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CPA Regulation Reg Quiz

CPA Regulation Reg Quiz: Gain Loss On Disposition Of Property

Practice Gain Loss On Disposition Of Property in CPA Regulation Reg with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

Question 1 / 12

0 of 12 answered

An individual purchased a personal residence for 500,000andlatermadekitchenrenovationscosting500,000 and later made kitchen renovations costing 500,000andlatermadekitchenrenovationscosting40,000 that are capital improvements. The taxpayer sold the home for 575,000andpaid575,000 and paid 575,000andpaid35,000 in selling expenses. Determine the adjusted basis and resulting gain or loss for tax purposes.

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What this quiz covers

This quiz focuses on Gain Loss On Disposition Of Property, giving you a quick way to practice the rules, question types, and explanations that matter most for CPA Regulation Reg.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

An individual purchased a personal residence for 500,000andlatermadekitchenrenovationscosting500,000 and later made kitchen renovations costing 500,000andlatermadekitchenrenovationscosting40,000 that are capital improvements. The taxpayer sold the home for 575,000andpaid575,000 and paid 575,000andpaid35,000 in selling expenses. Determine the adjusted basis and resulting gain or loss for tax purposes.

  1. Gain of $0 (correct answer)
  2. Gain of $35,000
  3. Gain of $75,000
  4. Loss of $35,000

Explanation: This question tests gain/loss calculation on the sale of a personal residence. The key facts are: purchase price of 500,000,capitalimprovementsof500,000, capital improvements of 500,000,capitalimprovementsof40,000, sale price of 575,000,andsellingexpensesof575,000, and selling expenses of 575,000,andsellingexpensesof35,000. The correct answer applies IRC Section 1001 to determine the gain. Adjusted basis = 500,000+500,000 + 500,000+40,000 = 540,000;Amountrealized=540,000; Amount realized = 540,000;Amountrealized=575,000 - 35,000=35,000 = 35,000=540,000; Gain = 540,000−540,000 - 540,000−540,000 = $0. Answer B incorrectly ignores selling expenses; Answer C grossly miscalculates; Answer D incorrectly shows a loss. The transferable framework is: When amount realized equals adjusted basis, the gain is zero.

Question 2

A taxpayer completes a Section 1031 like-kind exchange of investment real estate. The taxpayer transfers property with an adjusted basis of 150,000andafairmarketvalueof150,000 and a fair market value of 150,000andafairmarketvalueof210,000, and receives replacement property worth 195,000plus195,000 plus 195,000plus15,000 cash. Determine the adjusted basis and resulting gain or loss for tax purposes.

  1. Recognized gain of $15,000 (correct answer)
  2. Recognized gain of $60,000
  3. Recognized gain of $0
  4. Recognized loss of $15,000

Explanation: This question tests Section 1031 like-kind exchange treatment with boot received. The key facts are: adjusted basis of 150,000,FMVofpropertygivenupof150,000, FMV of property given up of 150,000,FMVofpropertygivenupof210,000, replacement property worth 195,000,andcashbootof195,000, and cash boot of 195,000,andcashbootof15,000. Under IRC Section 1031, gain is recognized to the extent of boot received, but not exceeding realized gain. Realized gain = 210,000−210,000 - 210,000−150,000 = 60,000;Recognizedgain=lesserofbootreceived(60,000; Recognized gain = lesser of boot received (60,000;Recognizedgain=lesserofbootreceived(15,000) or realized gain (60,000)=60,000) = 60,000)=15,000. Answer B incorrectly recognizes the full realized gain; Answer C incorrectly states no recognition; Answer D incorrectly shows a loss. The transferable rule is: In Section 1031 exchanges, recognized gain equals the lesser of boot received or realized gain.

Question 3

A corporation purchased equipment for 95,000andclaimed95,000 and claimed 95,000andclaimed65,000 of accumulated depreciation. The corporation sold the equipment for 40,000andpaid40,000 and paid 40,000andpaid2,000 in selling costs. Based on the provided details, what is the taxpayer's gain or loss on disposition?

