Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property’s adjusted basis at the date of disposition. T

In computing the amount realized when the fair market value of the property received cannot be determined, the fair market value of the property surrendered may be used. T

. If Wal-Mart stock increases in value during the tax year by $6,000, the amount realized is a positive $6,000. F

If the buyer assumes the seller’s liability on the property acquired, the seller’s amount realized is decreased by the amount of the liability assumed. F

The fair market value of property received in a sale or other disposition is the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy. T

If a seller assumes the buyer’s liability on the property acquired, the buyer’s adjusted basis for the property is increased by the amount of the liability assumed. F

. Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property’s adjusted basis whereas capital expenditures are added to the original basis. T

Milton purchases land and a factory building for his business for $300,000 with $100,000 being allocated to the land. During the first year, Milton deducts cost recovery of $4,922. Milton’s adjusted basis for the building at the end of the first year is $195,078 ($200,000 – $4,922). T

In a casualty or theft, the basis of property involved is reduced by the amount of insurance proceeds received and by any resulting recognized loss. T

Monroe’s delivery truck is damaged in an accident. Monroe’s adjusted basis for the delivery truck prior to the accident is $20,000. If Monroe receives insurance proceeds of $21,000 and recognizes a casualty gain of $1,000, his adjusted basis for the delivery truck after the accident is $21,000. F

If insurance proceeds are received for property used in a trade or business, a casualty transaction can result in recognized gain, but cannot result in a recognized loss. F

If the amount of a corporate distribution is less than the amount of the corporate earnings and profits, the return of capital concept does not apply and the shareholders’ adjusted basis for the stock remains unchanged. T

Reggie owns all the stock of Amethyst, Inc. (adjusted basis of $100,000). If he receives a distribution from Amethyst of $90,000 and corporateearnings and profits are $15,000, Reggie has a capital gain of $5,000 and an adjusted basis for his Amethyst stock of $0. F

The amount of a corporate distribution qualifying for capital recovery treatment which exceeds the shareholder-recipient’s basis in the stock investment is treated as a capital gain. T

15. The adjusted basis for a taxable bond purchased at a premium is reduced if the amortization election is made. The amount of the amortized premium is treated as an interest deduction. T

16. Helen purchases a $10,000 corporate bond at a premium of $1,000 and elects to amortize the premium. On the later sale of the bond for $10,800, she has amortized $300 of the premium. Helen has a recognized gain of $800 ($10,800 amount realized – $10,000 adjusted basis). F

17. The amount received for a utility easement on land is included in the gross income of the taxpayer. F

18. A realized gain on the sale or exchange of a personal use asset is recognized, but a realized loss on the sale, exchange, or condemnation of a personal use asset is not recognized. T

19. A realized gain whose recognition is postponed results in the temporary recovery of more than the taxpayer’s cost or other basis. T

20. A realized loss whose recognition is postponed results in the temporary recovery of more than the taxpayer’s cost or other basis. F

21. Wade is a salesman for a real estate development company. Because he is the “salesperson of the year,” he is permitted to purchase a lot from the developer for $90,000. The fair market value of the lot is $150,000 and the developer’s adjusted basis is $100,000. Wade must recognize a gain of $10,000 ($100,000 developer’s adjusted basis – $90,000 cost to Wade), and his adjusted basis for the lot is $100,000 ($90,000 cost + $10,000 recognized gain). F

22. When a taxpayer has purchased several lots of stock on different dates at different purchase prices and cannot identify the lot of stock that is being sold, he should use either a weighted average approach or a LIFO approach. F

23. Lump-sum purchases of land and a building are allocated on the basis of the relative fair market values of the individual assets acquired. T

24. Purchased goodwill is assigned a basis equal to cost, which is calculated using the residual method associated with the purchase of a business. T

25. The holding period for nontaxable stock dividends that are the same type (i.e., common on common) includes the holding period of the original shares, but the holding period for nontaxable stock dividends that are not the same type (i.e., preferred on common) is new and begins on the date the dividend is received. F

26. For nontaxable stock rights where the fair market value of the rights is 15% or more of the fair market value of the stock, the taxpayer is required to allocate a portion of the stock basis to the stock rights. T

27. The carryover basis to a donee for property received by gift can be an amount greater than the donor’s adjusted basis. T

28. This year, Fran receives a birthday gift of stock worth $75,000 from her aunt. The aunt has owned the stock (adjusted basis $50,000) for 10 years and pays gift tax of $27,000 on the transfer. Fran’s basis in the stock is $75,000—the lesser of $77,000 ($50,000 + $27,000) or $75,000. F

29. The amount of the loss basis of a gift will differ from the amount of the gain basis only if at the date of the gift the adjusted basis of the property exceeds the property’s fair market value. T

30. The basis for depreciation on depreciable gift property received is the donor’s adjusted basis of the property at the date of the gift (assuming no gift taxes are paid). The rule applies regardless of whether the fair market value at the date of the gift is greater than or less than the donor’s adjusted basis. T

31. The holding period for property acquired by gift is automatically long term. F

32. The basis of inherited property usually is its fair market value on the date of the decedent’s death. T

33. If the fair market value of the property on the date of death is greater than on the alternate valuation date, the use of the alternate valuation amount is mandatory. F

34. If the alternate valuation date is elected by the executor in 2013, the total basis of inherited property will be more than what it would have been if the primary valuation date and amount had been used. F

35. If the alternate valuation date is elected by the executor of the estate, the basis of all of the property included in the decedent’s estate becomes the fair market value 6 months after the decedent’s death. F

36. If a husband inherits his deceased wife’s share of jointly owned property in a common law state, both the husband’s original share and the share inherited from the deceased wife are stepped-up or down to the fair market value at the date of the wife’s death. F

37. Parker bought a brand new Ferrari on January 1, 2013, for $125,000. Parker was fatally injured in an auto accident on June 23, 2013, when the fair market value of the car was $105,000. Parker was driving a loaner car from the Ferrari dealership while his car was being serviced. In his will, Parker left the Ferrari to his best friend, Ryan. Ryan’s holding period for the Ferrari begins on January 1, 2013. F

38. Transactions between related parties that result in disallowed losses might later provide a tax benefit to the related party buyer. T

39. For the loss disallowance provision under § 267, related parties include certain family members, a shareholder and his or her controlled corporation (i.e., greater than 50% in value of the corporation’s outstanding stock), and a partner and his or her controlled partnership (i.e., greater than 50% of the capital interests or profits interest in the partnership). T

