Saudi Electronic University

ACCT 422

CH5:

 1)Antonio owns land held for investment with a basis of $28,000. The city of Lafayette exercises the right of eminent domain and Antonio receives a payment of $48,000. What is Antonio's realized gain?

2. Will exchanges a building with a FMV of $80,000, a basis of $35,000, and subject to a liability of

$30,000 for land with a FMV of $50,000 owned by Jane. The amount realized by Will is

3. Richard exchanges a building with a FMV of $75,000, a basis of $35,000, and subject to a liability of

$25,000 for land with a FMV of $50,000 owned by Bill. What is the amount of Richard's realized gain?

4. Jack exchanged land with an adjusted basis of $65,000 subject to a liability of $22,000 for $50,000 (FMV) of stock owned by Hayden. Hayden takes the land subject to the liability. Jack incurs $500 of selling expenses. What is the amount of Jack's realized gain on the exchange?

5. Michelle purchased her home for $150,000, and subsequently added a garage costing $25,000 and a new porch costing $5,000. Repairs to the home's plumbing cost $1,000. The adjusted basis in the home is

6. Which one of the following does not affect the adjusted basis of a house held as rental property?

7. Jordan paid $30,000 for equipment two years ago and has claimed total depreciation deductions of

$15,600 for the two years. The cost of repairs during the same time period was $2,000 while a major overhaul which extended the life of the equipment cost $7,000. What is Jordan's adjusted basis in the equipment at the end of the two-year period?

8. Allison buys equipment and pays cash of $50,000, signs a note of $10,000 and assumes a liability on the property for $3,000. Also, Allison pays an installation cost of $500 and a delivery cost of $800. Allison's basis in the asset is

9. Dennis purchased a machine for use in his business. Mr. Dennis' costs in connection with this purchase were as follows:

What is the amount of Mr. Dennis' basis in the machine?

10. During the current year, Tony purchased new car wash equipment for use in his service station business. Tony's costs in connection with the new equipment this year were as follows:

What is Tony's basis in the car wash equipment?

11. Terra Corp. purchased a new enterprise software system and incurred the following costs:

What is Terra Corp.'s basis in the software system?

12. Edward purchased stock last year as follows:

In April of this year, Edward sells 80 shares for $250. Edward cannot specifically identify the stock sold.

The basis for the 80 shares sold is

13. Kathleen received land as a gift from her grandfather. At the time of the gift, the land had a FMV of

$105,000 and an adjusted basis of $85,000 to Kathleen's grandfather. The grandfather did not have any gift taxes due. One year later, Kathleen sold the land for $110,000. What was her gain or (loss) on this transaction?

14. Kathleen received land as a gift from her grandfather. At the time of the gift, the land had a FMV of

$85,000 and an adjusted basis of $110,000 to Kathleen's grandfather. One year later, Kathleen sold the land for $80,000. What was her gain or (loss) on this transaction?

15. Dale gave property with a basis of $16,000 to Sarah when it had a FMV of $12,000. Sarah later sold the property for $22,000 resulting in a recognized gain of

16. In the current year, Andrew received a gift of property from his uncle. At the time of the gift, the property had a FMV of $114,000 and an adjusted basis to his uncle of $70,000. After deducting the annual exclusion, the amount of the gift was $100,000. Andrew's uncle paid a gift tax on the property of

$24,000. What is the amount of Andrew's basis in the property?

17. During the current year, Don's aunt Natalie gave him a house. At the time of the gift, the house had a FMV of $144,000 and his aunt's adjusted basis was $133,000. After deducting the annual exclusion, the amount of the gift was $130,000. His aunt paid a gift tax of $20,000 on the house. What is Don's basis in the house for purposes of determining gain?

18. David gave property with a basis of $1,330 to Hannah when the property had a FMV of $1,000 and paid gift taxes of $80. If Hannah later sells the property for $1,400, Hannah's basis (to determine gain) in the property immediately before the sale is

19. Joycelyn gave a diamond necklace to her granddaughter Emma. Joycelyn had purchased the necklace in 1980 for $15,000. The FMV of the necklace at the time of the gift was $44,000. After deducting the annual exclusion, the amount of the gift was $30,000. Gift taxes of $10,000 were paid. What is Emma's adjusted basis in the necklace?

20. Monte inherited 1,000 shares of Corporation Zero stock from his father who died on March 4 of the current year. His father paid $30 per share for the stock on September 2, 2005. The FMV of the stock on the date of death was $50 per share. On September 4 this year, the FMV of the stock was $55 per share. The executor did not elect the alternate valuation date. Monte sold the stock for $65 per share on December 3. What is the amount and nature of any gain or loss?

