Humphrey Corp., a calendar year C corporation, realized taxable income of $20,000 from its regular business operations for calendar year 2013. In addition, Humphrey had the following capital gains and losses during 2013: Short-term capital gain $2,000 Short-term capital loss (6,000) Long-term capital gain 3,500 Long-term capital loss (9,500) 1. Humphrey did not realize any other capital gains or losses since it began operations. What is Humphrey's total taxable income for 2013? $ 20,000 $ 17,000 $ 12,000 $ 10,000 Meeker operates a hardware store and owns a parcel of land that is operated as a parking lot. Meeker owns an additional parcel across the street from the store that is being held for investment purposes. Land/Parking Land/Investment a. Capital Capital b. Section 1231 Section 1231 c. Capital Section 1231 d. Section 1231 Capital 2. Carlos Anderson died on March 13, 2013 and bequeathed his entire $4,000,000 estate to his daughter, Derna. His estate included investment real estate that had a tax basis to Carlos of $230,000. This property was distributed to Derna seven months after Carlos's death. The alternate valuation date was validly elected by the executor of Carlos's estate. Fair market values for the real estate were: At the date of Carlos's death $500,000 Six months after Carlos's death 460,000 Seven months after Carlos's death 470,000 Derna's basis for the stock is: $0 $460,000 $470,000 $500,000 Suzanne gave corporate bonds to her child, Benjamin. At the date of gift, Suzanne's basis in the bonds was $17,000 and the stock's fair market value was $12,000. No gift taxes were paid on the transfer. What is Benjamin's basis in the bonds? Gain Basis Loss Basis A $12,000 $12,000 b $17,000 $17,000 c $17,000 $12,000 d $12,000 $17,000 Rico sells a parcel of investment real estate and received $120,000 cash and stock with a fair market value of $100,000 and basis of $60,000. Additionally, his $50,000 mortgage on the property is assumed by the buyer. Rico paid an attorney $1,000 to execute the sale. The week before the sale he paid $75 to have a fence repaired on the property. His basis in the property is $200,000. What is Rico's amount realized from selling the property? $219,000 $268,925 $269,000 $270,000 Which of the following assets are classified as "ordinary" for purposes of determining the character of gain or loss? I. Personal residence II. Inventory III. Asset sold by a business that had been owned for 8 months II II, III I, II I, II, III Which of the following assets are classified as "capital" for purposes of determining the character of gain or loss? I. Equipment used in a business II. Land owned by a dealer in real estate III. Personal use lawnmower IV. Copyright owned by author of book III IV II, III I, II, III, IV Based on Zella's taxable income for 2013 her ordinary income is taxed at a marginal tax rate of 15%. Zella also has net capital gains for 2013 of $3,000. At what rate will the $3,000 capital gain be taxed? 28% 15% 10% 0% In 2013, Yousi has net short-term capital loss of $35,000. He has also realized a net long-term gain of $60,000 comprised of the following net gains and losses: $15,000 gain on the sale of coins held 3 years. $25,000 gain on the sale of securities held 5 years. $20,000 gain on the sale of realty (attributable to straight-line depreciation). Which gains will the $35,000 net capital loss offset for 2013? None; the losses cannot offset the gains Gain from securities and realty Gain from coins and securities Gain from coins and realty Which of the following assets is classified as a Section 1231 asset? Antique car held as an investment Accounts receivable Equipment owned for three years and used in a business Goodwill Wolf, Inc. had the following net Section 1231 gains/losses for its first four years of operations: Year 1 $10,000 Year 2 $ 4,000 Year 3 $12,000 Year 4 ($18,000) In Year 5, Wolf has a net Section 1231 gain of $30,000. How will this gain be taxed according to the following classification? Ordinary Income Long-Term Capital Gain a $18,000 $12,000 b $0 $30,000 c $30,000 $0 d $12,000 $18,000 Carmella purchased a commercial building on June 1, 2003 for $200,000. The building was depreciated using regular MACRS straight-line depreciation. The apartment building was sold on December 31, 2013 for $330,000 when its adjusted tax basis was $160,000 (assume that $40,000 of depreciation has been claimed). How much gain from the sale of the building is subject to the 25% rate and qualifies as Section 1250 depreciation recapture? 25% rate Section 1250 a $0 $170,000 b $40,000 $130,000 c $40,000 $0 d $170,000 $0 On January 1, 2011, Whitehouse Corp. placed into service 5year MACRS equipment with a tax basis of $10,000. On December 31, 2013, Whitehouse sold the property for $8,000, after having taken $6,000 in MACRS depreciation deductions. What amount of the gain should Whitehouse recapture as ordinary income under the Section 1245 recapture rules? $0 $2,000 $4,000 $5,000 Which of the following statements is false? Depreciation recapture does not apply to losses Buildings used as residential rental property are Section 1245 property Buildings used as commercial rental property are Section 1250 property All depreciable property is classified as Section 1231 property BOX Corporation purchased MACRS 5 year property in Year 1 for $5,000. On November 19 of Year 5 BOX sells the property for $1,500. The MACRS deprecation percentages provided are as follows: Year 1 20.00% Year 2 32.00% Year 3 19.20% Year 4 11.52% Year 5 11.52% Year 6 5.76% The depreciation allowed for Year 5 (ignoring bonus depreciation