Ch. 7 Acct.

Alton received a Form 1099-B that shows a net sales price of $3,500 on the sale of 600 shares of FNP Company. He bought the stock on October 21, 2017, and sold it on October 22, 2018. His basis in the stock is $2,025, of which $25 is a commission fee. What is the amount and nature of Alton's gain?

$1,475 long-term gain.

In 2018 Ann received 1,000 shares of stock as a gift from her husband, Tim, who purchased them in 2009. At the time of the gift, the FMV of the stock was $29,300 and Tim's basis was $31,000. If Ann sells the stock for $32,834 in 2018, what is the nature and amount of the gain from the sale?

$1,834 long-term gain.

In 2015, Grant purchased land for $103,000 for use in his business. He sold it in 2018 for $114,000. What is the amount and type of gain on this sale, before netting of any other gains and/or losses?

$11,000 § 1231 gain. The land was used in his business and is considered a § 1231 asset.

In 2018 Ann received 1,000 shares of stock as a gift from her husband, Tim, who purchased them in 2009. At the time of the gift, the FMV of the stock was $29,300 and Tim's basis was $31,000. If Ann sells the stock for $26,834 in 2018, what is the nature and amount of the loss from the sale?

$2,466 short-term loss.

Jim sells a parcel of land for $75,000 cash, and the buyer assumes Jim's liability of $10,000 on the land. Jim's basis is $64,000. What is the gain or loss on the sale?

$21,000 gain. If the buyer assumes a liability, this is added to the amount realized from the sale of the asset. In this case, the amount realized includes the cash of $75,000 and the assumed liability of $10,000 are added together as the proceeds. The gain is calculated as $85,000 − $64,000 = $21,000.

On May 20, 2017, Jessica purchased land for $105,647 to use in her business. She sold it on May 21, 2018, for $102,595. What is the amount and type of loss on this sale if Jessica does not have any other sales from a trade or business?

$3,052 ordinary loss. $105,647 basis − $102,595 sales price = $3,052 loss. Since this was land used in her business the loss is considered ordinary.

In 2006, Duncan purchased 2,000 shares of stock for $50,000 in a midsize local company with gross assets of $15,000,000. In 2018, Duncan sold the stock for $68,000. How is the gain treated for tax purposes?

$9,000 excluded from gross income under § 1202 and $9,000 taxed at 28%.

Francisco, a single taxpayer, has income from his W-2 of $93,250. He also has a short-term capital loss of $7,311, a short-term capital gain of $2,100, and a long-term capital gain of $4,680. What is Francisco's AGI for 2018?

$92,719.

Which statement is true regarding short-term capital gains?

A long-term loss offsets a short-term gain, and if a gain results, the gain is taxed at regular rates.

Which is true regarding long-term capital gains?

A net long-term gain can be taxed at 28%, 25%, 20%, 15% or 0%, depending on the type of gain generated.

When there are a net short-term loss and a net long-term loss, which of the following is true?

Regardless of the amount of a short-term or long-term loss, the maximum amount of loss that can be taken in any one year is $3,000. Any remaining loss amounts can be carried forward indefinitely for individual taxpayers.

All of the following expenses increase the basis of stock held for investment except:

Stock splits. In a stock split, the basis per share is decreased by the number of additional shares given. In a two-for-one split, there will be twice as many shares; however, the basis per share is reduced by half.

Alice owns undeveloped land with an adjusted basis of $160,000. She sells the property to George for $205,000. a. What is Alice's realized and recognized gain? b. To what IRC section does the gain on the property apply? c. If the land is used in a trade or business, to what IRC section does the gain on the property apply?

a. 45,000 b. 1221 c. 1231

Haneen has taxable income of $115,000 without consideration of capital gain or loss transactions. She has a short-term capital gain of $18,000, a long-term capital loss of $10,000, and a short-term capital gain of $4,000. Assume no gains or losses are from collectibles or unrecaptured § 1250 property, and Haneen is in the 24% tax bracket. a. What is the total short-term gain or loss? b. What is the total long-term gain or loss? c. What is the carryover amount? d. Is the gain or loss after netting taxed at the Ordinary or Capital rate?

a. Total short-term gain $22,000 b. Total long-term loss $10,000 c. Carryover amount $0 d. Ordinary rate