Question 1

Dan sold 135 shares assume 100 are long-term)of Elite Mutual Fund on July 26,2016 for $95 per share and received a 1099-B box 3 was not checked for basis)to record the sale of the shares.Dan's investment portfolio includes the following purchases of Elite Mutual Fund: May 20,2013 50 shares at $100 per share
March 29,2014 50 shares at $95 per share
August 21,2015 50 shares at $85 per share
February 22,2016 100 shares at $75 per share
In 2016,Dan will recognize:

Accepted Answer

The answer of Dan sold 135 shares assume 100 are...

Question 2

Which of the following statements is incorrect regarding the gain or loss from the sale of property received as a gift?

Accepted Answer

If the FMV is equal to or more than the donor's adjusted basis, the basis for any gain or loss on a sale is the donor's adjusted basis, not the FMV of the asset.

Question 3

The gain or loss on the sale of property held as an investment is recorded on which one of the following forms or schedules?

Accepted Answer

According to IRS guidelines, the gain or loss on the sale of property held as an investment should be recorded on Schedule D if the taxpayer used the asset for investment purposes. Schedule D is used to report capital gains and losses on Form 1040.

Question 4

Sylvio purchased an apartment building as an investment in January 2010 for $383,500 and sold it for $475,000 in 2016.He reported $68,436 of allowed accumulated straight-line depreciation.If Sylvio is in the highest tax bracket for ordinary income,how much of his gain qualifies for preferential tax treatment?

Accepted Answer

To calculate the gain on the sale of the property, we need to subtract the adjusted basis from the sale price. 
Adjusted basis = purchase price - accumulated depreciation 
Adjusted basis = $383,500 - $68,436 = $315,064 
Gain = sale price - adjusted basis 
Gain = $475,000 - $315,064 = $159,936 
Since Sylvio is in the highest tax bracket for ordinary income, he qualifies for a preferential tax treatment of 20% on the gain, which amounts to $91,500 (20% of the gain of $159,936). Therefore, the correct answer is B.

Question 5

Diane gifted 100 shares of Runners Link common stock with a FMV of $8,000 to her brother,Sean.The stock originally cost Diane $11,000.Sean later sells the stock on the open market for $9,000.Sean recognizes:

Accepted Answer

When a gift is made, the recipient's basis for determining gain is the donor's original cost ($11,000), and for determining loss, it's the lower of the donor's cost or the FMV at the time of the gift ($8,000). Since Sean sold the stock for $9,000, which is between the original cost and the FMV at the time of the gift, he recognizes no gain or loss.

Question 6

Elandra purchased 500 shares in Prompt Messenger Services for $12,000 on November 21,2015.The company went bankrupt on June 12,2016,with no hope of recovery for the shareholders.On what date is the stock deemed to be worthless and what is the nature of the loss?

Accepted Answer

The answer of Elandra purchased 500 shares in Prompt Messenger...

Question 7

A taxpayer purchased land in 2014 for $26,000 and sold it in 2016 for $31,000 cash.The buyer also assumed the remaining mortgage of $13,000.What is the amount recognized on the sale of the land?

Accepted Answer

The answer of A taxpayer purchased land in 2014 for...

Question 8

Josephine gave her son,Shane 700 shares of Creative Marketing Inc.,common stock on May 26,2015.Josephine originally paid $9,000 for the stock on April 15,2015.At the date of the gift,the fair market value of the stock was $8,500.If no gift tax is paid and Shane sells the stock for $5,500 on May 26,2016,he will recognize:

Accepted Answer

Since Shane sells the stock for less than its fair market value at the date of the gift, he will recognize a capital loss. The holding period for gifted stock includes the donor's holding period, therefore it is considered a short-term holding period. The fact that Josephine already recognized the loss when she gifted the stock to Shane does not affect Shane's recognition of the loss upon sale. Therefore, option A is correct.

Question 9

Anike received property as part of an inheritance from her father who passed away on March 10,2016.Her father purchased the property on July 3,2015,for $156,000.Anike sold the property on June 30,2016,for $168,000.At the date of his death the property had a FMV of $154,000.What gain,if any,will Anike pick up on her return for 2016?

Accepted Answer

Anike's basis in the inherited property is the fair market value at the date of her father's death, which is $154,000. She sold it for $168,000, resulting in a gain of $14,000. Inherited property is considered long-term, regardless of the holding period.

Question 10

The following is true if land is sold except:

Accepted Answer

The answer of The following is true if land is...

Question 11

In 2010,Niveen purchased land for $88,000 for use in her landscape business.She sold it in 2016 for $94,000.If Niveen has no other sales of business or trade property,how will this gain be taxed?

