BU404 11.20.2024

Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property’s adjusted basis at the date of disposition.

• True

• False

Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property’s adjusted basis, whereas capital expenditures are added to the original basis.

• True

• False

Lump-sum purchases of land and a building are allocated on the basis of the relative fair market values of the individual assets acquired.

• True

• False

The holding period for property acquired by gift is automatically long term.

• True

• False

The terms “realized gain” and “recognized gain” can be used interchangeably; they mean the same thing.

• True

• False

In computing asset basis, capital recoveries include:

• The cost of capital improvements.

• Ordinary repair and maintenance expenditures.

• Payments made on the principal of a mortgage on taxpayer's building.

• Amortization of bond premium.

Nontaxable stock dividends result in:

• A higher cost per share for all shares than before the stock dividend.

• A lower cost per share for all shares than before the stock dividend.

• An increase in the total cost of the old and new stock combined.

• A decrease in the total cost of the old and new stock combined.

Gift property (disregarding any adjustment for gift tax paid by the donor):

• Has a $0 basis to the donee because they did not pay anything for the property.

• Has the same basis to the donee as the donor's adjusted basis if the donee disposes of the property at a gain.

• Has the same basis to the donee as the donor's adjusted basis if the donee disposes of the property at a loss, and the fair market value on the date of gift was less than the donor's adjusted basis.

• Has a $0 basis to the donee if the fair market value on the date of gift is less than the donor's adjusted basis.

The holding period of property acquired by gift may begin on:

• The date the property was acquired by the donor only.

• The date of gift only.

• Either the date the property was acquired by the donor or the date of gift.

• The last day of the tax year in which the property was originally acquired by the donor.

Which of the following is correct?

• The gain basis for property received by gift is the lesser of the donor's adjusted basis or the fair market value on the date of the gift.

• The gain basis for property received by gift is the same as the donor's basis.

• The gain basis for inherited property is the same as the decedent's basis.

• The loss basis for inherited property is the lesser of the decedent's basis or the fair market value on the date of the decedent's death.