TB Individual Income ch. 14

TB Individual Income ch. 14 - CHAPTER 14 TRUE/FALSE 1....

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CHAPTER 14 TRUE/FALSE 1. Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property’s adjusted basis at the date of disposition. ANS: T Realized gain or loss is the difference between the amount realized and the property’s adjusted basis. PTS: 1 DIF: 1 REF: p. 14-3 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 2. Molanda sells a parcel of land for $18,000 in cash and the buyer assumes Molanda’s mortgage of $12,000 on the land. Molanda’s amount realized is $30,000. ANS: T The amount realized includes the cash of $18,000 and the mortgage of $12,000 assumed by the buyer. PTS: 1 DIF: 1 REF: p. 14-3 | Example 4 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 3. If Wal-Mart stock increases in value during the tax year by $4,500, the amount realized is a positive $4,500. ANS: F Increases or decreases in the value of an asset during the tax year do not affect the amount realized. PTS: 1 DIF: 1 REF: Example 3 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 4. If the buyer assumes the seller’s liability on the property acquired, the seller’s amount realized is decreased by the amount of the liability assumed. ANS: F The seller’s amount realized is increased by the amount of the liabilities assumed by the buyer. PTS: 1 DIF: 1 REF: Example 4 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 5. The fair market value of property received in a sale or other disposition is the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy. ANS: T PTS: 1 DIF: 1 REF: p. 14-4 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 14-1
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14-2 2010 Annual Edition/Test Bank 6. If a seller assumes the buyer’s liability on the property acquired, the buyer’s adjusted basis for the property is increased by the amount of the liability assumed. ANS: F In this situation, the buyer’s adjusted basis is decreased by the amount of liability assumed. PTS: 1 DIF: 1 REF: p. 14-4 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 7. Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property’s adjusted basis whereas capital expenditures are added to the original basis. ANS: T Only expenditures that are capitalized are added to a property’s adjusted basis. Expenditures for ordinary repairs and maintenance may be deductible in the current tax year if they are for business or income- producing property. PTS: 1 DIF: 1 REF: p. 14-5 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 8. Deductions taken for depreciation or cost recovery on business or income-producing property reduce the adjusted basis of the property. ANS: T
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TB Individual Income ch. 14 - CHAPTER 14 TRUE/FALSE 1....

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