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Exam 5: Property Transactions: Capital Gains and Losses

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Question 51

True/False

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Unless the alternate valuation date is elected,the basis of property received from a decedent is generally the property's fair market value at the date of decedent's death.

A) True
B) False

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Question 52

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All recognized gains and losses must eventually be classified either as capital or ordinary.

A) True
B) False

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Question 53

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Kendrick,who has a 33% marginal tax rate,had the following results from transactions during the year: After offsetting the STCL,what is (are) the resulting gain(s) ?

Unlike an individual taxpayer,the corporate taxpayer does not utilize the 25% and 28% specialty capital gain rates,but it does apply the 15% tax rate to adjusted net capital gain.

All realized gains and losses are recognized for tax purposes.

An individual taxpayer who is not a dealer in real estate plans to subdivide a parcel of land into four lots and sell them at a substantial gain.The parcel of land had been held six years.In order to qualfiy for capital gain treatment,the individual must satisfy all of the requirements except

Joy purchased 200 shares of HiLo Mutual Fund on July 15,2012,for $10,500,and has been reinvesting dividends.On December 15,2016,she sells 100 shares. What is the basis for the shares sold assuming (1)FIFO and (2)average cost method?

Niral is single and provides you with the following tax information for 2016: Compute her tax liability.[Show all calculations in good form.]

Jamahl and Indira are married and live in a common law state.They jointly own real property with an adjusted basis of $200,000.When the property has a FMV of $450,000,Jamahl dies leaving all of the property to Indira.If she later sells the property for $700,000,what is Indira's gain on the sale?

Sanjay is single and has taxable income of $13,000 without considering the sale of a capital asset in November of 2016 for $15,000.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain is

A taxpayer purchased an asset for $50,000 several years ago.He is now planning to sell it.Under the recovery of basis doctrine the taxpayer will not recognize any gain or pay any related taxes unless he sells the asset for more than $50,000.

If the shares of stock sold or exchanged are not specifically identified,the average cost method of identification must be used.

A nonbusiness bad debt is deductible only in the year in which the debt becomes totally worthless.

Melody inherited 1,000 shares of Corporation Zappa stock from her mother who died on March 4 of the current year.Her mother paid $30 per share for the stock on September 2,2005.The FMV of the stock on the date of death was $65 per share.On September 4 of the current year,the FMV of the stock was $70 per share.Melody sold the stock for $85 per share on December 3.The estate qualified for,and the executor elected,the alternate valuation method for these and other assets in the estate.An estate tax return was filed.What was Melody's basis in the stock on the date of the sale?

Gina owns 100 shares of XYZ common stock with a $12,000 basis and a $25,000 FMV.She receives 100 stock rights with a total FMV of $15,000.Answer the following: a.What is the basis of the 100 shares of stock? b.What is the basis of the 100 stock rights?

Empire Corporation purchased an office building for $500,000 cash on April 1.Prior to renting it out to tenants on July 1,Empire spent $200,000 on materials and labor to renovate the property.It funded $50,000 of the renovation cost with its own funds and borrowed the remaining $150,000.As of July 1,$2,000 of interest had been paid to the bank,but none of the principal had been repaid.The basis of the building on July 1 is

Edward purchased stock last year as follows: In April of this year,Edward sells 80 shares for $250.Edward cannot specifically identify the stock sold.The basis for the 80 shares sold is

Funds borrowed and used to pay for an asset are not included in the cost until the borrowed funds are repaid.

If an individual taxpayer's net long-term capital losses exceed the net short-term capital gains,the excess may be offset against ordinary income up to $3,000 per year.Any excess losses over $3,000 may be carried over indefinitely.

Jordan paid $30,000 for equipment two years ago and has claimed total depreciation deductions of $15,600 for the two years.The cost of repairs during the same time period was $2,000 while a major overhaul which extended the life of the equipment cost $7,000.What is Jordan's adjusted basis in the equipment at the end of the two-year period?