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Exam 8: Capital Gains and Losses

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Question 21

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The § 1245 depreciation recapture potential does not reduce the amount of the charitable contribution deduction under § 170.

A) True
B) False

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Question 22

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Harold is a head of household, has $27,000 of taxable income in 2017 from non-capital gain or loss sources, and has the following capital gains and losses: $\begin{array} { l r } 28 \% \text { long-term capital gain } & \$ 4,300 \\28 \% \text { long-term capital loss } & ( 2,000 ) \\0 \% / 15 \% / 20 \% \text { long-term capital gain } & 19,000 \\\text { Short-term capital loss } & ( 1,700 )\end{array}$ ? Ignore standard deductions and exemptions.What is Harold's taxable income and the tax on that taxable income?

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Harold has taxable income of and the ta...

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Question 23

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Willie is the owner of vacant land that he purchased in 2013 for $1,400,000 and held for investment.On January 22, 2016, he was paid $145,000 for a thirteen-month option on the land by Susan.Susan could buy the land for an additional $1,200,000 by exercising the option.Susan had hoped to build a luxury home on the land, but was unable to get approval to build a big enough home to satisfy her needs.Consequently, Susan did not exercise her option and the option expired on February 22, 2017.(1) What is Willie's basis, gain or loss, and type of gain or loss from these events? (2) What is Susan's basis, gain or loss, and type of gain or loss from these events?

Phil's father died on January 10, 2017.The father had owned stock for 20 years with a basis of $45,000 that was transferred to Phil as a gift on August 10, 2016, when the stock was worth $430,000.His father paid no gift taxes.This stock was worth $566,000 at the date of the father's death.Phil sold the stock for $545,000 net of commissions on February 23, 2017.What is the amount and nature of Phil's gain or loss from disposition of this property?

On January 10, 2017, Wally sold an option for $2,000 on vacant land he held as an investment.He had purchased the land in 2013 for $76,000.The option allowed the option holder to purchase the property for $122,000 plus the cost of the option.On March 1, 2017, the option holder exercised the option.What is the amount and nature of Wally's gain or loss from disposition of the land?

An individual had the following gains and losses during 2017 on property held for the long-term holding period: sale of Orange common stock ($8,000 gain) ; sale of real property used in the taxpayer's business ($1,800 loss) ; destruction of real property used in the taxpayer's business by fire ($1,000 loss) .Which of the following statements is correct?

A lessor is paid $45,000 by its commercial tenant as a lease cancellation fee.The tenant wanted to get out of its lease so it could move to a different building.The lessor had held the lease for three years before it was canceled.The lessor had a zero tax basis for the lease.The lessor has received:

Residential real estate was purchased in 2014 for $345,000, held as rental property, and depreciated straight-line.Assume the land cost was $45,000 and the building cost was $300,000.Depreciation totaled $34,089.The building and land were sold on June 10, 2017, for $683,000 total.What is the tax status of the property, the nature of the gain from the disposition, and is any of it § 1250 depreciation recapture gain or unrecaptured § 1250 gain?

In 2017 Angela, a single taxpayer with no dependents, disposed of for $44,000 a business building which cost $100,000.$60,000 of depreciation had been taken on the building.Angela has a short-term capital loss of $3,000 this year.She has taxable income (not related to property transactions) of $125,000.She has no § 1231 lookback loss.What is the amount and nature of the gain or loss, what is Angela's taxable income, and what is her tax on the taxable income?

Section 1231 lookback losses may convert some or all of § 1245 gain into ordinary income.

Depreciation recapture under § 1245 and § 1250 is reported on Form 4797.

"Collectibles" held long-term and sold at a gain are subject to maximum tax rate of 28%.An individual taxpayer recently sold an antique car for $40,000.The car had been held for several years and $30,000 was originally paid for it.Explain why the car is or is not a collectible.

Vertigo, Inc., has a 2017 net § 1231 loss of $64,000 and had a $32,000 net § 1231 gain in 2016.For 2017, Vertigo's net § 1231 loss is treated as:

On January 18, 2016, Martha purchased 200 shares of Blue Corporation stock for $2,000.On November 11, 2017, she sold short 200 shares of Blue Corporation stock which she borrowed from her broker for $2,300.On February 10, 2018, Martha closed the short sale by delivering the 200 shares of Blue Corporation stock which she had acquired in 2016.On that date, Blue Corporation stock had a market price of $4 per share.What is Martha's recognized gain or loss and its character in 2017? In 2018?

A personal use property casualty loss is generally deductible only to the extent it exceeds 10% of AGI.

A business machine purchased April 10, 2015, for $98,000 was fully depreciated in 2015 using § 179 immediate expensing.On August 15, 2017, the machine was sold for $67,000.What is the amount and nature of the gain or loss from disposition of the machine?

If a capital asset is sold at a gain, the holding period is important.

Section 1231 property generally does not include artistic compositions.

Martha is unmarried with one dependent and files as head of household.She had 2017 taxable income of $45,000 which included $16,000 of 0%/15%/20% net long-term capital gain.What is her tax on taxable income using the alternative tax on net long-term capital gain method?

The maximum amount of the unrecaptured § 1250 gain (25% gain) is the depreciation taken on real property sold at a recognized gain.