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business building held ve years ($ 5,000) Loss on sale of machinery held three years ($4,000) Realized gain on sale of machinery held four years; $9,000 depreciation taken was $3,000 Net short-term capital loss ($1,500) Linda had adjusted gross income of $45,000 and $6,000 itemized deductions without the above items. (a.) What is Linda s taxable income for 2009? (b.) Assuming the same facts as given above except that Linda had a casualty gain of $2,000 on the business building held ve years rather than a casualty loss of $5,000, what is Linda s taxable income for 2009? Chapter 12 2009 CCH. All Rights Reserved. Testbank 701 ANSWERS TO TRUE-FALSE QUESTIONS CHAPTER 12 1. 2. 3. 4. 5. 6. 7. False. The general rule for the holding period of property is that the day the property was acquired is excluded and the date of disposition is included. False. If the donor s basis is used, the holding period includes the donor s holding period. False. Depreciable property used in a trade or business is speci cally excluded from the de nition of capital asset. True. The items listed are not excluded from capital assets. False. Real property used in a trade or business is speci cally excluded from the capital asset de nition. False. If substantially all rights are transferred, the transaction is treated as a sale and not a de nition. True. The holding period for property received in an exchange includes the holding
period of the property exchanged if the property received has the same basis in whole or in part as the property exchanged. The basis of the acquired gem is the same as the basis of the gem exchanged. Therefore, the gain or loss is long-term because the total holding period exceeded 12 months. False. Since Jim led a joint return, all of the $75,000 loss is ordinary. On a joint return, up to $100,000 may be taken as an ordinary loss deduction on Section 1244 stock. True. To loss deduction on the sale of Section 1244 stock issued to such individual. False. Only unused capital loss forward. True. False. Securities held by a brokerage rm are inventory. True.