Questions and Answers: 166
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NEW QUESTION: 1
Which of the following sales should be reported as a capital gain?
A. Government bonds sold by an individual investor.
B. Sale of inventory.
C. Sale of equipment.
D. Real property subdivided and sold by a dealer.
Answer: A
Explanation:
Explanation
Choice "d" is correct. Government bonds held by an individual investor are considered capital assets in
the hands of the investor. When these types of security investments are sold, the resulting gain or loss is
reported as capital.
Choice "a" is incorrect. In this case, we must assume that the BEST answer is option "d" (as that option
would ALWAYS result in capital gain or loss treatment) and that the examiners are assuming that the
equipment is depreciable equipment that has been used in a business for over one year. [If the equipment
had been considered a personal asset by the examiners and had sold for a gain, it would also be a capital
asset that sold for a capital gain, and there would be two correct answers. Remember that the correct
answer is the option that best answers the question.] Depreciable equipment used in a business and held
for over one year falls under the category of Section 1245 property. When Section 1245 assets are sold at
a gain, all the accumulated depreciation on the asset is recaptured as ordinary income (the same
category as the depreciation expense was deducted against), and any remaining gain (typically, in
practice, this is not the case, though, as the asset would have had to sell for an amount greater than its
purchase price) is capital gain under Code Section 1231. [Note that Section 1245 applies only to gains. If
the asset had sold for a loss, the loss would have been ordinary under Section 1231.]
Choice "b" is incorrect. Real property sold by a dealer is considered inventory and results in ordinary
income or ordinary losses upon sale. Inventory is not a capital asset and is not afforded the capital gain
benefits.
Choice "c" is incorrect. Inventory is not a capital asset and is not afforded the capital gain benefits. The
sale of inventory results in ordinary income or loss (e.g., gross profit on sales) being reported on the tax
return, as inventory is an asset held for sale in the ordinary course of business.
NEW QUESTION: 2
Drag and drop the IPv4 network subnets from the left onto the correct usable host ranges on the right
Answer:
Explanation:
NEW QUESTION: 3
Providers at a healthcare system with many geographically dispersed clinics have been fined five times
this year after an auditor received notice of the following SMS messages:
Which of the following represents the BEST solution for preventing future fines?
A. Provide a courier service to deliver sealed documents containing public health informatics.
B. Implement FTP services between clinics to transmit text documents with the information.
C. Implement a secure text-messaging application for mobile devices and workstations.
D. Write a policy requiring this information to be given over the phone only.
E. Implement a system that will tokenize patient numbers.
Answer: C