FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 8: Capital Gains and Losses

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

True/False

Review LaterAdd Note

Review Later

A net short-term capital loss first offsets any 28% net long-term capital gain before it offsets either 25% net long-term capital gain or 0%/15%/20% net long-term capital gain.

A) True
B) False

Correct Answer

verified

Show Answer

Question 42

True/False

Review LaterAdd Note

Review Later

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

A) True
B) False

Correct Answer

verified

Show Answer

Question 43

True/False

Review LaterAdd Note

Part III of Form 4797 is used to report gains from the sale of depreciable business equipment sold at a gain and held more than one year.

Stella purchased vacant land in 2010 that she subdivided for resale as lots.All 10 of the lots were sold during 2017.The lots had a tax basis of $12,000 each and sold for $35,000 each.Stella made no substantial improvements to the lots.She acted as her own real estate broker; so there were no sales expenses for selling the lots.Which of the following statements is correct?

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.

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.

Lease cancellation payments received by a lessor are always ordinary income because they are considered to be in lieu of rental payments.

If there is a net § 1231 loss, it is treated as an ordinary loss.

A worthless security had a holding period of 6 months when it became worthless on December 10, 2017.The investor who had owned the security had a basis of $20,000 for it.Which of the following statements is correct?

In 2017, 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?

The chart below describes the § 1231 assets sold by the Tan Company (a sole proprietorship) this year.Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year.Assume there is a § 1231 lookback loss of $14,000. $\begin{array} { l c c c c c } \text { Asset } & \text { Acquired } & \text { Sold } & \text { Cost } & \text { Depreciation } & \text { SalePrice } \\\text { Stamping machine } & 3 / 10 / 13 & 8 / 10 / 17 & \$ 40,000 & \$ 29,736 & \$ 2,000 \\\text { Factory building } & 2 / 12 / 10 & 7 / 23 / 17 & 80,000 & 18,838 & 90,000 \\\text { Tractor } & 5 / 16 / 12 & 11 / 13 / 17 & 52,000 & 52,000 & 60,000 \\\text { Overhead crane } & 11 / 12 / 06 & 2 / 25 / 17 & 74,000 & 74,000 & 18,000\end{array}$

A business taxpayer sold all the depreciable assets of the business, calculated the gains and losses, and would like to know the final character of those gains and losses.The taxpayer had $353,000 of adjusted gross income before considering the gains and losses from sale of the business assets.The taxpayer had unrecaptured § 1231 lookback loss of $22,000.What is the treatment of the gains and losses summarized in the chart below after all possible netting and reclassification has been completed? What is the taxpayer's adjusted gross income? (Ignore the self-employment tax deduction.) $\begin{array} { l c c c c } \text { Asset } & \text { Purchase Date } & \text { Sale Date } & \text { Depreciation } & \text { Gain (Loss) } \\\text { Machine \#1 } & 10 / 10 / 15 & 11 / 11 / 17 & \$ 323,000 & \$ 66,000 \\\text { Machine \#2 } & 10 / 02 / 14 & 11 / 11 / 17 & 65,000 & ( 15,000 ) \\\text { Machine \#3 } & 09 / 23 / 13 & 11 / 11 / 17 & 183,000 & 23,000 \\\text { Machine \#4 } & 09 / 23 / 13 & 11 / 11 / 17 & 28,000 & 34,000\end{array}$

The maximum § 1245 depreciation recapture generally equals the accumulated depreciation.

Orange Company had machinery destroyed by a fire on December 23, 2017.The machinery had been acquired on April 1, 2015, for $49,000 and its adjusted basis was $14,200.The machinery was completely destroyed and Orange received $30,000 of insurance proceeds for the machine and did not replace it.This was Orange's only casualty or theft event for the year.As a result of this event, Orange has:

All collectibles short-term gain is subject to a potential alternative tax rate of 28%.

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.

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

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

Tan, Inc., sold a forklift on April 12, 2017, for $8,000 (its FMV) to its 100% shareholder, Ashley.Tan's adjusted basis for the forklift was $12,000.Ashley's holding period for the forklift:

Cason is filing as single and has 2017 taxable income of $36,000 which includes $34,000 of 0%/15%/20% net long-term capital gain.What is his tax on taxable income using the alternative tax method? Note: Use the tax rate schedule rather than the tax table.