a. Two years ago, White used its excess cash to purchase a piece of land as an investment.
a. Capital, because it is held for investment.
b. Two years ago, White purchased land and a warehouse. It uses these assets in its business.
b. The land and building are both �1231 property because White uses the assets in its trade or business and has held the assets property for more than a year.
c. Manufacturing machinery White purchased earlier this year.
c. Ordinary, the property is ordinary even though it is used in a trade or business because it has been held for less than one year. Once White has held the machinery for more than a year, it will become �1231 property.
d. Inventory White purchased 13 months ago, but is ready to be shipped to a customer.
d. Ordinary, inventory is held in the ordinary course of business.
e. Office equipment White has used in its business for the past three years.
e. �1231, the property is used in a trade or business and held for more than one year.
f. 1,000 shares of stock in Black corporation that White purchased two years ago because it was a good investment.
f. Capital, because it is held for investment.
g. Account receivable from a customer with terms 2/10 net 30.
g. Ordinary, accounts receivable are created in the ordinary course of business.
h. Machinery White held for three years and then sold at a loss of $10,000.
h. �1231, the property is used in a trade or business and held for more than one year.
10-41: In year 0, Longworth Partnership purchased a machine for $40,000 to use in its business. In year 3, Longworth sold the machine for $35,000. Between the date of the purchase and the date of the sale, Longworth depreciated the machine by $22,000.
Wha
first is 17,000 ordinary income
second is 22,000 ordinary and 5,000 section 1231
third is 3000 ordinary loss
10-44 Moran owns a building he bought during year 0 for $150,000. He sold the building in year 6. During the time he held the building he depreciated it by $32,000. What is the amount and character of the gain or loss Moran will recognize on the sale in e
a. $27,000 unrecaptured �1250 gain, which is �1231 gain subject to a maximum tax rate of 25%, computed as follows:
b. �1231 gain of $52,000. Of the $52,000, $32,000 is unrecaptured �1250 gain subject to a maximum 25% tax rate and the remaining $20,000 is
In Year 1, Anita bought a diamond necklace for her own use at a cost of $10,000. In Year 5 when the
fair market value was $12,000, Anita gave this necklace to her daughter, Ivana. Ivana's holding period for
this gift
A. Starts in Year 5
B. Starts in Year
B. Starts in Year 1
2. You received an acre of land as a gift. At the time of the gift, the land had an FMV of $10,000. The
donor's adjusted basis was $15,000. After you received the land, no events occurred to increase or
decrease your basis. If you sell the land for $20,00
A. Gain of $5,000
. When receiving property for services, you should:
A. Include the property's fair market value in income
B. Include the seller's original purchase price of the property in income
C. Include the property's selling price in income
D. Do not include any amo
A. Include the property's fair market value in income
If you trade a tract of farm land with an adjusted basis of $5,000 for a tractor that has a FMV of
$10,000, the taxable gain to be reported is:
A. $0
B. $3,000
C. $5,000
D. $10,000
C. $5,000
5. You exchange your real estate (adjusted basis $25,000, FMV $45,000) held for investment for other
real estate (FMV $45,000) held for investment. Your basis in the new property is:
A. $20,000
B. $25,000
C. $45,000
D. $70,000
B. $25,000
You trade in a truck (adjusted basis $15,000) for another truck (FMV of $20,500) and pay $5,000. Your
basis in the new truck is:
A. $5,000
B. $15,000
C. $20,000
D. $20,500
C. $20,000
Hannah Tywin owns 100 shares of MM Inc. stock. She sells the stock on December 11 for $25 per
share. She received the stock as a gift from her Aunt Pam on March 20 of this year when the fair market
value of the stock was $18 per share. Aunt Pam originally
$1,300 long-term capital gain, computed as follows:
8. On September 30th of last year, Rex received some investment land from Holly as a gift. Holly's
adjusted basis was $50,000 and the land was valued at $40,000 at the time of the gift. Holly acquired the
land five years ago. What is the amount of Rex's r
a. $8,000 short-term capital loss, computed as follows:
b. $20,000 long-term capital gain, computed as follows:
c. No gain or loss is realized.
