Question 39

2.5 Points

Which of the following gains does not result solely in an ordinary gain or loss?

A. Sale of equipment where the accumulated depreciation exceeds the gain realized.

B. Sale of equipment where the gain realized exceeds the accumulated depreciation.

C. Sale of inventory.

D. Sale of equipment held for less than a year.

E. None of the choices are correct.

Question 40

2.5 Points

Which of the following statements regarding home-related transactions is correct?

A. If a taxpayer converts a rental home to a principal residence, the taxpayer's basis in the principal residence is the greater of the basis of the home at the time of the conversion or the fair market value at the time of the conversion.

B. If a taxpayer uses a residence as a rental property (and deducts depreciation expense against the basis of the property) and as a personal residence the taxpayer will not be allowed to exclude the entire amount of gain even if the taxpayer otherwise meets the ownership and use tests and the amount of the gain is less than the limit on excludable gain.

C. If a taxpayer converts a home from personal use to rental use, the basis of the rental property is the greater of the basis of the property at the time of the conversion or the fair market value of the property at the time of the conversion.

D. None of these statements are correct.