Please answer the following as accurately as possible.
1. Your basis in a
repossessed property is determined as of the date of repossession. It is
A. Your adjusted basis in the installment obligation.
B. Your repossession costs.
C. Your taxable gain on the repossession.
D. The sum of all of the above.
2. Use the following rule
to figure your gain or loss from the disposition of an installment obligation.
A. If you sell or exchange the obligation, or you accept less than face value in
satisfaction of the obligation, your gain or loss is the difference between your
basis in the obligation and the amount you realize.
B. If you dispose of the obligation in any other way, your gain or loss is the
difference between your basis in the obligation and its FMV at the time of the
disposition.
C. Both A and B above.
D. None of the above.
3. Each payment on an installment sale usually consists of
A.
Interest income.
B.
Return of your adjusted basis in the property.
C.
Gain on the sale.
D. All
of the above.
4. An installment sale is a sale of property where you receive at
least one payment after the tax year of the sale.
True
False
5. After you have determined how much of each payment to treat as
interest, you treat the rest of each payment as if it were made up of
A. A
tax-free return of your adjusted basis in the property.
B. You
gain (referred to an installment sale income on Form 6252).
C.
Both A and B above.
D.
None of the above.
6. The selling price is the total cost of the property to the
buyer. It does not include
A. Any
money you are to receive.
B. The
fair market value (FMV) of any property you are to receive.
C.
Stated interest, unstated interest, any amount recomputed or recharacterized as
interest, or original issue discount.
D. Any
of your selling expenses the buyer pays.
7. Your adjusted basis for installment sale purposes is the
A.
Adjusted basis.
B.
Selling expenses.
C.
Depreciation recapture.
D.
The total of all of the above.
8. The selling price, minus the mortgages, debts, and other
liabilities assumed or taken by the buyer, plus the amount by which the
mortgages, debt, and other liabilities assumed or taken by the buyer exceed your
adjusted basis for installment sale purposes is
A.
Gross profit.
B.
Contract price.
C.
Adjusted basis.
D.
None of the above.
9. The regular sale of inventory is considered an installment
sale as long as you receive a payment after the sale.
True
False
10. To report an installment sale income from casual sales
of real or personal property during the year, you will usually report it on
A.
Form 6252.
B.
Schedule D (Form 1040).
C.
Form 4797.
D.
Any of the above.
11. If you sell your home, you may be able to exclude all or part
of the gain on the sale. If the sale is an installment sale, any gain you
exclude is included in gross profit when figuring your gross profit percentage.
True
False
12. An installment sale of property used in your business or
that earns rent or royalty income may result in a capital gain, an ordinary
gain, or both. For trade or business property held for more than 1 year, enter
the amount from line 26 of Form 6252 on
A.
Schedule P (Form 1040).
B.
Form 4797, line 4.
C.
Form 4797, line 10.
D.
Schedule B or Schedule 1.
13. If you receive property rather than money from the buyer,
it is still considered a payment in he year received. Generally, the amount of
the payment is the property's FMV on the date you receive it. If the property
the buyer gives you is payable on demand or readily taxable, the amount you
should consider as payment in the year received is
A.
The FMV of the property on the date you receive it if you use the cash receipts
and disbursements method of accounting.
B.
The face amount of the obligation on the date you receive it if you use the
accrual method of accounting.
C.
The stated redemption price at maturity less any original issue discount (OID)
or if there is not OID, the stated redemption price at maturity appropriately
discounted to reflect the unstated interest.
D.
Any of the above.
14. If the buyer pays any part of your expenses related to the
sale of your property, it is considered a payment to you in the year of sale
A.
Include these expenses in the selling and contract prices when figuring the
gross profit percentage.
B.
Do not include these expenses in the selling and contract prices when figuring
the gross profit percentage.
C.
Treat these expenses as a recovery of your basis rather than as a payment.
D.
None of the above.
15. If the buyer of your property is the person who hold the
mortgage on it, your debt is canceled, not assumed. You are considered to
receive a payment equal to the outstanding canceled debt.
True
False
16. If you are an installment obligation to secure any debt, the
net proceeds from the debt may be treated as a payment on the installment
obligation. This is known as the pledge rule and it applies if
A. The sales of property is used or produced in farming.
B. The sales are of personal-use property.
C. The qualifying sales are of time-shares and residential lots.
D. The selling price of the property is over $150,000.
17. If you sell depreciable property to a related person and the
sale is an installment sale, you may not be able to report the sale using the
installment method. Related persons include
A. A
person and all entities that are controlled entities with respect to such
person.
B.
A taxpayer and any trust in which such taxpayer (or his spouse) is a
beneficiary, unless such beneficiary's interest in the trust is a remote
contingent interest.
C.
Two or more partnerships in which the same person owns, directly or indirectly,
more than 50% of the capital interests or the profits interests.
D.
Any of the above.
18. You can use the installment method to report a sale of
depreciable property to a related person if no significant tax deferral benefit
will be derived from the sale and show to the satisfaction of the IRS that
avoidance of federal income tax was not one of the principal purpose of sale.
True
False
19. If you repossess your property after making an installment
sale, you must figure
A. Your
gain (or loss) on the repossession.
B.
Your basis in the repossess property.
C. Both
A and B above.
D. The
smaller of A or B above.
20. Figure your basis in an installment obligation by
A. Multiplying
the unpaid balance on the obligation by your gross profit percentage.
B. Subtracting the
product of the unpaid balance on the obligation and the gross profit percentage.
C. The
result of A and B above is your basis in the installment obligation.
D. Any of the
above.