21. Melody inherited 1,000 shares of Corporation Zappa stock from her mother who died on March 4 of the current year. Her mother paid $30 per share for the stock on September 2, 2005. The FMV of the stock on the date of death was $65 per share. On September 4 of the current year, the FMV of the stock was $70 per share. Melody sold the stock for $85 per share on December 3. The estate qualified for, and the executor elected, the alternate valuation method for these and other assets in the estate. An estate tax return was filed. What was Melody's basis in the stock on the date of the sale?

22. Douglas and Julie are a married couple who live in Louisiana, a community property state. They jointly own property with an adjusted basis of $140,000. On December 2 of this year, Julie died when the property had a fair market value of $160,000. Douglas's basis in the property after Julie's death is

23. Terrell and Michelle are married and living in New York, which is a not a community property state. They jointly own property with an adjusted basis of $240,000. On December 2 of this year, Michelle

died when the property had a fair market value of $260,000. Terrell's basis in the property after Michelle's death is

24. Billy and Sue are married and live in Texas, a community property state. They jointly own real property with an adjusted basis of $200,000. When the property has a FMV of $450,000, Billy dies leaving all of the property to Sue. If she later sells the property for $650,000, what is Sue's gain on the sale?

25. DeMarcus and Brianna are married and live in a common law state. They jointly own real property with an adjusted basis of $200,000. When the property has a FMV of $450,000, DeMarcus dies leaving all of the property to Brianna. If she later sells the property for $650,000, what is Brianna's gain on the sale?

26. In a community property state, jointly owned property left to the surviving spouse will have a basis after the estate is settled equal to

27. In a common law state, jointly owned property left to the surviving spouse will have a basis after the estate is settled equal to

28. Tina purchases a personal residence for $278,000, but subsequently converts the property to rental property when its FMV is $275,000. Assume depreciation of $65,000 has been deducted after conversion to rental use. If Tina sells the property for $200,000, her realized gain or loss will be

29. Josh purchases a personal residence for $278,000 but subsequently converts the property to rental property when its FMV is $275,000. Assume depreciation of $65,000 has been deducted after conversion to rental use. If Josh sells the property for $280,000, his gain or loss will be

30. Dustin purchased 50 shares of Short Corporation for $500. During the current year, Short declared a 10% stock dividend. What is the basis per share before and after the stock dividend is distributed?
31. In 2011 Toni purchased 100 shares of common stock in Blue Corporation for $5,280. In 2012, Blue declared a stock dividend of one share of its common stock for each 10 shares held. This year, 2013, Blue's common stock split 2 for 1 at a time when the FMV was $80 a share. What is Toni's basis in each of her shares of the Blue Corporation stock if both distributions were tax-free?

32. If a nontaxable stock dividend is received and is not the same type of stock as that owned before the dividend, the original stock's basis is allocated to all shares

33. Bob owns 100 shares of ACT Corporation common stock with a basis of $3,500 and a FMV of

$12,000. Bob receives 10 stock rights as a nontaxable distribution, and no basis is allocated to the stock rights. With each stock right, Bob may acquire one share of stock for $25. Bob exercises all 10 stock rights. The total basis of the newly acquired stock is

34. Jessica owned 200 shares of OK Corporation with a basis of $12,000 and a FMV of $24,000. Jessica received 20 stock rights as a nontaxable distribution with a total FMV of $8,000. Jessica sold the stock rights for $4,000. Jessica's gain or loss on the sale was

35. Brad owns 100 shares of AAA Corporation with a basis of $6,000 and a FMV of $24,000. Brad receives 15 stock rights as a nontaxable distribution with a total FMV of $6,000. Brad allows the stock rights to expire. Brad's loss recognized and the basis of the original 100 shares after expiration of the stock rights is

36. All of the following are capital assets with the exception of

37. Which one of the following is a capital asset?

38. Mike, a dealer in securities and calendar-year taxpayer, purchased a security for inventory on November 18, 2012 for $15,000. The FMV on December 31, 2012 was $16,000. The security was sold on December 19, 2013 for $16,500. These transactions result in

39. Kate subdivides land held as an investment and Section 1237 is satisfied. The lots sell for $30,000 per lot (basis $10,000). Kate sells five lots in the first year. Kate's ordinary income is

40. Coretta sold the following securities during 2013:

What is Coretta's net capital gain or loss result for the year?

