1. Heidi invested in a mid-sized local company with gross assets of $17,000,000.
ID: 2450448 • Letter: 1
Question
1. Heidi invested in a mid-sized local company with gross assets of $17,000,000. Heidi purchased 2,000 shares for $44,000 in 1998. In 2014, Heidi sold the stock for $84,000. How is the gain treated for tax purposes? (Points : 1) $40,000 capital gain and taxed at preferential rates.$20,000 excluded from gross income under Section 1202 with the remaining gain recognized and taxed at regular rates.
$20,000 excluded from gross income under Section 1202 and $20,000 taxed at 28%.
$20,000 excluded from gross income under Section 1202 and $20,000 taxed at preferential capital gains rates. Question 2.2. Sylvio purchased an apartment building as an investment in January 2008 for $383,500 and sold it for $475,000 in 2014. He reported $68,436 of allowed accumulated straight-line depreciation. If Sylvio is in the highest tax bracket for ordinary income, how much of his gain qualifies for preferential tax treatment? (Points : 1) $0.
$68,436.
$91,500.
$159,936. Question 3.3. Darius and Chantal own a cabin in Lake Arrowhead, California. During the year, they rented it for 45 days for $10,000 and used it for 12 days for personal use. The house remained vacant for the remainder of the year. The expenses for the house included $9,000 in mortgage interest, $2,000 in property taxes, $1,000 in utilities, $600 in maintenance, and $3,000 in depreciation. What is their net income or loss from their cabin (without considering the passive loss limitation)? Use the IRS method for allocation of expenses. (Round your answer to the nearest whole dollar) (Points : 1) $0
$2,316 net loss
$5,600 net loss
$10,000 net income Question 4.4. The standard mileage rate encompasses all of the following auto costs except for: (Points : 1) Depreciation or lease payments.
Auto property taxes.
Maintenance and repairs.
Gasoline, oil, and insurance. Question 5.5. On June 1st of the current year, Kayla and Ralph purchased a rental beach house for $700,000. Of that amount, $400,000 was for the land value. How much depreciation deduction can they take in the current year? (You may need to refer to the depreciation tables.) (Points : 1) $0.
$5,910.
$7,880.
$13,790. Question 6.6. Joe received a parcel of land as a gift from his sister, Lisa, in 2009. At the time of the gift, the land had a FMV of $10,000. Lisa purchased the land in 2005 for $13,000. If Joe sells the land in 2014 for $22,450, he will report a (Points : 1) 1. Heidi invested in a mid-sized local company with gross assets of $17,000,000. Heidi purchased 2,000 shares for $44,000 in 1998. In 2014, Heidi sold the stock for $84,000. How is the gain treated for tax purposes? (Points : 1) $40,000 capital gain and taxed at preferential rates.
$20,000 excluded from gross income under Section 1202 with the remaining gain recognized and taxed at regular rates.
$20,000 excluded from gross income under Section 1202 and $20,000 taxed at 28%.
$20,000 excluded from gross income under Section 1202 and $20,000 taxed at preferential capital gains rates.
Explanation / Answer
1. Total capital gain = 84,000 - 44,000 = $40,000. The stock was acquired in the year 1998. As per section 1202, as the acquisition of the stock was before 17th February 2009, it will qualify for a 50% capital gain exclusion. (The stock was held for more than 5 years as well.)
50% of capital gain = 50% of $40,000 = $20,000. This will qualify for capital gain exclusion. The remaining amount is: $40,000 - $20,000 = $20,000. This will be treated as mid term capital gain and will be taxed at 28%.
So, the answer is option "c".
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