Sue and Bob had been married 30 years when Bob passed away in Year 13. Bob's taxable estate was equal to $4,000,000 and no taxes were paid due to the amount allowed as an estate exclusion. Sue passed away in Year 16. The exclusion amount for Year 13 was $
1 $4,160,000
A total of $4,160,000 of Sue's estate would be subject to estate taxes after consideration of the estate exclusion. Since Bob did not fully utilize his exclusion amount, the unused amount of $1,250,000 could be used by Sue's estate. Therefore
On year 1, Janice had the following transactions in Jacky, Inc. common stock:
Shares Price
Jan. 01 - Purchase 500 $25
May 12 - Sale 500 $23
May 28 - Purchase 250 $22
Oct. 15 - Sale 100 $18
What is Janice's deductible capital loss?
1 $400
2 $700
3 $1,100
4
3 $1,100
Janice's deductible capital loss is $1,100 as a result of her wash sale. A wash sale takes place when securities are sold at a loss and replaced with substantially identical securities within 30 days before or after the sale. Such losses are not
There are certain rules of construction, that is, stock owned by one person is considered as owned by another. Rules of construction do not apply to which of the following?
1 A family member (brothers and sisters, spouse, ancestor, or lineal descendant)
2
4 A shareholder of a corporation if she owns various classes of shares which are valued at more than 50% of the value of the corporation
Under constructive ownership rules, a taxpayer is considered to own stock owned by a family member (brother or sister,
An individual had the following capital gains and losses for the year:
Short-term capital loss $70,000
Long-term gain (unrecaptured Section 1250 at 25%) 56,000
Collectibles gain (28% rate) 10,000
Long-term gain (15% rate) 20,000
What will be the net gain
1 Long-term gain of $16,000 at the 15% rate
The net short-term capital loss is used to offset the net long-term capital gain in the following order: 28% gains, 25% gains, and 15% gains. In this case, the $70,000 net short-term capital loss offsets the lon
hich of the following transactions would qualify for tax-deferred exchanges?
1 An exchange of real property for personal property
2 Swap of livestock of different sexes
3 Transfer of property to a controlled corporation
4 Exchange of interests in a partne
3 Transfer of property to a controlled corporation
When property that is owned by the taxpayer is transferred to his controlled corporation (80% owned immediately following the transfer of property to the corporation), no gain or loss is recognized if the
Kane created a $100,000 trust that provided her nephew with the income interest until he reached 45 years of age. When the trust was created, Kane's nephew was 25. The income distribution is to start when Kane's nephew is 29. After Kane's nephew reaches t
2 is a gift of a future interest.
The income interest is a gift of a future interest because the beneficiary will not benefit from the gift until a future time, when he is age 29.
To be a gift of a present interest, the recipient must have an unrestricted
Platt owns land that is operated as a parking lot. A shed was erected on the lot for the related transactions with customers. With regard to capital assets and Section 1231 assets, how should these assets be classified?
1 Land: Capital; Shed: Capital
2 La
4 Land: Section 1231; Shed: Section 1231
IRC Section 1221 defines a capital asset by exclusion. If an item is listed there, then it is not a capital asset. All property used in a taxpayer's trade or business is excluded from being a capital asset.
IRC Sec
The sale of which of the following types of business property should be reported as Section 1231 property (property used in the trade or business and involuntary conversions)?
1 Inventory held for resale
2 Machinery held for 6 months
3 Cattle held for 6 m
4 Land held for 18 months
To qualify as Section 1231 property, the property items listed must be held long enough to meet the long-term capital gain and loss holding period requirement, which is greater than one year. Inventory is specifically excluded fr
Trees were cut down and made into lumber. The lumber was used to build a house. Which of the following statements best describes the property aspect of these events?
1 The trees were and remained tangible personal property.
2 The trees were and remained r
4 The trees were real property, became personal property, and then reverted to being real property.
This question requires an understanding of the two major types of property, real and personal.
Real property is land and anything permanently attached to t
In Year 1, a taxpayer sold real property for $200,000, receiving $100,000 at closing and $100,000 plus accrued interest at the prime rate in the next year. The buyer also assumed a $50,000 mortgage on the property. The taxpayer's adjusted basis was $75,00
3 $165,000
The installment method allows for a taxpayer to spread the recognition of gain over the years of receipt of payment. The gross profit is determined by total payments received ($200,000 payments received and $50,000 mortgage assumed by the buyer
An individual acquired 500 shares of stock on December 20, year 1, for a personal portfolio. On March 15, year 2, the individual executed a short sale of 500 shares of the stock. On December 21, year 2, the individual delivered the 500 shares to cover the
4 The transaction will be treated as a short-term capital asset sale.
A short sale is the sale of an asset or stock (which is classified as a capital asset) the seller does not own. It is generally a transaction in which an investor sells borrowed securit
Which of the following is correct concerning payments received on an inherited installment obligation?
1 It is taxable to the beneficiary at the same gross profit percentage used by the decedent.
2 It is taxable only to the estate.
3 It is taxable to the
1 It is taxable to the beneficiary at the same gross profit percentage used by the decedent.