  1. Recognized gain of $8,000 (correct answer)
  2. Recognized gain of $10,000
  3. Recognized loss of $8,000
  4. Recognized loss of $55,000

Explanation: This question tests gain/loss calculation on the disposition of depreciated business equipment. The key facts are: original cost of 95,000,accumulateddepreciationof95,000, accumulated depreciation of 95,000,accumulateddepreciationof65,000, sale price of 40,000,andsellingcostsof40,000, and selling costs of 40,000,andsellingcostsof2,000. The correct answer follows IRC Sections 1001 and 1016 for basis adjustments. Adjusted basis = 95,000−95,000 - 95,000−65,000 = 30,000;Amountrealized=30,000; Amount realized = 30,000;Amountrealized=40,000 - 2,000=2,000 = 2,000=38,000; Gain = 38,000−38,000 - 38,000−30,000 = $8,000. Answer B slightly miscalculates the gain; Answer C and D incorrectly show losses when there is actually a gain. The transferable rule is: For depreciated property, Gain = (Sale Price - Selling Costs) - (Original Cost - Accumulated Depreciation).

Question 4

An investor purchased commercial land for 300,000andlateraddedsiteimprovementsthatarecapitalizedtolandof300,000 and later added site improvements that are capitalized to land of 300,000andlateraddedsiteimprovementsthatarecapitalizedtolandof40,000. The investor sold the land for 390,000andpaid390,000 and paid 390,000andpaid18,000 in selling costs. Determine the adjusted basis and resulting gain or loss for tax purposes.

  1. Recognized gain of $32,000 (correct answer)
  2. Recognized gain of $50,000
  3. Recognized gain of $72,000
  4. Recognized loss of $32,000

Explanation: This question tests gain/loss calculation on the sale of commercial land with improvements. The key facts are: purchase price of 300,000,siteimprovementsof300,000, site improvements of 300,000,siteimprovementsof40,000, sale price of 390,000,andsellingcostsof390,000, and selling costs of 390,000,andsellingcostsof18,000. The correct answer applies IRC Section 1001, recognizing that land improvements are capitalized to the land's basis. Adjusted basis = 300,000+300,000 + 300,000+40,000 = 340,000;Amountrealized=340,000; Amount realized = 340,000;Amountrealized=390,000 - 18,000=18,000 = 18,000=372,000; Gain = 372,000−372,000 - 372,000−340,000 = $32,000. Answer B incorrectly ignores selling costs; Answer C incorrectly calculates the gain; Answer D incorrectly shows a loss. The transferable principle for land sales is: Gain = (Sale Price - Selling Costs) - (Purchase Price + Capitalized Improvements).

Question 5

A taxpayer completes a Section 1031 like-kind exchange of investment real estate. The taxpayer transfers property with an adjusted basis of 500,000andafairmarketvalueof500,000 and a fair market value of 500,000andafairmarketvalueof640,000, and receives replacement property worth 620,000plus620,000 plus 620,000plus20,000 cash. What is the recognized gain or loss on the sale of the property?

  1. Recognized gain of $20,000 (correct answer)
  2. Recognized gain of $140,000
  3. Recognized gain of $0
  4. Recognized loss of $20,000

Explanation: This question tests Section 1031 like-kind exchange rules with boot received. The key facts are: adjusted basis of 500,000,FMVofpropertygivenupof500,000, FMV of property given up of 500,000,FMVofpropertygivenupof640,000, replacement property worth 620,000,andcashbootof620,000, and cash boot of 620,000,andcashbootof20,000. Under IRC Section 1031, gain is recognized to the extent of boot received, limited by realized gain. Realized gain = 640,000−640,000 - 640,000−500,000 = 140,000;Recognizedgain=lesserofbootreceived(140,000; Recognized gain = lesser of boot received (140,000;Recognizedgain=lesserofbootreceived(20,000) or realized gain (140,000)=140,000) = 140,000)=20,000. Answer B incorrectly recognizes the entire realized gain; Answer C incorrectly states no gain when boot is received; Answer D incorrectly shows a loss. The transferable rule for Section 1031 is: When boot is received, recognize gain equal to the lesser of boot or realized gain.

