ch 14 practice test

ch 14 practice test - ch 14 practice test Multiple Choice...

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ch 14 practice test Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. The tax law requires that capital gains and losses be separated from other types of gains and losses. Among the reasons for this treatment are: a. Long-term capital gains may be taxed at a lower rate than ordinary gains. b. Capital losses that are short term are not deductible. c. Net capital loss is deductible only up to $3,000 per year for individual taxpayers. d. a. and c. e. None of the above. ____ 2. Monty is in the business of song writing. He writes jingles for television advertisements. He writes a jingle and sells it for a lump sum plus a royalty each time the jingle is played on TV. He has: a. Sold a capital asset. b. Sold an ordinary asset. c. No gain or loss. d. An ordinary gain. e. b. and d. ____ 3. Julia purchased vacant land in 2009 that she subdivided for resale as lots. All 10 of the lots were sold during 2010. The lots had a tax basis of $3,000 each and sold for $45,000 each. Julia made no substantial improvements to the lots. She acted as her own real estate broker; so there were no sales expenses for selling the lots. Which of the following statements is correct ? a. Julia must hold the lots for at least five years before she is eligible for the special capital gain treatment of § 1237. b. Some of the gain from the sale of the ten lots is long-term capital gain. c. All of the gain from the sale of the ten lots is long-term capital gain. d. To be eligible for the special capital gain treatment of § 1237, Julia must be a real estate dealer. e. None of the above. ____ 4. Sylvia purchased for $1,610 a $2,000 bond when it was issued two years ago. Sylvia amortized $200 of the original issue discount and then sold the bond for $1,800. Which of the following statements is correct ? a. Sylvia has $10 of long-term capital loss. b. Sylvia has $190 of long-term capital gain. c. Sylvia has no capital gain or loss. d. Sylvia has $190 of long-term capital loss. e. None of the above. ____ 5. A lessor is paid $45,000 by its commercial tenant as a lease cancellation fee. The tenant wanted to get out of its lease so it could move to a different building. The lessor had held the lease for three years before it was canceled. The lessor had a zero tax basis for the lease. The lessor has received: a. Ordinary income of $45,000. b. Long-term capital gain of $45,000. c. Short-term capital gain of $45,000. d. Neither gain nor loss. e. None of the above.
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____ 6. Magenta, Inc. sold a forklift on February 12, 2010, for $3,000 (its FMV) to its 100% shareholder, Anise. Magenta’s adjusted basis for the forklift was $7,000. Anise’s holding period for the forklift: a. Includes Magenta’s holding period for the forklift. b.
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This note was uploaded on 02/01/2011 for the course ACCT 401 taught by Professor Savage,g during the Fall '08 term at Winthrop.

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ch 14 practice test - ch 14 practice test Multiple Choice...

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