Podcast
Questions and Answers
If Derek gifts property with a basis of $16,000 to Sarah when the fair market value is $12,000, and Sarah later sells the property for $10,000, what is Sarah's gain or loss?
If Derek gifts property with a basis of $16,000 to Sarah when the fair market value is $12,000, and Sarah later sells the property for $10,000, what is Sarah's gain or loss?
- ($6,000) loss (correct)
- ($2,000) loss
- $50
- ($12,000) loss
Annie, Inc., acquires a competitor's assets on May 1 for $150,000. $125,000 is allocated to tangible assets, and $25,000 is allocated to goodwill. What is Annie's tax amortization expense for year one and year two?
Annie, Inc., acquires a competitor's assets on May 1 for $150,000. $125,000 is allocated to tangible assets, and $25,000 is allocated to goodwill. What is Annie's tax amortization expense for year one and year two?
- Year 1: $7,500; Year 2: $10,000
- Year 1: $1,250; Year 2: $1,667
- Year 1: $1,111; Year 2: $1,667 (correct)
- Year 1: $25,000; Year 2: $0
Nate sold a rental house for $250,000. He bought it for $225,000 and claimed $50,000 of depreciation. What is the amount and character of Nate's gain on the sale?
Nate sold a rental house for $250,000. He bought it for $225,000 and claimed $50,000 of depreciation. What is the amount and character of Nate's gain on the sale?
- $25,000 §1231 gain and $50,000 unrecaptured §1250 gain (correct)
- $75,000 capital gain
- $75,000 ordinary gain
- $25,000 ordinary gain and $50,000 unrecaptured §1250 gain
Rebecca, a cash-method sole proprietor, prepaid $1,200 on October 1 for 12 months of business loan interest. How much interest can she deduct this year?
Rebecca, a cash-method sole proprietor, prepaid $1,200 on October 1 for 12 months of business loan interest. How much interest can she deduct this year?
Ice, Inc. placed furniture (7-year property) in service on April 16 with a basis of $20,000. What is the maximum depreciation expense for the current year, ignoring Section 179 and bonus depreciation?
Ice, Inc. placed furniture (7-year property) in service on April 16 with a basis of $20,000. What is the maximum depreciation expense for the current year, ignoring Section 179 and bonus depreciation?
How does the application of depreciation recapture impact a gain resulting from a property disposition?
How does the application of depreciation recapture impact a gain resulting from a property disposition?
Blake earned $40,000 as an employee. How much should his employer withhold from his paychecks for FICA taxes?
Blake earned $40,000 as an employee. How much should his employer withhold from his paychecks for FICA taxes?
Under the passive activity loss rules, what types of income can losses from the passive category offset?
Under the passive activity loss rules, what types of income can losses from the passive category offset?
At her death, Lila had an adjusted gross estate of $15.3 million. Which statement is correct regarding the estate?
At her death, Lila had an adjusted gross estate of $15.3 million. Which statement is correct regarding the estate?
During the current year, Pippa recognizes a $19,000 §1231 gain and a $12,000 §1231 loss. Her only other §1231 transaction resulted in an $11,000 loss two years ago. What amount and character of gain or loss must Pippa report?
During the current year, Pippa recognizes a $19,000 §1231 gain and a $12,000 §1231 loss. Her only other §1231 transaction resulted in an $11,000 loss two years ago. What amount and character of gain or loss must Pippa report?
Kathleen received land as a gift from her grandfather when its FMV was $105,000 and his adjusted basis was $75,000. Two years later, Kathleen sold the land for $102,000. What is her gain or loss on the sale?
Kathleen received land as a gift from her grandfather when its FMV was $105,000 and his adjusted basis was $75,000. Two years later, Kathleen sold the land for $102,000. What is her gain or loss on the sale?
Julia owned a life insurance policy on her life that paid her daughter $800,000 upon Julia's death. The policy was valued at $250,000 just prior to Julia's death. What amount, if any, is included in Julia's gross estate?
Julia owned a life insurance policy on her life that paid her daughter $800,000 upon Julia's death. The policy was valued at $250,000 just prior to Julia's death. What amount, if any, is included in Julia's gross estate?
