CHAPTER 14–PROPERTY TRANSACTIONS

| November 9, 2018

1.
Realized gain or loss is measured by the
difference between the amount realized from the sale or other disposition of
property and the property’s adjusted basis at the date of disposition.

True False

2.
Molanda sells a parcel of land for $18,000 in cash
and the buyer assumes Molanda’s mortgage of $12,000 on the land. Molanda’s
amount realized is $30,000.

True False

3.
If Wal-Mart stock increases in value during the
tax year by $4,500, the amount realized is a positive $4,500.

True False

4.
If the buyer assumes the seller’s liability on the
property acquired, the seller’s amount realized is decreased by the amount of
the liability assumed.

True 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. True False

6.
If a seller assumes the buyer’s liability on the
property acquired, the buyer’s adjusted basis for the property is increased by
the amount of the liability assumed.

True False

7.
Expenditures made for ordinary repairs and
maintenance of property are not added to the original basis in the
determination of the property’s adjusted basis whereas capital expenditures are
added to the original basis.

True False

8.
Deductions taken for depreciation or cost recovery
on business or income-producing property reduce the adjusted basis of the
property.

True False

9.
The adjusted basis of property that is stolen is
reduced by the amount of insurance proceeds received and by any recognized
loss.

True False

1

10.
Monroe’s delivery truck is damaged in an accident.
Monroe’s 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.

True False

11.
If insurance proceeds are received for property
used in a trade or business, a casualty transaction can result in recognized
gain or recognized loss.

True False

12.
If a distribution by a corporation to a
shareholder exceeds the corporation’s earnings and profits, the excess first
reduces the shareholder’s stock basis to zero and any remaining excess is
classified as capital gain or ordinary income depending on the shareholder’s
holding period for the stock.

True False

13.
Ricky owns all the stock of Amethyst, Inc.
(adjusted basis of $100,000). If he receives a distribution from Amethyst of
$94,000 and corporate earnings and profits are $10,000, Ricky has a capital
gain of $6,000.

True False

14.
The amount of a corporate distribution qualifying
for capital recovery treatment which exceeds the recipient’s stock basis is
treated as an ordinary gain.

True False

15.
Bond premium on tax-exempt bonds must be
amortized. The annual amortization reduces the owner’s taxable income and decreases
the adjusted basis for the bond.

True False

16.
The amortization of bond premium decreases the
basis of the bond and the amortization of bond discount increases the basis of
the bond.

True False

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