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Exam 8: Capital Gains and Losses

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Question 1

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Ben purchased an apartment building on January 1,1994,for $200,000.The building has been depreciated over the appropriate recovery period using the straight-line method.On December 31,2013,the building was sold for $220,000,when the accumulated depreciation was $62,500.Ben is in the highest tax bracket;on his 2013 tax return,he should report:

A) Section 1231 gain of $20,000 and ordinary income of $62,500
B) Section 1231 gain of $62,500 and ordinary income of $20,000
C) Ordinary income of $82,500
D) Section 1231 gain of $20,000 and "unrecaptured depreciation" taxed at 25 percent of
E) None of the above

F) C) and E)
G) B) and C)

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Question 2

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Which of the following is true about capital gains?

A) Short-term capital gains are not netted with other capital gains and losses.
B) For 2013,long-term capital gains are subject to special tax treatment.
C) Long-term capital gains are never taxed.
D) Net short-term capital gains are not netted with net long-term capital losses.
E) None of the above.

F) C) and D)
G) B) and D)

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Question 3

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Assuming a taxpayer has no other gains or losses for the year,a loss from the theft of a Section 1231 asset is treated as a capital loss.

The basis of property received as an inheritance is generally equal to the fair market value at the date of death.

During 2013,an office desk used by Pat in his business was completely destroyed by a fire.The adjusted basis of the desk was $900 original cost of $1,500 less accumulated depreciation of $600).Pat received $500 from his insurance company,but he did not replace the desk. a.What is the amount of Pat's recognized gain or loss deduction)as a result of the casualty? b.Assuming this is Pat's only casualty gain or loss for 2013,what is the nature of the gain or loss?

Sol purchased land as an investment on January 12,2004,for $85,000.On January 31,2013,Sol sold the land for $20,000 cash.In addition,the purchaser assumed the mortgage of $70,000 on the land.What is the amount realized not gain realized) on the sale of the land?

Martha has a net capital loss of $20,000 and other ordinary taxable income of $45,000 for the current year.What is the amount of Martha's capital loss carryforward?

A taxpayer's personal automobile is a capital asset.

An asset's adjusted basis is computed as:

If not entirely used in one sale,the unused portion of the $250,000 exclusion on the sale of a taxpayer's principal residence may be used to reduce the recognized gain on the sale of the taxpayer's next residence.

In 2013,Paul,a single taxpayer,has taxable income of $30,000 exclusive of capital gains and losses.Paul incurred a $1,000 short-term capital loss and a $5,000 long-term capital loss.What is the amount of his long-term capital loss carryover to 2014?

Cows used in a farming business are Section 1245 property.

If a capital asset acquired on October 27,2001 is sold on April 30,2013 for a gain,the gain is a long- term capital gain.

Which of the following is a capital asset?

Bennett purchased a tract of land for $20,000 in 2004 when he heard that a new highway was going to be constructed through the property and the land would soon be worth $200,000.The highway project was abandoned in 2013 and the value of the land fell to $15,000.Bennett can claim a loss in 2013 of:

On December 31,2013,Henry,a sole proprietor,sold for $65,000 a machine that was used in his business.The machine had been purchased in 2003 for $50,000,and when it was sold,it had accumulated depreciation of $20,000 and an adjusted basis of $30,000.For the year 2013,how should this gain be treated?

An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000.If the asset's adjusted basis is $15,000,what is the amount of capital improvements that have been made to the asset?

Which of the following sales results in a short-term gain/loss?

Sol purchased land as an investment on January 12,2004 for $85,000.On January 31,2013,Sol sold the land for $20,000 cash.In addition,the purchaser assumed the mortgage of $70,000 on the land.What is the amount of the realized gain or loss on the sale?

Which one of the following is true about Section 1231 assets?