41. Antonio is single and has taxable income of $150,000 without considering the sale of a capital asset (land held for investment) in September of 2013 for $25,000. That asset was purchased six years earlier and has a tax basis of $5,000. The tax liability applicable to only the capital gain (without consideration of the additional Medicare tax) is

42. Sanjay is single and has taxable income of $13,000 without considering the sale of a capital asset in November of 2013 for $15,000. That asset was purchased six years earlier and has a tax basis of

$5,000. The tax liability applicable to only the capital gain is

43. Renee is single and has taxable income of $480,000 without considering the sale of a capital asset (land held for investment) in September of 2013 for $25,000. That asset was purchased six years earlier and has a tax basis of $5,000. The tax liability applicable to only the capital gain (without consideration of the additional Medicare tax) is

44. Nate sold two securities in 2013:

Nate has a 25% marginal tax rate. What is the additional tax resulting from the above sales?

45. Darla sold an antique clock in 2013 for $3,000. She had purchased the clock in 2009 for $2,000. If she is otherwise in the 35% marginal tax bracket, what is the maximum tax rate on the capital gain on the sale of the clock?

46. To be considered a Section 1202 gain, the stock being sold must meet all of the following characteristics except

47. The taxable portion of a gain from qualified small business stock is taxed at a top tax rate of

48. Andrea died with an unused capital loss carryover of $3,300. The carryover

49. This year, Lauren sold several shares of stock held for investment. The following is a summary of her capital transactions for the year:

What are the amounts of Lauren's capital gains (losses) for this year?

50. Joel has four transactions involving the sale of capital assets during the year resulting in a STCG of

$5,000, a STCL of $12,000, a LTCG of $1,800 and a LTCL of $1,000. As a result of these transactions, Joel will

51. Stella has two transactions involving the sale of capital assets during the year resulting in a STCL of

$5,200 and LTCL of $2,400. As a result, Stella can offset

52. Gertie has a NSTCL of $9,000 and a NLTCG of $5,500 during the current taxable year. After gains and losses are offset, Gertie reports

53. During the current year, Nancy had the following transactions:

What is the amount of her capital loss deduction for the current year, and what is the amount and character of her capital loss carryover?

54. Kendrick, who has a 35% marginal tax rate, had the following results from transactions during the year:

After offsetting the STCL, what is (are) the resulting gain(s)?

55. Amanda, whose tax rate is 33%, has NSTCL of $25,000, a $30,000 LTCG from sale of a rare coin held 15 months and a $18,000 LTCG from the sale of stock held for three years. By what amount will Amanda's tax liability increase?

56. Candice owns a mutual fund that reinvests her dividends and capital gains earned during the year. The mutual fund reported to her that her share of earnings was: $500 in dividends, $1,500 in short- term net capital gains, and $1,300 in long-term net capital gains. She reported the items on her tax return and paid the appropriate tax on these earnings. If her basis in the fund was $25,000 at the beginning of the year, what is her basis at the end of the year?

57. Olivia, a single taxpayer, has AGI of $280,000 which includes $220,000 of salary and $60,000 of investment income. She will pay Medicare tax on the $60,000 of investment income of
58. Melanie, a single taxpayer, has AGI of $220,000 which includes $160,000 of salary and $60,000 of investment income. She will pay Medicare tax on the $60,000 of investment income of

59. In the current year, ABC Corporation had the following items of income, expense, gains, and losses:

What is taxable income for the year?

60. Topaz Corporation had the following income and expenses during the current year:

What is Topaz's taxable income?

61. Everest Inc. is a corporation in the 35% marginal tax bracket. It sold two stockholdings this year, resulting in a long-term capital gain of $15,000 on stock A and a short-term capital loss of $5,000 on stock B. What is the extra tax that Everest will pay due to the sales of these stocks?

62. On January 31 of this year, Jennifer pays $700 for an option to acquire 100 shares of Lifetime Corporation common stock for $70 per share. Jennifer exercises the option on June 2. Jennifer sells the stock on April 30 of next year for $10,000. Jennifer's basis for the stock immediately before the sale is

63. On January 31, 2013, Mallory pays $800 for an option to acquire 100 shares of Mesa Corporation common stock for $85 per share. As a result of an increase in the market value of the Mesa stock, the market price of the option increases and Mallory sells the option for $1,000 on August 4, 2013. As a result of the sale, Mallory must recognize

64. On January 31 of the current year, Sophia pays $1,000 for an option to acquire 100 shares of Texas Corporation common stock for $105 per share at any time prior to December 31. As of December 31 Sophia had not exercised the option or sold it. Which of the following statements is correct?

65. How long must a capital asset be held to qualify for long-term treatment?

66. On July 25, 2012, Marilyn gives stock with a FMV of $7,500 and a basis of $5,000 to her nephew Darryl. Marilyn had purchased the stock on March 18, 2012. Darryl sold the stock on April 18, 2013 for

$7,800. As a result of the sale, what will Darryl report on his 2013 tax return?