CHAPTER 14 PROPERTY TRANSACTIONS: CAPITAL GAINS

1. On June 10, 2014, Ebon, Inc. acquired an office building as a result of a like-kind exchange. Ebon had given up a factory building that it had owned for 26 months as part of the like-kind exchange. Which of the statements below is correct?

a. The holding period of the factory building includes the holding period of the office building.

b. The holding period of the office building starts on June 11, 2014.

c. The holding period of the office building starts on June 10, 2014.

d. The holding period of the office building includes the holding period of the factory building.

e. None of the above.

2. 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:

a. Includes Tan’s holding period for the forklift.

b. Begins on April 12, 2014.

c. Begins on April 13, 2014.

d. Does not begin until Ashley sells the forklift.

e. None of the above.

3. Hank inherited Green stock from his mother when she died. The mother had a tax basis of $366,000 for the Green stock when she died and the Green stock was worth $437,000 at the date of her death. Which of the statements below is correct?

a. Hank’s holding period for the Green stock includes his mother’s holding period for the stock.

b. Hank’s holding period for the Green stock does not include his mother’s holding period for the stock.

c. Hank’s holding period for the Green stock is automatically long term.

d. b. and c.

e. None of the above.

4. Which of the following is correctconcerning short sales of stock?

a. At the time the short sale is made, the taxpayer does not deliver to the purchaser the shares sold short.

b. At the time the short sale is made, the taxpayer delivers to the purchaser the shares sold short.

c. At the time the short sale is made, the taxpayer may already own the shares sold short.

d. At the time the short sale is made, the taxpayer always already owns the shares sold short.

e. None of the above.

5. Ryan has the following capital gains and losses for 2014: $6,000 STCL, $5,000 28% gain, $2,000 25% gain, and $6,000 0%/15%/20% gain. Which of the following is correct:

a. The net capital gain is composed of $1,000 25% gain and $6,000 0%/15%/20% gain.

b. The net capital gain is composed of $5,000 28% gain and $2,000 0%/15%/20% gain.

c. The net capital gain is composed of $3,000 28% gain, $2,000 25% gain, and $2,000 0%/15%/20% gain.

d. The net capital gain is composed of $1,000 28% gain and $6,000 0%/15%/20% gain.

e. None of the above.

6. In 2014, Mark has $18,000 short-term capital loss, $7,000 28% gain, and $6,000 0%/15%/20% gain. Which of the statements below is correct?

a. Mark has a $5,000 capital loss deduction.

b. Mark has a $3,000 capital loss deduction.

c. Mark has a $13,000 net capital gain.

d. Mark has a $5,000 net capital gain.

e. Mark has a $18,000 net capital loss.

7. In 2013, Jenny had a $12,000 net short-term capital loss and deducted $3,000 as a capital loss deduction. In 2014, Jenny has a $18,000 0%/15%/20% long-term capital gain and no other capital gain or loss transactions. Which of the statements below is correct?

a. Jenny has a 2014 $18,000 net capital gain.

b. Jenny has a 2014 $9,000 net capital gain.

c. Jenny has a 2014 $9,000 net capital loss.

d. Jenny has a 2014 $3,000 capital loss deduction.

e. Jenny has a 2014 $9,000 capital loss deduction.

8. In 2014, Satesh has $5,000 short-term capital loss, $13,000 0%/15%/20% long-term capital gain, and $7,000 qualified dividend income. Satesh is single and has other taxable income of $15,000. Which of the following statements is correct?

a. No more than $13,000 of Satesh’s taxable income is taxed at 0%.

b. No more than $7,000 of Satesh’s taxable income is taxed at 0%.

c. No more than $15,000 of Satesh’s taxable income is taxed at 0%.

d. None of Satesh’s taxable income is taxed at 0%.

e. All of Satesh’s taxable income is taxed at 0%.

9. 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?

a. $0.

b. $200.

c. $4,954. d. $300.

e. None of the above.

10.Sara is filing as head of household and has 2014 taxable income of $57,000 which includes $3,000 of net long-term capital gain. The net long-term capital gain is made up of $1,000 25% gain and $2,000 0%/15%/20% gain. What is the tax on her taxable income using the alternative tax method?

a. $0.

b. $8,363.

c. $8,663.

d. $8,463.

e. None of the above.

11.Seamus had $16,000 of net short-term capital loss in 2013. In 2014, Seamus has $17,000 of long-term capital loss and $26,000 of long-term capital gain. Which of the following statements is correct?

a. Seamus had a $13,000 short-term capital loss carryover to 2014.

b. Seamus has an $9,000 2014 net long-term capital gain.

c. Seamus has a $4,000 2014 net short-term capital loss.

d. a. and c.

e. None of the above.

12.In 2014, an individual taxpayer has $863,000 of taxable income that includes $48,000 of 0%/15%/20% long-term capital gain. Which of the following statements is correct?

a. All of the LTCG will be taxed at 0%.

b. All of the LTCG will be taxed at 15%.

c. All of the LTCG will be taxed at 20%.

d. Some of the LTCG will be taxed at 15% and some at 20%.

e. None of the above.

13.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 notbenefit from the special treatment for long-term capital gains.

c. Martha will have a capital loss deduction.

d. All of the above.

e. None of the above.

14.Which of the following comparisons is correct?

a. Corporations may carryback capital losses; individuals may not.

b. Both corporation and individual long-term capital losses carryover as short-term capital losses.

c. Corporations may carryforward capital losses indefinitely; individuals may only carryforward capital losses for five years.

d. Both corporations and individuals may use an alternative tax rate on net capital gains.

e. None of the above.