Question 1

On January 10,2010,Wally sold an option for $1,000 on vacant land he held as an investment.He had purchased the land in 2006 for $66,000.The option allowed the option holder to purchase the property for $132,000 plus the cost of the option.On March 1,2010,the option holder exercised the option.What is the amount and nature of Wally's gain or loss from disposition of the land?

Accepted Answer

The answer of On January 10,2010,Wally sold an option for...

Question 2

Barbara has the following results of netting her short-term and long-term capital gains and losses for 2010: $36,000 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 2010 and,if there is a net capital loss,how much of the loss and what type of loss carries over to 2011?

Accepted Answer

The answer of Barbara has the following results of netting...

Question 3

Section 1239 (relating to the sale of certain property between related taxpayers)does not apply unless the property:

Accepted Answer

Section 1239 only applies to sales of depreciable property between related taxpayers if the property is also depreciable in the hands of the transferee. Therefore, choice B is the correct answer. The other choices are not relevant to the application of Section 1239.

Question 4

An individual has the following recognized gains and losses from disposition of § 1231 assets (all the assets were vacant land): $15,000 gain,$10,000 loss,$25,000 gain,and $2,000 loss.The individual has a $5,500 § 1231 lookback loss.The individual also has a $16,000 net short-term capital loss from the disposition of stock.Which of the following statements is correct?

Accepted Answer

The answer of An individual has the following recognized gains...

Question 5

Samuel,head of household with two dependents,has 2010 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 2010 taxable income and the tax on the taxable income?

Accepted Answer

The answer of Samuel,head of household with two dependents,has 2010...

Question 6

Marsha is single with no dependents.She had 2010 taxable income of $155,000 which included $36,000 of 0%/15% net long-term capital gain.What is her tax on taxable income using the alternative tax on net long-term capital gain method?

Accepted Answer

The answer of Marsha is single with no dependents.She had...

Question 7

Yuki and Omana,married filing jointly,and both over 65 years of age,have no dependents.Their 2010 income tax facts are:
  What is their taxable income for 2010?

Accepted Answer

The answer of Yuki and Omana,married filing jointly,and both over...

Question 8

Which of the following statements is correct?

Accepted Answer

When depreciable property is inherited by a taxpayer, the depreciation recapture potential is extinguished. This is because the property receives a new tax basis equal to its fair market value at the time of the decedent's death. Therefore, any potential recapture is wiped out and the property's depreciation history starts anew for the heir.

Question 9

An individual has a $10,000 § 1245 gain,a $15,000 § 1231 gain,a $13,000 § 1231 loss,a $4,000 § 1231 lookback loss,and a $15,000 long-term capital gain.The net long-term capital gain is:

Accepted Answer

The answer of An individual has a $10,000 § 1245...

Question 10

Kari owns depreciable residential rental real estate which has accumulated depreciation (all from straight-line)of $45,000.If Kari sold the property,she would have a $33,000 gain.The initial characterization of the gain would be:

Accepted Answer

The initial characterization of the gain would be Section 1231 gain because the property is depreciable rental real estate which is a Section 1250 asset. Since the accumulated depreciation is less than the gain, the gain will be treated as a long-term capital gain under Section 1231.

Question 11

Bakra was the holder of a patent on a wireless modem.During 2010,he sold all substantial rights in the patent for $345,000 in cash and a 3% royalty on the purchaser's first $10,200,000 of sales each year related to the product in which the patent is incorporated.Bakra had not reduced the patent to practice.He had a $56,000 basis for the patent.During 2010,he received $10,000 in royalties.What is the nature and amount of Bakra's gain?

Accepted Answer

The answer of Bakra was the holder of a patent...

Question 12

Phil's father died on January 10,2010.The father had owned stock for 20 years with a basis of $45,000 that was transferred to Phil as a gift on August 10,2009,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 23,2010.What is the amount and nature of Phil's gain or loss from disposition of this property?

Accepted Answer

The answer of Phil's father died on January 10,2010.The father...

Question 13

Assume a building is subject to § 1250 depreciation recapture because it was acquired before 1987 and accelerated depreciation was used to depreciate it.The building is destroyed in a fire and this is the taxpayer's only casualty or theft for the year.In which of the following situations could there be a § 1250 depreciation recapture gain?

