Question 1

"Collectibles" held long-term and sold at a gain are subject to maximum tax rate of 28%.An individual taxpayer recently sold an antique car for $40,000.The car had been held for several years and $30,000 was originally paid for it.Explain why the car is or is not a collectible.

Accepted Answer

The definition of "collectibles" is quit...

Question 2

A lessor is paid $45,000 by its commercial tenant as a lease cancellation fee.The tenant wanted to get out of its lease so it could move to a different building.The lessor had held the lease for three years before it was canceled.The lessor had a zero tax basis for the lease.The lessor has received:

Accepted Answer

A)   Ordinary income of $45,000.
B)   Long-term capital gain of $45,000.
C)   Short-term capital gain of $45,000.
D)   Neither gain nor loss.
E)   None of the above.F) A) and B)
G) All of the above

Question 3

Vertical,Inc. ,has a 2015 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2014.For 2015,Vertical's net § 1231 gain is treated as:

Accepted Answer

A)   $45,000 long-term capital gain and $22,000 ordinary loss.
B)   $67,000 ordinary gain.
C)   $45,000 long-term capital gain and $22,000 ordinary gain.
D)   $67,000 capital gain.
E)   None of the above.F) B) and E)
G) C) and D)

Question 4

Verway,Inc. ,has a 2015 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2014.For 2015,Verway's net § 1231 gain is treated as:

Accepted Answer

A)   $55,000 ordinary loss.
B)   $55,000 ordinary gain.
C)   $55,000 capital loss.
D)   $55,000 capital gain.
E)   None of the above.F) None of the above
G) All of the above

Question 5

In 2015,Satesh has $5,000 short-term capital loss,$13,000 0%/15%/20% long-term capital gain,and $7,000 qualified dividend income.Satesh is single and has other taxable income of $15,000.Which of the following statements is correct?

Accepted Answer

A)   No more than $13,000 of Satesh's taxable income is taxed at 0%.
B)   No more than $7,000 of Satesh's taxable income is taxed at 0%.
C)   No more than $15,000 of Satesh's taxable income is taxed at 0%.
D)   None of Satesh's taxable income is taxed at 0%.
E)   All of Satesh's taxable income is taxed at 0%.F) A) and B)
G) All of the above

Question 6

If the holder of an option fails to exercise the option,the lapse of the option is considered a sale or exchange on the option expiration date.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following events could result in § 1250 depreciation recapture?

Accepted Answer

A)   Sale at a loss of a depreciable business building held more than one year.
B)   Sale at a gain of a business building held more than a year on which straight-line depreciation was taken.
C)   Sale at a loss of a depreciable business building held for 9 months.
D)   Sale at a gain of depreciable equipment held more than a year on which straight-line depreciation was taken.
E)   None of the above.F) A) and B)
G) C) and D)

Question 8

The Code contains two major depreciation recapture provisions-§§ 1245 and 1250.

Accepted Answer

A) True 
 B)False

Question 9

Tom has owned 40 shares of Orange Corporation stock for five years.He sells the stock short for a total of $1,100.One month later,he closes the short sale by purchasing and delivering 40 shares of Orange Corporation stock for a total of $600.Tom has a $500 short-term capital gain.

Accepted Answer

A) True 
 B)False

Question 10

In 2014,Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction.In 2015,Jenny has a $18,000 0%/15%/20% long-term capital gain and no other capital gain or loss transactions.Which of the statements below is correct?

Accepted Answer

A)   Jenny has a 2015 $18,000 net capital gain.
B)   Jenny has a 2015 $9,000 net capital gain.
C)   Jenny has a 2015 $9,000 net capital loss.
D)   Jenny has a 2015 $3,000 capital loss deduction.
E)   Jenny has a 2015 $9,000 capital loss deduction.F) A) and B)
G) A) and C)

Question 11

Why is it generally better to have a net § 1231 gain year followed by a net § 1231 loss year rather than a net § 1231 loss year followed by a net § 1231 gain year?

Accepted Answer

It is generally better to have a net § 1...

Question 12

Virgil was leasing an apartment from Marple,Inc.Marple paid Virgil $1,000 to cancel his lease and move out so that Marple could demolish the building.As a result:

Accepted Answer

A)   Virgil has a $1,000 capital gain.
B)   Virgil has a $1,000 capital loss.
C)   Marple has a $1,000 capital loss.
D)   Marple has a $1,000 capital gain.
E)   None of the above.F) C) and E)
G) A) and B)

Question 13

Lana purchased for $1,410 a $2,000 bond when it was issued two years ago.Lana amortized $200 of the original issue discount and then sold the bond for $1,800.Which of the following statements is correct?

