QUESTION 1 Nontaxable exchanges may be subject to alternative minimum tax. True False QUESTION 2 The amount of gain or loss realized by a taxpayer when they sell, exchange, or othenNise dispose of property equals the: A. sales price minus selling expenses. B. sales price minus the cost of the property. C. fair market value ofthe property minus the book value ofthe property. D. discounted sales price. QUESTION 3 The basis of a property is the term used to describe: A. the fair market value of a property. B. a taxpayer's investment in property. QUESTION 4 Capital additions to a property include the cost of improvements whether they increase the value of a property or not. True False QUESTION 5 When property is damaged in a casualty, taxpayers reduce their basis in the property by: A. amounts they estimate the value of the property has diminished. B. amounts they owe on the property. C. amounts they receive from the insurance company. D. amounts they expect to write off on their taxes. QUESTION 6 The initial basis of purchased property is: A. its fair market value. B. its taxable value. C. its book value. D. its cost (what the taxpayer gives up to buy the property). QUESTION 7 Taxpayers can acquire property through other means than just purchasing the property, such as through gifts. inheritances, and divorce settlements. True False QUESTION 8 When a person dies, an executor is assigned to distribute the decedent's property, otherwise known as the person's estate. True False QUESTION 9 Recognized gains and losses are realized gains and losses taxpayers: A. avoid reporting on their tax returns. O B. report on their tax returns. C. are not required to report on their tax returns. O D. only consider the gains and losses for accounting purposes only. QUESTION 10 Two sets of rules apply to property received as a gift. O True O False QUESTION 11 When like-kind exchanges occur, a realized gain or loss results from the difference between the fair market value (FMV) of the property received and the adjusted basis of the property given up. O True FalseQUESTION 12 The term to describe sales and repurchases when a taxpayer sells securities and repurchases "substantially identical" securities that occur within 30 days before or 30 days after the sale are called: A. bargain purchases. B. wash sales. C. relatedparty sales. D.discounted sales. QUESTION 13 For tax purposes, individuals and their family members are never considered to be related parties. True False QUESTION 14 Four conditions must be met for a property to qualify as like-kind property. True QUESTION 15 Related parties can use the likekind exchange rules unless either related party disposes ofthe likekind property within two years after the exchange. If this occurs: A. gains or losses on the disposed property are not required to be recognized for tax purposes. B. gains, but not losses, must be recognized in the year the property was disposed of. C. any postponed gain or loss must be recognized in the year the property was exchanged. D. any postponed gain or loss must be recognized in the year the property was disposed of. QUESTION 16 Married couples that sell their principal residence and file a joint return can exclude a gain on the sale up to: A. $250,000. B. $100,000. C. $500,000. D. $650,000. QUE: I IUI' II The most common involuntary conversions are: A. casualties, thefts, and condemnations. B. securities are converted to real property. C. creditors demand a company's assets be liquidated. D. likekind exchanges when the property exchanged is used for purposes it was not originally designed for. QUESTION 13 Taxpayers realize a casualty or theft loss when the amount of the loss exceeds the amount they are reimbursed by insurance. True False QUESTION 19 Taxpayers realizing a gain from an involuntary conversion must report the gain regardless of what they do with the converted property. True False