Question 1

A worthless security had a holding period of 6 months when it became worthless on December 10,2016.The investor who had owned the security had a basis of $20,000 for it.Which of the following statements is correct?

Accepted Answer

A)  The investor has a long-term capital loss of $20,000.
B)  The investor has a short-term capital loss of $20,000.
C)  The investor has a nondeductible loss of $20,000.
D)  The investor has a short-term capital gain of $20,000.
E)  None of the above.F) All of the above
G) A) and B)

Question 2

Martha has both long-term and short-term 2015 capital gains and losses.The result of netting these gains and losses is a net long-term capital loss.Martha has no qualified dividend income.Also,Martha's 2015 taxable income puts her in the 28% tax bracket.Which of the following is correct?

Accepted Answer

A)  Martha will use Parts I,II,and III of 2015 Form 1040 Schedule D.
B)  Martha will not benefit from the special treatment for long-term capital gains.
C)  Martha will have a capital loss deduction.
D)  All of the above.
E)  None of the above.F) B) and E)
G) All of the above

Question 3

In 2015,Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction.In 2016,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 for 2016?

Accepted Answer

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

Question 4

For tax purposes,there is no original issue discount on a bond unless the bond is issued for less than its face value and the difference between the face value and the bond issue price is at least one-fourth of 1 percent of the redemption price at maturity multiplied by the number of years to maturity.

Accepted Answer

A) True 
 B)False

Question 5

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) D) and E)
G) B) and E)

Question 6

A security that was purchased by an individual and qualifies as § 1244 stock becomes worthless.The taxpayer is single and the loss is $30,000.The loss is treated as an ordinary loss.

Accepted Answer

A) True 
 B)False

Question 7

Gold Company signs a 13-year franchise agreement with Silver.Silver retained significant powers,rights,and a continuing interest.Gold Company (the franchisee) makes noncontingent payments of $18,000 per year for the first four years of the franchise.Gold Company also pays a contingent fee of 2% of gross sales every month.Which of the following statements is correct?

Accepted Answer

A)  Gold Company may deduct the $18,000 per year noncontingent payments in full as they are made.
B)  Gold Company may deduct the monthly contingent fee as it is paid.
C)  Gold Company may deduct both the noncontingent annual fee and the contingent monthly fees as they are paid.
D)  Gold Company may not deduct either the noncontingent annual fee or the contingent monthly fees as they are paid.
E)  None of the above.F) A) and E)
G) B) and D)

Question 8

Short-term capital losses are netted against long-term capital gains and long-term capital losses are netted against short-term capital gains.

Accepted Answer

A) True 
 B)False

Question 9

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 E)
G) C) and D)

Question 10

In 2012,Harold purchased a classic car that he planned to restore for $12,000.However,Harold is too busy to work on the car and he gives it to his daughter Julia in 2016.At this time,the fair market value of the car has declined to $10,000.Harold paid no gift tax on the transaction.Julia completes some of the restoration herself with out-of-pocket costs of $5,000.She later sells the car for $30,000.What is Julia's recognized gain or loss on the sale of the car?

Accepted Answer

A)  $0
B)  $13,000
C)  $15,000
D)  $18,000
E)  None of the aboveF) B) and E)
G) A) and E)

Question 11

Individuals who are not professional real estate developers may get capital gain treatment for sale of their real property if they engage only in limited development activities.

Accepted Answer

A) True 
 B)False

Question 12

A business taxpayer sells depreciable business property with an adjusted basis of $40,000 for $32,000.The taxpayer held the property for more than a year.The taxpayer has an $8,000 capital loss.

Accepted Answer

A) True 
 B)False

Exam 16: Property Transactions Capital Gains and Losses

A security that was purchased by an individual and qualifies as § 1244 stock becomes worthless.The taxpayer is single and the loss is $30,000.The loss is treated as an ordinary loss.

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

Correct Answer
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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
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In 2015,Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction.In 2016,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 for 2016?

Correct Answer
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Correct Answer
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Individuals who are not professional real estate developers may get capital gain treatment for sale of their real property if they engage only in limited development activities.

Correct Answer
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Short-term capital losses are netted against long-term capital gains and long-term capital losses are netted against short-term capital gains.

Correct Answer
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Martha has both long-term and short-term 2015 capital gains and losses.The result of netting these gains and losses is a net long-term capital loss.Martha has no qualified dividend income.Also,Martha's 2015 taxable income puts her in the 28% tax bracket.Which of the following is correct?

Correct Answer
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A worthless security had a holding period of 6 months when it became worthless on December 10,2016.The investor who had owned the security had a basis of $20,000 for it.Which of the following statements is correct?

Correct Answer
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Correct Answer
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A business taxpayer sells depreciable business property with an adjusted basis of $40,000 for $32,000.The taxpayer held the property for more than a year.The taxpayer has an $8,000 capital loss.

Correct Answer
verified

Exam 16: Property Transactions Capital Gains and Losses

A security that was purchased by an individual and qualifies as § 1244 stock becomes worthless.The taxpayer is single and the loss is $30,000.The loss is treated as an ordinary loss.

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

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

In 2015,Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction.In 2016,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 for 2016?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Individuals who are not professional real estate developers may get capital gain treatment for sale of their real property if they engage only in limited development activities.

Correct AnswerverifiedShow Answer

Short-term capital losses are netted against long-term capital gains and long-term capital losses are netted against short-term capital gains.

Correct AnswerverifiedShow Answer

Martha has both long-term and short-term 2015 capital gains and losses.The result of netting these gains and losses is a net long-term capital loss.Martha has no qualified dividend income.Also,Martha's 2015 taxable income puts her in the 28% tax bracket.Which of the following is correct?

Correct AnswerverifiedShow Answer

A worthless security had a holding period of 6 months when it became worthless on December 10,2016.The investor who had owned the security had a basis of $20,000 for it.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A business taxpayer sells depreciable business property with an adjusted basis of $40,000 for $32,000.The taxpayer held the property for more than a year.The taxpayer has an $8,000 capital loss.

Correct AnswerverifiedShow Answer

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