Terry Trumbull purchased a tract of land. In order to have city water, he had to pay the water company $5,000 to extend the water line to his property. The $5,000 cost is an addition to the basis of the land.
A) True
B) False
2. The basis for nonbusiness property changed to business use is the greater of the adjusted basis of the property or its fair market value on the date it is converted to business use.
A) True
B) False
3. In 2011, Tom Turner received a gift of property that had a fair market value of $10,000 at the time of the gift. The donor's adjusted basis in the property at the time of the gift was $12,000. Tom's basis for computing depreciation is $12,000.
A) True
B) False
4. David Dawson owned two shares of a corporation's common stock. He paid $60 for one share and $30 for the other share. The corporation declared a stock dividend which gave stockholders two new shares of common stock for each share they held. After the distribution, David owns six shares of stock with an adjusted basis of $15 each.
A) True
B) False
5. In a gain situation, the holding period of gift property begins on the date of the gift.
A) True
B) False
6. If a wife sells depreciable property to her husband, the gain on the sale is treated as ordinary income.
A) True
B) False
7. The holding period of property acquired from a decedent is considered to be long term regardless of when the property was acquired or disposed of.
A) True
B) False
8. Recognition of a gain or loss always occurs at the time of sale or exchange.
A) True
B) False
9. Unless the taxpayer can specifically identify the shares of stock that are sold or transferred, the FIFO rule comes into play (i.e., the stock sold is charged against the earliest of the stock purchases).
A) True
B) False
10. The wash sale rules merely postpone the loss until the taxpayer sells the securities in a