40. If losses are disallowed in a related party transaction, the holding period for the buyer includes the holding period of the seller. F

41. Ben sells stock (adjusted basis of $25,000) to his son, Ray, for its fair market value of $15,000. Ray gives the stock to his daughter, Trish, who subsequently sells it for $26,000. Ben’s recognized loss is $0 and Trish’s recognized gain is $1,000 ($26,000 – $15,000 – $10,000). F

42. The basis of property acquired in a wash sale is its cost plus the loss not recognized on the wash sale. T

43. Realized losses from the sale or exchange of stock are disallowed if within 30 days before or 30 days after the sale or exchange, the taxpayer acquires substantially identical stock. T

44. Gene purchased an SUV for $45,000 which he uses 100% for personal purposes. When the SUV is worth $30,000, he contributes it to his business. The gain basis is $45,000, the loss basis is $30,000, and the basis for cost recovery is $45,000. F

45. If property that has been converted from personal use to business use has appreciated in value, its basis for gain will be the same as the basis for loss. T

46. The basis for gain and loss of personal use property converted to business use is the lower of the adjusted basis or the fair market value on the date of conversion. F

47. Stuart owns land with an adjusted basis of $190,000 and a fair market value of $500,000. If the property is going to be given to Stuart’s nephew, Alex, it is preferable for the transfer to be by inheritance rather than by gift. T

48. The taxpayer owns stock with an adjusted basis of $15,000 and a fair market value of $8,000. If the stock or cash is going to be given to her niece, it is preferable for the taxpayer to sell the stock and give the $8,000 of cash to her niece. The same preference would exist if the recipient were a qualified charitable organization. T

49. Broker’s commissions, legal fees, and points paid by the seller reduce the seller’s amount realized. T

50. Since wash sales do not apply to gains, it may be desirable to engage in this type of transaction before the end of the tax year. T

51. Gains and losses on nontaxable exchanges are deferred because the tax law recognizes that nontaxable exchanges result in a change in the substance but not the form of the taxpayer’s relative economic position. F

52. Abby exchanges an SUV that she has held for personal use plus $24,000 for a new SUV which she will use exclusively in her sole proprietorship business. This exchange qualifies for nontaxable exchange treatment. F

53. In a nontaxable exchange, recognition is postponed. In a tax-free transaction, nonrecognition is permanent. T

54. In a nontaxable exchange, the replacement property is assigned a carryover basis if there is a realized gain, but receives a new basis if there is a realized loss. F

55. The nonrecognition of gains and losses under § 1031 is mandatory for gains and elective for losses. F

56. Leonore exchanges 5,000 shares of Pelican, Inc., stock for 2,000 shares of Blue Heron, Inc., stock. Leonore’s adjusted basis for the Pelican stock is $300,000 and the fair market value of the Blue Heron stock is $350,000. Leonore’s recognized gain is $0 and her adjusted basis for the Blue Heron stock is $300,000. F

57. Livestock of different sexes can qualify for like-kind exchange treatment if the livestock has been held for over 24 months. F

58. To qualify as a like-kind exchange, real property must be exchanged either for other real property or for personal property with a statutory life of at least 39 years. F

59. The exchange of unimproved real property located in Topeka (KS) for improved real property located in Atlanta (GA) does not qualify as a like-kind exchange. F

60. Lola owns land as an investor. She exchanges the land for a warehouse which she leases to a tenant who uses it to store his business inventory. The exchange doesqualify for like-kind exchange treatment. T

61. A building located in Virginia (used in business) exchanged for a building located in France (used in business) cannot qualify for like-kind exchange treatment. T

62. Pat owns a 1965 Mustang car which he uses for personal use. He purchased it four years ago for $22,000, and it currently is worth $27,000. He exchanges it for a 1979 Triumph Spitfire convertible worth $27,000. Pat’s recognized gain is $0 and his adjusted basis for the convertible is $22,000. F

63. Kate exchanges land held as an investment for land and a building owned by Clark, to be used in her business. If Clark is Kate’s father, her realized gain of $150,000 must be recognized because they are related parties. F

64. An exchange of two items of personal property (personalty) that belong to different general business asset classes qualifies for nonrecognition under § 1031 as long as both properties are used in the taxpayer’s trade or business. F

65. If boot is received in a § 1031 like-kind exchange, the recognized gain cannot exceed the realized gain. T

66. Shari exchanges an office building in New Orleans (adjusted basis of $700,000) for an apartment building in Baton Rouge (fair market value of $900,000). In addition, she receives $100,000 of cash. Shari’s recognized gain is $100,000 and her basis for the apartment building is $800,000 ($700,000 adjusted basis + $100,000 recognized gain). F

67. When boot in the form of cash is given in a like-kind exchange, recognized gain is the greater of the boot or the realized gain. F

68. The surrender of depreciated boot (fair market value is less than adjusted basis) in a like-kind exchange can result in the recognition of loss. T

69. Cole exchanges an asset (adjusted basis of $15,000; fair market value of $25,000) for another asset (fair market value of $19,000). In addition, he receives cash of $6,000. If the exchange qualifies as a like-kind exchange, his recognized gain is $6,000 and his adjusted basis for the property received is $21,000 ($15,000 + $6,000 recognized gain). F

70. The basis of boot received in a like-kind exchange is its fair market value, unless the realized gain is a smaller amount. F

71. Terry exchanges real estate (acquired on August 25, 2007) held for investment for other real estate to be held for investment on September 1, 2013. None of the realized gain of $10,000 is recognized, and Terry’s adjusted basis for the new real estate is a carryover basis of $80,000. Consequently, Terry’s holding period for the new real estate begins on August 25, 2007. T

72. If boot is received in a § 1031 like-kind exchange that results in some of the realized gain being recognized, the holding period for both the like-kind property and the boot received begins on the date of the exchange. F

73. If a taxpayer exchanges like-kind property under § 1031 and assumes a liability associated with the property received, the taxpayer is considered to have received boot in the transaction. F

74. An involuntary conversion results from the destruction (complete or partial), theft, seizure, requisition or condemnation, or the sale or exchange under threat or imminence of requisition or condemnation of the taxpayer’s property. T

