13 Jan Casualty netting, § 1231

Question 1. Question :

(TCO 6) James is a dealer in securities. He would like to acquire and hold stock as a capital asset, then sell it to get a capital gain or loss. Which of the statements below is correct?

Because he is a dealer, he cannot hold stock as a capital asset.

Because he is a dealer, all the stock he acquires is a capital asset.

Losses are capital losses if, at any time, the stock has been clearly identified by James as held for investment.

If James clearly identifies the stock as held for investment by the close of business on the acquisition date, then gain from the stock’s sale will be capital gain.

C and D

Question 2. Question :

(TCO 6) Which of the statements below concerning sports franchises (e.g., the Detroit Tigers) is correct?

Sports franchises are subject to the franchise rules of § 1253.

Player contracts are usually one of the major assets acquired with a sports franchise.

Player contracts are amortizable over 15 years.

All of the above

None of the above

Question 3. Question :

(TCO 6) On August 10, 20X2, Black Inc. acquired an office building as a result of a like-kind exchange. Black had given up a factory building that it had owned for 18 months as part of the like-kind exchange. Which of the statements below is correct?

The holding period of the office building does not include the holding period of the factory building.

The holding period of the factory building starts on August 11, 20X2.

The holding period of the factory building starts on August 10, 20X2.

The holding period of the office building includes the holding period of the factory building.

None of the above

Question 4. Question :

(TCO 6) A business building owned by an individual is destroyed by fire. The building was depreciated using straight-line depreciation. The building was insured, and the insurance proceeds exceeded the building’s adjusted basis. The building was not replaced. The insurance proceeds did not exceed the original cost of the building. The gain from disposition of the building is initially _____.

casualty gain

casualty loss

Section 1231 gain

Section 1250 gain

None of the above

Question 5. Question :

(TCO 11) Julia purchased vacant land in 20X1 that she subdivided for resale as lots. All 10 of the lots were sold during 20X2. 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?

Julia must hold the lots for at least 5 years before she is eligible for the special capital gain treatment of 1237.

Some of the gain from the sale of the 10 lots is long-term capital gain.

All of the gain from the sale of the 10 lots is long-term capital gain.

To be eligible for the special capital gain treatment of § 1237, Julia must be a real estate dealer.

None of the above

Question 6. Question :

(TCO 11) Ryan has the following capital gains and losses for 20X2: $3,000 STCL, $3,000 at 28% gain, $2,000 at 25% gain, and $6,000 at 0% / 15% gain. Which of the following is correct?

The net capital gain is composed of $2,000 at 25% gain and $6,000 at 0% / 15% gain.

The net capital gain is composed of $2,000 at 28% gain and $6,000 at 0% / 15% gain.

The net capital gain is composed of $3,000 at 28% gain, $2,000 at 25% gain, and $3,000 of 0% / 15% gain.

The net capital gain is composed of $1,000 at 25% gain and $7,000 at 0% / 15% gain.

None of the above

Question 7. Question :

(TCO 11) For 20X2, Ryan (a single person) has $35,000 net capital gain (all 0% / 15% gain). His taxable income is $185,000. Which of the following is correct?

The net capital gain will be subject to special tax treatment.

Ryan’s taxable income without the net capital gain will be taxed at greater than 25%.

The tax rate on the net capital gain cannot exceed 15%.

All of the above

None of the above

Question 8. Question :

(TCO 11) An individual had the following gains and losses during 20X2 on property held for the long-term holding period: sale of Orange common stock ($3,000 gain), sale of real property used in the taxpayer’s business ($1,800 loss), and destruction of real property used in the taxpayer’s business by fire ($1,000 loss). Which of the following is correct?

The fire loss would reduce the real property sale loss.

The fire loss would reduce the stock sale gain.

The sale of real property loss would be netted against the stock sale gain.

The sale of real property is a § 1231 loss.

None of the above

Question 9. Question :

(TCO 11) An individual has a $10,000 § 1245 gain, a $15,000 § 1231 gain, a $13,000 § 1231 loss, a $4,000 § 1231 look-back loss, and a $15,000 long-term capital gain. The net long-term capital gain is _____.

$30,000

$40,000

$17,000

$15,000

None of the above

Question 10. Question :

(TCO 11) What is the proper series of steps in Section 1231 computation?

§ 1231 netting, casualty netting, and lookback provisions

Casualty netting, § 1231 netting, and lookback provisions

Lookback provisions, § 1231 netting, and casualty netting

§ 1231 netting, lookback provisions, and casualty netting

Casualty netting, lookback provisions, and § 1231 netting