Question 1
In 2004, Norma purchased 100 shares of XYZ stock as an investment. The stock cost $10,000. In 2009, when the fair market value was $12,000, Norma gave the stock to her daughter, Lydia. No gift tax was paid. If Lydia sells the stock for $13,000, Lydia will recognize:
no gain or loss.
a $1,000 gain.
a $2,000 gain.
a $3,000 gain.
none of the above.
Question 2
Benito died on May 23, 2013, bequeathing his entire $3,000,000 estate to his brother, Alfonso. The executor of Benito's estate validly elected to use the alternative valuation date. Benito's estate included 4,000 shares of listed stock, for which Benito's basis was $500,000. The stock was distributed to Alfonso eight months after Benito's death. The fair market values of this stock on various dates follow:
May 23, 2013 $600,000
November 23, 2013 550,000
January 23, 2014 530,000
Alfonso's basis in the stock is:
$500,000.
$530,000.
$550,000.
$600,000.
None of the above.
Question 3
Clara sold 200 shares of ABC stock for $22,500. Clara's investment portfolio includes the following purchases of ABC stock:
2003 100 shares at $100 per share
2007 50 shares at $110 per share
2011 125 shares at $130 per share
2012 75 shares at $125 per share
Assuming Clara does not identify which shares she sold, she will recognize:
no gain or loss.
a $500 gain.
a $1,000 loss.
a $3,125 loss.
none of the above.
Question 4
Yang converted her personal residence to rental property ten years ago. At the time of conversion, the fair market value of the house was $60,000. After taking depreciation deductions of $12,000, Yang sells the house for $68,000. If Yang paid $50,000 for the house, her adjusted basis in the house is:
$30,000.
$38,000.
$48,000.
$50,000.
$60,000.
Question 5
Riley exchanged an apartment building with an adjusted basis of $100,000 and a fair market value of $200,000 for a rental house valued at $180,000 and cash of $20,000. What is Riley's recognized gain and basis of the rental beach house?
$0 and $100,000
$0 and $180,000
$20,000 and $100,000
$20,000 and $180,000
None of the above
Question 6
Teresa, a self-employed consultant, traded in her old computer for a newer model. In addition to trading in her old computer, Teresa paid $7,000 for the newer model. Other relevant information about the trade-in is shown below:
Cost of original computer traded in $ 8,000
Adjusted basis of original computer at date of trade-in 1,000
List price (FMV) of new computer 10,000
Trade-in allowance (FMV) for old computer 3,000
Teresa's basis in the new computer is:
$1,000.
$7,000.
$8,000.
$10,000.
none of the above.
Question 7
Mr. and Mrs. Axelson sold their main home in January 2013 for $325,000. Selling expenses were $20,000. The Axelsons purchased the house 30 years ago for $40,000. The gain reported on the Axelsons' tax return is:
$0.
$15,000.
$35,000
$265,000.
none of the above.
Question 8
Which of the following is not included in the taxpayer's basis in business property?
Sales taxes paid with the purchase
Title insurance paid with the purchase
Amounts paid to have the property installed
Amounts paid to have the property delivered to the taxpayer's business
All of the above are included in the taxpayer's basis
Question 9
A taxpayer pays $200,000 for real property. The market value of the land and building purchased are $120,000 and $180,000, respectively. The taxpayer's basis in the land and building are:
$120,000 and $180,000, respectively.
$180,000 and $120,000, respectively.
$120,000 and $80,000, respectively.
$80,000 and $120,000, respectively.
None of the above.
Question 10
In 2000, Darlene received stock worth $100,000 from her aunt. The aunt purchased the stock for $15,000 in 1970. Using the $100,000 value of the stock, the aunt paid $30,000 of gift tax on the transfer. Darlene's basis in the stock is:
$15,000.
$40,500.
$45,000.
$100,000.
$130,000.
Question 11
Several years ago, Kurt paid $15,000 for 1,000 shares of stock in ABC. During the current year ABC declares a three-for-one stock split. Shortly thereafter, Kurt sells 1,000 shares of ABC stock for $12,000. His recognized gain on the sale of the 1,000 shares is:
$7,000.
$2,000.
$0.
$12,000.
$5,000.
Question 12
Years ago, Frank purchased stock in ABC company for $23,000. Last year, Frank sold the stock to his daughter, Deb, for $12,000 (its current market value). Deb later sells the shares for $15,000. Deb's adjusted basis in the stock and her recognized gain or loss on the sale are:
$12,000 adjusted basis, $0 recognized gain
$23,000 adjusted basis,$0 recognized gain
$23,000adjusted basis,$3,000 recognized gain
$12,000adjusted basis,$3,000 recognized gain
$12,000adjusted basis,$8,000 recognized loss
Question 13
Years ago, Fran purchased stock in ABC company for $33,000. Last year, Fran sold the stock to her son, Steve, for $25,000 (its current market value). Steve later sells the shares for $20,000. Steve's adjusted basis in the stock and his recognized gain or loss on the sale are:
$33,000adjusted basis, $13,000 recognized loss
$33,000adjusted basis, $5,000 recognized loss
$25,000adjusted basis, $13,000 recognized loss
$25,000adjusted basis, $5,000 recognized loss
$33,000adjusted basis, $0 recognized gain
Question 14
Joel's main home is destroyed in a tornado in a federally declared disaster area. The insurance company compensates Joel for his loss in 2013, which produces a $350,000 realized gain. How long does Joel have to purchase a new principal residence and avoid being taxed on the gain?
December 31, 2013
December 31, 2014
December 31, 2015
December 31, 2016
December 31, 2017
Question 15
The basis of property acquired as a result of an involuntary conversion is equal to the cost of the replacement property plus the amount of the postponed gain.
True
False