Taxation Of Individuals & Business Entities 11th Edition By Brian 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 initial 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: 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