Question 1

If a seller assumes the buyer's liability on the property acquired,the buyer's adjusted basis for the property is increased by the amount of the liability assumed.

Accepted Answer

False

Question 2

The amount of a corporate distribution qualifying for capital recovery treatment which exceeds the recipient's stock basis is treated as an ordinary gain.

Accepted Answer

The amount of a corporate distribution qualifying for capital recovery treatment which exceeds the recipient's stock basis is treated as a capital gain, not an ordinary gain.

Question 3

Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property's adjusted basis whereas capital expenditures are added to the original basis.

Accepted Answer

Expenditures made for ordinary repairs and maintenance of property are considered deductible expenses and are not added to the property's basis. However, capital expenditures such as significant improvements or renovations are added to the original basis in the determination of the property's adjusted basis.

Question 4

If insurance proceeds are received for property used in a trade or business,a casualty transaction can result in recognized gain or recognized loss.

Accepted Answer

If insurance proceeds exceed the adjusted basis of the property, then recognized gain can result. If insurance proceeds are less than the adjusted basis of the property, then recognized loss can result.

Question 5

A realized loss whose recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis.

Accepted Answer

A realized loss whose recognition is postponed does not result in the recovery of more than the taxpayer's cost or other basis; it merely delays the recognition of the loss for tax purposes, not allowing for any recovery beyond the original investment.

Question 6

The amount received for a utility easement on land is included in the gross income of the taxpayer.

Accepted Answer

The answer of The amount received for a utility easement...

Question 7

A realized gain on the sale or exchange of a personal use asset is recognized,but a realized loss on the sale,exchange,or condemnation of a personal use asset is not recognized.

Accepted Answer

This is true according to IRS regulations.

Question 8

The amortization of bond premium decreases the basis of the bond and the amortization of bond discount increases the basis of the bond.

Accepted Answer

Amortizing a bond premium reduces the bond's carrying value over time, while amortizing a bond discount increases the carrying value, aligning it with the bond's face value at maturity.

Question 9

Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property's adjusted basis at the date of disposition.

Accepted Answer

Realized gain or loss is calculated by subtracting the adjusted basis of the property from the amount realized from the sale or disposition of the property.

Question 10

Molanda sells a parcel of land for $18,000 in cash and the buyer assumes Molanda's mortgage of $12,000 on the land.Molanda's amount realized is $30,000.

Accepted Answer

The amount realized from the sale of property includes the cash received plus any liabilities assumed by the buyer. In this case, $18,000 in cash plus the $12,000 mortgage assumed equals $30,000.

Question 11

A realized gain whose recognition is postponed results in the temporary recovery of less than the taxpayer's cost or other basis.

Accepted Answer

The answer of A realized gain whose recognition is postponed...

Question 12

Deductions taken for depreciation or cost recovery on business or income-producing property reduce the adjusted basis of the property.

Accepted Answer

Depreciation and cost recovery deductions are subtracted from the original cost or basis of income-producing property. Over time, these deductions reduce the adjusted basis of the property, which affects the amount of gain or loss when the property is sold or disposed of.

Question 13

The adjusted basis of property that is stolen is reduced by the amount of insurance proceeds received and by any recognized loss.

Accepted Answer

The adjusted basis of stolen property is reduced by any insurance proceeds received and any recognized loss.

Question 14

If a distribution by a corporation to a shareholder exceeds the corporation's earnings and profits,the excess first reduces the shareholder's stock basis to zero and any remaining excess is classified as capital gain or ordinary income depending on the shareholder's holding period for the stock.

Accepted Answer

The answer of If a distribution by a corporation to...

Question 15

Ricky owns all the stock of Amethyst,Inc.(adjusted basis of $100,000).If he receives a distribution from Amethyst of $94,000 and corporate earnings and profits are $10,000,Ricky has a capital gain of $6,000.

Accepted Answer

The answer of Ricky owns all the stock of Amethyst,Inc.(adjusted...

Question 16

Bond premium on tax-exempt bonds must be amortized.The annual amortization reduces the owner's taxable income and decreases the adjusted basis for the bond.

Accepted Answer

The answer of Bond premium on tax-exempt bonds must be...

Question 17

The fair market value of property received in a sale or other disposition is the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy.

Accepted Answer

This is the definition of fair market value as recognized by the IRS.

Question 18

If Wal-Mart stock increases in value during the tax year by $4,500,the amount realized is a positive $4,500.

Accepted Answer

The answer of If Wal-Mart stock increases in value during...

Question 19

If the buyer assumes the seller's liability on the property acquired,the seller's amount realized is decreased by the amount of the liability assumed.

Accepted Answer

The seller's amount realized is increased by the amount of the liability assumed by the buyer, as it effectively adds to the total consideration received for the property.

Question 20

Monroe's delivery truck is damaged in an accident.Monroe's adjusted basis for the delivery truck prior to the accident is $20,000.If Monroe receives insurance proceeds of $21,000 and recognizes a casualty gain of $1,000,his adjusted basis for the delivery truck after the accident is $21,000.

Accepted Answer

The answer of Monroe's delivery truck is damaged in an...

Quiz 13: Part 1--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges