Question 1: Tamara owns a non-depreciable capital asset she has held for investment. She purchased the asset for $240,000 six years ago, and it is now subject to a $74,000 liability. During the current year, Tamara sells the asset to Leon in exchange for $93,000 cash and a new automobile with a fair market value of $51,000 to be used by Tamara for personal use. Leon assumes the $74,000 liability. What is the amount of Tamara's Long Term Capital Gain (LTCG) or her Long Term Capital Loss (LTCL) on this sale?
A) $166,000 LTCG
B) ($22,000) LTCL
C) $218,000 LTCG
D) ($73,000) LTCL
Question 2: Durwin receives a house as a gift from his father. His father's basis in the house and the land is $90,000. On the date of the gift, the land and the house have a fair market value of $40,000 and $80,000, respectively. No gift tax is paid by Durwin's father at the time of the gift.
Select the answer that correctly answers the following:
(a) What is Durwin's basis in the land?
(b) What is Durwin's basis in the house?
(c) Will the basis of the land and house be the same as in parts (a) and (b) for purposes of determining a loss on their sale?
a) (a) $90,000
(b) $90,000
(c) Yes
B) (a) $30,000
(b) $60,000
(c) Yes
C) (a) $40,000
(b) $80,000
(c) No
D) (a) $40,000
(b) $40,000
(c) Yes
Question 3: During the current year, Lance sells a tract of land for $800,000 that he had received from Gwen on March 10, 1995, when the land had a fair market value (FMV) of $310,000. The taxable gift was $300,000 because the annual exclusion was $10,000 in 1995. Gwen had purchased the land on April 12, 1980, for $110,000. On the date of the gift (in 1995), Gwen paid a gift tax of $12,000. In the current year, when Lance sold the property, Lance paid a sales commission to his broker of $16,000 to sell the land.
What is Lance's realized gain on the sale?
A) $666,000
B) $690,000
C) $674,000
D) $800,000
Question 4: Nigel received a Land Rover from his mother as a gift. His mom had purchased the Land Rover two years earlier for $65,000, but its fair market value at the date that she made the gift to him was only $50,000. No gift tax was paid by his mom at the time of the gift.
If Nigel sells the Land Rover for $70,000, what, if any, gain or loss will he recognize on the sale?
A) ($5,000) loss.
B) $5,000 gain.
C) No gain or loss.
D) $20,000 gain.
Question 5: Frederick, a CPA, provided accounting services to a client, James. On December 15 of the same year, James gave Frederick 100 shares of Franklin Corp. common stock as compensation for his services. The adjusted basis of the stock was $4,000, and its fair market value at the time of the transfer was $5,000. Two months later, Frederick sold the stock on February 15, for $7,500. What is the amount that Frederick should recognize as a gain on the sale of stock?
A) $5,000
B) $2,500
C) $3,500
D) $7,500
Question 6: Jane and Kyle Cooper had the following stock sales during the current taxable year:
Gross Proceeds Basis
Crispy Crunch, Inc. $4,000 $5,000
Summer Solstice $3,500 $3,000
Sealy & Sealy, Inc. $2,000 $10,000
Each stock was held for over 12 months. What amount should be reported on their current year tax return for capital gain/loss?
A) ($8,000) loss
B) ($8,500) loss
C) $8,500 gain
D) ($3,000) loss
Question 7: Thor acquired a machine at a cost of $27,000 for use in his business, and he placed it in service on April 1, 2014. The machine is depreciated under MACRS, with a 7-year recovery period. This machine was the only asset Thor purchased this year. Thor elects to expense $25,000 of the acquisition cost under Tax Code Section 179.
What is Thor's total depreciation deduction for the machine in 2014?
A) $286
B) $25,286
C) $3,858
D) $28,858
Question 8: In 2014, Shelley, a self-employed CPA and calendar-year taxpayer, purchased and placed in service a car and personal computer. Both assets are "listed property" and are subject to the special rules contained in Tax Code Section 280F. Both assets are 5-year MACRS property. The following information regarding each asset is presented below:
Car
Date Acquired: 1/2/14
Acquisition Cost: $21,000
Business Usage: 60%
Sec. 179 Election? No
Computer
Date Acquired: 7/1/14
Acquisition Cost: $4,000
Business Usage: 40%
Sec. 179 Election? No
Select the multiple choice answer below that has the correct amount that can be depreciated using MACRS for both items (assume that Shelley does not elect the Sec. 179 expensing option).
A) Car: $1,896
Computer: $160
B) Car: $2,520
Computer: $160
C) Car: $1,896
Computer: $1,600
D) Car: $2,520
Computer: $1,600
Question 9: How is the depreciation deduction for nonresidential real property determined for regular tax purposes using MACRS?
A) 150% declining-balance method with a switch to the straight-line method over 27.5 years.
B) Straight-line method over 27.5 years.
C) Straight-line method over 39 years.
D) 150% declining-balance method with a switch to the straight-line method over 39 years.
E) Straight-line method over 40 years.
Question 10: Tractors R Us, Corp., a calendar year corporation, purchased and placed into service office equipment during November of Year 1. No other equipment was placed into service during Year 1. Under the general MACRS depreciation system, what convention must the corporation use?
Mid-quarter
Full-year
Mid-month
Half-year