75. Section 1033 (nonrecognition of gain from an involuntary conversion) applies to both gains and losses. F

76. The amount realized does not include any amount received by the taxpayer that is designated as severance damages by both the government and the taxpayer. T

77. Under the taxpayer-use test for a § 1033 involuntary conversion, the taxpayer has less flexibility in qualifying replacement property than under the functional-use test. F

78. Milt’s building which houses his retail sporting goods store is destroyed by a flood. Sandra’s warehouse which she is leasing to Milt to store the inventory of his business also is destroyed in the same flood. Both Milt and Sandra receive insurance proceeds that result in a realized gain. Sandra will have less flexibility than Milt in the type of building in which she can invest the proceeds and qualify for postponement treatment under § 1033 (nonrecognition of gain from an involuntary conversion). F

79. Sidney, a calendar year taxpayer, owns a building in Columbus, OH, in which he conducts his retail computer sales business. The building is destroyed by fire on December 12, 2013, and two weeks later he receives insurance proceeds of $600,000. Due to family ties, Sidney decides to move to Columbia, SC. He reinvests all of the insurance proceeds in a building in Columbia where he opens a retail computer sales business on April 2, 2014. By electing § 1033, Sidney has no recognized gain and a basis in the new building of $450,000 ($600,000 cost – $150,000 postponed gain). T

80. Dennis, a calendar year taxpayer, owns a warehouse (adjusted basis of $190,000) which is destroyed by a tornado in October 2013. He receives insurance proceeds of $250,000 in January 2014. If before 2017, Dennis replaces the warehouse with another warehouse costing at least $250,000, he can elect to postpone the recognition of any realized gain. T

81. If a taxpayer reinvests the net proceeds (amount received – related expenses) received in an involuntary conversion in qualifying replacement property within the statutory time period, it is possible to defer the recognition of the realized gain. T

82. The holding period of replacement property where the election to postpone gain is made includes the holding period of the involuntarily converted property. T

83. A realized gain on an indirect (conversion into money) involuntary conversion of business property can be postponed, but a realized loss on an indirect involuntary conversion of business property cannot be postponed. T

84. Gil’s office building (basis of $225,000 and fair market value $275,000) is destroyed by a hurricane. Due to a 30% co-insurance clause, Gil receives insurance proceeds of $192,500 two months after the date of the loss. One month later, Gil uses the insurance proceeds to purchase a new office building for $275,000. His adjusted basis for the new building is $307,500 ($275,000 cost + $32,500 postponed loss). F

85. Casualty losses and condemnation losses on the involuntary conversion of a personal residence receive the same tax treatment. F

86. If the recognized gain on an involuntary conversion equals the realized gain because of a reinvestment deficiency, the basis of the replacement property will be more than its cost (cost plus realized gain). F

87. If there is an involuntary conversion (i.e., casualty, theft, or condemnation) of the taxpayer’s principal residence, the realized gain may be postponed as a § 1033 involuntary conversion or excluded as a § 121 sale of a principal residence. T

88. The taxpayer must elect to have the exclusion of gain under § 121 (sale of principal residence) apply. F

89. At a particular point in time, a taxpayer can have two principal residences for § 121 exclusion purposes. F

90. To qualify for the § 121 exclusion, the property must have been used by the taxpayer for the 5 years preceding the date of sale and owned by the taxpayer as the principal residence for the last 2 of those years. F

91. A taxpayer who sells his or her principal residence at a realized loss can elect to recognize the loss even if a qualified residence is acquired during the statutory time period. F

92. Wyatt sells his principal residence in December 2013 and qualifies for the § 121 exclusion. He sells another principal residence in November 2014. Under no circumstance can Wyatt qualify for the § 121 exclusion on the sale of the second residence. F

93. Taxpayer owns a home in Atlanta. His company transfers him to Chicago on January 2, 2013, and he sells the Atlanta house in early February. He purchases a residence in Chicago on February 3, 2013. On December 15, 2013, taxpayer’s company transfers him to Los Angeles. In January 2014, he sells the Chicago residence and purchases a residence in Los Angeles. Because multiple sales have occurred within a two-year period, § 121 treatment does not apply to the sale of the second home. F

94. The maximum amount of the § 121 gain exclusion on sale of a principal residence is $250,000 for a single individual and $500,000 for a married couple. T

95. Deidra has owned and occupied her principal residence for 10 years. Two and one-half years ago she married Doug who moved into her house. Doug has never owned a home. When Deidra is transferred to another city, she sells the house and has a realized gain of $425,000. Deidra can exclude the realized gain of $425,000 from her gross income under § 121 if she and Doug file a joint return. T

96. Alex used the § 121 exclusion three months prior to his marriage to June. If June sells her principal residence four months after their marriage, she cannot use the § 121 exclusion. F

97. Kitty, who is single, sells her principal residence, which she has owned and occupied for 8 years, for $375,000. The adjusted basis is $64,000 and selling expenses are $22,000. She purchases another principal residence three months later for $200,000. Her recognized gain is $39,000 and her basis for the new principal residence is $200,000. T

98. Matt, who is single, sells his principal residence, which he has owned and occupied for 5 years, for $435,000. The adjusted basis is $140,000 and the selling expenses are $20,000. Three days after the sale he purchases another residence for $385,000. Matt’s recognized gain is $25,000 and his basis for the new residence is $385,000. T

99. A taxpayer whose principal residence is destroyed in a fire can use both the § 121 (sale of residence gain exclusion) and the § 1033 (involuntary conversion postponement of gain) provisions. T

100. Owen and Polly have been married for five years. Owen sells investment property to Polly for a realized gain of $140,000. Owen’s gain of $140,000 is not recognized and Polly’s basis for the property she purchased is her cost. F

101.Albert purchased a tract of land for $140,000 in 2010 when he heard that a new highway was going to be constructed through the property and that the land would soon be worth $200,000. Highway engineers surveyed the property and indicated that he would probably get $180,000. The highway project was abandoned in 2013 and the value of the land fell to $100,000. What is the amount of loss Albert can claim in 2013? A. $40,000.

B. $60,000.

C. $80,000.

D. $100,000.

E. None of the above.

102. Abby sells real property for $300,000. The buyer pays $5,000 in property taxes that had accrued during the year while the property was still legally owned by Abby. In addition, Abby pays $15,000 in commissions and $3,000 in legal fees in connection with the sale. How much does Abby realize (the amount realized) from the sale of her property?

