Final Exam > Results Page
final exam score:
85%
Question 1
Incorrect
Which of the following transactions do not qualify as a Code Sec. 1035 exchange?
(Correct Answer) Annuity contract for a life insurance contract
Life insurance contract for another life insurance contract
Life insurance contract for an annuity contract
Life insurance contract for an endowment contract
Question 2
Correct
All of the following statements with regard to like-kind exchanges are correct except:
An exchange of an apartment house for a factory can qualify as a like-kind exchange.
Foreign realty can never be treated as like-kind property.
In an otherwise qualifying like-kind exchange, gain is generally recognized to the extent of “boot” received by the taxpayer.
(You Answered) (Correct Answer) For transfers to qualify as like-kind exchanges, the exchange must be completed within 45 days.
Question 3
Correct
Which of the following is a requirement for the $250,000/$500,000 exclusion on sale of residence (assume the home was not acquired in a tax-free exchange)?
The taxpayer must be age 55 or older.
(You Answered) (Correct Answer) The taxpayer must have owned and occupied the residence as a principal residence for at least two of the five years before the sale (unless the taxpayer is eligible to suspend the five-year period).
The taxpayer must not have previously claimed any home sale exclusion.
The taxpayer’s modified adjusted gross income must be below a set level.
Question 4
Incorrect
John Anderson, who is single, bought his home on May 1, 2011. On May 1, 2012, he sold his home because his employer relocated him across the country. Assume his gain is $20,000. He may exclude:
(You Answered) $0
$10,000
(Correct Answer) $20,000
None of the above
Question 5
Correct
A married individual has owned a home in her name since 2006. Both she and her husband have lived in the home since the day she bought it. She bought the home for $150,000 and sold it in 2012 for a profit of $600,000. What is her maximum home sale exclusion?
$150,000
$250,000
(You Answered) (Correct Answer) $500,000
$600,000
Question 6
Correct
In 2012, a surviving spouse sells the residence that she and her deceased husband owned and lived in since 1993. Her husband died in 2011. Gain on the sale was $300,000. How much of the gain can she exclude?
$0
$250,000
(You Answered) (Correct Answer) $300,000
$500,000
Question 7
Correct
The basis of a primary residence can be increased by each of the following except:
Waterproofing the basement
Installing new countertops in the kitchen
(You Answered) (Correct Answer) Painting the exterior
Installing solar panels
Question 8
Correct
A home owner, who is single, used one bedroom in his residence as a home office for the past five years. Assume he owned the home for this period as well. Which of the following statements is correct?
He can exclude all of his gain on the sale of the home up to $250,000 and need not report any depreciation on the home office.
He must apportion the gain between the residence and the home office, reporting gain with respect to the home office.
He cannot exclude any gain because of the business use of the home office.
(You Answered) (Correct Answer) He can exclude his gain on the sale of the home up to $250,000 but must report any depreciation on the home office, which is taxed at 25%.
Question 9
Correct
Henry Davidson started using a room in his home as an office in 2007, using 10% of the space in his home for business. He has claimed a total of $2,000 depreciation for the portion of his residence used as a home office. If he sells his home in 2012 at a gain of $80,000, which amount is taxed at 25%?
$0
(You Answered) (Correct Answer) $2,000
$8,000
$78,000
Question 10
Correct
A business’s building in New Jersey is destroyed by flooding, and the owner receives an insurance recovery. Assume that the business has a gain from this involuntary conversion. What is the replacement period for postponing gain?
One year
Two years
(You Answered) (Correct Answer) Three years
Five years
Question 11
Incorrect
The basis of property received for services performed is equal to the:
Cost of the services provided
(Correct Answer) Fair market value of the property
Cost of the property
Lower-of-cost-or-market price of the property
Question 12
Incorrect
Which of the following will affect the basis of property?
(You Answered) Depreciation
Boot paid for property acquired in an exchange
Unrecognized gains on involuntary conversions
(Correct Answer) All of the above
Question 13
Correct
Harriet Nichols purchased a painting for $50 40 years ago at a tag sale. She died in 2012, leaving the painting to her niece. The value of the painting on the date of her death was $5,000, and this value was reported on Harriet’s state estate tax return (assume her total estate was $500,000). Eight months later, the artist died, increasing the value of his works. The niece sold the painting at auction 10 months after Harriet’s death for $12,000. For purposes of determining gain or loss, the niece’s basis in the painting is:
$40
$50
(You Answered) (Correct Answer) $5,000
$12,000
Question 14
Correct
Which of the following is true as to net long-term capital gain in 2012?
For taxpayers in the 10% or 15% bracket, the rate on net long-term capital gains is 5% for sales.
For taxpayers in high-income taxpayers, the rate is 20%.
Corporations are eligible for the special rates.
(You Answered) (Correct Answer) For taxpayers in the 10% or 15% bracket, there is no tax on net long-term capital gains for sales.
Question 15
Incorrect
Which of the following is true as to long-term capital gain?
(Correct Answer) The 15% rate applies to installment payments received in 2012, on installment sales made before May 6, 2003.
The 15% rate has been made permanent for long-term capital gains.
The 15% rate applies to all sales or exchanges made in 2012, even sales of collectibles and unrecaptured depreciation.
(You Answered) The 15% rate applies as well to short-term capital gains of all taxpayers.
Question 16
Correct
Daniel Baxter purchased a building for $150,000, has a basis of $40,000 after several years of straight-line depreciation (totaling $110,000), and sells the building in August 2012 for $175,000. Gain is taxed in the following manner:
$135,000 at 15%
(You Answered) (Correct Answer) $110,000 at 25% and $25,000 at 15%
$135,000 at 20%
$135,000 at 25%
Question 17
Correct
In 2012, a taxpayer sells Section 1202 stock that had been issued nine years ago. What is the exclusion percentage?
28%
(You Answered) (Correct Answer) 50%
75%
100%
Question 18
Correct
All of the following statements are correct except:
(You Answered) (Correct Answer) When a taxpayer carries over any capital loss, its character will be long-term.
If the total of a taxpayer’s capital gains is more than the total of capital losses, the excess is taxable.
The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately.
The yearly limit on the amount of the capital loss a taxpayer can deduct in excess of capital gains is $3,000 ($1,500 if married filing separately).
Question 19
Correct
Vince Maxwell, who is in the 28% tax bracket, sold 10 shares of X stock for a gain on June 30, 2012. He had purchased the stock on April 12, 2011. The gain is taxed at:
(You Answered) (Correct Answer) 15%
20%
25%
28%
Question 20
Correct
Capital losses in excess of capital gains (after offsetting up to $3,000 of ordinary income) can be carried forward:
One year
Two years
Five years
(You Answered) (Correct Answer) Indefinitely