Accepted Answer

Because the building was subject to § 1250 depreciation recapture, any gain realized upon its destruction (i.e. insurance recovery minus adjusted basis) will also be subject to § 1250 depreciation recapture. Therefore, if the insurance recovery exceeds the adjusted basis, there could be a § 1250 depreciation recapture gain. A, C, and D are incorrect because they do not involve a gain resulting from the destruction of the building. E is incorrect because there is a potential for a gain subject to § 1250 depreciation recapture.

Question 14

Harold is a head of household,has $27,000 of taxable income in 2010 from non-capital gain or loss sources,and has the following capital gains and losses:
  What is Harold's taxable income and the tax on that taxable income?

Accepted Answer

The answer of Harold is a head of household,has $27,000...

Question 15

Septa is the owner of vacant land that he purchased in 2005 for $400,000 and held for investment.On January 22,2009,he was paid $45,000 for a eighteen-month option on the land by Samantha.Samantha could buy the land for an additional $1,200,000 by exercising the option.Samantha had hoped to develop the land into a shopping center,but was unable to get the zoning changed to accommodate building a shopping center on the land.Consequently,Samantha did not exercise her option and the option expired on August 15,2010.What is Septa's basis,gain,and type of gain from these events?

Accepted Answer

The answer of Septa is the owner of vacant land...

Question 16

On January 18,2009,Martha purchased 200 shares of Blue Corporation stock for $2,000.On November 11,2010,she sold short 200 shares of Blue Corporation stock which she borrowed from her broker for $2,300.On February 10,2011,Martha closed the short sale by delivering the 200 shares of Blue Corporation stock which she had acquired in 2009.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 2010? In 2011?

Accepted Answer

The answer of On January 18,2009,Martha purchased 200 shares of...

Question 17

A retail building used in the business of a sole proprietor is sold on March 10,2010,for $322,000.The building was acquired in 2000 for $400,000 and straight-line depreciation of $104,000 had been taken on the building.What is the maximum unrecaptured § 1250 gain from the disposition of this building?

Accepted Answer

The answer of A retail building used in the business...

Question 18

The chart below details Sheen's 2008,2009,and 2010 stock transactions.What is the capital loss carryover to 2010 and what is the net capital gain or loss for 2010?

Accepted Answer

The answer of The chart below details Sheen's 2008,2009,and 2010...

Question 19

Ulma had the following transactions during 2010: a painting held for three years and sold at a gain of $65,000;100 shares of Gray stock held six months and sold for a loss of $3,000;50 shares of Yellow stock held 18 months and sold for a gain of $36,000.Ulma also had $344,000 of taxable income from other sources than these property transactions.What is Ulma's net capital gain or loss and what is her taxable income?

Accepted Answer

The answer of Ulma had the following transactions during 2010:...

Question 20

Which of the following would extinguish the § 1245 recapture potential?

Accepted Answer

The answer of Which of the following would extinguish the...

Quiz 14: Property Transactions: Capital Gains and Losses,1231,and Recapure Provisions

Section 1239 (relating to the sale of certain property between related taxpayers) does not apply unless the property:

Samuel,head of household with two dependents,has 2010 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 2010 taxable income and the tax on the taxable income?

Marsha is single with no dependents.She had 2010 taxable income of $155,000 which included $36,000 of 0%/15% net long-term capital gain.What is her tax on taxable income using the alternative tax on net long-term capital gain method?

Yuki and Omana,married filing jointly,and both over 65 years of age,have no dependents.Their 2010 income tax facts are: What is their taxable income for 2010?

Which of the following statements is correct?

An individual has a $10,000 § 1245 gain,a $15,000 § 1231 gain,a $13,000 § 1231 loss,a $4,000 § 1231 lookback loss,and a $15,000 long-term capital gain.The net long-term capital gain is:

Kari owns depreciable residential rental real estate which has accumulated depreciation (all from straight-line) of $45,000.If Kari sold the property,she would have a $33,000 gain.The initial characterization of the gain would be:

Harold is a head of household,has $27,000 of taxable income in 2010 from non-capital gain or loss sources,and has the following capital gains and losses: What is Harold's taxable income and the tax on that taxable income?

The chart below details Sheen's 2008,2009,and 2010 stock transactions.What is the capital loss carryover to 2010 and what is the net capital gain or loss for 2010?

Which of the following would extinguish the § 1245 recapture potential?