Question 4 of 15. Which of the following is categorized as a capital asset under Section 1221 of the Internal Revenue Code? Items held in inventory. An office building used in a taxpayer's business. A rare coin collection. A van owned by a florist, used to make deliveries to customers.
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Step 1: According to Section 1221 of the Internal Revenue Code, a capital asset is defined as property held by the taxpayer (whether or not connected with his trade or business), but does not include: (1) stock in trade or other property of a kind which would Show more…
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33. Which of the following assets is NOT generally considered a capital asset? A) Ken owns a personal residence. B) Drake owns U.S. government securities that he is holding as an investment. C) Rosie bought a personal auto earlier this year. D) Darren bought a computer to use in his business. 34. Two years ago, Raul purchased a parcel of raw land on which he could construct a new building for his hardware business. He paid $60,000 for the land and incurred $800 in legal fees associated with the title search. He also paid an attorney $2,000 to draft the contract for the purchase of the land. Property taxes on the land have totaled $1,200 annually. What is Raul's adjusted basis in the land? A) $60,000 B) $60,800 C) $65,200 D) $62,800 35. Margaret purchased a used pickup truck at a cost of $12,400, with sales tax of $600, to use in her floral business. She purchased the pickup (five-year property) and placed it in service on June 1 of the current tax year. Assuming Margaret opts out of bonus depreciation, using MACRS, what is the first-year cost recovery deduction that Margaret can claim? If the Recovery Year Is: And the Recovery Period Is: 3-Years 5-Year 7-Year 10-Year 15-Year 20-Year The Depreciation Rate Is: 1 33.33 2 44.45 3 14.81 4 7.41 5 11.52 6 5.76 7 8.93 8 4.46 9 6.56 10 6.55 11 3.28 12 5.90 13 5.91 14 5.90 15 5.91 16 2.95 17 4.46 18 4.46 19 4.46 20 4.46 21 2.231 A) $1,240 B) $2,600 C) $5,200 D) $1,300 36. Maria purchased manufacturing equipment several years ago at a cost of $16,000 to use in her business. She claimed $9,716 of cost recovery deductions. She sold the equipment for $8,000. What is the amount and character of the gain or loss resulting from this disposition? A) $9,716 ordinary income B) $8,000 ordinary loss C) $8,000 capital loss D) $1,716 of ordinary income, $0 long-term capital gain
Adi S.
Robert bought a rental property ten years ago for $320,000, with $80,000 of the purchase price allocated to the land. Over the ten years, he claimed CCA such that his UCC at the beginning of this year for the building was $196,000. Robert sold the property this year for $520,000, with $180,000 of the sale price allocated to the land. Which of the following statements is correct? a) Robert has recapture of $44,000. b) Robert has recapture of $124,000. c) Robert has recapture of $144,000. d) Robert has a capital gain of $100,000. For vendors of taxable supplies who purchase goods for resale and make capital expenditures to be used in commercial activities, input tax credits can be claimed for GST/HST billed or paid on: a) All capital expenditures made during the period and goods sold during the period. b) A portion of capital expenditures based on their estimated service life and goods purchased for resale during the period. c) A portion of capital expenditures based on their estimated service life and goods sold during the period. d) All capital expenditures made during the period and goods purchased for resale during the period. Which of the following is a specified investment business? a) A business which principally derives its income from rental property and has less than 5 full-time employees. b) A business which principally derives its income from rental property and has more than 5 full-time employees. c) A business which principally derives its income from rental property and has 5 or more full-time employees. d) A business which actively derives its income from rental property and has more than 5 full-time employees.
Akash M.
Items 1 through 12 describe various types of transactions that an individual or business entity may be involved in. For each one, indicate the appropriate tax treatment. A tax treatment may be used once, more than once, or not at all. Note: The answer to 4 is G (if accelerated depreciation rules applied to real property, gain due to depreciation in excess of S/L depreciation would be Section 125 gain. A. Long-term capital gain F. Section 1245 gain B. Long-term capital loss G. Section 1250 gain C. Short-term capital gain H. Ordinary Income or loss D. Short-term capital loss I. Not deductible E. Section 1231 gain or loss
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