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Exam 16: Property Transactions: Capital Gains and Losses

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Question 31

True/False

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Since the Code section that defines "capital asset" says what is not a capital asset,other Code sections have to help determine what is and what is not a capital gain or loss.

A) True
B) False

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Question 32

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All collectibles long-term gain is subject to a potential alternative tax rate of 28%.

A) True
B) False

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Question 33

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Tan,Inc.,has a 2012 $50,000 long-term capital gain included in its $185,000 taxable income.Which of the following is correct?

The tax law requires that capital gains and losses be separated from other types of gains and losses because an alternative tax calculation may be used when taxable income includes net long-term capital gain.

Virgil was leasing an apartment from Marple,Inc.Marple paid Virgil $1,000 to cancel his lease and move out so that Marple could demolish the building.As a result:

An individual taxpayer with 2012 net short-term capital loss of $5,000 generally can deduct up to $3,000 for AGI and carry the balance forward to 2013.

Willie is the owner of vacant land that he purchased in 2008 for $1,400,000 and held for investment.On January 22,2011,he was paid $145,000 for a thirteen-month option on the land by Susan.Susan could buy the land for an additional $1,200,000 by exercising the option.Susan had hoped to build a luxury home on the land,but was unable to get approval to build a big enough home to satisfy her needs.Consequently,Susan did not exercise her option and the option expired on February 22,2012.(1)What is Willie's basis,gain or loss,and type of gain or loss from these events? (2)What is Susan's basis,gain or loss,and type of gain or loss from these events?

Phil's father died on January 10,2012.The father had owned stock for 20 years with a basis of $45,000 that was transferred to Phil as a gift on August 10,2011,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 23,2012.What is the amount and nature of Phil's gain or loss from disposition of this property?

As a general rule,the sale or exchange of an option to buy or sell property results in capital gain or loss if the property subject to the option is (or would be)a capital asset in the hands of the option holder.

Individuals who are not professional real estate developers may get capital gain treatment for sale of their real property if they engage only in limited development activities.

Sandy has the following results of netting her short-term and long-term capital gains and losses for 2012: $48,000 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 2012 and,if there is a net capital loss,how much of the loss and what type of loss carries over to 2013?

Judith (now 37 years old)owns a collection of porcelain dolls that she acquired when she was a grade schooler.She had forgotten about them until her mother sent them to her.Her mother had discovered them in a box in her attic while she was cleaning out her house before selling it.Judith had originally acquired all the dolls as gifts from her parents,so she has no way to establish a basis for the dolls.Using information from the Internet,she prepares a careful inventory of the dolls that includes their name,when they were first available for sale,their current value,and other pertinent information.She then lists them for sale on the Internet.To her surprise,she quickly gets an offer of $5,000 for all of them and sells them.Judith has no other gain or loss transactions for the year and is in the 28% marginal tax bracket.What issues do these facts create?

In 2012,Mark has $18,000 short-term capital loss,$7,000 28% gain,and $6,000 0%/15% gain.Which of the statements below is correct?

What characteristics must the seller of a patent have in order to be classified as a holder?

Original issue discount is amortized over the life of the bond.

Sara is filing as head of household and has 2012 taxable income of $27,000 which includes $13,000 of net long-tem capital gain.The net long-term capital gain is made up of $10,000 25% gain and $3,000 0%/15% gain.What is the tax on her taxable income using the alternative tax method?

Harry inherited a residence from his mother when she died.The mother had a tax basis of $566,000 for the residence when she died and the residence was worth $433,000 at the date of her death.Which of the statements below is correct?

Ramon is in the business of buying and selling securities.Which of the following is a capital asset for Ramon?

Cason is filing as single and has 2012 taxable income of $38,000 which includes $36,000 of 0%/15% net long-term capital gain.What is his tax on taxable income using the alternative tax method?

Mike is a self-employed TV technician.He is usually paid as soon as he completes repairs,but occasionally bills a customer with payment expected within 30 days.At the end of the year he has $2,500 of receivables outstanding.He expects to collect $1,200 of this and write off the remainder.Mike is a cash basis taxpayer and had net earnings from his business (not including the effect of the items above)of $55,000.He also had $3,500 interest income,$200 gambling winnings,and sold corporate stock for $7,000.The stock had been purchased in 2009 for $8,200.Mike is single,has no dependents,and claims the standard deduction.What is his 2012 taxable income? (Ignore the self-employment tax deduction.)