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Exam 8: Capital Gains and Losses

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Question 41

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Net short-term capital gains may be offset by net long-term capital losses.

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Question 42

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

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Question 43

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In 2014, the basis of a taxpayer's replacement residence is equal to the cost of the replacement residence less the gain which was deferred on the sale of the old residence.

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

Indicate whether a gain or loss realized in each of the following situations would be long-term or short-term by putting an "X" on the appropriate blank line: ​

Robert and Becca are in the 25-percent tax bracket. They have a long-term capital gain of $28,000 and a long-term capital loss of $17,000 on sales of stock in 2014. What will their capital gains tax be in 2014?

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.

Verlin sells a commercial building and receives $50,000 in cash and a note for $50,000 at 10 percent interest. Verlin's adjusted basis in the building on the date of sale is $40,000 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.

Accounts receivable are capital assets.

The first day a capital asset, acquired on August 31, 2014, may be sold for long-term capital gain or loss treatment is September 1, 2015.

Sally acquired an apartment building in 1999 for $150,000 and sold it for $410,000 in 2014. 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?

To have the like-kind exchange provisions apply, a taxpayer must make an election.

After 4 years of life in the slow lane, Doug decided to give up his goat ranch and move back to the big city. He sold the goat milking machine for $1,000. The machine originally cost $1,200 and had $890 of accumulated depreciation at the time of sale. ​ a. What is the total gain or loss on the sale of the goat milking machine? b. Is the gain or loss treated as capital or ordinary? Explain.

There is no limit on the amount of capital losses that an individual may deduct against ordinary income.

Which one of the following is a capital asset?

A taxpayer's personal automobile is a capital asset.

Which of the following is not true about capital assets?

The condemnation of property is not an involuntary conversion, since it is done pursuant to a government decree.

Sol purchased land as an investment on January 12, 2005, for $85,000. On January 31, 2014, Sol sold the land for $25,000 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?

Stewart, age 44, sells his personal residence of 4 years on June 14, 2014, for $185,000. The expenses of sale are $15,000 and he has paid for capital improvements of $3,000. Stewart purchased the residence for $100,000. On February 2, 2015, Stewart purchases and occupies a new residence at a cost of $200,000. a.Calculate the gain realized on the sale of Stewart's residence. b.How much gain must be recognized on the sale of Stewart's residence? c.Calculate Stewart's basis in the new residence.