2. Select the correct option (there is only one) for parts a. to g.

a. Mateo bought machinery on December 4, 2014. On June 4, 2015, he traded this machinery for other machinery in a nontaxable exchange. On December 6, 2015, Mateo sold the machinery he got in the exchange. His holding period for this machinery began on which date?

i. December 4, 2014

ii. December 5, 2014

iii. June 4, 2015

iv. June 5, 2015

b. Which of the following is considered a taxpayers capital asset?

i. Taxpayer's house

ii. Real estate used in the trade or business

iii. Depreciable property used in the trade or business

iv. Supplies regularly used in the trade or business

c. The taxpayer can elect to treat musical compositions and copyrights in musical works as capital assets when he or she sells or exchange them if certain conditions apply. The taxpayer must make the election within what time period of the due date (including extensions) of the income tax return for the tax year of the sale or exchange?

i. On or before the due date

ii. 30 days after the due date of the return

iii. 90 days after the due date of the return

iv. 6 months after the due date of the return

d. In 2010 Lois purchased a painting for $5,000 at a local art gallery. She decided to sell the painting in 2015 and finds a buyer willing to pay $12,000. What is the maximum capital gains rate and maximum amount she may owe?

i. 22% capital gains rate and $1,540 owed

ii. 24% capital gains rate and $1,680 owed

iii. 26% capital gains rate and $1,820 owed

iv. 28% capital gains rate and $1,960 owed

e. Gwen inherited 100 shares of SuperShoes stock when her mother died on October 21, 2013; the fair market value of the stock was $20 per share. Her mother paid $200 per share when she purchased the stock March 1, 2004. If Gwen sells all 100 shares for $50 per share on July 3, 2015, how should she report the sale on her return for 2015?

i. $3,000 long-term capital gain

ii. $3,000 short-term capital gain

iii. $12,000 long-term capital gain

iv. $15,000 short-term capital loss

f. John and Jill Jones sold stock that resulted in a short-term capital loss of $5,000. They had no other capital transactions during the year. Their taxable income was $10,000. How much of the capital loss is deductible on their joint return and how much must be carried over to the next year?

i. $0 loss; $5,000 carryover

ii. $1,500 loss; $1,500 carryover

iii. $3,000 loss; $0 carryover

iv. $3,000 loss; $2,000 carryover

g. Brandt exchanged his collection of stamp albums for a tractor from Virgil in September 2015. The fair market value of the stamp albums is $3,000. The tractor has the same $3,000 fair market value. The collection of stamps cost Brandt $2,000 over the years to assemble. How should Brandt report this transaction on his 2015 tax return?

i. He reports it as a capital transaction with a $0 gain

ii. He is not required to report it because it is not taxable

iii. He attaches a statement to his return explaining that the exchange was for something of equal value

iv. He reports a $1,000 capital gain