5,000,a short-term capital gain of $2,000,and a long-term capital gain of $3,000.What is Caesar's AGI for 2016?

Accepted Answer

The answer of Caesar,a single taxpayer,has wage income of $75,000.He...

Question 20

Hiroko,a single taxpayer,has wage income of $80,000.In addition,she has $5,000 in long-term capital losses,$4,000 in long-term capital gains,and $4,000 in short-term capital gains.What is Hiroko's AGI for 2016?

Accepted Answer

Hiroko's total long-term capital losses ($5,000) exceed her total long-term capital gains ($4,000), resulting in a net long-term capital loss of $1,000. This $1,000 loss can be used to offset her short-term capital gains of $4,000, resulting in a taxable capital gain of $3,000. 
Thus, her total income would be $80,000 + $3,000 = $83,000, making the correct answer choice C.

Quiz 7: Capital Gains and Other Sales of Property Schedule D and Form 4797