Question 1. Which of the following is true of a realized gain?
a) Difference between the amount realized and the adjusted basis.
b) Difference between the amount realized and the original basis
c) The amount of proceeds you receive in exchange for an asset
d) Not recognized
Question 2. Terry purchased an ice-cream machine for $14,000; the seller is holding the note. Terry paid $1,500 for the required wiring and installation. Terry has deducted depreciation on the ice-cream machine for 2 years totaling $2,400. Terry owes $8,000 to the Seller. What is Terry's adjusted basis in the ice-cream machine?
a) $13,100
b) $11,100
c) $11,600
d) $21,100
Question 3. Sue inherited 50 shs of Zoll Industry stock from her Uncle Dave. Dave purchased the stock in 1986 at $20/sh. The stock was worth $50/sh when Dave passed away. What is Sue's basis in the stock?
a) $1,000
b) $2,500
c) $3,500
d) No basis.
Question 4. Which is true regarding the sale of a Personal Residence?
a) Exclusions are available up to $250,000 for joint filers if requirements are met.
b) An exclusion under IRC 121 may be pro-rated for certain life circumstances.
c) Exclusions are available up to $75,000
d) The gain is 100% taxable and losses are not deductible.
Question 5. Which is true regarding a Like-Kind Exchange?
a) The assumption of liabilities is not considered in the transaction.
b) IRC Section 1040 states the rules for the like-kind exchange
c) IRC Section 1031states the rules for the like-kind exchange
d) Losses in a like-kind exchange receive immediate recognition.
Question 6. Chuck had a short-term capital loss of $5,000, a short-term capital gain of $1,900, a short-term capital loss carryover from 2015 of $700, a long-term capital gain of $1,200, and a long-term capital loss of $1,000. What is net gain (loss) for 2015? What is his recognized gain (Loss) for 2015? What is his short-term capital loss carryover (if anything) to 2016? What is his long-term capital loss carryover (if anything) to 2016?
Question 7. In May 2016, Kevin McElwainee sells property with an adjusted basis of $75,000 for $125,000 to Josh Amico. Josh pays Kevin $12,000 cash at closing and the remaining to be paid in 5 annual installments of $22,600 beginning in May 2017. Ignore the impact of interest for this exercise.
(a) What is Kevin's gross profit or loss on the sale?
(b) what is Kevin's gross profit percentage?
(c) How much profit will Kevin recognize in 2016?
(d) How much profit will he recognize in the later years?