C. $287,000.

103. Alice owns land with an adjusted basis of $610,000, subject to a mortgage of $350,000. Real estate taxes are $9,000 per calendar year and are payable on December 31. On April 1, 2013, Alice sells her land subject to the mortgage for $650,000 in cash, a note for $600,000, and property with a fair market value of $120,000. What is the amount realized?

D. $1,722,219.

104. Pedro borrowed $250,000 to purchase a machine costing $300,000. He later borrowed an additional $25,000 using the machine as collateral. Both notes are nonrecourse. Eight years later, the machine has an adjusted basis of zero and two outstanding note balances of $145,000 and $18,000. Pedro sells the machine subject to the two liabilities for $45,000. What is his realized gain or loss?

D. $208,000.

105. The bank forecloses on Lisa’s apartment complex. The property had been pledged as security on a nonrecourse mortgage, whose principal amount at the date of foreclosure is $750,000. The adjusted basis of the property is $480,000, and the fair market value is $750,000. What is Lisa’s recognized gain or loss?

A. $270,000.

106. Carlton purchases land for $550,000. He incurs legal fees of $10,000 and broker’s commission of $28,000 associated with the purchase. He subsequently incurs additional legal fees of $25,000 in having the land rezoned from agricultural to residential. He subdivides the land and installs streets and sewers at a cost of $800,000. What is Carlton’s basis for the land and the improvements?

D. $1,413,000.

107. Jamie bought her house in 2008 for $395,000. Since then, she has deducted $70,000 in depreciation associated with her home office and has spent $45,000 replacing all the old pipes and plumbing. She sells the house on July 1, 2013. Her realtor charged $34,700 in commissions. Prior to listing the house with the realtor, she spent $300 advertising in the local newspaper. Sammy buys the house for $500,000 in cash, assumes her mortgage of $194,000, and pays property taxes of $4,200 for the entire year on December 1, 2013. What is Jamie’s adjusted basis at the date of the sale and the amount realized?

B. $370,000 adjusted basis; $661,100 amount realized.

108. Yolanda buys a house in the mountains for $450,000 which she uses as her personal vacation home. She builds an additional room on the house for $40,000. She sells the property for $560,000 and pays $28,000 in commissions and $4,000 in legal fees in connection with the sale. What is the recognized gain or loss on the sale of the house?

B. $38,000.

109. On February 2, 2013, Karin purchases real estate for $375,000. The annual property taxes of $5,000 are payable on December 31. Realizing that she will pay the property taxes for the entire year, Karin remits $374,575 to the seller at closing. Karin’s adjusted basis for the real estate is:

B. $375,000.

110. Capital recoveries include:

D. Amortization of bond premium.

111. Steve purchased his home for $500,000. As a sole proprietor, he operates a certified public accounting practice in his home. For this business, he uses one room exclusively and regularly as a home office. In Year 1, $3,042 of depreciation expense on the home office was deducted on his income tax return. In Year 2, Steve sustained losses in his business; therefore, no depreciation was taken on the home office. Had he been allowed to deduct depreciation expense, his depreciation expense would have been $3,175. What is the adjusted basis in the home?

A. $493,783.

112. Sandra’s automobile, which is used exclusively in her trade or business, was damaged in an accident. The adjusted basis prior to the accident was $11,000. The fair market value before the accident was $10,000 and the fair market value after the accident is $6,000. Insurance proceeds of $3,200 are received. What is Sandra’s adjusted basis for the automobile after the casualty?

B. $7,000.

113. Joyce’s office building was destroyed in a fire (adjusted basis of $350,000; fair market value of $400,000). Of the insurance proceeds of $360,000 she receives, Joyce uses $310,000 to purchase additional inventory and invests the remaining $50,000 in short-term certificates of deposit. She received only $360,000 because of a co-insurance clause in her insurance policy. What is Joyce’s recognized gain or loss?

C. $10,000 gain.

114. Elvis owns all of the stock of White Corporation. The accumulated earnings and profits of White Corporation at the beginning of the year are a deficit of $20,000. The current earnings and profits are $30,000. Elvis’ basis for his stock is $250,000. He receives a distribution of $300,000 on the last day of the tax year. How much dividend income and/or capital gain should Elvis report?

B. Dividend income of $30,000 and capital gain of $20,000.

117. A strip along the boundary of Joy’s land is condemned for a utility easement. She receives a payment of $7,500 from the utility company. Her basis in the land is $80,000. Which of the following is correct?

B. Joy must reduce the basis of the land by $7,500.

118. Katie sells her personal use automobile for $12,000. She purchased the car three years ago for $25,000. What is Katie’s recognized gain or loss?

A. $0.

119. Noelle owns an automobile which she uses for personal use. Her adjusted basis is $45,000 (i.e., the original cost). The car is worth $22,000. Which of the following statements is correct?

A. If Noelle sells the car for $22,000, her realized loss of $23,000 is not recognized.

B. If Noelle exchanges the car for another car worth $22,000, her realized loss of $23,000 is not recognized.

C. If the car is stolen and it is uninsured, Noelle may be able to recognize part of her realized loss of $23,000.

E. a., b., and c. are correct.

120. Mary sells her personal use automobile for $20,000. She purchased the car two years ago for $17,000. What is Mary’s recognized gain or loss? It increased in value due to its excellent mileage, yet safe design.

B. $3,000.

121. Which of the following statements is F?

A. A realized gain that is never recognized results in the temporary recovery of more than the taxpayer’s cost or other basis for tax purposes.

122. Nat is a salesman for a real estate developer. His employer permits him to purchase a lot for $75,000. The employer’s adjusted basis for the lot is $45,000, and its normal selling price is $90,000.

What is Nat’s recognized gain and his basis for the lot? Recognized gain Basis

D. $15,000 $ 90,000

123. Over the past 20 years, Alfred has purchased 380 shares of Green, Inc., common stock. His first purchase was in 1992 when he acquired 30 shares for $20 a share. In 1997, Alfred bought 150 shares at $10 a share. In 2012, Alfred acquired 200 shares at $50 a share. Alfred intends to sell 125 shares at $60 per share in the current year (2013). If Alfred’s objective is to minimize gain, what is his recognized gain?

A. $1,250.

124. Mona purchased a business from Judah for $1,000,000. Judah’s records and an appraiser provided her with the following information regarding the assets purchased:

Adjusted Basis FMV

Land $195,000 $270,000

Building 310,000 450,000

Equipment 95,000 180,000

What is Mona’s adjusted basis for the land, building, and equipment?

