BU404 12/2/2024

Confusingly, §1221 defines what is not a capital asset.

• True

• False

The effect of § 1244 may be to convert a capital loss into an ordinary loss deductible for adjusted gross income.

• True

• False

In order to be long term, the holding period must include at least parts of two tax years.

• True

• False

The possible holding periods for capital assets include:

• Short-term = held 14 months or less.

• Long-term = greater than six months.

• Long-term = greater than six months.

• Short-term = greater than 12 months.

Which of the following events causes the purchaser of an option to add its cost to the basis of the property to which the option relates?

• The option is exercised.

• The option is sold.

• The option lapses.

• The option is rescinded.

Which of the following is correct concerning short sales of stock at the time the short sale is made?

• The taxpayer does not deliver to the purchaser the shares sold short.

• The taxpayer delivers to the purchaser the shares sold short.

• The taxpayer may already own the shares sold short.

• The taxpayer always already owns the shares sold short.

Which of the following comparisons is correct?

• Corporations may carry back capital losses; individuals may not.

• Both corporation and individual long-term capital losses carry over as short-term capital losses.

• Corporations may carry forward capital losses indefinitely; individuals may carry forward capital losses for only five years.

• Both corporations and individuals may use an alternative tax rate on net capital gains.

A painting that is not of investment quality is acquired by an individual for use in his home. It is later sold at a loss of $45. Which of the following statements is correct?

• The painting was a capital asset.

• The loss on the painting is not deductible.

• The loss on the painting is a deductible capital loss.

• Choices a. and b.

Property is acquired in a qualifying like-kind exchange. The acquired property is sold three months after it is acquired. Which of the following is correct?

• Since the holding period of the property given up in the exchange tacks to the holding period of the acquired property, the holding period of the acquired property could be long-term.

• The holding period of the acquired property is short-term.

• The holding period of property acquired in a like-kind exchange is always long-term.

• When property acquired in a like-kind exchange is disposed of, the holding period is not relevant.

A net § 1231 loss is treated as an ordinary loss.

• True

• False