Day 6

Question 1

What are the tax rates for a Child’s Unearned Income?

Answer 1

$0 - $1,150 = $0
$1,151 - $2,300 = Child’s Rate
$2,301 - Over = Parent’s Rate

MCQ-15621

Question 2

Employee taxation of non-qualified stock options:

Answer 2

Taxed as Ordinary Income at the value of the option trading on an established market

MCQ-07356

Question 3

What is the recipient’s basis in gifted property?

Answer 3

The recipient basis = the donors basis

EXCEPTION: When FMV of the gift is less than the donor’s basis the recipient can assume the lower value

MCQ-01653

Question 4

Rule: The basis of property received as a
gift in the hands of the donee depends
on whether the selling price of the
property is more or less than the basis
for gain or loss
If the property is sold at a gain, the basis
to the donee is the same as it would be
in the hands of the donor. lf the property
is sold at a loss, the basis to the donee
is the same as it would be in the hands
of the donor or the FV of the property at
the date of the gift, whichever is lower.
In some cases, such as in this fact
situation, there is neither gain nor loss
on the sale of the gift, because the
selling price is less than the basis for
gain and more than the basis for loss

Answer 4

MCQ-01736

Question 5

Choice “A” is correct. In general, property
acquired as a gift retains the cost basis
it had in the hands of the donor.
However, if the fair market value of the
property at the time of the gift is lower
than the cost basis in the hands of the
donor (as in this case), the basis to the
donee depends on the donee’s future
selling price of the property, as follows:
If the future selling price is higher
than the donor’s cost basis, the
donee’s basis is the donor’s cost
basis.
If the future seling price is lower
than the fair market value of the
property at the time of the gift, the
donee’s basis is the fair market
value of the property at the time of
the gift.
If the future selling price is lower
than the donor’s cost basis but
higher than the fair market value of
the property at the time of gift,
neither gain nor loss is recognized
by the donee on the sale of the
property.
In this problem, the donee’s selling price
of $6,000 is less than the donor’s cost
basis of $8,000 but more than the fair
market value of the property at the time
of the gift of $5,000, so the donee does
not recognize a gain or a loss on the
sale of the propertv

Answer 5

MCQ-06572

Question 6

What type of gain is recognized when gifted property is sold?

Answer 6

Long Term Capital Gain

MCQ-14925

Question 7

What is the beneficiary’s basis of inherited property?

Answer 7

The FMV at the time of inheritance

MCQ-06976

Question 8

Requirement for the de minimis safe harbor rule:

Answer 8

Must have a written policy to expense certain property as of the beginning of the year and have a written financial statement

MCQ-12118