A. Land $270,000, building $450,000, equipment $180,000.

125. Nontaxable stock dividends result in:

B. A lower cost per share for all shares than before the stock dividend.

126. Kevin purchased 5,000 shares of Purple Corporation stock at $10 per share. Two years later, he receives a 5% common stock dividend. At that time, the common stock of Purple Corporation had a fair market value of $12.50 per share. What is the basis of the Purple Corporation stock, the per share basis, and gain recognized upon receipt of the common stock dividend?

B. $50,000 basis in stock, $9.52 basis per share, $0 recognized gain.

127. Etta received nontaxable stock rights on October 3, 2013. She allocated $16,000 of the $50,000 basis for the associated stock to the stock rights. The stock rights are exercised on November 8, 2013. The exercise price for the stock is $52,000. What is Etta’s basis for the acquired stock?

D. $68,000.

128. Mike’s basis in his stock in Tan Corporation is $75,000. He receives nontaxable stock rights (fair market value of $20,000) when the value of the stock is $100,000. What is the basis for the stock rights?

B. $12,500.

129. Which of the following statements is correct?

B. If the fair market value of stock rights is equal to at least 15% of the fair market value of the stock, part of the stock basis must be allocated to nontaxable stock rights.

130. In 2009, Harold purchased a classic car that he planned to restore for $12,000. However, Harold is too busy to work on the car and he gives it to his daughter Julia in 2013. At this time, the fair market value of the car has declined to $10,000. Harold paid no gift tax on the transaction. Julia completes some of the restoration herself with out-of-pocket costs of $5,000. She later sells the car for $30,000. What is Julia’s recognized gain or loss on the sale of the car?

B. $13,000.

131. Ralph gives his daughter, Angela, stock (basis of $8,000; fair market value of $6,000). No gift tax results. If Angela subsequently sells the stock for $10,000, what is her recognized gain or loss?

B. $2,000.

132. Gift property (disregarding any adjustment for gift tax paid by the donor):

B. Has the same basis to the donee as the donor’s adjusted basis if the donee disposes of the property at a gain.

133. Shontelle received a gift of income-producing property with an adjusted basis of $49,000 to the donor and fair market value of $35,000 on the date of gift. Gift tax of $6,000 was paid by the donor. Shontelle subsequently sold the property for $31,000. What is the recognized gain or loss?

B. ($4,000).

134. Rob was given a residence in 2013. At the time of the gift, the residence had a fair market value of $201,000, and its adjusted basis to the donor was $141,000. The donor paid a gift tax of $10,000 on the taxable gift of $187,000. What is Rob’s basis for gain?

B. $144,200.

135. In addition to other gifts, Megan made a gift of stock to Jeri in 1976. Megan had purchased the stock in 1974 for $7,500. At the time of the gift, the stock was worth $20,000. If Megan paid $850 of gift tax on the transaction in 1976, what is Jeri’s gain basis for the stock?

B. $8,350.

136. Noelle received dining room furniture as a gift from her friend, Jane. Jane’s adjusted basis was $9,200 and the fair market value on the date of the gift was $7,000. Noelle decided she did not need the furniture and sold it to a neighbor six months later for $6,500. What is her recognized gain or loss?

A. $0.

137. The holding period of property acquired by gift may begin on:

C. Either the date the property was acquired by the donor or the date of gift.

138. Nancy gives her niece a crane to use in her business with a fair market value of $61,000 and a basis in Nancy’s hands of $80,000. No gift tax was paid. What is the niece’s basis for depreciation (cost recovery)?

D. $80,000.

139. Which of the following is correct?

A. The gain basis for property received by gift is the lesser of the donor’s adjusted basis or the fair market value on the date of the gift.

B. The loss basis for property received by gift is the same as the donor’s basis.

C. The gain basis for inherited property is the same as the decedent’s basis.

D. The loss basis for inherited property is the lesser of the decedent’s basis or the fair market value on the date of the decedent’s death.

E. None of the above.

140. Tobin inherited 100 acres of land on the death of his father in 2013. A Federal estate tax return was filed and the land was valued at $300,000 (its fair market value at the date of the death). The father had originally acquired the land in 1970 for $19,000 and prior to his death had made permanent improvements of $6,000. What is Tobin’s basis in the land?

C. $300,000.

141. Al owns stock with an adjusted basis of $100,000 and a fair market value of $300,000. He gives the stock to Jane on July 1, 2012. When Jane dies, the fair market value of the stock is $900,000. Jane’s will provides that Al is to receive the stock. Which of the following is F?

C. If Jane dies on June 15, 2013, Al’s basis is $300,000.

142. Emma gives 1,000 shares of Green, Inc. stock to her niece, Margaret. Emma’s adjusted basis for the stock is $200,000 and the fair market value is $300,000. Seven months after the gift, Margaret is killed in an airplane accident. Emma inherits the stock which then is worth $350,000. What is the adjusted basis of the inherited stock to Emma?

B. $200,000.

143. Neal and his wife Faye reside in Texas, a community property state. Their community property consists of real estate (adjusted basis of $800,000; fair market value of $6 million) and personal property (adjusted basis of $390,000; fair market value of $295,000). Neal dies first and leaves his estate to Faye. What is Faye’s basis in the property after Neal’s death?

D. $6,000,000 real estate and $295,000 personal property.

144. Robert and Diane, husband and wife, live in Pennsylvania, a common law state. They purchased land as joint tenants in 2009 for $300,000. In 2013, Diane dies and bequeaths her share of the land to Robert. The land has a fair market value of $450,000. What is Robert’s adjusted basis for the land?

B. $375,000.

145. Taylor inherited 100 acres of land on the death of his father in 2013. A Federal estate tax return was filed and this land was valued therein at $650,000, its fair market value at the date of the father’s death. The father had originally acquired the land in 1967 for $112,000 and prior to his death he had expended $20,000 on permanent improvements. Determine Taylor’s holding period for the land.

B. Will automatically be long-term.

146. Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4, 2013, the date of the decedent’s death. The executor distributes the land to Kelly on November 12, 2013, at which time the fair market value is $49,000. The fair market value on February 4, 2014, is $45,000. In filing the estate tax return, the executor elects the alternate valuation date. Kelly sells the land on June 10, 2014, for $48,000. What is her recognized gain or loss?

