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Multiple Choice Quiz
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1
The amount realized from a sale or trade of property is the amount received for the asset minus the basis that will be recognized for tax purposes.
A)True
B)False
2
If land were an investment held in a trade or business, the gain or loss would be reported on Schedule D.
A)True
B)False
3
When a Section 1231 asset is sold, the gain can be either classified as an ordinary or capital gain.
A)True
B)False
4
The 25% bracket is a special rate that relates to capital gains from Section 1250 property used in a trade or business.
A)True
B)False
5
A taxpayer can deduct a loss on a security when the market price of the stock is less than the basis at the end of the year.
A)True
B)False
6
Francisco sells a parcel of land for $80,000 cash and the buyer also assumes Francisco's liability of $10,000. The basis of his land is $50,000. What is the gain or loss realized on the sale?
A)$10,000 gain
B)$20,000 gain
C)$30,000 gain
D)$40,000 gain
7
Which of the following is Section 1231 property?
A)Inventory
B)Copyright owned by the author
C)A building used in a trade or business
D)Accounts Receivable
8
Which one of the following is a capital asset?
A)Business inventory
B)A computer used for investment
C)A non-musical copyright created by the taxpayer
D)Rental property
9
Greg sold some equipment for $78,500 on June 13, 2007. Greg had originally purchased the equipment for $86,750 on November 21, 2006. The equipment was subject to depreciation of $11,360. What gain or loss will Greg recognize on the sale?
A)$3,110 ordinary gain
B)$3,110 capital gain
C)$8,250 capital loss
D)$8,250 ordinary loss
10
In 2003, Terri purchased 300 shares of Flowers R Us stock at a cost of $8,600 as an investment. In 2007, when the fair market value was $10,400, Terri gave the stock to her daughter Michele. Assuming no gift tax was paid, if Michele sells the stock for $12,800, she will recognize:
A)no gain or loss
B)$1,800 gain
C)$2,400 gain
D)$4,200 gain
11
In 2006, Linda gave Jonathan 250 shares of School Products, Inc. common stock. Linda paid $9,350 for the stock in 2004. At the date of the gift, the FMV of the stock was $6,800. Assuming that there is no gift tax paid, if Jonathan sells the stock for $6,000, he will recognize: Assume the holding period requirement has been met
A)no gain or loss
B)$800 loss
C)$3,350 loss
D)$3,450 loss
12
Yolanda, a single taxpayer, has W-2 income of $70,000. She also has a short-term capital loss of $7,000, a short-term capital gain of $1,000, and a long-term capital gain of $2,000. What is Yolanda's AGI for 2007?
A)$66,000
B)$67,000
C)$70,000
D)$74,000
13
Heidi invested in a mid-sized local company with gross assets of $17,000,000. Heidi purchased 2,000 shares for $44,000 in 1995. In 2007, Heidi sold the stock for $84,000. How is the gain treated for tax purposes?
A)$40,000 capital gain and taxed at preferential rates.
B)$20,000 excluded from gross income under Section 1202 with the remaining gain recognized and taxed at regular rates.
C)$20,000 excluded from gross income under Section 1202 and $20,000 taxed at 28%.
D)$20,000 excluded from gross income under Section 1202 and $20,000 taxed at preferential capital gains rates.
14
Sammy sells a piece of equipment used in his business for $41,650 on September 10, 2007. The equipment was purchased on May 20, 2004 for $32,000. Sammy has taken $9,200 of depreciation on the equipment. What are the amount and classification of the gain on the sale by Sammy?
A)$18,850 Section 1231 gain
B)$9,200 Section 1231 gain and $9,650 Section 1245 ordinary income
C)$9,200 ordinary income under Section 1250 and $9,650 Section 1231 gain.
D)$9,200 ordinary income under Section 1245 and $9,650 Section 1231 gain.
15
Otis bought a 2-unit apartment building in July 1999 for $330,000 and sold it for $400,000 on December 20, 2007. At the time of sale there was $60,892 of accumulated straight line depreciation on the apartment building. Assuming Otis is in the 33% tax bracket, how much of the gain will be taxed at 25%?
A)$0
B)$60,892
C)$70,000
D)$130,892
16
Tamiko buys a painting from a collector for resale in her gallery for $3,500. She sold it 15 months later for $5,500. What are the nature and amount of the gain on the sale of the painting?
A)$2,000 Section 1245 gain
B)$2,000 ordinary income
C)$2,000 Section 1231 gain
D)$2,000 gain subject to 28% collectible tax rate
17
In 2005, Joe purchased land for $73,500 for use in his business. He sold it in 2007 for $100,000. What is the gain on the sale before any netting?
A)$26,500 Section 1250 gain
B)$26,500 Section 1245 gain
C)$26,500 Section 1231 gain
D)$26,500 ordinary income
18
Jeannie purchased 1,000 shares in Course Developers for $10,000 on August 11, 2006. The company went bankrupt on May 11, 2007with no hope of recovery for the shareholders. On what date is the stock deemed to be worthless and what is the nature of the loss?
A)December 31, 2006, short-term loss in 2006
B)December 31, 2007, short-term loss in 2007
C)December 31, 2007, long term loss in 2007
D)May 11, 2007, short-term loss in 2007
19
Georgia sold 300 shares of Clothes and More, Inc. in 2007 for $30,000. Georgia’s investment portfolio includes the following purchases of Clothes and More, Inc. stock:
2000 100 shares @ 80 per share
2001 75 shares   @ 75 per share
2002 125 shares @ 67 per share
2004 100 shares @ 85 per share
Assuming Georgia does not identify which shares she sold, she will recognize a (an)
A)$8,000 gain
B)$7,125 gain
C)$500 gain
D)$500 loss
20
In 2007, Pete sold 425 shares of Basketball Heaven Mutual Fund for $18,000. He made the following purchases of Basketball Heaven stock:
2002 275 shares @ $50 per share
2003 125 shares @ $48 per share
2004 100 shares @ $55 per share
Assuming Pete uses the single category average cost method, he will realize:
A)$1,750.00 long-term loss
B)$2,200.00 long-term loss
C)$3,125.00 long-term loss
D)$3,462.50 long-term loss





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