Multiple Choice Questions
1. Which statement is true regarding short-term capital gains?
a. If there are a net short-term gain and a net long-term gain, both gains are taxed at regular rates.
b. A long-term loss offsets a short-term gain, and if a gain results, the gain is taxed at regular rates.
c. A long-term loss offsets a short-term gain, and if a gain results, the gain is taxed at preferential rates.
d. If there are a net short-term gain and a net long-term gain, both gains are taxed at preferential rates.
2. Which is true regarding long-term capital gains?
a. A net long-term gain can offset a short-term gain but not a short-term loss.
b. A net long-term gain can be taxed at 28%, 25%, 20%, 15% or 0%, depending on the type of gain generated.
c. A net long-term loss can be offset against a long-term gain, and if there is a resulting long-term gain, it is taxed at regular rates.
d. A long-term loss can offset a long-term gain only if the netting result produces a loss of more than $3,000.
3. When there are a net short-term loss and a net long-term loss, which of the following is true?
a. The entire short-term loss is used to reduce other income before the long-term loss can be used to offset other income.
b. A long-term loss is used to reduce other income before the short-term loss.
c. 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 for three years for individual taxpayers.
d. 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.
4. Alton received a Form 1099-B that shows a net sales price of $2,500 on the sale of 600 shares of FNP Company. He bought the stock on October 21, 2013, and sold it on October 22, 2014. His basis in the stock is $1,875, of which $25 is a commission fee. What is the amount and nature of Alton’s gain?
a. $625 short-term gain.
b. $650 short-term gain.
c. $625 long-term gain.
d. $650 long-term gain.
5. Amal received a Form 1099-DIV with a capital gain distribution of $210. She also received a Form 1099-B from the sale of 240 shares of AMS stock she purchased for $2,900 plus a $28 commission fee on February 22, 2013. The net proceeds of the stock sale were $2,700 (the commission fee was $14) and the trade date was February 22, 2014. What are the amount and nature of Amal’s gain (loss) on these transactions?
a. $214 short-term loss and $210 long-term gain.
b. $214 long-term loss and $210 short-term gain.
c. $228 long-term loss and $210 short-term gain.
d. $228 short-term loss and $210 long-term gain.
6. Shannon bought an apartment building in July 2008 for $360,000 and sold it for $480,000 in 2014. There was $77,994 of accumulated depreciation allowed on the apartment building. Assuming that Shannon is in the 33% tax bracket, how much of her gain is taxed at 25%?
a. $0.
b. $42,006.
c. $77,994.
d. $120,000.
7. In 2014 Ann received 1,000 shares of stock as a gift from her husband Tim, who purchased them in 2005. 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 2014, what are the nature and amount of the gain from the sale?
a. $1,834 long-term gain.
b. $3,534 long-term gain.
c. $1,834 short-term gain and $1,700 long-term gain.
d. $1,834 term gain and $1,700 short-term gain.
8. In 2014 Ann received 1,000 shares of stock as a gift from her husband Tim, who purchased them in 2005. 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 2014, what is the nature and amount of the loss from the sale?
a. $2,466 short-term loss.
b. $1,700 long-term loss.
c. $4,166 long-term loss.
d. $2,466 short-term loss and $1,700 long-term loss.