Question 6

A taxpayer owns investment real estate and completes a Section 1031 like-kind exchange. The taxpayer transfers property with an adjusted basis of 260,000andafairmarketvalueof260,000 and a fair market value of 260,000andafairmarketvalueof420,000, and receives like-kind replacement property worth 405,000plus405,000 plus 405,000plus15,000 cash. Based on the provided details, what is the taxpayer's recognized gain or loss on disposition?

  1. Recognized gain of $15,000 (correct answer)
  2. Recognized gain of $160,000
  3. Recognized gain of $0
  4. Recognized loss of $15,000

Explanation: This question tests the application of Section 1031 like-kind exchange rules with boot received. The key facts are: adjusted basis of 260,000,FMVofpropertygivenupof260,000, FMV of property given up of 260,000,FMVofpropertygivenupof420,000, replacement property worth 405,000,andcashbootreceivedof405,000, and cash boot received of 405,000,andcashbootreceivedof15,000. Under IRC Section 1031, gain is recognized to the extent of boot received, but not more than the realized gain. Realized gain = 420,000−420,000 - 420,000−260,000 = 160,000;Recognizedgain=lesserofbootreceived(160,000; Recognized gain = lesser of boot received (160,000;Recognizedgain=lesserofbootreceived(15,000) or realized gain (160,000)=160,000) = 160,000)=15,000. Answer B incorrectly recognizes the entire realized gain; Answer C incorrectly states no gain is recognized when boot is received; Answer D incorrectly shows a loss. The transferable rule for Section 1031 exchanges is: Recognized gain = lesser of (boot received, realized gain).

Question 7

An individual purchased a personal residence for 360,000andlaterbuiltadeckcosting360,000 and later built a deck costing 360,000andlaterbuiltadeckcosting18,000 as a capital improvement. The taxpayer sold the home for 410,000andpaid410,000 and paid 410,000andpaid24,000 in selling expenses. Based on the provided details, what is the taxpayer's gain or loss on disposition?

  1. Gain of $8,000 (correct answer)
  2. Gain of $32,000
  3. Gain of $26,000
  4. Loss of $8,000

Explanation: This question tests gain/loss calculation on the sale of a personal residence. The key facts are: purchase price of 360,000,capitalimprovement(deck)of360,000, capital improvement (deck) of 360,000,capitalimprovement(deck)of18,000, sale price of 410,000,andsellingexpensesof410,000, and selling expenses of 410,000,andsellingexpensesof24,000. The correct answer applies IRC Section 1001 to calculate the gain. Adjusted basis = 360,000+360,000 + 360,000+18,000 = 378,000;Amountrealized=378,000; Amount realized = 378,000;Amountrealized=410,000 - 24,000=24,000 = 24,000=386,000; Gain = 386,000−386,000 - 386,000−378,000 = $8,000. Answer B incorrectly ignores selling expenses; Answer C miscalculates the gain; Answer D incorrectly shows a loss. The transferable framework for personal residence sales is: Gain = (Sale Price - Selling Expenses) - (Purchase Price + Capital Improvements).

Question 8

A corporation purchased equipment for 310,000andclaimed310,000 and claimed 310,000andclaimed205,000 of accumulated depreciation. The corporation sold the equipment for 120,000andpaid120,000 and paid 120,000andpaid6,000 in selling costs. Based on the provided details, what is the taxpayer's gain or loss on disposition?