In 2012, Erin had the following capital gains (losses) from the sale of her investments:
$2,000 LTCG, $25,000 STCG, ($9,000) LTCL, and ($15,000) STCL. What is the amount
and nature of Erin's capital gains and losses?
A. $3,000 net short-term capital gain
A. $3,000 net short-term capital gain
The maximum amount of net capital losses individuals may deduct against their ordinary
income per year is:
A. $3,000
B. $5,000
C. Zero, losses are not deductible
D. There is no maximum. All losses are allowed to be deducted.
E. None of the above
A. $3,000
In the current year, Norris, an individual, has $50,000 of ordinary income, a Net Short
Term Capital Loss (NSTCL) of $10,000 and a Net Long Term Capital Gain (NLTCG) of
$2,800. From his capital gains and losses, Norris reports:
A. an offset against ordina
E. an offset against ordinary income of $3,000 and a NSTCL carryforward of $4,200
Rebecca sold her art collections for $5,000. She bought them for 1,000 two years ago.
What is her taxable gain and at what rate will it be taxed?
A. 4,000 long-term capital gain, taxed at ordinary income rate
B. 4,000 long-term capital gain, taxed at 28%.
B. 4,000 long-term capital gain, taxed at 28%.
If an individual taxpayer's marginal tax rate is 35 percent and he holds the following
assets for more than a year, which gains will be taxed at the highest rate at the time of
sale?
A. gains from investment land
B. gains from personal-use property
C. gai
C. gains from a coin collection
. During the year, Mr. Patel had the following capital transactions:
Short-term Long-term (28%) Long-term (15%)
Gains 7,000 16,000 29,000
Losses (9,000) (10,000) (20,000)
What is the amount of tax, if any, on Mr. Patel's capital transactions?
A. 2,000 sho
D. 9,000 LTCG taxed at 15% and 4,000 LTCG taxed at 28%
For the current year, Kathy has salary of 30,000. In addition, she has the following capital
transactions:
Long-term capital gain (15%) 12,000
Short-term capital gain 8,000
Long-term capital loss (28%) (2,000)
Short-term capital loss (10,000)
What is her
38,000
37,000
The sale of machinery at a loss that was used in a trade or business and held for more
than one year results in the following type of loss?
A. Capital.
B. Ordinary.
C. Section 1231 and ultimately ordinary loss.
D. Section 1245.
E. None of the above.
C. Section 1231 and ultimately ordinary loss.
The sale of computer equipment used in a trade or business for 9 months results in the
following type of gain or loss?
A. Capital.
B. Ordinary income.
C. Section 1231.
D. Section 1245.
E. None of the above
B. Ordinary income.
0. What is the character of a gain resulting from the sale of a piece of land used in an active
trade or business for two years?
A. Capital.
B. Ordinary.
C. Section 1231 and ultimately long-term capital gain.
D. Investment.
E. None of the above
C. Section 1231 and ultimately long-term capital gain.
Which of the following is true regarding depreciation recapture?
A. Changes the character of a loss.
B. Changes the character of a gain.
C. Changes the amount of a gain.
D. Only applies to ordinary assets.
E. None of the above.
B. Changes the character of a gain.
In July, Tommy sold a printing press used in his business that originally cost him $10,000
for $8,000. His adjusted basis at the time of the sale was $3,000, and Tommy paid
$1,000 in selling expenses. What is the amount of the realized gain that would be
B. $4,000
3. Bob sold manufacturing equipment to a dealer for $50,000. He bought the equipment for
$55,000 several years ago and has claimed $12,500 of depreciation expense on the
equipment. What is the amount and character of the gain or loss for Bob on the
equipm
C. $7,500 ordinary income.
Greene operates a parking lot that yielded net income of $13,000 during the current year.
The only other transactions that Mr. Greene had during the year were: 1) a gain of
$16,000 on the sale of some Dell Corporation stock that he bought two years ago; 2
B. $16,000
Defined benefit plans specify amount of benefit an employee will receive on retirement while defined contribution plans specify the amounts that employers and employees will contribute to an employee's plan.
