1. All of the following assets are capital assets, except:
a. A personal automobile
b. IBM stock
c. Business inventory
d. Personal furniture
e. An individual’s stamp collection
2. Which of the following is a capital asset?
a. Account receivable
b. Copyright created by the taxpayer
c. Copyright (held by the writer)
d. Business inventory
e. A taxpayer’s residence
3. Bob sells a stock investment for $45,000 cash, and the purchaser assumes Bob’s $32,500 debt on the investment. The basis of Bob’s stock investment is $55,000. What is the gain or loss realized on the sale?
a. $10,000 loss
b. $10,000 gain
c. $12,500 gain
d. $22,500 loss
e. $22,500 gain
4. In 2014, the top tax rates are percent on individual long-term capital gains on sale of stock, and percent on capital gains on sales of collectible items, assuming the ACA Medicare surtax does not apply.
a. 10; 20
b. 15; 25
c. 20; 28
d. 25; 28
5. In November 2014, Ben and Betty (married, filing jointly) have a long-term capital gain of $50,000 on the sale of stock. They have no other capital gains and losses for the year. Their ordinary income for the year after the standard deduction and personal exemptions is $72,500, making their total taxable income for the year $122,500 ($72,500 1 $50,000). In 2014, married taxpayers pay 10 percent on taxable income up to $18,150, 15 percent on the next $55,650, and 25 percent on the next $75,050 of taxable income. What will be their 2014 total tax liability assuming a tax of $9,971 on the $72,500 of ordinary income?
a. $9,971
b. $18,375
c. $17,471
d. $22,338
6. Harold and Wanda (married filing jointly) have $30,000 ordinary income after the standard deduction and personal exemptions, and $50,000 in unrecaptured depreciation on the sale of rental property, for total taxable income of $80,000. For 2014, the 10 percent tax bracket for married taxpayers filing jointly ends at $18,150, the next $55,650 in taxable income is taxed at 15 percent, and 25 percent applies to the next $75,050. What is Harold and Wanda’s tax? (Please use the percentages given in this problem to calculate your answer.)
a. $7,500
b. $11,093
c. $11,713
d. $16,093
7. In 2014, Tim, a single taxpayer, has ordinary income of $30,000. In addition, he has $2,000 in short-term capital gains, long-term capital losses of $5,000, and long-term capital gains of $4,000. What is Tim’s AGI for 2014?
a. $28,000
b. $30,000
c. $31,000
d. $32,000
8. Which of the following is Section 1231 property?
a. A building used in a trade or business
b. Poultry used for egg production
c. Accounts receivable
d. Inventory
e. Paintings owned by the artist
9. In 2014, Mary sells for $15,000 a machine used in her business. The property was purchased on May 1, 2012, at a cost of $12,500. Mary has claimed depreciation on the machine of $4,750. What is the amount and nature of Mary’s gain as a result of the sale of the machine?
a. $7,250 Section 1231 gain
b. $7,250 ordinary income under Section 1245
c. $2,500 ordinary income and $4,750 Section 1231 gain
d. $2,500 Section 1231 gain and $4,750 ordinary income under Section 1245
e. None of the above
10. During 2014, Paul sells residential rental property for $300,000, which he acquired in 1994 for $150,000. Paul has claimed straight-line depreciation on the building of $57,525. What is the amount and nature of Paul’s gain on the sale of the rental property?
a. $207,525 Section 1231 gain
b. $150,000 Section 1231 gain, $57,525 “unrecaptured depreciation”
c. $167,400 Section 1231 gain, $57,525 ordinary income
d. $190,125 Section 1231 gain, $17,400 “unrecaptured depreciation”
e. None of the above