C237- TAXATION | PRE-ASSESSMENT | ACCURATE
AND VERIFIED | 2026 UPDATE
. What is the nature of a progressive tax rate structure? - Answers - increasing marginal
tax rate as the tax base increases-federal taxes is an example
Which two expenses are a tax-free use of a qualified tuition plan (QTP) distribution? -
Answers - QTP (such as 529 plans) allow for qualified higher education expenses such
as tuition, room & board, books, supplies, computer equipment/software
Which event would result in taxable income? - Answers - Insolvent means they qualify
as having less assets than their liabilities discharged in bankruptcy is not taxable
forgiveness through public service is not taxable at the federal level
Which type of gain does a taxpayer have if the taxpayer owns stock that has
appreciated in value? - Answers - The stock has appreciated in value, but has not been
sold. Therefore, it is an unrealized gain currently. Once the stock is sold, if it has a gain,
it will be a realized capital gain if it has appreciated in value and is sold for higher than
what it was purchased at minus any fees.
An individual purchases a piece of property with a fair market value of $30,000 for
$28,000. The individual takes out a loan for $14,000 and pays the other $14,000 in
cash. In addition, the individual pays $500 in transactions costs to purchase the
property and $200 of delivery costs. What is the basis for the property? - Answers - The
basis is only what was paid for the property (cash + mortgage + all fees) $14,000 +
$14,000 + 500 + $200 = $28,700
An individual purchases a piece of property with a fair market value of $50,000 for
$54,000. The individual uses a loan for $44,000 and pays the other $10,000 in cash. In
addition, the individual pays $1,000 in transactions costs to purchase the property and
expects to earn $5,000 per year from renting the property to others. What is the basis
for this property? - Answers - The basis is only what was paid for the property (cash +
mortgage + all fees)$44,000 + $10,000 + $1,000 = $55,000
What is an example of an ordinary asset? - Answers - Assets created or used in
taxpayer's trade or business
Which item is a capital asset? - Answers - Held for investment (stocks/bonds) to create
income or for personal use (car/house/computer)
An individual with a taxable income of $100,000 sells 200 shares of stock at a market
price of $60 per share. One hundred shares of the stock were acquired 2 years earlier
AND VERIFIED | 2026 UPDATE
. What is the nature of a progressive tax rate structure? - Answers - increasing marginal
tax rate as the tax base increases-federal taxes is an example
Which two expenses are a tax-free use of a qualified tuition plan (QTP) distribution? -
Answers - QTP (such as 529 plans) allow for qualified higher education expenses such
as tuition, room & board, books, supplies, computer equipment/software
Which event would result in taxable income? - Answers - Insolvent means they qualify
as having less assets than their liabilities discharged in bankruptcy is not taxable
forgiveness through public service is not taxable at the federal level
Which type of gain does a taxpayer have if the taxpayer owns stock that has
appreciated in value? - Answers - The stock has appreciated in value, but has not been
sold. Therefore, it is an unrealized gain currently. Once the stock is sold, if it has a gain,
it will be a realized capital gain if it has appreciated in value and is sold for higher than
what it was purchased at minus any fees.
An individual purchases a piece of property with a fair market value of $30,000 for
$28,000. The individual takes out a loan for $14,000 and pays the other $14,000 in
cash. In addition, the individual pays $500 in transactions costs to purchase the
property and $200 of delivery costs. What is the basis for the property? - Answers - The
basis is only what was paid for the property (cash + mortgage + all fees) $14,000 +
$14,000 + 500 + $200 = $28,700
An individual purchases a piece of property with a fair market value of $50,000 for
$54,000. The individual uses a loan for $44,000 and pays the other $10,000 in cash. In
addition, the individual pays $1,000 in transactions costs to purchase the property and
expects to earn $5,000 per year from renting the property to others. What is the basis
for this property? - Answers - The basis is only what was paid for the property (cash +
mortgage + all fees)$44,000 + $10,000 + $1,000 = $55,000
What is an example of an ordinary asset? - Answers - Assets created or used in
taxpayer's trade or business
Which item is a capital asset? - Answers - Held for investment (stocks/bonds) to create
income or for personal use (car/house/computer)
An individual with a taxable income of $100,000 sells 200 shares of stock at a market
price of $60 per share. One hundred shares of the stock were acquired 2 years earlier