Accepted Answer

The gain on the sale of the land is a capital gain since it is a sale of a capital asset. Since Niveen held the land for more than one year, it is considered a long-term capital gain. The difference between the sales price of $94,000 and the purchase price of $88,000 is $6,000, which is the amount of the capital gain. Therefore, the gain will be taxed as a long-term capital gain.

Question 12

Kwon-Lee sold 200 shares held in FNP Mutual Fund in 2016 for $22,500 and received a 1099-B to record the sale of the shares.Kwon-Lee's investment portfolio includes the following purchases of FNP Mutual Fund stock: 2004 100 shares at $100 per share
2008 50 shares at $110 per share
2012 125 shares at $130 per share
2012 75 shares at $125 per share
Assuming Kwon-Lee uses the single category average cost method,he will recognize

Accepted Answer

The answer of Kwon-Lee sold 200 shares held in FNP...

Question 13

Joe received a parcel of land as a gift from his sister,Lisa,in 2011.At the time of the gift,the land had a FMV of $20,000.Lisa purchased the land in 2007 for $23,000.If Joe sells the land in 2016 for $32,450,he will report a

Accepted Answer

Joe's basis in the land is the same as Lisa's original purchase price of $23,000. Selling it for $32,450 results in a capital gain of $9,450 ($32,450 - $23,000).

Question 14

Francisco sells a parcel of land for $100,000 cash and the buyer also assumes Francisco's liability of $10,000.The basis of his land is $70,000.What is the gain or loss realized on the sale?

Accepted Answer

The gain realized is calculated as the amount realized from the sale minus the basis of the property. The amount realized is the cash received plus the liability assumed by the buyer: $100,000 + $10,000 = $110,000. The basis is $70,000. Therefore, the gain is $110,000 - $70,000 = $40,000.

Question 15

On May 1,2015,Kelalani purchased land for $88,000 for use in her business.She sold it on May 1,2016,for $82,000.If there are no other sales of business or trade property,how is this loss treated for tax purposes on Kelalani's return?

Accepted Answer

The answer of On May 1,2015,Kelalani purchased land for $88,000...

Question 16

Keisha sold 200 shares of Chic-Chic stock in 2016 for $22,500 and received a 1099-B to record the sale of the shares.Keisha's investment portfolio includes the following purchases of Chic-Chic's stock: 2007 100 shares at $100 per share
2008 50 shares at $110 per share
2009 125 shares at $130 per share
2012 75 shares at $125 per share
Assuming Keisha does not identify which shares she sold,she will recognize

Accepted Answer

Keisha's cost basis using the FIFO method (first-in, first-out) is calculated as follows: 100 shares from 2007 at $100 each = $10,000, and 100 shares from 2008 at $110 each = $11,000. Total cost basis = $21,000. Sale price = $22,500. Gain = $22,500 - $21,000 = $1,500 gain.

Question 17

In 2007,Savannah purchased 200 shares of Hi-Style stock as an investment.The stock cost $17,000.In 2016 when the fair market value was $19,000,Savannah gave the stock to her daughter,Daniele.If no gift tax is paid and Daniele sells the stock for $20,000,she will recognize:

Accepted Answer

Daniele's basis in the stock is the same as Savannah's original cost basis of $17,000 because no gift tax was paid. When Daniele sells the stock for $20,000, she recognizes a gain of $3,000 ($20,000 - $17,000).

Question 18

Shanstella bought a 4-unit apartment building in July 2007 for $360,000 and sold it for $480,000 in 2016.There was $96,541 of accumulated straight-line depreciation on the apartment building.Assuming that Shanstella is in the 33% tax bracket,how much of her gain is taxed at 25%?

Accepted Answer

The gain taxed at 25% is the amount of accumulated depreciation, which is $96,541. This is because the IRS requires recaptured depreciation to be taxed at a maximum rate of 25%.

Question 19

Jake purchased a $300,000 earthmover for his business.He sold the earthmover for $245,000 after taking $210,000 of depreciation.What is the nature and amount of the gain or loss on the sale?

Accepted Answer

The answer of Jake purchased a $300,000 earthmover for his...

Question 20

Which of the following is Section 1231 property?

Accepted Answer

Section 1231 property is property that has been held for more than one year and is used in a trade or business, including real property, depreciable personal property, and livestock. A building used in a trade or business falls under this category. Accounts receivable and inventory are considered ordinary income property, and copyrights are considered intangible property.

Quiz 7: Capital Gains and Other Sales of Property Schedule D and Form 4797