A. ($1,000).

147. Arthur owns a tract of undeveloped land (adjusted basis of $145,000) which he sells to his son, Ned, for its fair market value of $105,000. What is Arthur’s recognized gain or loss and Ned’s basis in the land?

A. $0 and $105,000.

148. Paul sells property with an adjusted basis of $45,000 to his daughter Dean, for $38,000. Dean subsequently sells the property to her brother, Preston, for $38,000. Three years later, Preston sells the property to Hun, an unrelated party, for $50,000. What is Preston’s recognized gain or loss on the sale of the property to Hun?

C. $12,000.

149. Karen purchased 100 shares of Gold Corporation stock for $11,500 on January 1, 2010. In the current tax year (2013), she sells 25 shares of the 100 shares purchased on January 1, 2010, for $2,500. Twenty-five days earlier, she had purchased 30 shares for $3,000. What is Karen’s recognized gain or loss on the sale of the stock, and what is her basis in the 30 shares purchased 25 days earlier?

C. $0 recognized loss, $3,375 basis in new stock.

150. Andrew acquires 2,000 shares of Eagle Corporation stock for $100,000 on March 31, 2009. On January 1, 2013, he sells 125 shares for $5,000. On January 22, 2013, he purchases 135 shares of Eagle Corporation stock for $6,075. When does Andrew’s holding period begin for the 135 shares?

D. March 31, 2009, for 125 shares and January 22, 2013, for 10 shares.

151. The basis of personal use property converted to business use is:

A. Always the lower of its adjusted basis or fair market value on the date of conversion.

B. Always its adjusted basis on the date of conversion.

C. Always its fair market value on the date of conversion.

D. Always the higher of its adjusted basis or fair market value on the date of conversion.

E. None of the above.

152. Lynn purchases a house for $52,000. She converts the property to rental property when the fair market value is $115,000. After deducting depreciation (cost recovery) expense of $1,130, she sells the house for $120,000. What is her recognized gain or loss?

D. $69,130.

153. Which of the following statements is correct?

C. In a tax-free transaction in which gain is realized, the transaction results in the permanent recovery of more than the taxpayer’s cost or other basis for tax purposes.

154. In order to qualify for like-kind exchange treatment under § 1031, which of the following requirements must be satisfied?

B. Both the property transferred and the property received are held either for productive use in a trade or business or for investment.

155. Which, if any, of the following exchanges qualifies for nonrecognition treatment as a § 1031 like-kind exchange?

D. Business realty for investment realty.

156. Brett owns investment land located in Tucson, Arizona. He exchanges it for other investment land. In which of the following locations may the other investment land be located and enable Brett to qualify for § 1031 like-kind exchange treatment?

A. Mexico City, Mexico.

B. Toronto, Canada.

C. Paris, France.

D. Only a. and b.

E. None of the above.

157. Lily exchanges a building she uses in her rental business for a building owned by Kendall, her brother, which she will use in her rental business. The adjusted basis of Lily’s building is $120,000 and the fair market value is $170,000. Which of the following statements is correct?

C. Lily’s recognized gain is $0 and her basis for the building received is $120,000.

158. Latisha owns a warehouse with an adjusted basis of $200,000. She exchanges it for a strip mall building worth $225,000. Which of the following statements is correct?

B. If the warehouse was used in Latisha’s business to store inventory and the strip mall building is to be used as a retail outlet for her business, her recognized gain is $0 and her basis for the strip mall building is $200,000.

C. If the warehouse is used by Latisha to store personal use items such as excess furniture and the strip mall building is to be rented to tenants, her recognized gain is $25,000 and her basis for the strip mall building is $225,000.

D. Only b. and c. are correct.

159. Which of the following statements is correct?

A. The receipt of boot in a § 1031 like-kind exchange can result in the recognition of gain.

B. The receipt of boot in a § 1031 like-kind exchange cannot result in the recognition of loss.

C. The giving of boot in a § 1031 like-kind exchange can result in the recognition of gain.

E. a., b., and c.

160. Bud exchanges a business use machine with an adjusted basis of $22,000 and a fair market value of $30,000 for another business use machine with a fair market value of $28,000 and $2,000 cash. What is Bud’s recognized gain or loss?

B. $2,000.

161. Maud exchanges a rental house at the beach with an adjusted basis of $225,000 and a fair market value of $200,000 for a rental house at the mountains with a fair market value of $180,000 and cash of $20,000. What is the recognized gain or loss?

A. $0.

162. Melvin receives stock as a gift from his uncle. No gift tax is paid. The adjusted basis of the stock is $30,000 and the fair market value is $38,000. Melvin trades the stock for bonds with a fair market value of $35,000 and $3,000 cash. What is his recognized gain and the basis for the bonds?

E. None of the above.

163. Moss exchanges a warehouse for a building he will use as an office building. The adjusted basis of the warehouse is $600,000 and the fair market value of the office building is $350,000. In addition, Moss receives cash of $150,000. What is the recognized gain or loss and the basis of the office building?

B. $0 and $450,000.

164. Pam exchanges a rental building, which has an adjusted basis of $520,000, for investment land which has a fair market value of $700,000. In addition, Pam receives $100,000 in cash. What is the recognized gain or loss and the basis of the investment land?

C. $100,000 and $520,000.

165. If boot is received in a § 1031 like-kind exchange and gain is recognized, which formula correctly calculates the basis for the like-kind property received?

D. Only a. and c.

166. In determining the basis of like-kind property received, postponed losses are:

C. Added to the fair market value of the like-kind property received.

167. Molly exchanges a small machine (adjusted basis of $85,000; fair market value of $78,000) used in her business and investment land (adjusted basis of $10,000; fair market value of $15,000) for a large machine (fair market value of $93,000) to be used in her business in a like-kind exchange. What is Molly’s recognized gain or loss?

B. $5,000.

168. In October 2013, Ben and Jerry exchange investment realty in a § 1031 like-kind exchange. Ben bought his real estate in 2003 while Jerry purchased his in 2006. In addition to the realty, Ben receives Pearl, Inc. stock worth $10,000 from Jerry. Ben’s realized gain is $30,000. On what date does the holding period for Ben’s realty received from Jerry begin? When does the holding period for the stock he receives begin?