and Section 179) is: $0 $288 $576 $1,000 On May 28, 2013, Randy purchased and placed into service a commercial building costing $1,000,000. Twenty percent of the cost was allocated to the land. What was Randy's 2013 MACRS deduction for the building (rounded to the $12,821 $18,182 $25,758 $29,091 Sonny, a calendar year taxpayer, purchased the following assets in the current year for use in his business. He does not make a Section 179 election or elect bonus depreciation. January 31 Equipment $50,000 November 15 Computers $150,000 December 30 Storage Building $500,000 Which of the following conventions will apply when computing depreciation for these assets for the current year? A. Mid-quarter only Half-year only Mid-quarter and mid-month Half-year, mid-month, and mid-quarter Which of the following assets qualify for both Section 179 and bonus depreciation treatment in 2013 if purchased for use in a business? Franchise fee New office building Refurbished computer New delivery van Which of the following transactions qualify for deferral of gain and loss under the like-kind exchange rules? Exchange of business computer for personal use computer Exchange of business office building for investment land Exchange of business automobile for business equipment Exchange of business office building for business equipment Matthew exchanges land used in his business for another parcel of land which is more suitable for parking for his customers. Matthew's land has a fair market value of $160,000 and adjusted basis of $100,000. The land he receives has a fair market value of $120,000 so he also receives cash of $40,000. What is Matthew's recognized gain or loss from this transaction? $0 $40,000 $60,000 $160,000 Karen exchanges land used in her business for another parcel of land which is more suitable for parking for her customers. Karen's land has a fair market value of $200,000 and adjusted basis of $80,000. The land she receives has a fair market value of $150,000 so she also receives cash of $50,000. Assume that Karen's recognized gain from this transaction is $50,000. What is Karen's basis in the new parcel of land? $ 80,000 $130,000 $150,000 $200,000 Fenwick operates a grocery store and his retail building was completely destroyed by a hurricane on August 22, 2013. The fair market value of the building before the hurricane was $1,200,000 with an adjusted basis of $800,000. His insurance company reimbursed him $1,200,000 of December 2, 2013. When is the last date that Fenwick can replace this building with qualifying property and avoid recognizing gain from this transaction? December 31, 2013 August 22, 2015 December 31, 2015 December 31, 2016 On April 16, 2013, Alvin sold 200 shares of Chipmunk stock to his father, Tang, for $18,000. Alvin had purchased the stock in 2009 for $23,000. Tang sold the stock to Amber, an unrelated third party, for $30,000 on December 28, 2013. What amount of gain from the sale of the stock to Amber should Tang report on his 2013 income tax return? $0 $2,000 $5,000 $7,000 Potter, who is 48 years old, sold his principal residence this year for $350,000. He had purchased the residence six years ago for $200,000 and has lived in it since them except for six months last year when he was in a rehabilitation center after a car accident. He paid a realtor's commission of $15,000. He has not bought a new home by the end of the tax year and does not plan to do so in the near future. What amount of gain is recognized from the sale of the former residence on Potter's tax return? $0 $135,000 $150,000 $350,000 Sabin purchased 100 shares of Risky company stock in 2012 for $10,000. He sold these shares on December 27, 2013 when the value had dropped to $2,000. On January 3, 2014 he repurchased 100 shares of Risky for $3,000. What gain or loss can Sabin recognize from this sale in 2013 what basis does he have in the shares purchased in 2014? a Gain/Loss Basis $0 $3,000 b ($8,000) $3,000 c $0 $11,000 d ($8,000) $11,000 Ike Investor purchased land in Year 1 for $600,000. He sold the land for $800,000 in Year 4 and received a down payment of $200,000. He will receive principal payments each year of $200,000 for the next three years. What amount of gain should be reported in Year 4 if he reports the gain under the installment method? $ 50,000 $100,000 $200,000 $800,000 Which of the following are NOT considered to be a related party for purposes of the loss disallowance rules on related party sales? A partnership and a partner who owns 60% of the partnership A grandfather and grandson A corporation and a shareholder owns 90% of the corporation Two cousins Dandy Corporation's business building was destroyed by an earthquake this year. Dandy had an adjusted basis in the building of $350,000. The fair market value of the building before the earthquake was $500,000. However, the building was insured for only $250,000 which was the amount received by Dandy's insurance company. Dandy uses these funds and other resources to purchase a new business building for $400,000 by the end of the year. How much gain or loss must be recognized by Dandy? $0 $50,000 gain $100,000 loss $150,000 gain Corporation P is organized this year and incurs $41,000 of organizational expenses. P, a calendar year corporation, begins business operations on October 1. What will be the total deductions taken on this year's tax return for these expenditures? $0 $ 5,000 $ 5,600 $ 41,000 Which of the following items is tangible personal property? 50 shares of stock in Ace Corp. Oil painting Land Franchise
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