3. Little Company purchased a $2,000 computer for use in its main office. This asset that is depreciated over 5 years for federal tax purposes. For five year assets, first year depreciation is 20%, second year depreciation is 32%, and third year depreciation is 19.2%. The computer was sold during the third year. At the time of sale, the adjusted basis would be

a. $1,000.

b. $800.

c. $768.

d. $576.

NEW

4. Robert, who is single, recently sold his home in 2015 for $375,000. He has lived there since he bought the house in 1990 for $100,000. How should this transaction be reported on his tax return?

a. He will report an ordinary gain of $275,000.

b. He will report a long term capital gain of $275,000.

c. He will report a long term capital gain of $25,000.

d. This transaction does not have to be reported because it involves the sale of his residence.

NEW

7. For federal tax purposes, real property is depreciated using the ______________ convention.

a. mid-month

b. mid-quarter

c. half-year

d. whole-year