A. 2003, 2013.

169. Dena owns 500 acres of farm land in southeastern Maryland. Her adjusted basis for the land is $480,000 and there is a $400,000 mortgage on the land. She exchanges the land for an office building owned by Chris in Newark, New Jersey. The building has a fair market value of $900,000. Chris assumes Dena’s mortgage on the land. What is the amount of Dena’s recognized gain or loss on the exchange?

B. $400,000.

170. On October 1, Paula exchanged an apartment building (adjusted basis of $375,000 and subject to a mortgage of $125,000) for another apartment building owned by Nick (fair market value of $550,000 and subject to a mortgage of $125,000). The property transfers were made subject to the mortgages. What amount of gain should Paula recognize?

A. $0.

171. Nancy and Tonya exchanged assets. Nancy gave Tonya her personal residence with an adjusted basis of $280,000 and a fair market value of $560,000. The house has a mortgage of $200,000 which is assumed by Tonya. Tonya gave Nancy a yacht used in her business with an adjusted basis of $250,000 and a fair market value of $360,000. What is Tonya’s realized and recognized gain?

C. $110,000 realized and $110,000 recognized gain.

172. If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion), makes the appropriate election, and the amount reinvested in replacement property is less than the amount realized, realized gain is:

A. Recognized to the extent of the deficiency (amount realized not reinvested).

173. Joyce, a farmer, has the following events occur during the tax year. Which of the events qualify as an involuntary conversion under § 1033 (nonrecognition of gain from an involuntary conversion)?

C. Her personal residence, adjusted basis of $100,000, is condemned to make way for an interstate highway. She recovers condemnation proceeds of $175,000.

174. Betty owns a horse farm with 500 acres of land (adjusted basis of $600,000). Fifty acres of the land are condemned by the state for $400,000 in order to build a municipal stadium. Since the fair market value of Betty’s farm is significantly decreased by the proximity to the future stadium, the state awards Betty $300,000 in severance damages. Betty does not use the $300,000 to restore the usefulness of the farm and all of the $700,000 ($400,000 + $300,000) proceeds are invested in the stock market. What is her recognized gain or loss associated with the receipt of the severance damages?

A. $0.

175. An office building with an adjusted basis of $320,000 was destroyed by fire on December 30, 2013. On January 11, 2014, the insurance company paid the owner $450,000. The fair market value of the building was $500,000, but under the co-insurance clause, the insurance company is responsible for only 90 percent of the loss. The owner reinvested $410,000 in a new office building on February 12, 2014, that was smaller than the original office building. What is the recognized gain and the basis of the new building if § 1033 (nonrecognition of gain from an involuntary conversion) is elected?

C. $40,000 and $320,000.

176. Which of the following statements is correct with respect to qualified replacement property in a § 1033 involuntary conversion?

C. If the like-kind exchange test applies, a building used by the taxpayer for manufacturing can be replaced with an office building to be used in the taxpayer’s business.

177. Jared, a fiscal year taxpayer with a August 31st year-end, owns an office building (adjusted basis of $800,000) that was destroyed by fire on December 24, 2013. If the insurance settlement was $950,000 (received March 1, 2014), what is the latest date that Jared can replace the office building in order to qualify for § 1033 nonrecognition of gain?

D. August 31, 2016.

178. Which of the following statements is correct for a § 1033 involuntary conversion of an office building which is destroyed by fire?

A. An election can be made to postpone gain on a § 1033 involuntary conversion only if the proceeds received are reinvested in qualifying property no later than two years after the end of the tax year in which a proceeds inflow is received that is large enough to produce a realized gain.

B. The postponement of realized gain in a § 1033 involuntary conversion is elective.

C. The functional use test is satisfied if a business warehouse is replaced with another business warehouse.

D. The taxpayer use test is satisfied if a shopping mall rented to tenants is replaced with an office building to be rented to tenants.

E. All of the above are correct.

179. Which of the following satisfy the time period requirement for postponement of gain as a § 1033 (nonrecognition of gain from an involuntary conversion) involuntary conversion?

A. Al’s business warehouse is destroyed by a tornado on October 31, 2013. Al is a calendar year taxpayer. He receives insurance proceeds on December 5, 2013. He reinvests the proceeds in another warehouse to be used in his business on December 29, 2013.

B. Heather’s personal residence is destroyed by fire on October 31, 2013. She is a calendar year taxpayer. She receives insurance proceeds on December 5, 2013. She purchases another principal residence with the proceeds on October 31, 2013.

C. Mack’s office building is condemned by the city as part of a road construction project. The date of the condemnation is October 31, 2013. He is a calendar year taxpayer. He receives condemnation proceeds from the city on that date. He purchases another office building with the proceeds on December 5, 2016.

D. Lizzy’s business automobile is destroyed in an accident on October 31, 2013. Lizzy is a fiscal year taxpayer with the fiscal year ending on June 30th. She receives insurance proceeds on December 5, 2013. She purchases another business automobile with the proceeds on June 1, 2016.

E. All of the above.

180. Sam’s office building with an adjusted basis of $750,000 and a fair market value of $900,000 is condemned on November 30, 2013. Sam is a calendar year taxpayer. He receives a condemnation award of $875,000 on March 1, 2014. He builds a new office building at a cost of $845,000 which is completed and paid for on December 31, 2016. What is Sam’s recognized gain on receipt of the condemnation award and basis for the new office building assuming his objective is to minimize gain recognition?

B. $30,000; $750,000.

181. A factory building owned by Amber, Inc. is destroyed by a hurricane. The adjusted basis of the building was $400,000 and the appraised value was $425,000. Amber receives insurance proceeds of $390,000. A factory building is constructed during the nine-month period after the hurricane at a cost of $450,000. What is the recognized gain or loss and what is the basis of the new factory building?

D. ($10,000) and $450,000.

182. If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion) and the amount reinvested in replacement property exceeds the amount realized, the basis of the replacement property is:

C. The cost of the replacement property minus the postponed gain.

183. Myrna’s personal residence (adjusted basis of $100,000) was condemned, and she received a condemnation award of $80,000. Myrna used the condemnation proceeds to purchase a new residence for $90,000. What is her recognized gain or loss and her basis in the new residence?

B. $0; $90,000.

184. Fran was transferred from Phoenix to Atlanta. She sold her Phoenix residence (adjusted basis of $250,000) for a realized loss of $50,000 and purchased a new residence in Atlanta for $375,000. Fran had owned and lived in the Phoenix residence for 6 years. What is Fran’s recognized gain or loss on the sale of the Phoenix residence and her basis for the residence in Atlanta?

