Taxation- REG CPA Exam Questions and
Answers 100% Solved | Latest Update
Ordinary Assets - ✔✔Depreciable business property held for one year or
less than one year (created assets)
Examples: inventory, AR, creative works, etc.
1231 Assets - ✔✔Depreciable business property held for more than one
year
Capital Assets - ✔✔anything not ordinary/1231 assets (personal and
investment assets, goodwill)
Calculation of Realized Gain/Loss - ✔✔Amount Realized - Adjusted Basis
Amount Realized - ✔✔Cash received, FMV of Property receive, liabilities
assumed by buyers, less selling expenses
Adjusted Basis - ✔✔Cost of property + capital improvements - depreciation
+ costs with acquisition
Gift Gain Basis - ✔✔adjusted basis of donor
,Gift Loss Basis - ✔✔Lower of: adjusted basis of donor and FMV of gift at
date
Loss on sale of personal use property - ✔✔NOT recognized
If sells Gift for between gain and loss basis - ✔✔NO basis recognized
Holding Period of gift - ✔✔if gain basis used - tacks onto donor's holding
period
if loss basis used - starts once donee gets gift
Inheritances - ✔✔valued at FMV at time of gift (if elected, 6 months later)
Holding Period_ Inheritances - ✔✔Always deemed long term
Netting Process - ✔✔Net ST and Net LT, then Net ST and LT together
Individual Capital Losses - ✔✔$3,000 is deductible (FOR AGI) and
remainder is carried forward indefinitely and NOT carried back at all
Long term capital losses are offset against capital gains in order of 28%,
25%, and 20%
Individual Capital Gains - ✔✔Added back to ordinary income and take at
preferential rates
Preferential Rates - ✔✔If regular tax rate is 15% or less = 0%
If regular tax rate is 39.6% = 20%
,If regular is above 15% and lower than 39.6% = 15%
Corporation Capital Losses - ✔✔NOT deductible but can offset capital
gains (carry forward 5 years, carry back 3 years)
Corporation Capital Gains - ✔✔just added back to income, no preferential
rates
Additional 3.8% tax - ✔✔If modified AGI exceeds:
single - 200,000
married - 250,000
the 3.8% tax is applied to lower of:
1) amount income exceeds threshold
2) net investment income
Collectibles tax rate - ✔✔28%
SL depreciation tax rate - ✔✔25%
Trade Date - ✔✔date of purchase/sale of stocks or bonds (this determines
holding period)
Settlement Date - ✔✔date when stock is delivered or payment actually
made
Section 1244 Stock - ✔✔small business stock sold by original holder
individuals
, Gains - treated as regular long term capital gains
Losses - treated as ordinary losses
** small business means receipts don't exceed 1 million at time of purchase
of stock
Non-dealer divides real property - ✔✔First 5 lots sold = capital gain, all
other lots sold = 5% of selling price ordinary income and the rest capital
Option Losses - ✔✔whatever optioned property would have been - that is
what loss is categorized as
Form 8949 - ✔✔Just totals of ST and LT capital assets
Schedule D - ✔✔Details of ST and LT capital assets
Net Gain on Section 1231 Assets - ✔✔Treated as LT Capital Gains
Net Loss on Section 1231 Assets - ✔✔Treated as Ordinary Loss
Recapture - Section 1245 Recapture - ✔✔gain on PERSONALTY are
ordinary income to extent of Accumulated Depreciation, the rest of the gain
is Section 1231 Gain
Recapture - Section 1250 Recapture - ✔✔gain on REALTY are ordinary
income to the extent MACRS (AD) exceeds SL, the SL amount is a 25%
gain, and the remainder is a Section 1231 Gain
Gain on Sale of LT Land - ✔✔Always a 1231 Gain
Answers 100% Solved | Latest Update
Ordinary Assets - ✔✔Depreciable business property held for one year or
less than one year (created assets)
Examples: inventory, AR, creative works, etc.
1231 Assets - ✔✔Depreciable business property held for more than one
year
Capital Assets - ✔✔anything not ordinary/1231 assets (personal and
investment assets, goodwill)
Calculation of Realized Gain/Loss - ✔✔Amount Realized - Adjusted Basis
Amount Realized - ✔✔Cash received, FMV of Property receive, liabilities
assumed by buyers, less selling expenses
Adjusted Basis - ✔✔Cost of property + capital improvements - depreciation
+ costs with acquisition
Gift Gain Basis - ✔✔adjusted basis of donor
,Gift Loss Basis - ✔✔Lower of: adjusted basis of donor and FMV of gift at
date
Loss on sale of personal use property - ✔✔NOT recognized
If sells Gift for between gain and loss basis - ✔✔NO basis recognized
Holding Period of gift - ✔✔if gain basis used - tacks onto donor's holding
period
if loss basis used - starts once donee gets gift
Inheritances - ✔✔valued at FMV at time of gift (if elected, 6 months later)
Holding Period_ Inheritances - ✔✔Always deemed long term
Netting Process - ✔✔Net ST and Net LT, then Net ST and LT together
Individual Capital Losses - ✔✔$3,000 is deductible (FOR AGI) and
remainder is carried forward indefinitely and NOT carried back at all
Long term capital losses are offset against capital gains in order of 28%,
25%, and 20%
Individual Capital Gains - ✔✔Added back to ordinary income and take at
preferential rates
Preferential Rates - ✔✔If regular tax rate is 15% or less = 0%
If regular tax rate is 39.6% = 20%
,If regular is above 15% and lower than 39.6% = 15%
Corporation Capital Losses - ✔✔NOT deductible but can offset capital
gains (carry forward 5 years, carry back 3 years)
Corporation Capital Gains - ✔✔just added back to income, no preferential
rates
Additional 3.8% tax - ✔✔If modified AGI exceeds:
single - 200,000
married - 250,000
the 3.8% tax is applied to lower of:
1) amount income exceeds threshold
2) net investment income
Collectibles tax rate - ✔✔28%
SL depreciation tax rate - ✔✔25%
Trade Date - ✔✔date of purchase/sale of stocks or bonds (this determines
holding period)
Settlement Date - ✔✔date when stock is delivered or payment actually
made
Section 1244 Stock - ✔✔small business stock sold by original holder
individuals
, Gains - treated as regular long term capital gains
Losses - treated as ordinary losses
** small business means receipts don't exceed 1 million at time of purchase
of stock
Non-dealer divides real property - ✔✔First 5 lots sold = capital gain, all
other lots sold = 5% of selling price ordinary income and the rest capital
Option Losses - ✔✔whatever optioned property would have been - that is
what loss is categorized as
Form 8949 - ✔✔Just totals of ST and LT capital assets
Schedule D - ✔✔Details of ST and LT capital assets
Net Gain on Section 1231 Assets - ✔✔Treated as LT Capital Gains
Net Loss on Section 1231 Assets - ✔✔Treated as Ordinary Loss
Recapture - Section 1245 Recapture - ✔✔gain on PERSONALTY are
ordinary income to extent of Accumulated Depreciation, the rest of the gain
is Section 1231 Gain
Recapture - Section 1250 Recapture - ✔✔gain on REALTY are ordinary
income to the extent MACRS (AD) exceeds SL, the SL amount is a 25%
gain, and the remainder is a Section 1231 Gain
Gain on Sale of LT Land - ✔✔Always a 1231 Gain