Which of the following is NOT a capital asset?
Which of the following is NOT a capital asset?
Which of the following is a method to maximize the annual gift tax exclusion?
Which of the following is a method to maximize the annual gift tax exclusion?
A business purchased a computer (5-year property) on January 20 for $15,000 and machinery (7-year property) on October 30 for $100,000. Which MACRS depreciation convention applies?
A business purchased a computer (5-year property) on January 20 for $15,000 and machinery (7-year property) on October 30 for $100,000. Which MACRS depreciation convention applies?
Flashcards
Tax Return Extension
Tax Return Extension
An extension to file a tax return does not extend the due date for payment of any tax liability.
Sarah's Loss on Sale
Sarah's Loss on Sale
Sarah's loss on the sale is $6,000. The formula is amount realized less the basis.
Amortization Expense
Amortization Expense
The amortization expense in year one is $1,111 and year two is $1,667.
Nate's Gain on sale of Rental House
Nate's Gain on sale of Rental House
Signup and view all the flashcards
Interest Deduction
Interest Deduction
Signup and view all the flashcards
Realized Gain/Loss Computation
Realized Gain/Loss Computation
Signup and view all the flashcards
Depreciation Expense Calculation
Depreciation Expense Calculation
Signup and view all the flashcards
Depreciation Recapture affect on Gain
Depreciation Recapture affect on Gain
Signup and view all the flashcards
Taxable Estate to Qualified Charity
Taxable Estate to Qualified Charity
Signup and view all the flashcards
Dwight's Gain on inherited stock
Dwight's Gain on inherited stock
Signup and view all the flashcards
12-Month Rule
12-Month Rule
Signup and view all the flashcards
Kiddie Tax
Kiddie Tax
Signup and view all the flashcards
Amount of Gain (Loss) recognized for Lauren Exchange
Amount of Gain (Loss) recognized for Lauren Exchange
Signup and view all the flashcards
Self employment taxes
Self employment taxes
Signup and view all the flashcards
Tax Deductions
Tax Deductions
Signup and view all the flashcards
Study Notes
- An extension to file a tax return does not extend the due date for payment of any tax liability.
- Property with a basis of $16,000 with a FMV of $12,000 was gifted to Sarah, who sold it later for $10,000, resulting in a $6,000 loss.
- Annie, Inc. acquires assets, allocating $25,000 to goodwill amortized over 15 years as a §197 intangible asset; year one amortization expense would be $1,111, and year two would be $1,667.
- Nate sold a rental house for $250,000 after buying it for $225,000 and claiming $50,000 in depreciation; the gain is $25,000 §1231 gain and $50,000 unrecaptured §1250 gain.
- Rebecca, using the cash method, prepaid $1,200 for 12 months of interest on October 1; she can deduct $300 this year.
- Realized gain or loss on a depreciable asset is computed as amount realized less adjusted basis.
- Ice, Inc. purchased furniture (7-year property) on April 16 with a basis of $20,000; the maximum depreciation expense for the current year is $2,858.
- Depreciation recapture changes the character of gains recognized.
- For an employee earning $40,000, the employer should withhold $2,480 for FICA taxes.
- Under passive activity loss rules, losses from passive activities cannot offset income from active or portfolio categories.
- Lila's adjusted gross estate is $15.3 million; Lila's taxable estate will not exceed $15.3 million.
- Pippa recognizes a $19,000 §1231 gain and a $12,000 §1231 loss, with an additional $11,000 §1231 loss from two years ago; Pippa must report $7,000 ordinary income.
- Kathleen received land as a gift with a FMV of $105,000 and an adjusted basis of $75,000; selling it for $102,000 results in a $45,000 gain.
- Julia owned a life insurance policy that paid her daughter $800,000 upon her death; if the policy was valued at $250,000 prior to Julia's death, $250,000 is included in Julia's gross estate if Julia transferred ownership of the policy within three years of her date of death.
- An automobile used in a taxpayer's appliance delivery business is a capital asset.
