1) In December 2022, Angela sold 20 shares of Neely Co. stock for $8,000. This was qualified small business stock that she had bought in August 2016. Her basis is $2,000. What is her taxable gain?
A. Zero
B. $3,000
C. $6,000
D. $8,000
.
2) Ms. Birch purchased the following stocks:
300 shares of Music Corp. on 1/18/2021 for $3,000
200 shares of Play Corp. on 2/11/2021 for $2,000
600 shares of Fun Corp. on 4/27/2021 for $16,000
100 shares of Book Corp. on 12/19/2021 for $8,000
On April 27, 2022, Ms. Birch sold all of the above stock for the following amounts:
Music Corp. $ 5,000
Play Corp. 10,000
Fun Corp. 4,000
Book Corp. 14,000
What are Ms. Birch’s net long-term capital gains or losses (LTCG/LTCL) and short-term capital gains or losses (STCG/STCL) on the above transactions? (Hint – do not net LT and ST gains/losses).
A. LTCG, $10,000; STCL, $6,000.
B. LTCG, $16,000; STCL, $12,000.
C. LTCL, $2,000; STCG, $6,000.
D. None of the answers are correct
.
3) A taxpayer purchased 100 shares of Eastern Corp. stock for $18,000 on April 1 of the prior year. On February 1 of the current year, 50 shares of Eastern were sold for $7,000. Fifteen days later, the taxpayer purchased 25 shares of Eastern for $3,750. What is the amount of the taxpayer’s recognized gain or loss?
A. $0
B. $500
C. $1,000
D. $2,000
.
4) A taxpayer owns business property that is destroyed in a fire on 12/10/X1. The insurance
company makes payment for the fair market value of the property (which exceeds its tax
basis) on 1/20/X2. The taxpayer can defer the gain if all of the proceeds are used to
replace the property by 12/31/X4. If the fire was part of a gigantic blaze that caused the
president to declare the area a federal disaster area, the taxpayer has until ——— to
replace the property.
A. 12/31/X6
B. 1/15/X6
C. 6/30/ X4
D. 6/30/X6
.
5) – If Jim owned a home for the last 5 years and used it as a personal residence for the first
year, rented it out for the next 3 years, and then moved back in for the last year, the
exclusion would be reduced by 3/5 for the period of nonqualified use. Thus, if Jim has a
gain of $100,000 on the sale, he can
A. exclude only 2/5 of it from his gross income, or $40,000, and must recognize the other $60,000.
B. exclude only 3/5 of it from his gross income
C. exclude 100% of the gain from his gross income
D. exclude the first $250,000 from his gross income no matter how many years he lived in the home.
.
6) Sam and Ann Hoyt filed a joint federal income tax return for the calendar year 2021. Among the Hoyts’ cash receipts during 2021 was the following: $6,000 first installment on a $75,000 life insurance policy payable to Ann in annual installments of $6,000 each over a 15-year period, as beneficiary of the policy on her uncle, who died in 2020. What portion of the $6,000 installment on the life insurance policy is excludable from 2021 gross income in arriving at the Hoyts’ adjusted gross income?
A. Zero
B. $1,000
C. $5,000
D. $6,000
Schedule A Exercise – No need to submit the Schedule A – just complete the questions below.
The following information pertains to Rich and Shelly Beach, a married couple filing a joint federal income tax return for the calendar year 2021:
Shelly, age 33 — received in 2021
Salary — employed as teacher
Gross amount $33,000
Amounts withheld
Federal income tax $4,950
State income tax 1,650
FICA taxes 2,525
Charitable pledge 75 $ 9,200
Total cash received $23,800
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Cash paid in 2021
Rich and Shelly’s home
Acquisition mortgage principal $3,410
Interest on the mortgage 5,400
Real property taxes 1,800
Sidewalk assessment (total) 1,750
Fire insurance premiums 240
Utilities 2,400 $15,000
Medical and dental expenses
Doctors $9,532
Dentists 4,920
Travel to doctors 922 15,374
Contribution to a national political party 200
Total cash paid $30,574
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Additional Information
1. Rich and Shelly use the cash receipts and disbursements method of accounting.
2. Rich conducts a bookkeeping service and mail order business in the basement of the couple’s home. Contact with bookkeeping customers is at the customers’ places of business. On weekends, Rich and Shelly use the basement to play pool, and Shelly hosts an exercise club there each Wednesday. The business use percentage of the room is 90%, and the fair rental value for the space was $125 per month during 2021.
3. In March 2021, Rich donated 100 shares of stock of a listed corporation to a recognized charitable organization. Rich’s basis for this stock, which was bought in January 2021, was $5,375. Fair market value of this stock on the date of the donation was $7,000.
4. Included in the Beaches’ personal expenses was $1,100 for state sales taxes, substantiated by receipts. Also included was $992 of state income taxes paid on Rich’s income.
Determine the amounts Rich and Shelly should enter on their Form 1040 Schedule A. Apply standard IRS itemized deduction rules and assume that adjusted gross income is $54,322 (as reported on Form 1040, line 11). For each item below, enter the appropriate amount in the associated cell. Round answers to the nearest dollar. If no entry is necessary or the answer is zero, enter a zero (0).
2021 Form 1040 Schedule A item (descriiption) Amount
1. Medical and dental expenses (Line 1)
2. Enter amount from Form 1040, line 11 (Line 2)
3. Multiply line 2 by 7.5% (0.075) (Line 3)
4. Subtract line 3 from line 1. If line 3 is more than line 1, enter 0. (Line 4)
5. State and local income taxes (Line 5a)
6. Other taxes – real estate (Line 6)
7. Home mortgage interest and points reported on Form 1098 (Line 8a)
8. Gifts by cash or check (Line 11)
9. Gifts other than by cash or check (Line 12)
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include 2021 form 1040 schedule A
