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Exam 8: Capital Gains and Losses

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Question 31

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Section 1231 property generally includes certain purchased intangible assets (such as patents and goodwill) that are eligible for amortization and held for more than one year.

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Question 32

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In 2017, an individual taxpayer has $863,000 of taxable income that includes $48,000 of 0%/15%/20% long-term capital gain.Which of the following statements is correct?

A) All of the LTCG will be taxed at 0%.
B) All of the LTCG will be taxed at 15%.
C) All of the LTCG will be taxed at 20%.
D) Some of the LTCG will be taxed at 15% and some at 20%.
E) None of the above.

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Question 33

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The chart below describes the § 1231 assets sold by the Ecru Company (a sole proprietorship) this year.Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year.Assume there is a § 1231 lookback loss of $4,000. $\begin{array} { l c c c c c } \text { Asset } & \text { Acquired } & \text { Sold } & \text { Cost } & \text { Depreciation } & \text { Sale Price } \\\text { Stamping } & 3 / 10 / 13 & 8 / 10 / 17 & \$ 40,000 & \$ 29,736 & \$ 32,000 \\\text { machine } & & & & & \\\begin{array} { l } \text { Factory } \\\text { building }\end{array} & 2 / 12 / 10 & 7 / 23 / 17 & 80,000 & 18,838 & 90,000 \\\text { Tractor } & 5 / 16 / 12 & 11 / 13 / 17 & 52,000 & 52,000 & 30,000 \\\begin{array} { l } \text { Overhead } \\\text { crane }\end{array} & 11 / 12 / 06 & 2 / 25 / 17 & 74,000 & 74,000 & 18,000\end{array}$ ?

If § 1231 asset casualty gains and losses net to a gain, the gain is treated as a § 1231 gain.

Sara is filing as head of household and has 2017 taxable income of $57,000 which includes $3,000 of net long-tem capital gain.The net long-term capital gain is made up of $1,000 25% gain and $2,000 0%/15%/20% gain.What is the tax on her taxable income using the alternative tax method? Note: Use the tax rate schedule rather than the tax table.

A business taxpayer sells inventory for $80,000.The adjusted basis of the property is $58,000 at the time of the sale and the inventory had been held more than one year.The taxpayer has:

Theresa and Oliver, married filing jointly, and both over 65 years of age, have no dependents.Their 2017 income tax facts are: $\begin{array}{lr}\text { Theresa's wages } & \$ 165,000 \\\text { Oliver's wages } & 33,000 \\\text { Shortterm capital gain } & 36,000 \\\text { Longterm capital loss } & (41,000)\end{array}$ What is their taxable income for 2017?

Lana purchased for $1,410 a $2,000 bond when it was issued two years ago.Lana amortized $200 of the original issue discount and then sold the bond for $1,800.Which of the following statements is correct?

Hilda lent $2,000 to a close personal friend to help the friend avoid overdrawing the friend's checking account.The friend was supposed to repay the $2,000 within a month.Instead, the friend declared personal bankruptcy and Hilda will never recover any of the $2,000.What are the tax implications of these events for Hilda?

Section 1231 gain that is treated as long-term capital gain carries from the 2016 Form 4797 to the 2016 Form 1040, Schedule D, line ____.

The chart below details Sheen's 2015, 2016, and 2017 stock transactions.What is the capital loss carryover to 2017 and what is the net capital gain or loss for 2017? $\begin{array} { r r r r r } \text { Tax Year } & \begin{array} { r } \text { Short-term } \\\text { Capital Gains }\end{array} & \begin{array} { r } \text { Short-term } \\\text { Capital Losses }\end{array} & \begin{array} { r } \text { Long-term } \\\text { Capital Gains }\end{array} & \begin{array} { r } \text { Long-term } \\\text { Capital Losses }\end{array} \\2015 & \$ 4,000 & \$ 6,000 & \$ 2,000 & \$ 13,000 \\2016 & \$ 16,000 & \$ 14,000 & \$ 23,000 & \$ 28,000 \\2017 & \$ 55,000 & \$ 52,000 & \$ 67,000 & \$ 33,000\end{array}$

Lynne owns depreciable residential rental real estate which has accumulated depreciation (all from straight-line) of $65,000.If Lynne sold the property, she would have a $53,000 gain.The initial characterization of the gain would be:

Recognized gains and losses from disposition of a capital asset may occur as a result of a:

An individual taxpayer with 2017 net short-term capital loss of $5,000 generally can deduct up to $3,000 for AGI and carry the balance forward to 2018.

Stanley operates a restaurant as a sole proprietorship.Which of the following items are capital assets in the hands of Stanley?

A business taxpayer sells depreciable business property with an adjusted basis of $40,000 for $32,000.The taxpayer held the property for more than a year.The taxpayer has an $8,000 capital loss.

A security that was purchased by an individual and qualifies as § 1244 stock becomes worthless.The taxpayer is single and the loss is $30,000.The loss is treated as an ordinary loss.

Section 1245 applies to amortizable § 197 intangible assets.

Blue Company sold machinery for $45,000 on December 23, 2017.The machinery had been acquired on April 1, 2015, for $69,000 and its adjusted basis was $34,200.The § 1231 gain, § 1245 recapture gain, and § 1231 loss from this transaction are:

Betty, a single taxpayer with no dependents, has the gains and losses shown below.Before considering these transactions, Betty has $45,000 of other taxable income.What is the treatment of the gains and losses and what is Betty's taxable income? $\begin{array}{lr}\S 1245 \text { gain \#1 } & \$ 18,000 \\\S1245 \text { gain \#2 } & 5,000 \\\text { Business equipment long-term casualty loss } & (8,000) \\\text { Business real property long-term casualty gain } & 12,000 \\\S 1231 \text { gain } & 13,000 \\\S 1231 \text { lookback loss } & (2,000)\end{array}$