Accounting : Calculate the taxable income
Subject: Business / Accounting
Simonne, a single taxpayer, bought her home in La Jolla 25 years ago for $55,000. She has lived continuously in the home since she purchased it. In the current year, she sells her home for $405,000. What is Simonne’s taxable gain on the sale?
$350,000 Question 3
The exchange of shares of stock does not qualify for likekind exchange treatment.
False Question 4 Sol purchased land as an investment on January 12, 2010 for $85,000. On January 31, 2015, Sol sold the land for $90,000 cash. What is the nature of the gain or loss?
Long-term capital loss
Long-term capital gain
Short-term capital gain
Short-term capital loss
None of the above Question 5
If a capital asset acquired on October 27, 2007 is sold on April 30, 2015 for a gain, the gain is a longterm capital gain.
False Question 6
Jerry bought his home 15 years ago for $60,000. Three years ago Jerry married Debbie
and she moved into the same house and has lived there since. If they sell Jerry’s house in the current year for $340,000, what is their taxable gain on a joint tax return?
$30,000 Question 7
Robert and Becca are in the 25 percent tax bracket. They have a longterm capital gain of $28,000 and a longterm capital loss of $17,000 on sales of stock in the current year. What will their capital gains tax be in the current year?
None of the above is correct Question 8
Which of the following statements is correct with respect to the deferral provisions of the
The like-kind exchange provision is elective.
The involuntary conversion provision is elective.
The exclusion of gain on the sale of a personal residence is elective.
Both the like-kind exchange and the involuntary conversion provisions are elective.
None of the above. Question 9
Which one of the following qualifies as a likekind exchange?
A chicken held by a farmer exchanged for medical services.
A home owned and lived in by a taxpayer exchanged for a new personal residence.
IBM stock exchanged for Exxon stock.
A Dodge Ram pickup truck used in business traded in for a new Ford F-250 pickup truck
also intended for business use.
None of the above are like-kind property. Question 10
Which of the following is true about capital gains?
Short-term capital gains are not netted with other capital gains and losses. For 2015, long-term capital gains are subject to special tax treatment.
Long-term capital gains are never taxed.
Net short-term capital gains are not netted with net long-term capital losses.
None of the above. Question 11
The adjusted basis of an asset may be determined by the:
Selling price + gain realized.
Selling price – gain realized.
Selling price + capital improvements – accumulated depreciation.
Original basis + capital improvements – selling price.
None of the above. Question 12
Simon sold investment property 2 years ago for $750. Simon’s basis in the property was
$200. Simon is receiving $150 per year from the buyer. Simon reports this income on the installment method. If Simon collects $150 in principal during the current year, how much gain should he report from the sale for the year?
None of the above Question 13
Martha has a net capital loss of $20,000 and other ordinary taxable income of $45,000 for the current tax year. What is the amount of Martha’s taxable income after deducting the allowed capital loss?
None of the above Question 14
If not entirely used in one sale, the unused portion of the $250,000 exclusion on the sale
of a taxpayer’s principal residence may be used to reduce the recognized gain on the saleof the taxpayer’s next residence.
False Question 15
For purposes of determining the adjusted basis of a capital asset at the time of its sale,
Capital improvements are added to the basis.
Ordinary repairs reduce the adjusted basis.
Accumulated depreciation is added to the basis.
The basis does not include costs such as title insurance and escrow fees related to the initial
purchase. Question 16
Terry has a casualty gain of $1,000 and a casualty loss of $5,500, before the $100 floor and before the adjusted gross income limitation. The gain and loss were the result of two separate casualties occurring during the current year and both properties were personaluse assets. If Terry itemizes deductions on her current year return and has adjusted gross income of $25,000, what is Terry’s gain or net itemized deduction as a result of these casualties?
$5,300 itemized deduction, $1,000 capital gain
$1,900 itemized deduction
$1,800 itemized deduction
$2,800 itemized deduction, $1,000 capital gain
None of the above Question 17
Johnny owned a gas station with an adjusted basis of $300,000. After it was destroyed in a fire, he received $560,000 from the insurance company. Within the next year, he bought a new gas station for $500,000. What is Johnny’s taxable gain and what is the basis in the new building?
$260,000; $500,000 $200,000; $300,000
$60,000; $500,000 Question 18
Which of the following is not true about capital assets?
Real property used in a trade or business is not a capital asset.
Capital losses may be carried back for 3 years to offset capital gains in those years.
For 2015, net long-term capital gains are granted preferential tax treatment.
Individual taxpayers may deduct net capital losses of up to $3,000 per year.
Shares of stock held for investment are capital assets. Question 19
If a taxpayer is relieved of a liability on the disposition of property, the amount of the liability should be included in the amount realized on the sale or other disposition.
False Question 20
A net longterm gain from the theft of a Section 1231 asset is treated as a Section 1231 gain.