A. $0 and $375,000.

185. Evelyn, a calendar year taxpayer, lists her principal residence with a realtor on February 7, 2013, enters into a contract to sell on July 12, 2013, and sells (i.e., the closing date) the residence on August 1, 2013. The realized gain on the sale is $225,000. Which date is the appropriate ending date in determining if the residence has been owned and used by the Evelyn as the principal residence for at least two years during the prior five-year period?

C. August 1, 2013.

186. During 2013, Howard and Mabel, a married couple, decided to sell their residence. The residence has a basis of $162,000 and has been owned and occupied by them for 11 years. The house was sold in May for $395,000 with broker’s commissions and other selling expenses being $24,000. They purchased a new residence in June for $400,000. What is the adjusted basis of the new residence?

E. None of the above.

187. During 2013, Ted and Judy, a married couple, decided to sell their residence, which had a basis of $300,000. They had owned and occupied the residence for 20 years. To make it more attractive to prospective buyers, they had the outside painted in April at a cost of $6,000 and paid for the work immediately. They sold the house in May for $880,000. Broker’s commissions and other selling expenses amounted to $53,000. Since they both are age 68, they decide to rent an apartment. They purchase an annuity with the net proceeds from the sale. What is the recognized gain?

C. $27,000.

188. During 2013, Zeke and Alice, a married couple, decided to sell their residence, which had a basis of $200,000. They had owned and occupied the residence for 20 years. To make it more attractive to prospective buyers, they had the inside painted in April at a cost of $5,000 and paid for the work immediately. They sold the house in May for $800,000. Broker’s commissions and other selling expenses amounted to $50,000. They purchased a new residence in July for $400,000. What is the recognized gain and the adjusted basis of the new residence?

B. $50,000 and $400,000.

189. Carl sells his principal residence, which has an adjusted basis of $150,000 for $200,000. He incurs selling expenses of $20,000 and legal fees of $2,000. He had purchased another residence one month prior to the sale for $380,000. What is the recognized gain or loss and the basis of the replacement residence if the taxpayer elects to forgo the § 121 exclusion (exclusion of gain on sale of principal residence)?

D. $28,000 and $380,000.

190. Ross lives in a house he received as a gift from his father. His father had lived in the house for 12 years. The adjusted basis of the house to his father was $160,000 and the fair market value at the time of the gift was $140,000. Ross sells this residence after living in it for 18 months for $150,000 and purchases a new home for $125,000. He incurs selling expenses of $7,000. What is Ross’ recognized gain or loss and basis for the new residence?

E. None of the above.

191. Paula inherits a home on July 1, 2013, that had a basis in the hands of the decedent at death of $290,000 and a fair market value of $500,000 at the date of the decedent’s death. She decides to sell her old principal residence, which she has owned and occupied for 9 years, with an adjusted basis of $125,000 and move into the inherited home. On September 16, 2013, she sells the old residence for $600,000. Paula incurs selling expenses of $30,000 and legal fees of $2,000. She decides to add a pool, deck, pool house, and recreation room to the inherited home at a cost of $100,000. These additions are completed and paid for on November 1, 2013. What is her recognized gain on the sale of her old principal residence and her basis in the inherited home?

B. $193,000; $600,000.

192. Weston sells his residence to Joanne on October 15, 2013. Indicate which of the following statements is correctly associated with § 121 (exclusion of gain on sale of principal residence).

C. Capital expenditures made by the seller prior to the sale increase the seller’s adjusted basis and have no effect on the buyer’s adjusted basis.

193. Eric and Faye, who are married, jointly own a house in which they have resided for the past 17 years. They sell the house for $375,000 with realtor’s fees of $10,000. Their adjusted basis for the house is $80,000. Since they are in their retirement years, they plan on moving around the country and renting. What is their recognized gain on the sale of the residence if they use the § 121 exclusion (exclusion of gain on sale of principal residence) and if they elect to forgo the § 121 exclusion?

With exclusion Elect to forgo

C. $0 $285,000

194. Lenny and Beverly have been married and living together in Lenny’s home for 6 years. He lived in the home alone for 20 years prior to their marriage. They sell the home, which has an adjusted basis of $120,000, for $700,000. Lenny and Beverly plan to use the § 121 exclusion (exclusion of gain on sale of principal residence). In Beverly’s prior marriage to Dan, Dan sold his principal residence and used the § 121 exclusion. Beverly and Dan filed joint returns during their seven years of marriage. They had lived in Dan’s house throughout their marriage. Dan’s sale had occurred one year prior to the divorce. Lenny and Beverly purchase a replacement residence for $650,000 one month after the sale. What is the recognized gain and basis for the new home?

C. $80,000; $650,000.

195. Which of the following is incorrect?

B. The deferral of realized gain on an indirect (into cash and then into qualified property) § 1033 involuntary conversion is mandatory.

196. Which of the following types of exchanges of insurance contracts qualify for nonrecognition treatment under § 1035?

A. Exchange of life insurance contracts.

B. Exchange of a life insurance contract for an endowment or annuity contract.

C. Exchange of an endowment contract for an annuity contract.

E. a., b., and c.

197. Which of the following types of transactions qualify for nonrecognition treatment?

B. Investment of the proceeds from the sale of the stock of a publicly traded company in the common stock of a specialized small business investment company (SSBIC) within 60 days of the sale.

C. Investment of proceeds from the sale of qualified small business stock in another qualified small business stock within 60 days of the sale.

D. Only b. and c.

198. As part of the divorce agreement, Tyler transfers his ownership interest in their personal residence to Lupe. The house had been jointly owned by Tyler and Lupe and the adjusted basis is $520,000. At the time of the transfer to Lupe, the fair market value is $800,000. What is the recognized gain to Tyler, and what is Lupe’s basis for the house?

A. $0 and $520,000.

199. Which of the following statements is correct with respect to § 1044 (rollover of publicly traded securities gain into specialized small business investment companies)?

E. None of the above.

200. Which of the following might motivate a taxpayer to try to avoid like-kind exchange treatment? A. Taxpayer has unused NOL

carryovers.

B. Taxpayer has unused general business credit carryovers.

C. Taxpayer has suspended or current passive activity losses.

E. a., b., and c. are correct.