1. (TCO D) How does the Code define a capital asset? (Points : 5) As inventory carried by the taxpayer's business As property used by the taxpayer in his/her business, which is depreciable As intangible property owned by the taxpayer, regardless of whether used in his/her business or not The Code does not define what a capital asset is, only what it is not. 2. (TCO H) Gary and Tracy file a joint return for the 2012 tax year. Their adjusted gross income is $65,000. They had net investment income of $9,000. In 2012, they had the following interest expenses: ? Personal credit card interest: $3,000 ? Home mortgage interest: $8,000 ? Interest paid on qualified education loans: $2,000 Investment interest (on loans used to buy stocks): $10,000 3. (TCO I) Carl had the following transactions for 2012: Salary: $55,000 Damage award (compensatory) for city bus accident: $20,000 Loss on sale of stock investment: $4,500 Loan from father to purchase auto: $10,000 Alimony paid to ex-wife: $11,000 What is Carl's AGI for 2012? (Points : 17) 4. (TCO H) On May 18, 2012, Sara purchased 30 shares of ABC stock for $210, and on October 29, 2012, she purchased 90 additional shares for $900. On November 28, 2012, she sold 48 shares, which could not be specifically identified, for $576, and on December 8, 2012, she sold another 25 shares for $150. What is her recognized gain or loss? (Points : 17)

1. (TCO D) How does the Code define a capital asset? (Points : 5) As inventory carried by the taxpayer's business As property used by the taxpayer in his/her business, which is depreciable As intangible property owned by the taxpayer, regardless of whether used in his/her business or not The Code does not define what a capital asset is, only what it is not. 2. (TCO H) Gary and Tracy file a joint return for the 2012 tax year. Their adjusted gross income is $65,000. They had net investment income of $9,000. In 2012, they had the following interest expenses: Personal credit card interest: $3,000 Home mortgage interest: $8,000 Interest paid on qualified education loans: $2,000 Investment interest (on loans used to buy stocks): $10,000 3. (TCO I) Carl had the following transactions for 2012: Salary: $55,000 Damage award (compensatory) for city bus accident: $20,000 Loss on sale of stock investment: $4,500 Loan from father to purchase auto: $10,000 Alimony paid to ex-wife: $11,000 What is Carl's AGI for 2012? (Points : 17) 4. (TCO H) On May 18, 2012, Sara purchased 30 shares of ABC stock for $210, and on October 29, 2012, she purchased 90 additional shares for $900. On November 28, 2012, she sold 48 shares, which could not be specifically identified, for $576, and on December 8, 2012, she sold another 25 shares for $150. What is her recognized gain or loss? (Points : 17)