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Exam 8: Capital Gains and Losses

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Question 21

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For the current year,Susan had salary income of $20,000.In addition she reported the following capital transactions during the year: There were no other items includable in her gross income.What is the amount of her adjusted gross income for the current year?

A) $19,000
B) $23,000
C) $24,000
D) $25,000
E) None of the above

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Question 22

Multiple Choice

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Joseph exchanged land (tax basis of $34,000) ,that he had held for 4 years as an investment,for similar land valued at $42,000 which was owned by Adrian.In connection with this transaction,Adrian assumed Joseph's $11,000 mortgage.As a result of this transaction Joseph should report a long-term capital gain of:

A) $0
B) $8,000
C) $11,000
D) $19,000
E) None of the above

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Question 23

Multiple Choice

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Sol purchased land as an investment on February 12,2016 for $85,000.On January 31,2017,Sol sold the land for $90,000 cash.What is the nature of the gain or loss?7

Casualty gains and losses from business or investment property:

Which of the following is a capital asset?

If property is inherited by a taxpayer,

Taxpayers are allowed to offset net short-term capital losses with net long-term capital gains.

Rod had the following personal casualty in 2017: ​ ​ ​ ​ Calculate the amount and nature of Rod's gain or loss as a result of this casualty.

If the proceeds from the sale of property will be collected over a period of more than one year,a taxpayer is required to use the installment method.

What is the treatment given to personal casualty gains and losses?

In October of the current year,Mike sold a share of Berkshire-Hathaway for $73,000.He had acquired it several years ago at a cost of $42,000.He also sold Microsoft stock he had held for 3 years at a gain of $17,000.He had a short-term $2,000 loss on the sale of stock of a start-up technology company.He has $85,000 in taxable income before capital transactions are taken into account. ​ Assuming Mike is single with no dependents,what is the amount of Mike's tax on the capital transactions?

Sally acquired an apartment building 15 years ago for $150,000 and sold it for $410,000 in the current year.At the time of the sale,there is $65,000 of accumulated straight-line depreciation on the apartment building.Assuming Sally is in the 35 percent tax bracket for ordinary income,how much of her gain is taxed at 15 percent?

Cows used in a farming business are Section 1231 property.

Tim sells land to Brad for $90,000.Tim originally purchased the land for $50,000.Brad agrees to pay Tim six annual installments of $15,000 each.In year three,Brad makes his third installment of $15,000.How much taxable gain will Tim recognize in year three?

Martha has a net capital loss of $17,000 and other ordinary taxable income of $45,000 for the current year.What is the amount of Martha's capital loss carryforward?

Gain recognized on the sale of a Section 1245 asset is classified as ordinary income up to the amount of depreciation claimed.

Verlin sells a commercial building and receives $50,000 in cash and a note for $60,000 at 10 percent interest.Verlin's adjusted basis in the building on the date of sale is $45,000 and he collects only the $50,000 down payment in the year of the sale. a.​ If Verlin elects to recognize the total gain on the property in the year of sale,calculate the taxable gain. b.​ Assuming Verlin uses the installment sale method,calculate the taxable gain he must report for the year of the sale. c.​ ​ Assuming Verlin collects $10,000 (not including interest)of the note principal in the year following the year of sale,calculate the amount of income recognized under the installment sale method.

The exchange of shares of stock does not qualify for like-kind exchange treatment.

An artist's painting is not a capital asset when held by the artist.

Bev owns an apartment complex she purchased 10 years ago for $480,000 with a $80,000 cash down payment accompanied by a $400,000 loan.Bev has made $70,000 of capital improvements on the complex and her depreciation claimed on the building to date is $100,000.Calculate Bev's adjusted basis in the building.