Accepted Answer

A)   Lana has $10 of long-term capital loss.
B)   Lana has $190 of long-term capital gain.
C)   Lana has no capital gain or loss.
D)   Lana has $190 of long-term capital loss.
E)   None of the above.F) C) and E)
G) A) and E)

Question 14

For § 1245 recapture to apply,accelerated depreciation must have been taken on the property.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?

Accepted Answer

A)   Depreciable office furniture held more than one year and sold for more than its original cost.
B)   Amortizable goodwill held more than one year and disposed of for less than its adjusted basis.
C)   Land held more than one year and sold for more than was paid for it.
D)   A note receivable held more than one year and sold for less than was paid for it.
E)   None of the above.F) C) and D)
G) B) and D)

Question 16

Stanley operates a restaurant as a sole proprietorship.Which of the following items are capital assets in the hands of Stanley?

Accepted Answer

A)   The restaurant's tables and chairs.
B)   A portable sound system used to play "theme music" for the restaurant.
C)   The restaurant building that is an asset of the sole proprietorship.
D)   An interest-bearing savings account used to keep the restaurant's excess cash.
E)   None of the above.F) A) and B)
G) A) and E)

Question 17

Red Company had an involuntary conversion on December 23,2015.The machinery had been acquired on April 1,2013,for $49,000 and its adjusted basis was $14,200.The machinery was completely destroyed by fire and Red received $10,000 of insurance proceeds for the machine and did not replace it.This was Red's only casualty or theft event for the year.As a result of this event,Red initially has:

Accepted Answer

A)   $10,000 § 1231 loss.
B)   $10,000 § 1245 recapture gain.
C)   $4,200 casualty loss.
D)   $4,200 § 1231 loss.
E)   None of the above.F) B) and D)
G) None of the above

Question 18

Casualty gains and losses from nonpersonal use assets are not netted against casualty gains and losses from personal use assets.

Accepted Answer

A) True 
 B)False

Question 19

An individual had the following gains and losses during 2015 on property held for the long-term holding period: sale of Orange common stock ($8,000 gain) ;sale of real property used in the taxpayer's business ($1,800 loss) ;destruction of real property used in the taxpayer's business by fire ($1,000 loss) .Which of the following statements is correct?

Accepted Answer

A)   The fire loss would reduce the real property sale loss.
B)   The fire loss would reduce the stock sale gain.
C)   The sale of real property loss would be netted against the stock sale gain.
D)   The sale of real property is a § 1231 loss.
E)   None of the above.F) C) and D)
G) B) and D)

Question 20

Section 1231 lookback losses may convert some or all of § 1245 gain into ordinary income.

Accepted Answer

A) True 
 B)False

Exam 8: Property Transactions: Capital Gains and Losses, section 1231, and Recapture Provisions

In 2014,Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction.In 2015,Jenny has a $18,000 0%/15%/20% long-term capital gain and no other capital gain or loss transactions.Which of the statements below is correct?

Correct Answer
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Correct Answer
verified

Verway,Inc. ,has a 2015 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2014.For 2015,Verway's net § 1231 gain is treated as:

Correct Answer
verified

Why is it generally better to have a net § 1231 gain year followed by a net § 1231 loss year rather than a net § 1231 loss year followed by a net § 1231 gain year?

Correct Answer
verified
It is generally better to have a net § 1...
View Answer

Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?

Correct Answer
verified

The Code contains two major depreciation recapture provisions-§§ 1245 and 1250.

Correct Answer
verified

If the holder of an option fails to exercise the option,the lapse of the option is considered a sale or exchange on the option expiration date.

Correct Answer
verified

Correct Answer
verified

Tom has owned 40 shares of Orange Corporation stock for five years.He sells the stock short for a total of $1,100.One month later,he closes the short sale by purchasing and delivering 40 shares of Orange Corporation stock for a total of $600.Tom has a $500 short-term capital gain.

Correct Answer
verified

A lessor is paid $45,000 by its commercial tenant as a lease cancellation fee.The tenant wanted to get out of its lease so it could move to a different building.The lessor had held the lease for three years before it was canceled.The lessor had a zero tax basis for the lease.The lessor has received:

Correct Answer
verified

Virgil was leasing an apartment from Marple,Inc.Marple paid Virgil $1,000 to cancel his lease and move out so that Marple could demolish the building.As a result:

Correct Answer
verified

"Collectibles" held long-term and sold at a gain are subject to maximum tax rate of 28%.An individual taxpayer recently sold an antique car for $40,000.The car had been held for several years and $30,000 was originally paid for it.Explain why the car is or is not a collectible.

