1) At what point do you calculate the gain/loss on an asset for tax purposes?

A.. Every year you must report your unrealized and realized gain/losses on your tax return.

B. Only in the year the asset is sold.

C. At any time the asset's fair market value changes.

D. Only when the IRS asks for it.

2) What is the formula for calculating a Gain or Loss from the sale of an asset?

A. Basis of Cash or Property Received less Fair Market Value of Asset sold = Gain/(Loss)

B. Amount Realized less Historical Original Unadjusted Basis = Gain/(Loss)

C. Cash Received less Adjusted Basis = Gain/(Loss)

D. Amount Realized less Adjusted Basis = Gain/(Loss)

3) Which of the following is not included in "Amount Realized" as discussed in the lecture?

A. Future verbal promises to pay for the item

B. Amount received by the seller from the buyer

C. Cash

D. Fair Market Value of Property

E. Seller debt assumed by buyer

4) Which best describes "adjusted basis" ?

A. How much was paid for the asset on the day it was originally purchased, ignoring any depreciation or improvements made to the asset.

B. How much was paid for the asset on the day it was originally purchased, adjusted for any depreciation or improvements made to the asset.

C. The value assigned to the asset by the IRS on the date of sale.

D. Fair market value on date of sale.

5) Ordinary income or gain is produced by an activity in which the taxpayer materially and actively participates. The tax rates that apply are Ordinary rates and possibly employment taxes.

True

False

6) Which does NOT describe the At Risk amount as discussed in the lecture?

A. Taxpayer's pledged assets only

B. Taxpayers net economic investment in the business

C. Limit to which taxpayer may use losses generated by the acivity

D. Sum of all assets contributed to the business less all assets withdrawn from the business.

7) Which of the following will increase a taxpayer's amount at risk?

A. Owner Contributions of cash to the business

B. Owner Withdrawals of cash to the business

C. Owner paydown of recourse debt

D. Losses incurred by the business

8) Sherri owns an interest in a business that is an ordinary active activity and in which she has $20,000 at risk and materially participates. If the business incurs a $32,000 loss from operations during the year, this loss will be fully deductible.

True

False

9) In the current year, Rich has a $40,000 loss from a business he owns. His at-risk amount at the end of the year, prior to considering the current year loss, is $24,000. He will be allowed to deduct the $40,000 loss this year if he is a material participant in the business.

True

False

10) Generally, capital assets are assets held for investment or personal purposes.

True

False

11) Capital losses must be seperated into Short Term and Long Term categories.

True

False

12) Gains from the sale of long term capital assets are subject to a higher tax rate that the gains on Short Term capital assets.

True

False

13) Gains from the sale of short term assets are not taxed at a preferential rate.

True

False

14) Which of the following is a capital asset?

A. Inventory held by a manufacturer

B. Accounts receivable held by a dentist

C. All property owned by a taxpayer other than property specifically noted in the law as an exception

D. Depreciable property and real estate used in a trade or business

15) Which of the following is a capital asset?

A. A literary work held by the author

B. Real estate held by a developer

C. A taxpayer's personal automobile

D. A truck used in a taxpayer's business

E. None of the above

16) An artist's painting is not a capital asset when held by the artist.

True

False

17) Martha has a net capital loss of $20,000 and other ordinary taxable income of $45,000 for the current year. What is the amount of Martha's capital loss carryforward?

A. $0

B. $10,000

C. $14,000

D. $17,000

E. None of the above

18)

For the year 20X1, Susan had salary income of $19,000. In addition she reported the following capital transactions during the year:

Long-term capital gain	$7,000
Short-term capital gain	3,000
Long-term capital loss	-2,000
Short-term capital loss	-4,000

There were no other items includable in her gross income. What is the amount of her income for 20X1 after considering allowable capital losses?

Group of answer choices

$19,000

$21,400

$23,000

$26,000

None of the above