Property Taxation

Question 1

The sale of which of the following types of business property should be reported as Section 1231

Answer 1

The land is business property owned for more than a year, so gain on its sale would generate Section 1231 gain.

Question 2

Properties listed in Code Section 1221 include

Answer 2

inventory, accounts receivable and depreciable properties or real estate used in trade or business.

Question 3

For income-tax purposes, capital assets are

Answer 3

any property held by a taxpayer, other than properties listed in Code Section 1221.

Question 4

For property received from a decedent through inheritance, a taxpayer generally assumes a basis equal to

Answer 4

The fair market value of the property at the date of the decedent’s death.

Question 5

Property bequeathed due to the death of the owner has a what type of basis and holding period

Answer 5

fair market value basis to the beneficiary, and a long-term holding period.

Question 6

What is the ordinary loss deduction limit on the sale of a worthless small business stock?

Answer 6

$50,000 ($100,000 if married filing joint).

Question 7

How can corporations use their capital loss deduction?

Answer 7

Can only use capital losses to offset capital gain net income; no deduction for net capital losses;

Unused losses are carried back three years and forward five years.

Question 8

List the characteristics of ordinary loss deduction on sale of worthless small business stock.

Answer 8

Corporation issued stock for less than $1 million;

Corporation must conduct an active business;

Taxpayer received stock from corporation in initial offering.

Question 9

What is the maximum tax rate for capital gains from the sale of collectibles?

Answer 9

The maximum rate is 28%.

Question 10

List the qualified small business stock exclusion of gain requirements.

Answer 10

Stock held for more than five years after initial issuance;

Stock from active corporation with assets less than $50 million.

Question 11

What is the net capital loss limit for individuals?

Answer 11

The loss limit is $3,000.

Question 12

What is the percentage of qualified small business exclusion of stock gain?

Answer 12

50% (increased to higher levels for certain temporary periods).

Question 13

Describe the elements of the net capital loss deduction for individuals.

Answer 13

Deductible up to $3,000 per year;

For AGI;

Also limited to taxable income;

Excess loss carries forward; no limit on carryforward period.