  1. Recognized gain of $9,000 (correct answer)
  2. Recognized loss of $9,000
  3. Recognized gain of $15,000
  4. Recognized loss of $190,000

Explanation: This question tests gain/loss calculation on the disposition of depreciated business equipment. The key facts are: original cost of 310,000,accumulateddepreciationof310,000, accumulated depreciation of 310,000,accumulateddepreciationof205,000, sale price of 120,000,andsellingcostsof120,000, and selling costs of 120,000,andsellingcostsof6,000. The correct answer follows IRC Sections 1001 and 1016. Adjusted basis = 310,000−310,000 - 310,000−205,000 = 105,000;Amountrealized=105,000; Amount realized = 105,000;Amountrealized=120,000 - 6,000=6,000 = 6,000=114,000; Gain = 114,000−114,000 - 114,000−105,000 = $9,000. Answer B incorrectly shows a loss; Answer C overstates the gain; Answer D grossly miscalculates a loss. The transferable rule for depreciated property is: Gain = (Sale Price - Selling Costs) - (Original Cost - Accumulated Depreciation).

Question 9

A corporation purchased equipment for 180,000andclaimed180,000 and claimed 180,000andclaimed120,000 of accumulated depreciation through the date of disposition. The corporation sold the equipment for 70,000andpaid70,000 and paid 70,000andpaid5,000 in selling costs. Determine the adjusted basis and resulting gain or loss for tax purposes.

  1. Adjusted basis 60,000;recognizedgain60,000; recognized gain 60,000;recognizedgain5,000 (correct answer)
  2. Adjusted basis 180,000;recognizedloss180,000; recognized loss 180,000;recognizedloss115,000
  3. Adjusted basis 60,000;recognizedgain60,000; recognized gain 60,000;recognizedgain10,000
  4. Adjusted basis 70,000;recognizedloss70,000; recognized loss 70,000;recognizedloss5,000

Explanation: This question tests the calculation of adjusted basis and gain/loss on the disposition of business equipment. The key facts are: original cost of 180,000,accumulateddepreciationof180,000, accumulated depreciation of 180,000,accumulateddepreciationof120,000, sale price of 70,000,andsellingcostsof70,000, and selling costs of 70,000,andsellingcostsof5,000. The correct answer applies IRC Section 1011, which requires calculating adjusted basis as original cost minus accumulated depreciation (180,000−180,000 - 180,000−120,000 = 60,000),andthendetermininggain/lossasamountrealizedminusadjustedbasis.Amountrealized=60,000), and then determining gain/loss as amount realized minus adjusted basis. Amount realized = 60,000),andthendetermininggain/lossasamountrealizedminusadjustedbasis.Amountrealized=70,000 - 5,000=5,000 = 5,000=65,000; Gain = 65,000−65,000 - 65,000−60,000 = $5,000. Answer B incorrectly uses the original cost without depreciation adjustment; Answer C incorrectly ignores selling costs; Answer D miscalculates both basis and gain/loss. The transferable framework is: Adjusted Basis = Cost - Accumulated Depreciation; Gain/Loss = (Sale Price - Selling Costs) - Adjusted Basis.

Question 10

A taxpayer completes a Section 1031 like-kind exchange of investment real estate. The taxpayer transfers property with an adjusted basis of 380,000andafairmarketvalueof380,000 and a fair market value of 380,000andafairmarketvalueof520,000, and receives replacement property worth $520,000 with no cash or other non-like-kind property received. Based on the provided details, what is the taxpayer's recognized gain or loss on disposition?

  1. Recognized gain of $0 (correct answer)
  2. Recognized gain of $140,000
  3. Recognized loss of $0
  4. Recognized gain of $520,000

