1. Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the propertys adjusted basis at the date of disposition.
a. True
b. False
2. In computing the amount realized when the fair market value of the property received cannot be determined, the fair market value of the property surrendered may be used.
a. True
b. False
3. If Wal-Mart stock increases in value during the tax year by $6,000, the amount realized is a positive $6,000.
a. True
b. False
4. If the buyer assumes the sellers liability on the property acquired, the sellers amount realized is decreased by the amount of the liability assumed.
a. True
b. False
5. The fair market value of property received in a sale or other disposition is the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy.
a. True
b. False
6. If a seller assumes the buyers liability on the property acquired, the buyers adjusted basis for the property is increased by the amount of the liability assumed.
a. True
b. False
7. Expenditures made for ordinary repairs and maintenance of property are notadded to the original basis in the determination of the propertys adjusted basis whereas capital expenditures are added to the original basis.
a. True
b. False
8. Milton purchases land and a factory building for his business for $300,000 with $100,000 being allocated to the land. During the first year, Milton deducts cost recovery of $4,922. Miltons adjusted basis for the building at the end of the first year is $195,078 ($200,000 $4,922).
a. True
b. False
9. In a casualty or theft, the basis of property involved is reduced by the amount of insurance proceeds received and by any resulting recognized loss.
a. True
b. False
10.Monroes delivery truck is damaged in an accident. Monroes adjusted basis for the delivery truck prior to the accident is $20,000. If Monroe receives insurance proceeds of $21,000 and recognizes a casualty gain of $1,000, his adjusted basis for the delivery truck after the accident is $21,000.
a. True
b. False
11.If insurance proceeds are received for property used in a trade or business, a casualty transaction can result in recognized gain, but cannot result in a recognized loss.
a. True
b. False
12.If the amount of a corporate distribution is less than the amount of the corporate earnings and profits, the return of capital concept does not apply and the shareholders adjusted basis for the stock remains unchanged.
a. True
b. False
13.Reggie owns all the stock of Amethyst, Inc. (adjusted basis of $100,000). If he receives a distribution from Amethyst of $90,000 and corporate earnings and profits are $15,000, Reggie has a capital gain of $5,000 and an adjusted basis for his Amethyst stock of $0.
a. True
b. False
14.The amount of a corporate distribution qualifying for capital recovery treatment which exceeds the shareholder-recipients basis in the stock investment is treated as a capital gain.
a. True
b. False
15.The adjusted basis for a taxable bond purchased at a premium is reduced if the amortization election is made. The amount of the amortized premium is treated as an interest deduction.
a. True
b. False
16.Helen purchases a $10,000 corporate bond at a premium of $1,000 and elects to amortize the premium. On the later sale of the bond for $10,800, she has amortized $300 of the premium. Helen has a recognized gain of $800 ($10,800 amount realized $10,000 adjusted basis).
a. True
b. False
17.The amount received for a utility easement on land is included in the gross income of the taxpayer.
a. True
b. False
18.A realized gain on the sale or exchange of a personal use asset is recognized, but a realized loss on the sale, exchange, or condemnation of a personal use asset is notrecognized.
a. True
b. False
