Mrs. Yee purchased stock in Jones Corporation in 2015 for $500. In 2018, she received a distribution
Question:
Mrs. Yee purchased stock in Jones Corporation in 2015 for $500. In 2018, she received a distribution of $800 when Jones had no current or accumulated earnings and profits. In 2020, Mrs. Yee received a $200 dividend when Jones had earnings and profits in excess of its dividend distribution. There has been no other activity on this stock. What is Mrs. Yee’s basis in her Jones Corporation stock as of December 31, 2020?
A.$(300)
B.$0
C.$500
D.$(500)
Part B
Sharon sold two collections during 2020. These were her only sales. Determine the amount and character of her gains (losses) on these sales.
- Coin collection she began as a child with a basis of $1,000, sold for $5,000
- Collection of original short stories she wrote in 2018, sold for $20,000
A.$4,000 long-term capital gain and $20,000 ordinary income.
B.$20,000 long-term capital gain.
C.$24,000 long-term capital gain.
D.$24,000 ordinary income.
Part C
Paula received notice that her mutual fund had allocated a long-term capital gain to her account in 2020 in the amount of $3,500 and had paid federal tax on her behalf in the amount of $1,225 on the gain. No amount was to be paid to Paula on the gain, but it would be credited to her account. All of the following statements are true EXCEPT
A.Paula will increase her basis in the stock by $2,275.
B.Paula will not report any gain because nothing was paid to her.
C.Paula will report a long-term capital gain of $3,500.
D.Paula is allowed a credit for the federal tax paid on her behalf of $1,225.
Part D
Mr. West decided to form West Company. As the sole proprietor, Mr. West purchased a machine for West Company. Mr. West incurred the following costs in connection with the purchase of the machine:
Note to seller | $60,000 |
Cash paid to seller | 5,000 |
Wages paid to install machine | 4,000 |
State sales tax | 3,250 |
Freight charges to place of business | 1,000 |
What is the amount of Mr. West’s basis in the property?
A.$73,250
B.$70,000
C.$69,250
D.$72,250
Part E
John decided to open a new business. As a necessary step in his business, he purchased land with a building on it. John incurred the following costs in connection with the purchase:
Cash down payment | $ 40,000 |
Appraisal fees | 2,000 |
Title insurance | 1,800 |
Mortgage on property | 300,000 |
Charges for installation of gas lines | 3,000 |
Back taxes owed by seller and paid by John | 1,200 |
Which of the following is John’s basis in the property?
A.$343,000
B.$345,000
C.$348,000
D.$346,800
Part F
Cost basis of property includes
A.Real estate taxes paid for seller without reimbursement.
B.Sales taxes charged on the purchase.
C.Certain settlement fees and other costs.
D.All of the answers are correct.
Part G
Eric owns several buildings throughout his state of residence. Costs related to these buildings include insurance and interest on credit used to secure the buildings. Eric recently performed maintenance on one of the buildings and installed rain gutters on another. The collective basis of the buildings will include the cost of the
A.Installation.
B.Interest on credit.
C.Maintenance.
D.Insurance and installation.
Part H
Rudy purchased 100 shares of publicly traded stock on January 2, 2020, for $1,000. He sold all his shares on December 31, 2020, for $1,500. On January 4, 2021, the settlement date, the stocks were actually delivered and payment was received in Rudy’s account. How and when should Rudy report this sale?
A.$500 long-term capital gain on 2021 return.
B.$500 short-term capital gain on 2021 return.
C.$500 short-term capital gain on 2020 return.
D.$500 long-term capital gain on 2020 return.
Part I
The basis of property received for services performed is equal to the
A.Cost of the property.
B.Cost of the services provided.
C.Fair market value of the property.
D.Lower-of-cost-or-market price of the property.
Part J
Yasmin purchased 50 shares of Tele Company stock on February 6, 2020, at $20 a share. She sold all 50 shares on February 23, 2020, for $15 a share. Later on the same day, she repurchased 40 shares of Tele Company stock at $16 per share. With only the information provided, what is Yasmin’s net capital loss that she can deduct on her 2020 return?
A.$50 net capital loss, but she can add $200 to her new stock basis.
B.$650 net capital loss.
C.$750 net capital loss.
D.$250 net capital loss.
