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Exam 16: Property Transactions: Capital Gains and Losses

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Question 21

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Marvin is in the business of song writing.He writes jingles for web ads.He writes a song and sells it for a lump sum.He has:

A) Sold a capital asset.
B) Sold an ordinary asset.
C) No gain or loss.
D) An ordinary gain.
E) b. and d.

F) A) and E)
G) A) and B)

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Question 22

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Short-term capital losses are netted against long-term capital gains and long-term capital losses are netted against short-term capital gains.

A) True
B) False

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Question 23

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

On January 10,2012,Wally sold an option for $2,000 on vacant land he held as an investment.He had purchased the land in 2008 for $76,000.The option allowed the option holder to purchase the property for $122,000 plus the cost of the option.On March 1,2012,the option holder exercised the option.What is the amount and nature of Wally's gain or loss from disposition of the land?

A worthless security had a holding period of 11 months when it became worthless on December 10,2012.The investor who had owned the security had a basis of $10,000 for it.Which of the following statements is correct?

Harold is a head of household,has $27,000 of taxable income in 2012 from non-capital gain or loss sources,and has the following capital gains and losses: What is Harold's taxable income and the tax on that taxable income?

The only things that the grantee of an option may do with the option are exercise it or let it expire.

Which of the following events causes the purchaser of an option to add the cost of the option to the basis of the property to which the option relates?

Which of the following comparisons is correct?

When a patent is transferred,the most common forms of payment received by the transferor are a lump sum and/or periodic payment.

Which of the following is correct concerning short sales of stock?

Robin Corporation has ordinary income from operations of $30,000,net long-term capital gain of $10,000,and net short-term capital loss of $15,000.What is the taxable income for 2012?

Martha is single with one dependent and files as head of household.She had 2012 taxable income of $45,000 which included $16,000 of 0%/15% net long-term capital gain.What is her tax on taxable income using the alternative tax on net long-term capital gain method?

An accrual basis taxpayer accepts a note receivable from a retail customer with a weak credit rating.The taxpayer immediately sells the note to a bank for less than the note's stated value.The taxpayer has a capital loss.

The subdivision of real property into lots for resale when no substantial physical improvements have been made to the property never causes the gain from sale of the lots to be treated as ordinary income.

In early 2011,Wendy paid $66,000 for an option on a parcel of land she intended to hold as an investment.After a survey of the land (paid for by the grantor)determined that the parcel was much smaller than the grantor said it was,she let the option lapse when it expired in 2012 after 14 months.How should Wendy treat these events in 2011? 2012?

The tax law requires that capital gains and losses be separated from other types of gains and losses because there are limitations on the deduction of net capital losses.

When an individual taxpayer has a net long-term capital gain that includes both 25% gain and 0%/15% gain,which of these gains will be taxed first when the alternative tax on net long-term capital gain method is used and what difference does it make?

Ryan has the following capital gains and losses for 2012: $6,000 STCL,$5,000 28% gain,$2,000 25% gain,and $6,000 0%/15% gain.Which of the following is correct:

Recognized gains and losses must be properly classified.Proper classification depends upon: