Multiple Choice Questions 1. Jim sells a parcel of land for $70,000 cash and the buyer assumes

Question:

Multiple Choice Questions
1. Jim sells a parcel of land for $70,000 cash and the buyer assumes Jim’s liability of $10,000 on the land. Jim’s basis is $62,000. What is the gain or loss on the sale?
a. $2,000 loss.
b. $2,000 gain.
c. $8,000 gain.
d. $18,000 gain.
2. All of the following statements regarding the definition of basis other than cost are true except
a. The basis for assets received as a gift depends on whether the FMV is greater than, equal to, or less than the donor’s basis at the time of the gift.
b. The basis of property transferred to a taxpayer from a former spouse pursuant to a divorce decree is valued at the FMV at the date of the decree.
c. The basis of inherited property is the FMV at the date of death or alternate valuation date that the personal representative is allowed by law to choose.
d. The basis for property received in exchange for services rendered is the FMV of the property if the FMV of the services is not known beforehand.
3. All of the following expenses increase the basis of stock held for investment except
a. Commission fees on the purchase of the stock.
b. Stock splits.
c. Stock dividends from a reinvestment plan.
d. All of the above increase the basis of stock held for investment.
4. In 2004, Matthew purchased land for $97,000 for use in his business. He sold it in 2014 for $103,000. What are the amount and type of gain on this sale, before netting of any other gains and/or losses?
a. $6,000 short-term capital gain.
b. $6,000 long-term capital gain.
c. $6,000 ordinary income.
d. $6,000 §1231 gain.
5. On May 20, 2013, Jessica purchased land for $103,647 to use in her business. She sold it on May 21, 2014 for $100,595. What are the amount and type of loss on this sale if Jessica does not have any other sales from a trade or business?
a. $3,052 deferred loss.
b. $3,052 long-term capital loss.
c. $3,052 ordinary loss.
d. $3,052 § 1231 loss.
6. Medhat and Nuveen, married filing jointly, have $375,000 in MAGI and $80,000 of net investment income (NII). They will pay a surtax of:
a. $0.
b. $1,710.
c. $2,850.
d. $3,040.
7. In 2004, Duncan purchased 2,000 shares of stock for $50,000 in a mid-size local company with gross assets of $15,000,000. In 2014, Duncan sold the stock for $68,000. How is the gain treated for tax purposes?
a. $18,000 capital gain and taxed at preferential rates.
b. $9,000 excluded from gross income under §1202 and $9,000 taxed at regular rates.
c. $9,000 excluded from gross income under §1202 and $9,000 taxed at 28%.
d. $13,500 excluded from gross income under §1202 and $4,500 taxed at preferential rates.
8. Blair sold the following in 2014: 200 shares of Dearborn Investments purchased May 15, 2013, for $3,050 and sold on January 9, 2014 for $4,135; and 40 shares of State Street Investments, purchased November 7, 2011, for $11,875 and sold on March 29, 2014, for $8,675. What are the pre-net amount and nature of the gain (loss) on the sale of these transactions on Blair’s 1040 return for 2014?
a. $1,085 short-term gain and $3,000 long-term loss.
b. $1,085 short-term gain and $3,200 long-term loss.
c. $1,915 net long-term loss.
d. $2,115 net long-term loss.
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