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mod 6 CFP 514 Q&A 2024
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mod 6 CFP 514 Q&A 2024
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mod 6 CFP 514Ethel had the following from securities transactions during the current year:
Long-term capital gain: $6,400
Long-term capital loss: $2,200
Short-term capital gain: $2,300
Short-term capital loss: $5,500
Which of the following describes the net capital gain or loss reportable by
Ethel for the current tax year?
A)
$1,000 net long-term capital loss
B)
$4,200 net long-term capital gain; $3,200 net short-term capital loss
C)
$1,000 net long-term capital gain
✅✅
D)
$900 net long-term capital gain; $100 net short-term capital loss - -C)
Long-term transactions are netted together, as are short-term transactions.
The net long-term capital gain is $4,200 ($6,400 - $2,200). The net short-term
capital loss is $3,200 ($2,300 - $5,500). The net short-term capital loss is
netted with the net long-term capital gain ($4,200 - $3,200) to result in a net
long-term capital gain of $1,000.
Eleven months ago, Lynnette received 1,000 shares of stock from her uncle,
Joseph. Joseph purchased the stock eight years ago for $12 per share. The
fair market value on the date of the gift to Lynnette was $9 per share, and she
sold the stock today for $5 per share. What is the amount and character of
Lynnette's loss from the sale of the stock?
A)
$4,000 short-term capital loss
B)
$7,000 long-term capital loss
C)
$3,000 long-term capital loss
✅✅
D)
$3,000 short-term capital loss - -A) There are two components to this
question. What is the basis, and is there tacking of the holding period? When
the fair market value on the date of the gift is less than the donor's basis in the
asset, the donee's basis in the asset for purposes of determining a loss is the
asset's FMV on the date of the gift. In this situation, the $9 per-share value on
,the date of the gift would be Lynnette's basis. The next issue is the "tacking" of
the holding period. In a situation where the donee uses the FMV as the basis,
there is no tacking of the holding period. In this situation, Lynnette used the
FMV; thus, she uses her own holding period of 11 months. If the donee uses
the donor's basis, then the holding period is tacked. In other words, the
donor's holding period is added to ("tacked") the donee's holding period.
During the current tax year, Rod purchased a building for exclusive use in his
manufacturing business. The cost of the property was $422,000, of which
$122,000 was attributable to the land. Which of the following statements
identifies the proper treatment of the expenditure?
A)
The $300,000 attributable to the building may be currently deductible.
B)
The $122,000 must be capitalized and may not be depreciated.
C)
The cost attributable to the building may be deducted under Section 179.
✅✅
D)
The $122,000 must be capitalized and may be depreciated. - -B) The
land may not be depreciated, as only "wasting" assets are subject to
depreciation. The Section 179 expense election generally applies to
personalty only, and is not available for most real estate. The cost of the
building may not be currently deducted; it must be capitalized and depreciated
because it has a useful life of over one year.
During the current tax year, Jamie sold several securities that resulted in the
following types of gains and losses: a long-term capital loss of $6,700; a
short-term capital loss of $7,000; a long-term capital gain of $1,900; and a
short-term capital gain of $9,200. What is the net capital gain or loss on
Jamie's security sales?
A)
Net short-term gain of $7,300; net long-term loss of $300
B)
Net long-term loss of $2,600
C)
Net long-term loss of $4,800; net short-term gain of $2,200
✅✅
D)
Net short term loss of $3,800 - -B) The long-term items are netted,
leaving a long-term capital loss of $4,800. The short-term items are netted,
, leaving a short-term capital gain of $2,200. These are netted, leaving a net
long-term capital loss of $2,600.
Three years ago, Sam received a gift of 100 shares of common stock from his
uncle. The fair market value of the stock on the date of the gift was $12 per
share. His uncle had purchased the stock four years earlier at $5 per share.
Sam sold this stock for $17 per share last week. What was Sam's per-share
basis in the stock when it was sold?
A)
$5
B)
$12
C)
$22
✅✅
D)
$17 - -A) If the fair market value on the date of the gift is greater than the
donor's adjusted basis, the donor's adjusted basis is used as the recipient's
basis. Note that the donor's holding period would be tacked to the donee's
holding period.
In the current tax year, Fay has short-term capital loss carryovers of $5,000
and long-term capital loss carryovers of $40,000, both carried over from the
previous year. Her net short-term gain for this year is $6,000, and her net
long-term gain for this year is $5,000. How much of her gain for this year will
be taxable?
A)
$6,000
B)
$5,000
C)
$1,000
✅✅
D)
$0 - -D) Fay can apply her short-term capital loss carryover to all current
short-term capital gains, which results in a net short-term capital gain for this
year of $1,000 ($6,000 gain − $5,000 carryover). She is then left with a net
long-term capital loss of $35,000 ($5,000 gain − $40,000 carryover). To
calculate net capital gains for the year, aggregate the long-term and
short-term gains or losses, which in this case equals $35,000 long-term loss −
$1,000 short-term gain, or a $34,000 net capital loss. She has no net gain
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