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Exam 16: Property Transactions: Capital Gains and Losses

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Question 21

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Marvin is in the business of song writing.He writes jingles for web ads.He writes a song and sells it for a lump sum.He has:

A) Sold a capital asset.
B) Sold an ordinary asset.
C) No gain or loss.
D) An ordinary gain.
E) b. and d.

F) A) and B)
G) A) and C)

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Question 22

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Magenta,Inc.,sold a forklift on April 12,2012,for $3,000 (its FMV) to its 100% shareholder,Anna.Magenta's adjusted basis for the forklift was $8,000.Anna's holding period for the forklift:

A) Includes Magenta's holding period for the forklift.
B) Begins on April 12, 2012.
C) Begins on April 13, 2012.
D) Does not begin until Anna sells the forklift.
E) None of the above.

F) B) and E)
G) All of the above

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Question 23

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Samuel,head of household with two dependents,has 2012 wages of $26,000,paid alimony of $3,000,has taxable interest income of $2,000,and a $12,000 0%/15% net long-term capital gain.Samuel uses the standard deduction and is age 38.What is his 2012 taxable income and the tax on the taxable income?

"Collectibles" held long-term and sold at a gain are subject to maximum tax rate of 28%.An individual taxpayer recently sold a baseball card for $400.The card had been held for several years and $40 was originally paid for it.The card depicts a famous baseball player (who hit 73 home runs in a recent season)when he was a rookie in the major leagues.Explain why the baseball card is or is not a collectible.

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:

If a capital asset is sold at a loss,the holding period is important.

The tax law requires that capital gains and losses be separated from other types of gains and losses because an alternative tax calculation may be used when taxable income includes net long-term capital gain.

The holding period of property given up in a like-kind exchange includes the holding period of the asset received if the property that has been exchanged is a capital asset.

When a patent is transferred,the most common forms of payment received by the transferor are a lump sum and/or periodic payment.

A business taxpayer sells inventory for $40,000.The adjusted basis of the property is $58,000 at the time of the sale and the inventory had been held more than one year.The taxpayer has:

What characteristics must the seller of a patent have in order to be classified as a holder?

Mauve Company signs a 13-year franchise agreement with Mauve Too.Mauve Too retained significant powers,rights,and a continuing interest.Mauve Company (the franchisee) makes noncontingent payments of $16,000 per year for the first five years of the franchise.Mauve Company also pays a contingent fee of 1% of gross sales every month.Which of the following statements is correct?

Phil's father died on January 10,2012.The father had owned stock for 20 years with a basis of $45,000 that was transferred to Phil as a gift on August 10,2011,when the stock was worth $430,000.His father paid gift tax of $31,000.This stock was worth $566,000 at the date of the father's death.Phil sold the stock for $545,000 net of commissions on February 23,2012.What is the amount and nature of Phil's gain or loss from disposition of this property?

An individual taxpayer with 2012 net short-term capital loss of $5,000 generally can deduct up to $3,000 for AGI and carry the balance forward to 2013.

A worthless security had a holding period of 11 months when it became worthless on December 10,2012.The investor who had owned the security had a basis of $10,000 for it.Which of the following statements is correct?

On January 18,2011,Martha purchased 200 shares of Blue Corporation stock for $2,000.On November 11,2012,she sold short 200 shares of Blue Corporation stock which she borrowed from her broker for $2,300.On February 10,2013,Martha closed the short sale by delivering the 200 shares of Blue Corporation stock which she had acquired in 2011.On that date,Blue Corporation stock had a market price of $4 per share.What is Martha's recognized gain or loss and its character in 2012? In 2013?

To compute the holding period,start counting on the day the property was acquired and include the day of disposition.

A security that is a capital asset becomes worthless.The loss is deemed to have occurred on the day that the security was declared worthless.

On June 10,2012,Ebon,Inc.acquired an office building as a result of a like-kind exchange.Ebon had given up a factory building that it had owned for 26 months as part of the like-kind exchange.Which of the statements below is correct?

Sandy has the following results of netting her short-term and long-term capital gains and losses for 2012: $48,000 short-term capital loss,$22,000 net long-term capital gain ($21,000 0%/15% long-term capital gain,and $1,000 28% long-term capital gain).What is her net capital gain or loss for 2012 and,if there is a net capital loss,how much of the loss and what type of loss carries over to 2013?