4422_Exam_2_Practice_Problem Set

4422_Exam_2_Practice_Problem Set - HA 4422 Exam 2 Practice...

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HA 4422 Exam 2 Practice Questions Chapter 9 7. Brad, an engineering consultant, was given $2,000 of stock for services rendered. His basis in the stock he received for the services is $2,000 since he will have to recognize income equal to the fair market value of the stock. 9. Taxpayers who construct property for their own use must capitalize both the direct and indirect construction costs. 13. The split basis rules for business property prevents the deduction of the disallowed personal loss through depreciation or a loss from the sale of business property. MULTIPLE CHOICE 11. David pays $35,000 cash and issues a mortgage note for $95,000 to purchase land. He pays $750 to his attorney for reviewing the purchase agreement. David's initial basis in the land is a. $ - 0 - b. $ 35,000 c. $ 35,750 d. $130,000 e. $130,750 17. Buffey operates a delivery service. She purchased a van in 2006 for $25,000, and she sold it in 2008 for $15,000. Buffey did not deduct any depreciation on the van from 2006 through 2008, although total allowable depreciation on the van would have been $17,000. What is the amount of Buffey 's recognized gain or loss on the sale of the van? a. $10,000 loss b. $ 7,000 gain c. $ 8,000 gain d. $15,000 gain e. $17,000 gain 18. Matt, an attorney, performs 5 hours of legal work for Andy. Matt 's normal billing rate is $120 per hour. Andy, a software consultant, gives Matt a new computer for his office in payment of the bill. The computer's adjusted basis was $550 and its fair market value is $750. Matt 's basis in the computer is a. $ - 0 - b. $ 550 c. $ 600 d. $ 750 e. $1,300
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24.John purchases all of the common stock of Clarke Corporation for $280,000. The assets of the corporation are: Asset Adjusted Basis Fair Market Value Inventory $ 25,000 $ 50,000 Equipment 60,000 40,000 Supplies 20,000 20,000 Building 80,000 95,000 Land 10,000 20,000 $195,000 $225,000 What is John's basis in the common stock he acquired? a. $195,000 b. $215,000 c. $225,000 d. $250,000 e. $280,000 27. James receives a gift of rare books valued at $10,000. The books have an adjusted basis of $6,000 to the donor. No gift tax was paid on the transfer. Several months later, James sells the books to a professional collector for $9,000. What is James 's gain or (loss) on the sale? a. $1,000 gain b. $3,000 gain c. $4,000 gain d. $1,000 loss e. $3,000 loss 30. Sarah purchased a diamond bracelet for $3,000 while vacationing in Hong Kong during 1997. Sarah gives the bracelet to her daughter Amy when she graduates from college in 2008. The bracelet is appraised at $8,000 on that date. No gift tax liability was incurred. In October 2008, Amy sells the bracelet for $9,000. What is the amount of gain Amy should recognize on the sale? a.
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4422_Exam_2_Practice_Problem Set - HA 4422 Exam 2 Practice...

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