Correct Answer
verified
The definition of "collectibles" is quit...
View Answer

Which of the following events could result in § 1250 depreciation recapture?

Correct Answer
verified

Stanley operates a restaurant as a sole proprietorship.Which of the following items are capital assets in the hands of Stanley?

Correct Answer
verified

Section 1231 lookback losses may convert some or all of § 1245 gain into ordinary income.

Correct Answer
verified

In 2015,Satesh has $5,000 short-term capital loss,$13,000 0%/15%/20% long-term capital gain,and $7,000 qualified dividend income.Satesh is single and has other taxable income of $15,000.Which of the following statements is correct?

Correct Answer
verified

Lana purchased for $1,410 a $2,000 bond when it was issued two years ago.Lana amortized $200 of the original issue discount and then sold the bond for $1,800.Which of the following statements is correct?

Correct Answer
verified

For § 1245 recapture to apply,accelerated depreciation must have been taken on the property.

Correct Answer
verified

Casualty gains and losses from nonpersonal use assets are not netted against casualty gains and losses from personal use assets.

Correct Answer
verified

Vertical,Inc. ,has a 2015 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2014.For 2015,Vertical's net § 1231 gain is treated as:

Correct Answer
verified

Exam 8: Property Transactions: Capital Gains and Losses, section 1231, and Recapture Provisions

In 2014,Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction.In 2015,Jenny has a $18,000 0%/15%/20% long-term capital gain and no other capital gain or loss transactions.Which of the statements below is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Verway,Inc. ,has a 2015 net § 1231 gain of $55,000 and had a $62,000 net § 1231 loss in 2014.For 2015,Verway's net § 1231 gain is treated as:

Correct AnswerverifiedShow Answer

Why is it generally better to have a net § 1231 gain year followed by a net § 1231 loss year rather than a net § 1231 loss year followed by a net § 1231 gain year?

Correct AnswerverifiedIt is generally better to have a net § 1...View AnswerShow Answer

Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?

Correct AnswerverifiedShow Answer

The Code contains two major depreciation recapture provisions-§§ 1245 and 1250.

Correct AnswerverifiedShow Answer

If the holder of an option fails to exercise the option,the lapse of the option is considered a sale or exchange on the option expiration date.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Tom has owned 40 shares of Orange Corporation stock for five years.He sells the stock short for a total of $1,100.One month later,he closes the short sale by purchasing and delivering 40 shares of Orange Corporation stock for a total of $600.Tom has a $500 short-term capital gain.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Virgil was leasing an apartment from Marple,Inc.Marple paid Virgil $1,000 to cancel his lease and move out so that Marple could demolish the building.As a result:

Correct AnswerverifiedShow Answer

"Collectibles" held long-term and sold at a gain are subject to maximum tax rate of 28%.An individual taxpayer recently sold an antique car for $40,000.The car had been held for several years and $30,000 was originally paid for it.Explain why the car is or is not a collectible.

Correct AnswerverifiedThe definition of "collectibles" is quit...View AnswerShow Answer

Which of the following events could result in § 1250 depreciation recapture?

Correct AnswerverifiedShow Answer

Stanley operates a restaurant as a sole proprietorship.Which of the following items are capital assets in the hands of Stanley?

Correct AnswerverifiedShow Answer

Section 1231 lookback losses may convert some or all of § 1245 gain into ordinary income.

Correct AnswerverifiedShow Answer

In 2015,Satesh has $5,000 short-term capital loss,$13,000 0%/15%/20% long-term capital gain,and $7,000 qualified dividend income.Satesh is single and has other taxable income of $15,000.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Lana purchased for $1,410 a $2,000 bond when it was issued two years ago.Lana amortized $200 of the original issue discount and then sold the bond for $1,800.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

For § 1245 recapture to apply,accelerated depreciation must have been taken on the property.

Correct AnswerverifiedShow Answer

Casualty gains and losses from nonpersonal use assets are not netted against casualty gains and losses from personal use assets.

Correct AnswerverifiedShow Answer

Vertical,Inc. ,has a 2015 net § 1231 gain of $67,000 and had a $22,000 net § 1231 loss in 2014.For 2015,Vertical's net § 1231 gain is treated as:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
It is generally better to have a net § 1...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The definition of "collectibles" is quit...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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