REG 3 - Taxable and Nontaxable Dispositions

Question 1

Explain the installment sale method for HIDE IT?

Answer 1

Revenue is recognized when cash is received - even if the accrual method is used for tax return.

Question 2

How do you calculate earned revenue (taxable income) for the installment sale method for HIDE IT?

1) Gross profit
2) Gross profit percentage
3) Earned revenue (taxable income)

Answer 2

1) Gross profit = Sales - COGS
2) Gross profit percentage = Gross profit / Sale price
3) Earned revenue (taxable income) = Cash received x gross profit percentage

Question 3

What are the three types of treasury and capital stock transactions that are exempt from gain by corporation?

Answer 3

1) Sales of stock by corporation
2) Repurchase of stock by corporation
3) Reissue of stock

Question 4

Define wash sale loss? WRaP

Answer 4

A wash sale loss is a loss that is NOT ALLOWED (nondeductible)

A wash sale loss exists when a stock or bond is sold for a loss and repurchased 30 days before the sale date OR 30 days after the sale date.

Question 5

What is the basis of repurchased security in a wash sale loss?

Answer 5

The repurchased security is equal to the purchase price of the new security PLUS the disallowed loss.

Question 6

Define related party transactions? WRaP

Answer 6

Sales between related parties are not considered and the loss is disallowed.

• Family
• More than 50% owned business

Question 7

Define personal loss? WRaP?

Answer 7

No deduction is allowed for the loss on a non business disposal or loss.

An itemized deduction may be available in the category of casualty and theft.