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P realized the following gains and losses in the current year:

• Gain on sale of public company shares $20,000

• Gain on sale of listed personal property 2,000

• Gain on sale of personal-use property 1,000

• Loss on sale of small business corporation shares (5,000)

• Loss on sale of listed personal property (3,000)

• Loss on sale of personal-use property (5,000)

What is the amount of net taxable capital gains to be reported for the current year [ITA 3(b)]?

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Bunny Greenfelder
Bunny GreenfelderLv2
28 Sep 2019

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Christina had a $12,000 gain on the sale of stock purchased three years ago, a $4,000 loss on selling stock she had only owned for 3 months, a $5,000 loss on the sale of her personal use auto, and a $5,000 loss from the sale of land used in her business (owned for six years). Chris had no other property transactions this year. What will be the net effect of these transactions on Chris' tax return, in terms of gains and/or losses?

Multiple Choice:

_____For purposes of calculating depreciation on the taxpayersbusiness usage of his home, the depreciable basis of the officeis:

The allocable share (example - square footage) of the adjustedbasis of the home when he converted the room from personal space toan office for business use.

The allocable share of the fair market value of the home at thetime he converted the room to an office space for business.

The lesser of a. or b.

The greater of a. or b.

____ Which of the following is not included inthe taxpayer’s basis of 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

All of the above are included in the taxpayer’s basis.

____ A taxpayer has a net short term capital lossof $2,000 and a net long term capital loss of $3,000 for the taxyear. If there are no other gains or losses, what, if anything,carries over to the next year?

$2,000 short term capital loss

$2,000 long term capital loss

$2,000 short term capital loss; $3,000 long term capitalloss

$500 short term capital loss; $1,500 long term capital loss

The taxpayer has no capital loss carryover.

_____ A taxpayer purchased a capital asset on March 22, 2015.What is the earliest date that he can dispose of the asset wherethe sale qualifies for long term capital gains/loss treatment?

September 22, 2015

September 23, 2015

March 22, 2016

March 23, 2016

_____ A married couple sells the following capital assets duringthe year:

Date Acquired

Date Sold

Sales Price

Adjusted Basis

The couple’s net capital gain is:

$4,000

$12,000

$5,000

$11,000

None of the above

_____ Land purchased for $80,000 in 2000 and used in thetaxpayers business is sold in 2015 for $87,000. The sale of theland results in:

$7,000 short term capital gain

$7,000 long term capital gain

$7,000 ordinary income

$7,000 section 1231 gain

None of the above

_____ Taxpayer purchased office equipment for $9,000. Theequipment had been depreciated $5,000. It was sold for $7,500. Whatis the amount and nature of the gain/loss from the sale?

$1,500 ordinary loss

$1,500 capital loss

$3,500 ordinary income

$3,500 long term capital gain.

_____ Taxpayer has a plant where she acquired a machine for$14,000. Over time depreciation of $6,000 was claimed. In thecurrent year taxpayer sells the asset for $19,000. What is theamount and nature of the gain/loss from the sale?

$6,000 of ordinary income, $5,000 long term capital gain

$5,000 of long term capital gain, $5,000 of ordinary income

$11,000 ordinary income.

$11,000 long term capital gain

______ Equipment used in the business is purchased in 2012 for$50,000. It was sold in 2015 for $22,000.

Depreciation information is as follows:

Accelerated depreciation claimed $23,758

Straight line Depreciation would have been$21,500

What is the gain or loss on the sale of the equipment, and howwill it be treated for tax purposes?

$4,242 Section 1231 loss

$1,758 Section 1231 loss

$2,258 ordinary loss; $1,984 Section 1231 loss

$4,242 ordinary loss

$6,500 ordinary loss

_____ In Malat v Riddell, 383 U.S. 569, 86 S.Ct. 1030,which of the following statements is accurate:

The Supreme Court sustained the government’s position, holdingthat the property was held by the taxpayer primarily for sale tocustomers in the ordinary course of his trade or business.

The Supreme Court held that the sale of “property held by thetaxpayer primarily for sale to customers in the ordinary course ofa trade or business is synonymous with the word“substantially”.

Words of the statutes should be interpreted where possible intheir ordinary, everyday senses. The Supreme Court concluded thatas used in Section 122191), “primarily” means “of first importance”or “principally”.

In so concluding as it did, the Supreme Court found itunnecessary to remand the case back to the lower court.

4. _____ In Commissioner v. Tufts, 461 U.S. 300, 103 S.Ct 1826,the Supreme Court concluded that when the amount of thenon-recourse note assumed by the buyer exceeds the property’s fairmarket value, the seller excludes the excess from the amountrealized on the sale. 5. _____ Prior to their marriage Jack soldDiane 50% interest in his rental property. Jack is not required torecognize gain/loss on the sale since the sale was in contemplationof marriage. 6. _____ Under a divorce decree the ex-spouse mustrelinquish ownership in an asset to the husband three years afterthe divorce is final. The husband will assume the basis of theproperty from the ex-spouse. 7. _____ A loss on the sale of apersonal residence is not deductible. 8. _____ When the buyerassumes the seller’s liability on a mortgage, the seller includesthe amount of the mortgage in computing the amount realized fromthe sale. 9. ____ Trade Accounts Receivable are capital assets. 10._____ A corporation may carry forward capital losses to offsetagainst capital gains indefinitely 11. _____To qualify as Section1231 property, it must be used in the trade or business and must beheld for more than one year. 12. _____ Under IRC Section 165(g) ifany security which is a capital asset becomes worthless during thetaxable year, the loss shall be treated as a loss from the sale orexchange of a capital asset on the last day of the taxable year.13. _T____ Business property held for less than or equal to oneyear always produces ordinary income or loss. 14. _____ The basisof business property is reduced by the greater of the depreciationallowed or allowable. 15. ____ Janice buys property by paying$1,000 down and borrowing $9,000. Janice’s initial basis in theproperty is $1,000.

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