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Exam 16: Property Transactions: Capital Gains and Losses

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Question 21

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The chart below details Sheen's 2012,2013,and 2014 stock transactions.What is the capital loss carryover to 2014 and what is the net capital gain or loss for 2014? $\begin{array}{lllll}&\text { Short-Term } & \text { Short-term } & \text { Long-term } & \text { Long-term } \\\text { Tax Year }&\text { Capital Gains } & \text { Capital Losses } & \text { Capital Gains } & \text { Capital Losses } \\2012 & \$ 4,000 & \$ 6,000 & \$ 2,000 & \$ 13,000 \\2013 & \$ 16,000 & \$ 14,000 & \$ 23,000 & \$ 28,000 \\2014 & \$ 55,000 & \$ 52,000 & \$ 67,000 & \$ 33,000\end{array}$

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There was a $2,000 net short-term capita...

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Question 22

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54. Martha has both long-term and short-term 2013 capital gains and losses. The result of netting these gains and losses is a net long­term capital loss. Martha has no qualified dividend income. Also, Martha’s 2013 taxable income puts her in the 28% tax bracket. Which of the following is correct?

A) Martha will use Parts I, II, and III of 2013 Form 1040 Schedule D.
B) Martha will not benefit from the special treatment for long-term capital gains.
C) Martha will have a capital loss deduction.
D) All of these.
E) None of these.

F) A) and B)
G) D) and E)

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Question 23

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Gold Company signs a 13-year franchise agreement with Silver.Silver retained significant powers,rights,and a continuing interest.Gold Company (the franchisee) makes noncontingent payments of $18,000 per year for the first four years of the franchise.Gold Company also pays a contingent fee of 2% of gross sales every month.Which of the following statements is correct?

Jambo invented a new flexible cover for a popular brand of cellphone,but did not have the finances to begin production of the cover.Instead,he sold all his rights to the invention (after patenting it)for $450,000 plus $.10 for each cover sold by the company that purchased the patent.Jambo had a zero tax basis for the invention.What is the character of his gain from disposition of the patent?

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 2011 for $8,200.Mike is single,has no dependents,and claims the standard deduction.What is his 2014 taxable income? (Ignore the self- employment tax deduction. )

An accrual basis taxpayer accepts a note receivable from a retail customer with a weak credit rating.The taxpayer immediately sells the note to a bank for less than the note's stated value.The taxpayer has an ordinary loss.

Which of the following comparisons is correct?

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.

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?

If a capital asset is sold at a gain,the holding period is important.

Samuel,head of household with two dependents,has 2014 wages of $26,000,paid alimony of $3,000,has taxable interest income of $2,000,and a $12,000 0%/15%/20% net long-term capital gain.Samuel uses the standard deduction and is age 38.What is his 2014 taxable income and the tax on the taxable income?

Violet,Inc. ,has a 2014 $80,000 long-term capital gain included in its $285,000 taxable income.Which of the following is correct?

Martha is unmarried with one dependent and files as head of household.She had 2014 taxable income of $45,000 which included $16,000 of 0%/15%/20% net long-term capital gain.What is her tax on taxable income using the alternative tax on net long-term capital gain method?

Tan,Inc. ,sold a forklift on April 12,2014,for $8,000 (its FMV) to its 100% shareholder,Ashley.Tan's adjusted basis for the forklift was $12,000.Ashley's holding period for the forklift:

When an individual taxpayer has a net long-term capital gain that includes both 28% gain and 0%/15%/20% gain,which of these gains will be taxed first when the alternative tax on net long-term capital gain method is used and what difference does it make?

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.

A lease cancellation payment received by a lessee is generally treated as an exchange because the lease extinguished is usually a capital asset.

Cason is filing as single and has 2014 taxable income of $36,000 which includes $34,000 of 0%/15%/20% net long- term capital gain.What is his tax on taxable income using the alternative tax method?

Lease cancellation payments received by a lessor are always ordinary income because they are considered to be in lieu of rental payments.

Robin Corporation has ordinary income from operations of $30,000,net long-term capital gain of $10,000,and net short-term capital loss of $15,000.What is the taxable income for 2014?