Explanation: This question tests Section 1031 like-kind exchange treatment with no boot. The key facts are: adjusted basis of 380,000,FMVofpropertygivenupof380,000, FMV of property given up of 380,000,FMVofpropertygivenupof520,000, replacement property worth 520,000,andnobootreceived.UnderIRCSection1031,whenqualifyingpropertyisexchangedsolelyforlike−kindpropertywithnoboot,nogainorlossisrecognized,regardlessoftherealizedgain.Realizedgain=520,000, and no boot received. Under IRC Section 1031, when qualifying property is exchanged solely for like-kind property with no boot, no gain or loss is recognized, regardless of the realized gain. Realized gain = 520,000,andnobootreceived.UnderIRCSection1031,whenqualifyingpropertyisexchangedsolelyforlike−kindpropertywithnoboot,nogainorlossisrecognized,regardlessoftherealizedgain.Realizedgain=520,000 - 380,000=380,000 = 380,000=140,000, but this gain is deferred. Answer B incorrectly recognizes the entire realized gain; Answer C is technically correct but less precise than Answer A; Answer D grossly miscalculates. The transferable rule is: In a pure Section 1031 exchange with no boot, no gain is recognized.

Question 11

An individual purchased a personal residence for 410,000andlaterinstalledaswimmingpoolcosting410,000 and later installed a swimming pool costing 410,000andlaterinstalledaswimmingpoolcosting35,000 as a capital improvement. The taxpayer sold the home for 495,000andpaid495,000 and paid 495,000andpaid29,000 in selling expenses. Based on the provided details, what is the taxpayer's gain or loss on disposition?

  1. Gain of $21,000 (correct answer)
  2. Gain of $50,000
  3. Gain of $79,000
  4. Loss of $21,000

Explanation: This question tests gain/loss calculation on the sale of a personal residence. The key facts are: purchase price of 410,000,capitalimprovement(swimmingpool)of410,000, capital improvement (swimming pool) of 410,000,capitalimprovement(swimmingpool)of35,000, sale price of 495,000,andsellingexpensesof495,000, and selling expenses of 495,000,andsellingexpensesof29,000. The correct answer applies IRC Section 1001 to calculate the gain. Adjusted basis = 410,000+410,000 + 410,000+35,000 = 445,000;Amountrealized=445,000; Amount realized = 445,000;Amountrealized=495,000 - 29,000=29,000 = 29,000=466,000; Gain = 466,000−466,000 - 466,000−445,000 = 21,000.AnswerBincorrectlyignoressellingexpenses(21,000. Answer B incorrectly ignores selling expenses (21,000.AnswerBincorrectlyignoressellingexpenses(495,000 - 445,000=445,000 = 445,000=50,000); Answer C adds both errors; Answer D incorrectly shows a loss. The transferable framework for personal residence sales is: Gain = (Sale Price - Selling Expenses) - (Purchase Price + Capital Improvements).

Question 12

An individual purchased a personal residence for 275,000andmadecapitalimprovementstotaling275,000 and made capital improvements totaling 275,000andmadecapitalimprovementstotaling25,000. The home was sold for 330,000,andthetaxpayerpaid330,000, and the taxpayer paid 330,000,andthetaxpayerpaid22,000 in selling expenses. What is the recognized gain or loss on the sale of the property?

  1. Gain of $8,000 (correct answer)
  2. Gain of $30,000
  3. Loss of $8,000
  4. Gain of $55,000

Explanation: This question tests gain/loss calculation on the sale of a personal residence. The key facts are: purchase price of 275,000,capitalimprovementsof275,000, capital improvements of 275,000,capitalimprovementsof25,000, sale price of 330,000,andsellingexpensesof330,000, and selling expenses of 330,000,andsellingexpensesof22,000. The correct answer applies IRC Section 1001 to calculate the gain on disposition. Adjusted basis = 275,000+275,000 + 275,000+25,000 = 300,000;Amountrealized=300,000; Amount realized = 300,000;Amountrealized=330,000 - 22,000=22,000 = 22,000=308,000; Gain = 308,000−308,000 - 308,000−300,000 = $8,000. Answer B incorrectly ignores selling expenses; Answer C incorrectly shows a loss; Answer D miscalculates the gain amount. The transferable framework is: Gain on personal residence = (Sale Price - Selling Expenses) - (Purchase Price + Capital Improvements).