TB Individual Income ch. 16

TB Individual Income ch. 16 - CHAPTER 16 TRUE/FALSE 1 The...

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CHAPTER 16 TRUE/FALSE 1. The tax law requires that capital gains and losses be separated from other types of gains and losses because an alternative tax calculation may be used when taxable income includes net long-term capital gain. ANS: T PTS: 1 DIF: 1 REF: p. 16-3 OBJ: 1 NAT: AICPA FN-Reporting | AACSB Analytic MSC: 2 min 2. The tax law requires that capital gains and losses be separated from other types of gains and losses because there are limitations on the deduction of net capital losses. ANS: T PTS: 1 DIF: 1 REF: p. 16-3 OBJ: 1 NAT: AICPA FN-Reporting | AACSB Analytic MSC: 2 min 3. If a capital asset is sold at a loss, the holding period is not important. ANS: F The holding period (short term or long term) is required to determine whether a short-term or long-term capital loss has occurred. PTS: 1 DIF: 1 REF: p. 16-3 | p. 16-20 to 16-22 OBJ: 2 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 4. An accrual basis taxpayer accepts a note receivable from a retail customer with a weak credit rating. The taxpayer immediately sells the note to a bank for less than the note’s stated value. The taxpayer has a short-term capital loss. ANS: F Since the note receivable was received in the normal course of the taxpayer’s business from the sale of inventory, it is not a capital asset. The loss from the disposition of the note is an ordinary loss. PTS: 1 DIF: 1 REF: p. 16-4 OBJ: 2 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 5. A university professor writes a mystery novel and publishes it at his own expense. Several years later, a national publishing company buys the copyright to the book for $345,000. The professor has a zero tax basis for the copyright. The professor has a long-term capital gain of $345,000. ANS: F Since the professor created the copyright work, it is not a capital asset. The gain is ordinary. PTS: 1 DIF: 1 REF: p. 16-5 OBJ: 2 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 16-1
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16-2 2010 Annual Edition/Test Bank 6. An individual taxpayer has a copy of a 1969 tax form that was mailed to him for free by the IRS. He puts the form up for sale on an Internet auction site and sells if for $35. The taxpayer has an ordinary gain of $35. ANS: F The tax form is a capital asset. PTS: 1 DIF: 1 REF: p. 16-6 OBJ: 2 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 2 min 7. Often the crux of the capital asset determination hinges on whether the asset is held for investment purposes (capital asset) or business purposes (ordinary asset). ANS: T PTS: 1 DIF: 1 REF: p. 16-6 OBJ: 2 NAT: AICPA FN-Reporting | AACSB Analytic MSC: 2 min 8. Section 1237 allows certain professional real estate developers capital gain treatment if they engage only in limited development activities. ANS: F
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This note was uploaded on 03/06/2011 for the course ECON 435 taught by Professor Galven during the Spring '11 term at Ill. Chicago.

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TB Individual Income ch. 16 - CHAPTER 16 TRUE/FALSE 1 The...

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