McGraw-Hill’s Essentials of Federal Taxation 2020 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
Accessibility: Keyboard Navigation; Screen Reader Compatible
AICPA/AACSB: BB Critical Thinking / Reflective 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
Accessibility: Keyboard Navigation; Screen Reader Compatible
AICPA/AACSB: BB Critical Thinking / Reflective 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
Accessibility: Keyboard Navigation; Screen Reader Compatible
AICPA/AACSB: BB Critical Thinking / Reflective 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
Accessibility: Keyboard Navigation; Screen Reader Compatible
AICPA/AACSB: BB Critical Thinking / Reflective 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
Accessibility: Keyboard Navigation; Screen Reader Compatible
AICPA/AACSB: BB Critical Thinking / Reflective 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
Accessibility: Keyboard Navigation; Screen Reader Compatible
AICPA/AACSB: BB Critical Thinking / Reflective 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
Accessibility: Keyboard Navigation; Screen Reader Compatible
AICPA/AACSB: BB Critical Thinking / Reflective 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
Accessibility: Keyboard Navigation; Screen Reader Compatible
AICPA/AACSB: BB Critical Thinking / Reflective 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
Accessibility: Keyboard Navigation; Screen Reader Compatible
AICPA/AACSB: BB Critical Thinking / Reflective 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
Accessibility: Keyboard Navigation; Screen Reader Compatible
AICPA/AACSB: BB Critical Thinking / Reflective Thinking