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| 1 | |
A taxpayer can use the like-kind exchange rules to defer the gain on the exchange of personal use property. |
| | A) | True |
| | B) | False |
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| 2 | |
Boot is any other property given in a like-kind exchange. |
| | A) | True |
| | B) | False |
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| 3 | |
Basis of the new asset received in a like-kind exchange is always the same as the basis of the asset given up. |
| | A) | True |
| | B) | False |
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| 4 | |
A taxpayer will never recognize a gain on an involuntary conversion. |
| | A) | True |
| | B) | False |
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| 5 | |
A taxpayer has a limited amount of time to replace property that has been involuntarily converted (e.g., destroyed by fire). |
| | A) | True |
| | B) | False |
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| 6 | |
The holding period of the replacement property in an involuntary conversion is determined by the holding period of the converted property. |
| | A) | True |
| | B) | False |
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| 7 | |
In an installment sale, the gross profit percentage is the gross profit divided by the contract price. |
| | A) | True |
| | B) | False |
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| 8 | |
A single taxpayer can exclude up to $500,000 of gain from the sale of a personal residence. |
| | A) | True |
| | B) | False |
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| 9 | |
The exclusion of gain on the sale of a personal residence applies to your personal residence and one vacation home. |
| | A) | True |
| | B) | False |
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| 10 | |
The loss on the sale of stock between an individual and his solely owned corporation is never allowed. |
| | A) | True |
| | B) | False |
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| 11 | |
In a like-kind of exchange, gain is recognized when? |
| | A) | Never. |
| | B) | When the taxpayer has a realized gain and receives boot. |
| | C) | When the taxpayer has a realized gain and gives boot. |
| | D) | None of the above. |
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| 12 | |
Ava exchanges a machine used in her business with Gail for another machine. The basis of Ava's old machine is $50,000, FMV is $66,000, and she gives Gail cash of $14,000. Gail's basis in her machine is $70,000 and FMV is $80,000. Which of the following statements is correct? |
| | A) | Gail must recognize $24,000 gain on the exchange. |
| | B) | Gail must recognize $10,000 gain on the exchange. |
| | C) | Because this is a like-kind exchange, neither Ava nor Gail must recognize any gain. |
| | D) | Ava must recognize gain of $16,000 on the exchange |
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| 13 | |
Allison exchanges a machine used in her business with Lexus for another machine. The basis of Allison's old machine is $60,000, FMV is $76,000, and she gives Lexus cash of $14,000. Lexus's basis in her machine is $80,000 and FMV is $90,000. What is Lexus's adjusted basis in the new machine she receives? |
| | A) | $66,000. |
| | B) | $74,000. |
| | C) | $76,000. |
| | D) | $90,000 |
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| 14 | |
Caleb exchanges equipment with an adjusted basis of $8,000 for equipment worth $12,000. Caleb also receives cash of $3,000. What are the recognized gain or loss and the basis of the new equipment? |
| | A) | $0 and $12,000. |
| | B) | $0 and $11,000. |
| | C) | $1,000 and $11,000. |
| | D) | $3,000 and $8,000. |
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| 15 | |
Mitch exchanges a warehouse with an adjusted basis of $250,000 and fair market value of $360,000 for a mini-storage building (a like-kind asset) with a fair market value of $200,000 and $160,000 cash. What are the recognized gain or loss and the basis of the mini storage building? |
| | A) | $0 gain and $250,000 basis. |
| | B) | $110,000 gain and $200,000 basis. |
| | C) | $110,000 gain and $250,000 basis. |
| | D) | ($110,000) loss and $260,000 basis. |
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| 16 | |
How is the election to defer the gain on an involuntary conversion made? |
| | A) | The taxpayer must file Form 8824. |
| | B) | The taxpayer must file Form 4797. |
| | C) | The taxpayer must file Form 1040, Schedule D. |
| | D) | No form is required. A statement is attached to the tax return. |
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| 17 | |
The City of Marcus condemned 10 acres of Jesse's land worth $50,000. Her basis in it was $12,500. In payment to Jesse, the city awarded Jesse 50 acres of similar land. An appraisal indicated that the land Jesse received was worth $65,000. What is Jesse's recognized gain or loss on the involuntary conversion and what is her basis in the land received? |
| | A) | $0 gain and $12,500 basis. |
| | B) | $0 gain and $52,500 basis. |
| | C) | $37,500 gain and $50,000 basis. |
| | D) | $52,000 gain and $65,000 basis. |
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| 18 | |
The City of Smithfield condemned 100 acres of Edna's land worth $500,000. Her basis in it was $125,000. In payment to Edna, Smithfield awarded Edna 500 acres of similar land. An appraisal indicated that the land Edna received was worth $650,000. What is Edna's recognized gain or loss on the involuntary conversion and what is her basis in the land received? |
| | A) | $0 gain and $125,000 basis. |
| | B) | $0 gain and $525,000 basis. |
| | C) | $375,000 gain and $500,000 basis. |
| | D) | $525,000 gain and $650,000 basis. |
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| 19 | |
An apartment building with an adjusted basis of $225,000 was destroyed by a tornado on May 15, 2007. On July 15, 2007, the insurance company paid the owner $295,000. The owner reinvested $270,000 in a warehouse. What is the basis of the new apartment building if nonrecognition of gain from an involuntary conversion is elected? |
| | A) | $200,000. |
| | B) | $225,000. |
| | C) | $270,000. |
| | D) | $295,000. |
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| 20 | |
An involuntary conversion occurs when: |
| | A) | A warehouse is destroyed by fire. |
| | B) | The city takes farm land to build a new school. |
| | C) | An apartment complex is destroyed by a hurricane. |
| | D) | All of the above. |
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| 21 | |
On August 15, 2007, Tucker sold land held for investment to Charles. Tucker's land had a basis of $400,000 and was subject to a mortgage of $100,000. Under the terms of the sale, Charles will pay Tucker $100,000 on the date of the sale, assume the $100,000 mortgage and give Tucker a note for $600,000 (plus interest at the federal rate) due the following year. What are the contract price and gain recognized in the year of sale?
