51. Rachael purchased 500 shares of Qualified Small Business Stock (QSB) for $900,000 on March 2, 2009. On November 29, 2014, she sells the stock for $1,000,000. Rachael also sells 100 shares of stock she acquired two years ago realizing a loss of $10,000. Which of the following explain(s) tax consequences of the QSB stock sale?
I.The effective tax rate applied to the net gain on the sale of the QSB stock is 15%.
II.Rachael nets her $10,000 loss with her $100,000 gain before applying her exclusion rate.
III.Rachael is eligible for a 75% exclusion of the gain from the QSB stock sale.
IV.The QSB stock is QSB stock partly because Rachael held the stock for the required 3-year minimum.
a. Statements I and II are correct.
b. Statements II and III are correct.
c. Statements III and IV are correct.
d. Statements I, II, and III are correct.
e. Statements I, II, III, and IV are correct.
52. Cheryl purchased 500 shares of Qualified Small Business Stock (QSB) for $900,000 on March 2, 2010. On November 29, 2015, she sells the stock for $1,000,000. Cheryl also sells 100 shares of stock she acquired two years ago realizing a loss of $10,000. Cheryl has $100,000 of other income. Which of the following statements about the stock sale is/are true?
I.The tax paid on Cheryl’s two stock sales is $6,300.
II.Cheryl can only deduct $3,000 of the $10,000 loss on the sale of the stock.
a. Only statement I is correct.
b. Only statement II is correct.
c. Both statements are correct.
d. Neither statement is correct.
53. Pamela purchased 500 shares of Qualified Small Business Stock (QSB) for $900,000 on October 2, 2012. On November 29, 2017, she sells the stock for $1,000,000. Pamela also sells 100 shares of stock she acquired two years ago realizing a loss of $10,000. Pamela has $100,000 of other income. Which of the following statements about the stock sale is/are true?
I.Pamela will pay no tax on the two stock sales.
II.Pamela can only deduct $3,000 of the $10,000 loss on the sale of the stock.
a. Only statement I is correct.
b. Only statement II is correct.
c. Both statements are correct.
d. Neither statement is correct.
54. Sybil purchased 500 shares of Qualified Small Business Stock (QSB) for $25,000 on March 2, 2003. On November 29, 2014, she sells the stock for $125,000. Sybil also sells 100 shares of stock she acquired two years ago realizing a gain of $20,000. Sybil has $100,000 of other income. Which of the following statements about the stock sale is/are true?
I.The tax paid on Sybil’s two stock sales is $17,000.
II.The tax rate on the $20,000 gain is 15%.
a. Only statement I is correct.
b. Only statement II is correct.
c. Both statements are correct.
d. Neither statement is correct.
55. Capital gain and loss planning strategies include
I.the optimal action of using capital gains to reduce an individual taxpayer’s net capital loss for a year to zero.
II.selling enough capital assets to create a $3,000 capital loss.
a. Only statement I is correct.
b. Only statement II is correct.
c. Both statements are correct.
d. Neither statement is correct.
56. Victor bought 100 shares of stock of Wabash Manufacturing Corporation from an unrelated individual paying $1 per share on December 20, 2014. On April 17, 2015, the corporation is declared bankrupt and the shares are deemed worthless. What is the amount and character of Victor’s recognized loss as a result of the bankruptcy?
a. $100 short-term capital loss.
b. $100 long-term capital loss.
c. $100 ordinary loss.
d. No gain or loss until the stock is sold.
e. The amount is $100, but the character is indeterminable from the information given.
57. When a security becomes worthless
I.no loss can be deducted because a realization has not occurred.
II.the measure of the loss is the adjusted basis of the securities.
a. Only statement I is correct.
b. Only statement II is correct.
c. Both statements are correct.
d. Neither statement is correct.
58. When securities are sold and the securities were purchased on different dates and at different prices
I.the basis of the shares may be determined on a first-in, first-out basis.
II.the basis of the shares may be determined on a last-in, first-out basis.
a. Only statement I is correct.
b. Only statement II is correct.
c. Both statements are correct.
d. Neither statement is correct.
59. Santana purchased 200 shares of Neffer, Inc. Common Stock on November 13, 2014, for $3,400 and paid a $200 commission. On December 28, 2014, Santana received a $2 per share cash dividend from Neffer. On June 17, 2015, Neffer declares and distributes a 2 for 1 stock split. On August 4, 2015, Santana purchased an additional 300 shares of Neffer, Inc. Common Stock for $4,200 plus a $300 commission. On November 22, 2015, Santana sells 500 shares of Neffer, Inc. stock for $6,000 and pays a $400 commission on the sale. Santana’s gain (loss) on the sale is
a. $500 loss
b. $500 gain
c. $2,700 loss
d. $2,000 gain
e. $3,600 loss
60. Sally owns 700 shares of Fashion Styles Clothing common stock. Sally purchased the 700 shares as follows:
Purchase DateNumber of SharesTotal Cost
March 2012200$ 2,000
August 2012300$ 3,600
January 2013200$ 3,000
As of December 29, 2015, Sally has not sold any securities. She needs to send a tuition payment of $5,200 to her daughter’s boarding school in Zurich before year-end. Since the Fashion Styles Clothing stock is selling for $13 per share, Sally plans to dispose of 400 shares to cover the tuition. Ignoring commissions and transaction costs, what is the optimal tax result of selling 400 shares?
a. $- 0 – gain or loss.
b. $200 long-term capital loss.
c. $100 long-term capital gain.
d. $800 long-term capital loss
e. $800 long-term capital gain
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