True False
true
2. Which of the following describes a defined benefit plan?
A. Provides fixed income to the plan participants
B. Distribution amounts determined by employee and employer contributions
C. Allows executives to defer income for a period of years
D. Retiremen
A. Provides fixed income to the plan participants
3. Which of the following statements is false regarding defined contribution plans?
A. Employers bear investment risk relating to the plan.
B. Employees immediately vest (entitled to) their contributions to the plan.
C. Employers typically match employee
A. Employers bear investment risk relating to the plan.
employees bear it
Distributions from defined contribution plans are taxed as long-term capital gains to beneficiaries.
True False
false they are taxed as ordinary income
When an employer matches an employee's contribution to his 401(k) plan, the employee is immediately taxed on the amount of the employer's matching contribution.
True False
false
When taxpayers contribute to a traditional IRA, they _____ allowed to deduct the contributions and they ______ taxed on distributions from the plan.
A. are, are not
B. are, are
C. are not, are
D. are not, are not
B. are, are
When taxpayers contribute to a Roth IRA, they _____ allowed to deduct the contributions and they _______ taxed on qualified distributions from the plan.
A. are, are not
B. are, are
C. are not, are
D. are not, are not
D. are not, are not
1. Braxton owns a second home that he rents to others. During the year, he used the second home for 50 days for personal use and for 100 days for rental use. After allocating the home-related expenses between personal use and rental use, which of the foll
E.
None of these statements is correct.
Brady owns a second home that he rents to others. During the year, he used the second home for 50 days for personal use and for 100 days for rental use. Brady collected $20,000 of rental receipts during the year. Brady allocated $7,000 of interest expense
A.
$0 net income. $1,000 depreciation expense carried forward to next year.
When a taxpayer experiences a net loss from a nonresidence (rental property)
A.
The taxpayer will not be allowed to deduct the loss under any circumstance if the taxpayer does not have passive income from other sources.
B.
The loss is fully deductible aga
D.
If the taxpayer is not allowed to deduct the loss due to the passive activity limitations, the loss is suspended and carried forward until the taxpayer generates passive income or until the taxpayer sells the property.
Harvey rents his second home. During 2014, Harvey reported a net loss of $35,000 from the rental. If Harvey is an active participant in the rental and his AGI is $80,000, how much of the loss can he deduct against ordinary income in 2014?
A.
$35,000
B.
$2
B.
$25,000
Ilene rents her second home. During 2014, Ilene reported a net loss of $15,000 from the rental. If Ilene is an active participant in the rental and her AGI is $140,000, how much of the loss can she deduct against ordinary income in 2014?
A.
$15,000
B.
$10
C.
$5,000
Cub purchased an automated tube blender for $300,000 in 2011 and sold it on 1/31/12. the tube bender, used to manufacture folding chairs, has an estimated useful life of 10 years and an est salvage value of $60,000. it is 5 year property under the MACRS t
B 48,000
mary recieved stocks as a gift from her father. At the time of the gift the stocks have a fair market value of $30,000 and an adjusted basis to mary's father of $40,000. six months later, mary sold the stocks for $45,000. what is marys tax basis at the ti
C) $40,000
in 2011, anita bought a gold necklace for her own use at a cost of $8,000. in 2013 when the fair market value of the gold necklace was $10,000, Anita gave this necklace to her daughter Bianka. Later in 2013, Bianka sold the necklace for 10,500. What is Bi
D) $2,500 long term capital gainD) $2,500 long term capital gain
In 2013 Walsh construction exchanged a large boiler having a fair market value of $100,000 for cash of $20,000 and a smaller boiler with a fair market value of $80,000. Walsh's adjusted basis in the old boiler is $60,000. How much gain should Walsh Constr
D) Recognized gain is $20,000 and the basis of the new boiler is $60,000
On august 15 of the current year, Harold recieved 100 shares of stock as an inheritance from his mother who died on January 20. Monas adjusted basis in the stock was $45,000. The stock had a fair market value of $50,000 on January 20. On July 20, its valu
D) 65,000