Question

1)A taxpayer cannot recognize the loss on the sale of stock if the taxpayer purchases substantially identical stock within 60 days before or 60 days after the sale.

TRUE

FALSE

2)A loss incurred on the sale of a personal residence is not deductible.

TRUE

FALSE

3)When the buyer assumes the seller's liability, the seller includes this amount in computing the amount realized from the sale.

TRUE

FALSE

4)Patty converted her main home to rental property two years ago when it was worth $70,000. Patty paid $85,000 for the house. What is Patty's basis in the house if after taking $10,000 of depreciation deductions she sells it for $66,000?

a.   $60,000

b.   $66,000

c.   $70,000

d.   $75,000

e.   $85,000

5) Barbara sold 100 shares of STP Company stock to her daughter, Doris, for $7,000. The stock originally cost Barbara $10,000. Doris later sells the stock on the open market for $8,000. Doris recognizes:

a.   no gain or loss.

b.   a $1,000 gain.

c.   a $2,000 gain.

d.   a $3,000 loss.

e.   a $2,000 loss.

Answer 1

1.A taxpayer cannot recognize the loss on the sale of stock if the taxpayer purchases substantially identical stock within 60 days before or 60 days after the sale.(TRUE)

2.A loss incurred on the sale of a personal residence is not deductible.(FALSE)

3.When the buyer assumes the seller's liability, the seller includes this amount in computing the amount realized from the sale.(TRUE)

I believe this question is related to a business purchase or stock sale. The buyer assumes the liabilities of the seller depending upon the purchase agreement. The buyer can assume all of the liabilities or only specific liabilities. Remaining liabilities will be paid by the seller itself. The amount realized from the sale will be affected by the liabilities assumed by the buyer. It is one of the key factors in determining the purchase price. So it can be construed that when the buyer assumes the seller’s liability, the seller includes this amount in computing the amount realized from the sale.

4.Patty converted her main home to rental property two years ago when it was worth $70,000. Patty paid $85,000 for the house. What is Patty's basis in the house if after taking $10,000 of depreciation deductions she sells it for $66,000?(d.75,000)

5.Barbara sold 100 shares of STP Company stock to her daughter, Doris, for $7,000. The stock originally cost Barbara $10,000. Doris later sells the stock on the open market for $8,000. Doris recognizes:(b.1,000 gain)