- A serial gift strategy utilizes inter vivos gifts to multiple donees over multiple years to maximize the annual exclusion
- A business purchased a computer (5-year property) on January 20 and machinery (7-year property) on October 30; the MACRS depreciation convention that applies to the computer expense is half-year
- Inventory and accounts receivable assets are not capital assets, so the statement is false
- Passive loss rules prevent active participants in a rental activity from deducting rental losses against other types of non-passive income, so this statement is true.
- Marvin sold equipment used in his business for $80,000. He bought it for $75,000, and claimed $20,000 of depreciation; the amount and character of Marvin's gain (loss) on the sale is $20,000 ordinary gain, and $5,000 1231 gain
- Miley, reporting $37,475 of taxable income, considers a second job increasing taxable income ; the income from the second job will increase her tax liability by $1,475.
- Hugh sold a machine he uses in his business for $50,000. He bought the machine for $55,000, and claimed $13,500 of depreciation; his gain is $8,500 ordinary gain.
- Sally sold equipment she uses in her business for $30,000. She bought it for $80,000, and has claimed $40,000 of depreciation; the amount and character of Sally's gain (loss) on the sale is $10,000 §1231 ordinary loss.
- The 12-month rule enables taxpayers to deduct the entire amount of certain prepaid expenses.
- The kiddie tax may cause a child's earned and unearned income to be taxed at their parents' marginal tax rate.
- Coaster, Inc. sold an office building used in its business for $800,000. Coaster bought the building ten years ago for $600,000, and has claimed $300,000 of depreciation; the amount and character of Coaster's gain (loss) on the sale is $60,000 ordinary and $440,000 §1231 gain.
- The alternative minimum tax is a tax on an alternative tax base meant to more closely reflect economic income than the regular income tax base. Also the base is higher. It was originally structured to ensure higher paying income tax payers would pay a minimum amount.
- Lacey, Inc. purchased a computer (5-year property) on August 26 with a basis of $22,000; the maximum depreciation expense is $4,400.
- Frank prepaid 12 months of property insurance on July 1 at $12,000; Frank can deduct $6,000 this year.
- Dwight inherited 1,000 shares of stock with a FMV of $60 per share on the date of death; he later sold them for $80 per share, resulting in a $20,000 gain.
- Susan sold a machine for $2,400 purchased for $2,600 three years ago. Susan had claimed $1,200 of depreciation; Susan's gain, is $1,000.
- Tina is unmarried with $18 million in assets, all left to charity; Tina's taxable estate will be zero.
- When wash sale rules apply, the realized loss is not recognized at time of sale and does not affect basis of newly acquired stock.
- The applicable convention for amortization of start-up costs is the half-year convention is false regarding start-up costs.
- The depreciation convention used for the MACRS depreciation of real property is the mid-month convention.
- The statement that the LLC is available only for students in their first four years of postsecondary (post high school) education is false.
- Real property does not include tangible property such as computers, automobiles, furniture, and equipment.
- §1231 assets are depreciable assets and land used in a trade or business held by taxpayers for more than six months, which is false.
- The all events test determines the period in which income will be recognized.
- Marie must sell equipment for more than $22,000 to recognize any long-term capital gain on a sale of the property. She acquired the equipment three years ago for $40,000 and has claimed $18,000 of depreciation
- Non-like-kind property transferred in a like-kind exchange is "boot".
- Ann earned $30,000 as a self-employed individual, she is required to pay on is $4,239.
- Oak, Inc. purchased machinery (7-year property) on December 20 with a basis of $60,000; is $2,142.
- The maximum amount of net capital losses individual taxpayers may deduct against their ordinary income per year is $3.000.
- The false statement is that self-employed taxpayers are allowed to deduct the employer portion of their self-employment taxes as a for AGI deduction.
- A false statement is that tax deductions are more valuable than tax credits because tax deductions reduce a taxpayer's gross tax liability dollar for dollar.
- It is false that a capitalized cost basis includes only the actual purchase price; expenses to complete the purchase transaction, prepare the asset for use, and begin using the asset are immediately expensed
- A false statement is that individual tax returns are always due on April 15 for calendar-year individuals.
- Lauren exchanged land with a $60,000 adjusted basis for other land worth $35,000 and $10,000 cash; Lauren recognizes a $15,000 loss.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