Contract Price Gain Recognized |
| | A) | $700,000 $50,000 |
| | B) | $700,000 $57,143 |
| | C) | $800,000 $50,000 |
| | D) | $800,000 $400,000 |
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| 22 | |
Which of the following statements is incorrect with regard to installment sales? |
| | A) | The contract price is generally the amount of cash the seller will receive. |
| | B) | The installment method cannot be used to report gain from the sale of stock or securities that are traded on an established securities market. |
| | C) | Sales by a taxpayer who is a dealer in the item sold are eligible for installment sale treatment. |
| | D) | Depreciation recapture is recognized in the year of sale. |
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| 23 | |
Where must an installment sale be reported? |
| | A) | Form 6252. |
| | B) | Form 8824. |
| | C) | Form 4562. |
| | D) | No form is required. It is reported directly on Schedule D. |
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| 24 | |
A taxpayer who sells her personal residence in 2007 may exclude some or all of the gain on the sale if the residence was owned and lived in for: |
| | A) | Any of the last fours years out of an eight year period before the sale. |
| | B) | At least one year prior to the sale date. |
| | C) | Any of the last two years out of a five year period before the sale. |
| | D) | At least three years before the sale date. |
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| 25 | |
Ashley and David are married and 45 years old. They sell their personal residence to Geoffry for $400,000 cash and Geoffry assumes their $220,000 mortgage. Ashley and David purchased the house ten years ago for $300,000. What is the amount of gain should Ashley and David recognize on the sale? |
| | A) | $0. |
| | B) | $100,000. |
| | C) | $250,000. |
| | D) | $320,000. |
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| 26 | |
Kevin, who is single, purchased a house on September 12, 1988 for $315,000. During the years he owned the house, he installed a sun room at a cost of $34,000 and replaced the roof at a cost of $8,000. On June 5, 2007, Kevin sold the house for $670,000. He paid a realtor commission of $33,500 and legal fees of $800 connected with the sale of the house. What is Kevin's recognized gain on the sale of the house? |
| | A) | $0. |
| | B) | $28,700. |
| | C) | $278,700. |
| | D) | $355,000. |
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| 27 | |
All of the following relationships are considered related parties except for: |
| | A) | A corporation and a taxpayer whose spouse of the taxpayer owns 80% of the corporation's stock. |
| | B) | A trust and a taxpayer who is the grantor of the trust. |
| | C) | A corporation and a taxpayer who owns 55% of the corporation's stock. |
| | D) | A partnership and a taxpayer who is a one-third partner. |
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| 28 | |
On September 1, 2007, Bart sells land (basis $105,000) to his son Bart, Jr. for $90,000, the land's fair market value on the date of the sale. On December 15, 2007, Bart, Jr. sells the land to an unrelated party. Which of the following statements is correct? |
| | A) | If Bart, Jr. sells the land for $85,000 he has a $30,000 recognized loss on the sale. |
| | B) | If Bart, Jr. sells the land for $105,000 he has a $15,000 recognized gain on the sale. |
| | C) | If Bart, Jr. sells the land for $106,000 he has a $16,000 recognized gain on the sale. |
| | D) | If Bart, Jr. sells the land for $107,000 he has a $2,000 recognized gain on the sale. |
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| 29 | |
Sonya owns 400 shares of Simple Company stock that she purchased for $16,000 six years ago. On December 29, 2007, Sonya sold 200 shares of the stock for $5,000. On January 5, 2008, Sonya repurchased 100 shares for $2,200. How much of the loss can Sonya deduct in 2007? |
| | A) | $0. |
| | B) | $1,500. |
| | C) | $8,800. |
| | D) | $11,000. |
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| 30 | |
What are the constructive ownership rules? |
| | A) | Rules used to determine the percentage ownership of buildings under construction. |
| | B) | Rules applied to determine if a taxpayer is deemed to also own the stock of anyone or any entity he or she also controls through ownership or family relationships. |
| | C) | Rules used to determine the amount of gain a taxpayer must recognize on the sale of stock. |
| | D) | None of the above. |
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