Chapter 14 - Federal and State Income Tax Flashcards Preview

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Flashcards in Chapter 14 - Federal and State Income Tax Deck (13)
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Cost Recovery is a term most closely related to 



All of the following are considered capital improvements or expenditures when determining adjusted basis except:

  • Adding a bedroom
  • Remodeling a kitchen
  • installing an automatic sprinkler system
  • replacing a broken window 

replacing a broken window 


To qualify for an exclusion from capital gain on a residential property, the homeowner must

Have owned and occupied the property for two of the previous five years


A method in which an equal portion of a structure's value is deducted each year is known as 

straight line depreciation 


If less than 100% of the sales price is received in the year of the sale, the tax code considers it to be:

an installment sale 


A gain is considered taxable when the property 

is sold 


Which one of the following would not be considered a like-kind property exchange under an IRS 1031 tax-deferred exchange:

  • a resort for a strip mall
  • a hotel for a motel
  • an office building for a warehouse
  • an unimproved lot for timber 

an unimproved lot for timber 


Which of the following types of property can be depreciated?

  • a principal residence property
  • an apartment building
  • undeveloped industrial land
  • a vacant lot 

an apartment building


Sean O'Brien just sold his personal residence for $185,000. His adjusted basis is $170,000. He will pay 6% of the sales price in broikerage fees and $3,500 in closing costs. For federal income tax purposes, what is the amount of Sean's capital gain?




The brokerage commission would be $11,100 ($185,000 x .06) plus closing costs of $3,500 for a total of $14,600 in expenses. Sean grossed $15,000 on the sale (185,000-170,000) the expenses minus the gross gain leaves a net capital gain of $400 (15000-14600)


A  net gain on an asset is the amount:

  1. subject to capital gain taxation
  2.  remaining after capital losses are deducted from capital gains


both 1 and 2.


net gain is what remains after capital losses are deducted from capital gains, and represents the amount subject to capital gain taxation.


California state income tax brackets and the standard deduction are adjusted each year based upon the:

California Consumer Price Index


The term boot is used as a factor for which one of the following?



Under current law, a qualified taxpayer can exclude the entire gain on the sale of his or her principal residents up to ____ if filing a single return.