12. 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

13. Sol purchased land as an investment on January 12, 2005 for $85,000. On January 31, 2015, Sol sold the land for $60,000 cash. What is the nature of the gain or loss?

a.

Long-term capital loss

b.

Long-term capital gain

c.

Short-term capital gain

d.

Short-term capital loss

e.

None of the above

14. Sol purchased land as an investment on January 12, 2005 for $85,000. On January 31, 2015, Sol sold the land for $20,000 cash. In addition, the purchaser assumed the mortgage of $70,000 on the land. What is the amount of the realized gain or loss on the sale?

a.

$65,000 loss

b.

$15,000 loss

c.

$5,000 gain

d.

$90,000 gain

e.

None of the above

15. An assets adjusted basis is computed as:

a.

Original basis + capital improvements - accumulated depreciation.

b.

Original basis - capital improvements + accumulated depreciation.

c.

Original basis + capital improvements + accumulated depreciation.

d.

Original basis + capital improvements + gain or loss realized.

e.

None of the above.

16. For the year 2015, 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 adjusted gross income for 2015?

a.

$19,000

b.

$21,400

c.

$23,000

d.

$26,000

e.

None of the above

17. Robert and Becca are in the 25 percent tax bracket. They have a long-term capital gain of $27,000 and a long-term capital loss of $18,000 on sales of stock in 2015. What will their capital gains tax be in 2015?

a.

$4,050

b.

$6,750

c.

$1,350

d.

$9,000

e.

None of the above is correct

18. Which of the following assets is not a Section 1231 asset?

a.

Equipment used in a business

b.

The unharvested crops of a farmer

c.

Timber

d.

Inventory

e.

All of the above are Section 1231 assets

19. On December 31, 2015, Henry, a sole proprietor, sold for $65,000 a machine that was used in his business. The machine had been purchased in 2005 for $50,000, and when it was sold, it had accumulated depreciation of $20,000 and an adjusted basis of $30,000. For the year 2015, how should this gain be treated?

a.

Ordinary income of $35,000

b.

Section 1231 gain of $35,000

c.

Section 1231 gain of $20,000 and ordinary income of $15,000

d.

Section 1231 gain of $15,000 and ordinary income of $20,000

e.

None of the above

20. In 2015, Tim sells Section 1245 property for $28,000 that he had purchased in 2008. Tim has claimed $5,000 in depreciation on the property and originally purchased it for $15,000. How much of the gain is taxable as ordinary income?

a.

$5,000

b.

$8,000

c.

$18,000

d.

$13,000

e.

None of the above is correct

21. Terry has a casualty gain of $1,000 and a casualty loss of $5,400, before the $100 floor and before the adjusted gross income limitation. The gain and loss were the result of two separate casualties occurring during 2015 and both properties were personal-use assets. If Terry itemizes deductions on her 2015 return and has adjusted gross income of $25,000, what is Terrys gain or net itemized deduction as a result of these casualties?

a.

$5,300 itemized deduction, $1,000 capital gain

b.

$4,300 itemized deduction

c.

$1,800 itemized deduction

d.

$2,800 itemized deduction, $1,000 capital gain

e.

None of the above

22. In January 2015, Keyaki Construction Company exchanged an old truck, which cost $54,000 and had accumulated depreciation of $18,000, for a new truck having a fair market value of $65,000. In connection with the exchange, Keyaki paid $35,000 in cash. What is the tax basis of the new truck?

a.

$54,000

b.

$65,000

c.

$71,000

d.

$89,000

e.

None of the above

23. On August 8, 2015, Sam, single, age 62, sold for $210,000 his principal residence, which he has lived in for 10 years, and which had an adjusted basis of $60,000. On November 1, 2015, he purchased a new residence for $80,000. For 2015, Sam should recognize a gain on the sale of his residence of:

a.

$0

b.

$25,000

c.

$50,000

d.

$130,000

e.

None of the above