ACCT 330 CH 5 | 102 QUESTIONS AND ANSWERS |
SOLVED 100% CORRECT.
All recognized gains and losses must eventually be classified either as capital or
ordinary. Answer - True
In 2013, five different capital gain tax rates could apply to long-term capital
assets sold by noncorporate taxpayers. Answer - True
A taxpayer sells an asset with a basis of $25,000 to an unrelated party for
$28,000. The taxpayer has a realized gain of $3,000. Answer - True
Gains and losses are recognized when property is disposed of by gift or
bequest. Answer - True
On January 1, 2013, Brad purchased 100 shares of stock at $4,000. By
December 31, 2013, the stock had declined in value to $2,200, but Brad still
held the shares. For 2013, Brad has recognized a $1,800 loss for tax purposes.
Answer - FALSE
Rick sells stock of Ty Corporation, which has an adjusted basis of $20,000, for
$22,000. He pays a sales commission of $500. In computing his gain or loss, the
amount realized by Rick is $1,500. Answer - False
The initial adjusted basis of property depends upon how the property is
acquired. Answer - True
, Expenditures which do not add to the value or prolong the life of property may
be expensed in the year in which they are incurred. Answer - True
A taxpayer purchased an asset for $50,000 several years ago. He is now
planning to sell it. Under the recovery of basis doctrine the taxpayer will not
recognize any gain or pay any related taxes unless he sells the asset for more
than $50,000. Answer - True
All realized gains and losses are recognized for tax purposes. Answer - False
Losses are generally deductible if incurred in carrying on a trade or business or
incurred in an activity engaged in for profit. Answer - True
If Houston Printing Co. purchases a new printing press during the current year
for $30,000, pays sales taxes of $2,000, and pays $1,000 for installation, the
cost basis for the printing press is $33,000. Answer - True
Funds borrowed and used to pay for an asset are not included in the cost until
the borrowed funds are repaid. Answer - False
Interest incurred during the development and manufacture of a machine must
be capitalized. Answer - True
Capitalization of interest is required if debt is incurred to construct real
property. Answer - True
If stock sold or exchanged is not specifically identified, the FIFO (first-in, first-
out) method of identification must be used. Answer - True
SOLVED 100% CORRECT.
All recognized gains and losses must eventually be classified either as capital or
ordinary. Answer - True
In 2013, five different capital gain tax rates could apply to long-term capital
assets sold by noncorporate taxpayers. Answer - True
A taxpayer sells an asset with a basis of $25,000 to an unrelated party for
$28,000. The taxpayer has a realized gain of $3,000. Answer - True
Gains and losses are recognized when property is disposed of by gift or
bequest. Answer - True
On January 1, 2013, Brad purchased 100 shares of stock at $4,000. By
December 31, 2013, the stock had declined in value to $2,200, but Brad still
held the shares. For 2013, Brad has recognized a $1,800 loss for tax purposes.
Answer - FALSE
Rick sells stock of Ty Corporation, which has an adjusted basis of $20,000, for
$22,000. He pays a sales commission of $500. In computing his gain or loss, the
amount realized by Rick is $1,500. Answer - False
The initial adjusted basis of property depends upon how the property is
acquired. Answer - True
, Expenditures which do not add to the value or prolong the life of property may
be expensed in the year in which they are incurred. Answer - True
A taxpayer purchased an asset for $50,000 several years ago. He is now
planning to sell it. Under the recovery of basis doctrine the taxpayer will not
recognize any gain or pay any related taxes unless he sells the asset for more
than $50,000. Answer - True
All realized gains and losses are recognized for tax purposes. Answer - False
Losses are generally deductible if incurred in carrying on a trade or business or
incurred in an activity engaged in for profit. Answer - True
If Houston Printing Co. purchases a new printing press during the current year
for $30,000, pays sales taxes of $2,000, and pays $1,000 for installation, the
cost basis for the printing press is $33,000. Answer - True
Funds borrowed and used to pay for an asset are not included in the cost until
the borrowed funds are repaid. Answer - False
Interest incurred during the development and manufacture of a machine must
be capitalized. Answer - True
Capitalization of interest is required if debt is incurred to construct real
property. Answer - True
If stock sold or exchanged is not specifically identified, the FIFO (first-in, first-
out) method of identification must be used. Answer - True
