McGraw Hills Taxation Of Individuals 2018 Edition 9th Edition by Brian C. Spilker – Test Bank

Chapter 11 Property Dispositions

1) The amount realized is the sale proceeds less the adjusted basis.

Answer: FALSE
Difficulty: 1 Easy
Topic: Dispositions
Learning Objective: 11-01 Calculate the amount of gain or loss recognized on the disposition of assets used in a trade or business.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking

2) Generally, the amount realized is everything of value received in a sale less selling expenses.

Answer: TRUE
Difficulty: 1 Easy
Topic: Dispositions
Learning Objective: 11-01 Calculate the amount of gain or loss recognized on the disposition of assets used in a trade or business.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking

3) The adjusted basis is the cost basis less cost recovery deductions.

Answer: TRUE
Difficulty: 1 Easy
Topic: Dispositions
Learning Objective: 11-01 Calculate the amount of gain or loss recognized on the disposition of assets used in a trade or business.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking

4) An asset’s tax adjusted basis is usually greater than its book adjusted basis.

Answer: FALSE
Explanation: Because businesses generally use more highly accelerated depreciation methods for tax purposes than they do for book purposes, the tax-adjusted basis of a particular asset is likely to be lower than the book-adjusted basis.
Difficulty: 1 Easy
Topic: Dispositions
Learning Objective: 11-01 Calculate the amount of gain or loss recognized on the disposition of assets used in a trade or business.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
5) The gain or loss realized on the sale of an asset is the amount realized less the adjusted basis.

Answer: TRUE
Difficulty: 2 Medium
Topic: Dispositions
Learning Objective: 11-01 Calculate the amount of gain or loss recognized on the disposition of assets used in a trade or business.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking

6) The gain or loss realized on the sale of an asset is always recognized for tax purposes.

Answer: FALSE
Difficulty: 1 Easy
Topic: Dispositions
Learning Objective: 11-01 Calculate the amount of gain or loss recognized on the disposition of assets used in a trade or business.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking

7) All tax gains and losses are ultimately characterized as either ordinary or capital.

Answer: TRUE
Difficulty: 1 Easy
Topic: Character of Gain or Loss
Learning Objective: 11-02 Describe the general character types of gain or loss recognized on property dispositions.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking

8) Ordinary gains and losses are obtained on the sale of investments.

Answer: FALSE
Explanation: Capital gains and losses are obtained on the sale of investments.
Difficulty: 1 Easy
Topic: Character of Gain or Loss
Learning Objective: 11-02 Describe the general character types of gain or loss recognized on property dispositions.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
9) Accounts receivable and inventory are examples of ordinary assets.

Answer: TRUE
Difficulty: 1 Easy
Topic: Character of Gain or Loss
Learning Objective: 11-02 Describe the general character types of gain or loss recognized on property dispositions.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking

10) Assets held for investment and personal use assets are examples of capital assets.

Answer: TRUE
Difficulty: 2 Medium
Topic: Character of Gain or Loss; Depreciation Recapture
Learning Objective: 11-02 Describe the general character types of gain or loss recognized on property dispositions.; 11-03 Explain the rationale for and calculate depreciation recapture.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking