Income & Assets
Part 1 · 109 study cards · Active recall format
Q1.What is the wash sale rule?
Exam wording
Loss disallowed if you buy substantially identical stock within 30 days before or after the sale. The disallowed loss is added to the basis of the replacement shares.
Q2.Are workers’ compensation benefits received for an occupational injury or sickness taxable?
Exam wording
No. Benefits paid under a workers’ compensation act or similar statute are exempt from tax.
Q3.How is qualifying military combat pay treated for federal income tax?
Exam wording
Qualifying combat-zone pay is excluded from income, subject to the commissioned-officer limitation.
Q4.How are qualified dividends taxed?
Exam wording
They receive the same 0%, 15%, or 20% maximum rates that apply to net capital gain.
Q5.Is interest on a bond used to finance government operations generally taxable?
Exam wording
No. Interest on a bond used to finance government operations is generally not taxable when the bond is issued by a state, D.C., a U.S. territory, or their political subdivisions.
Q6.What is the usual basis of property an estate receives from a decedent?
Exam wording
Its fair market value on the date of death.
Q7.What is the basis for gain when gifted property’s fair market value is below the donor’s adjusted basis?
Exam wording
The donor’s adjusted basis, plus or minus required basis adjustments while the recipient holds the property.
Q8.When does the wash-sale rule generally disallow a stock or securities loss?
Exam wording
When substantially identical stock or securities are acquired within 30 days before or after the loss sale.
Q9.How is a digital asset treated for federal income tax purposes?
Exam wording
As property; the general tax principles for property transactions apply.
Q10.What property can qualify for section 1031 like-kind nonrecognition?
Exam wording
Real property held for investment or productive use in a trade or business; property held primarily for sale does not qualify.
Q11.What is the general replacement period for a condemnation involuntary conversion?
Exam wording
It generally ends two years after the close of the first tax year in which any gain is realized, subject to exceptions.
Q12.Where are residential rental income and expenses generally reported?
Exam wording
Schedule E (Form 1040).
Q13.Where is rental activity reported when substantial services are provided primarily for the tenant’s convenience?
Exam wording
Schedule C (Form 1040), rather than Schedule E.
Q14.Is unemployment compensation taxable?
Exam wording
Yes. Unemployment compensation generally must be included in gross income.
Q15.Which information return generally reports canceled debt of $600 or more by an applicable entity?
Exam wording
Form 1099-C, Cancellation of Debt.
Q16.Recall the rule for this EA objective in Preliminary Work And Taxpayer Data: Sources of worldwide taxable and non-taxable income (e.g., interest, wages, business, sales of property, dividends, rental income, flow-through entities, alimony received)
Exam wording
Worldwide income
Q17.Recall the rule for this EA objective in Income And Assets: Personal property rental
Exam wording
Schedule 1 (Form 1040)
Q18.Recall the rule for this EA objective in Income And Assets: Constructive dividends (e.g., payments of personal expenses from a business entity)
Exam wording
As a distribution to the shareholder
Q19.Recall the rule for this EA objective in Income And Assets: Royalties and related expenses
Exam wording
Schedule E (Form 1040)
Q20.Recall the rule for this EA objective in Income And Assets: 1099 MISC, 1099 NEC, 1099 K reporting, irregularities, and corrections
Exam wording
When business payments exceed $20,000 and more than 200 transactions occur
Q21.Recall the rule for this EA objective in Income And Assets: Basis of stock after stock splits and/or stock dividends (e.g., research, schedules, brokerage records)
Exam wording
The old-stock basis is allocated between the old and new stock
Q22.Recall the rule for this EA objective in Income And Assets: Publicly traded partnerships (PTP) (e.g., sales, dispositions, losses)
Exam wording
They may offset only passive income or gain from that same partnership
Q23.Recall the rule for this EA objective in Income And Assets: Sale of a personal residence (e.g., IRC sec 121 exclusions)
Exam wording
$250,000
Q24.Recall the rule for this EA objective in Income And Assets: Installment sales (e.g., related parties, original cost, date of acquisition, possible recalculations and recharacterization)
Exam wording
A sale in which at least one payment is received after the tax year of sale
Q25.Recall the rule for this EA objective in Income And Assets: Options (e.g., stock, commodity, ISO, ESPP)
Exam wording
The option cost
Q26.Recall the rule for this EA objective in Income And Assets: Non-business bad debts
Exam wording
As a short-term capital loss
Q27.Recall the rule for this EA objective in Income And Assets: Investor versus trader
Exam wording
Profit from daily market movements rather than dividends, interest, or capital appreciation
Q28.Recall the rule for this EA objective in Income And Assets: Self-employment tax
Exam wording
A Social Security part and a Medicare part
Q29.What compensation is generally included in gross income?
Exam wording
wages, salaries, bonuses, commissions, and similar pay for services tips when received noncash compensation at fair market value unless a specific exclusion applies
Q30.Name common fringe benefits that may be excluded from wages when requirements are met.
Exam wording
no-additional-cost services qualified employee discounts working-condition fringes de minimis fringes qualified transportation fringes within limits certain employer-provided educational, dependent-care, adoption, and group-term-life benefits within applicable rules
Q31.Why does worker classification matter for individual income reporting?
Exam wording
employees generally receive Form W-2 wages with withholding and employment taxes independent contractors generally receive Form 1099-NEC or similar reporting and may owe self-employment tax misclassification changes withholding, SE tax, and deductible expense treatment
Q32.How are cash tips generally treated for income-tax purposes?
Exam wording
cash tips of $20 or more in a month while working for one employer must be reported to the employer all tips are generally includible in gross income unreported tips remain taxable even if not reported to the employer
Q33.What interest is generally taxable to an individual?
Exam wording
interest on bank deposits, bonds, and similar obligations is generally taxable interest on most state and local bonds may be tax-exempt nominee interest received for another person is generally not the nominee's income
Q34.What are qualified dividends?
Exam wording
dividends that meet holding-period and payer requirements and are eligible for the preferential long-term capital-gain tax rates ordinary dividends that fail those requirements are taxed as ordinary income Form 1099-DIV generally identifies the qualified portion
Q35.How is original issue discount generally reported?
Exam wording
OID is generally treated as accrued interest income over the life of the debt instrument the holder includes OID each year even if no cash interest is received de minimis OID may be ignored under the applicable threshold rules
Q36.What is nominee interest or dividend reporting?
Exam wording
amounts received as a nominee for another person are generally not the nominee's income the nominee reports the amount and issues a nominee Form 1099 to the true owner only the owner's share remains taxable to the owner
Q37.What is the general cost basis of purchased property?
Exam wording
cost generally includes cash paid plus debt assumed and other amounts paid to acquire the property settlement fees and closing costs that are capital expenditures are added when they are part of the purchase basis is later adjusted for improvements, depreciation, and other required items
Q38.What is the general basis rule for gifted property?
Exam wording
for gain, the donee generally uses the donor's adjusted basis for loss, the donee generally uses the lesser of the donor's adjusted basis or fair market value at the time of the gift gift tax may increase basis in limited circumstances
Q39.What is the general basis of inherited property?
Exam wording
basis is generally the fair market value on the decedent's date of death if the estate elects alternate valuation, basis generally uses the alternate valuation date value special rules can apply to community property and income in respect of a decedent
Q40.What commonly increases or decreases adjusted basis?
Exam wording
capital improvements and certain assessments increase basis depreciation allowed or allowable decreases basis casualty losses, insurance reimbursements, credits, and easements may decrease basis
Q41.How is the capital-asset holding period generally measured?
Exam wording
holding period begins the day after acquisition and ends on the day of disposition assets held more than one year are generally long-term assets held one year or less are generally short-term special tacking rules can apply to gifted or exchanged property
Q42.How are capital gains and losses generally netted?
Exam wording
separately net short-term gains and losses and long-term gains and losses then net the short-term and long-term results against each other individuals may deduct up to $3,000 of net capital loss against ordinary income each year, with the excess carried forward
Q43.What happens to a loss on a sale of property to a related party?
Exam wording
losses on sales or exchanges of property between related parties are generally disallowed later resale by the related buyer may allow the previously disallowed loss to offset gain under limited rules relationship definitions include certain family members and controlled entities
Q44.What is the basic section 121 home-sale exclusion?
Exam wording
an eligible taxpayer may exclude gain on the sale of a principal residence up to the applicable dollar limit ownership and use tests generally require two years out of the five years ending on the sale date only one exclusion is generally allowed in a two-year period, subject to limited partial-exclusion exceptions
Q45.What property generally qualifies for a section 1031 like-kind exchange?
Exam wording
only real property held for productive use in a trade or business or for investment personal-use property does not qualify real property in the United States and real property outside the United States are not like-kind to each other
Q46.What is the basic involuntary-conversion nonrecognition idea under section 1033?
Exam wording
gain may be deferred when property is compulsorily or involuntarily converted into similar property or into money used to purchase replacement property within the replacement period the replacement property must be similar or related in service or use, with special rules for certain business/investment real property basis of the replacement property is reduced by deferred gain
Q47.Why can related-party issues affect nonrecognition transactions?
Exam wording
related-party sales can disallow losses even when a nonrecognition label is claimed incorrectly section 1031 has special related-party timing and disposition traps section 121 has lookback and eligibility limits that related ownership changes can affect
Q48.Where do individuals generally report residential rental income and expenses?
Exam wording
Schedule E for rental real estate and royalties income includes rents received and certain advance rents ordinary and necessary rental expenses are deducted subject to passive-activity and capitalization rules
Q49.How does personal use of a dwelling affect rental deductions?
Exam wording
if personal use exceeds the greater of 14 days or 10% of rental days, the dwelling is a residence and deductions are limited expenses must be allocated between rental and personal use special rules apply if rented fewer than 15 days
Q50.When is a rental security deposit includible in the landlord's income?
Exam wording
a security deposit is generally not income when the landlord has an obligation to return it it becomes income when the landlord keeps it because the tenant breaches the lease or applies it as rent advance rent is generally income when received
Q51.What is the general passive-activity treatment of rental real estate?
Exam wording
rental activities are generally passive even with material participation limited exceptions exist for qualifying real-estate professionals and certain active-participation special allowances passive losses are generally deductible only against passive income until disposition or another exception applies
Q52.When is cancellation of debt generally included in gross income?
Exam wording
canceled debt is generally income to the extent the taxpayer is personally liable and the debt is discharged exclusions may apply for bankruptcy, insolvency, qualified farm indebtedness, qualified real property business indebtedness, and certain student-loan discharges excluded COD may require tax-attribute reduction
Q53.How are gambling winnings and losses generally treated?
Exam wording
gambling winnings are includible in gross income losses are deductible only to the extent of winnings and only if the taxpayer itemizes professional gamblers follow business-expense rules instead of the itemized-loss limitation
Q54.Are unemployment compensation benefits taxable?
Exam wording
yes unemployment compensation is generally included in gross income voluntary withholding may be elected, but taxability does not depend on withholding
Q55.How is alimony treated for divorce or separation instruments executed after 2018?
Exam wording
alimony and separate maintenance payments under post-2018 instruments are neither deductible by the payer nor includible by the recipient pre-2019 instruments generally keep the old deduction/inclusion rules unless modified to apply the new rules
Q56.Are punitive damages taxable when awarded with compensatory damages for a physical injury?
Exam wording
Yes. Compensatory damages for personal physical injury are generally excluded, but punitive damages are generally taxable even if related to physical injury.
Q57.Are emotional-distress damages from unlawful discrimination taxable when there is no physical injury?
Exam wording
Yes. Emotional distress alone is not a physical injury or sickness, so those damages are included in income except for related medical-care amounts.
Q58.How are unemployment compensation and insolvent canceled debt generally treated?
Exam wording
Unemployment compensation is generally included in income. Canceled debt can be excluded to the extent the taxpayer was insolvent immediately before cancellation.
Q59.Flavian owns a restaurant. He provides his daytime waitress, Alida, two free meals during each workday. Flavian encourages (but does not require) Alida to have her breakfast on the business premises before starting work so she can help him answer phones. She is required to have her lunch on the premises. How should Flavian treat this fringe benefit to Alida?
Exam wording
None of Alida's meals at the restaurant are taxable.
Q60.Which of the following fringe benefits is taxable (or partially taxable) to the employee?
Exam wording
An employer-provided company car that is used for personal commuting.
Q61.Anastasia is a sales rep who sells pharmaceutical drugs to doctor's offices on commission (she is an employee). On December 25, 2025, Anastasia receives $12,000 of income from commissions, plus an advance of $1,000 for future commissions. She also receives a $200 check for expense reimbursements from her employer after turning in her receipts as part of an accountable plan. How much taxable income should Anastasia report on her 2025 tax return?
Exam wording
$13,000
Q62.Rasheed is employed as a staff accountant by a large CPA firm. When he travels for his audit work, he submits his travel receipts for reimbursement by his firm, which has an accountable plan for its employees. Which of the following statements about accountable plans is correct?
Exam wording
The reimbursed amounts are not taxable to Rasheed.
Q63.Salvador is an enlisted soldier in the U.S. Army who served in a combat zone from January 30, 2025, to September 2, 2025. He returned to the United States and received his regular duty pay for the remainder of the year. How many months of his income are taxable in 2025?
Exam wording
Three months of wages are subject to tax.
Q64.Cruz is a bartender at Jack's Bistro. In 2025, his Form W-2 shows $60,000 in box 1 and $20,000 in box 7 (Social security tips). Cruz also reports $4,000 of unreported tips on Form 4137. Cruz files as single, and his modified adjusted gross income is $152,400. What amount of qualified tip deduction may Cruz claim for 2025?
Exam wording
$23,800
Q65.What is "adjusted gross income"?
Exam wording
Gross income minus certain allowable adjustments, calculated before the standard deduction or itemized deductions are taken.
Q66.Bartholomew is a naval officer who was injured while serving in a combat zone. He was later awarded Veterans Affairs (VA) disability benefits. How are these payments reported on Bartholomew's tax return?
Exam wording
100% of the disability benefits may be excluded from income.
Q67.Which of the following should be reported as interest income, not dividend income, on a taxpayer's return?
Exam wording
Dividends earned on deposits in credit unions.
Q68.Araceli received $500 of interest from municipal bonds issued by the state of New Jersey. How should she report this on her Form 1040?
Exam wording
It must be reported on her tax return, but it is not taxable income.
Q69.On January 15, 2025, Alex purchased 200 shares of Tech Innovators, Inc. for $3,900, plus an additional $100 in broker's commissions. On July 15, 2025, he sold half of the shares (100 shares) for $2,500. What is the adjusted basis of the stock he sold?
Exam wording
$2,000
Q70.Claudine owns a piece of land that she purchased several years ago for $250,000. The land is now worth $750,000. During the year, she borrows $500,000 from a bank to improve the property. She uses $260,000 of the loan to demolish two existing buildings on the property and clear the land for the construction of a stockyard and horse stable, which will begin next year. What is Claudine's basis in the land after the demolition is completed?
Exam wording
$510,000
Q71.Yoshiko owns two shares of common stock in Singleton Toys, Inc. She bought one share for $30 in 2018 and the other for $45 in 2019. In 2025, the corporation distributed two additional shares of common stock for each share held (a 3-for-1 stock split). Yoshiko owns six shares after the stock split. How is Yoshiko's basis allocated between these six shares?
Exam wording
Three shares have a basis of $10 each, and three have a basis of $15 each.
Q72.Simeon owns 100% of the stock in TOP Corporation. Gerald owns 100% of the stock in DAB Corporation. During the year, TOP Corporation sold used manufacturing equipment to DAB Corporation at a $52,000 loss. Simeon and Gerald are stepbrothers. Concerning the related party transaction loss rules, how should this transaction between Simeon and Gerald be handled?
Exam wording
The related party transaction rules do not apply in this scenario.
Q73.Grady exchanges his residential rental property with an adjusted basis of $50,000 and an FMV of $80,000 for 10 acres of undeveloped land with an FMV of $80,000. He plans to hold the land as an investment. What is Grady's basis in the land after this Section 1031 exchange?
Exam wording
$50,000
Q74.Which of the following transactions does not qualify for a Section 1031 like-kind exchange?
Exam wording
An exchange of a home developer's inventory for a house flipper's housing inventory.
Q75.Which form might be received by a taxpayer who has sold their primary residence?
Exam wording
Form 1099-S
Q76.Treyton owns a commercial building. He signs a three-year lease with a business tenant who wishes to rent the building. Treyton offers a substantial discount to the tenant if payment is made in advance. The tenant agrees, and in December 2025, Treyton receives $12,000 for the entire first year's rent and $12,000 as rent for the last year of the lease. He also receives a $1,500 security deposit that is refundable at the end of the lease. How much rental income must Treyton include in his tax return?
Exam wording
$24,000
Q77.Zachariah lived in his home until the end of September. Then his employer transferred his job overseas and Zachariah began renting out his residence on October 1, 2025. The property is rented at fair rental value. The total amount of Zachariah's mortgage interest for the entire tax year was $2,400 and his property taxes were $600 for the year. How much of Zachariah's mortgage interest and property taxes should be reported on his Schedule E?
Exam wording
$600 in interest and $150 in property taxes
Q78.Antoine and Ludivina are physically separated and have lived apart for three years. They file separate tax returns (MFS). They own a rental property jointly; actively participate in the rental activity, and share income and losses equally. The rental property had (\$30,000) of losses during the year, mostly due to accidental damage that was done by a tenant. Antoine has wage income of \$48,000. He has no other income or loss items. What is the maximum amount of rental losses that Antoine can claim on his separate return?
Exam wording
$12,500
Q79.Sheldon, age 67, received Social Security in 2025 totaling $11,720. Sheldon also liquidated all his stock and moved into senior housing during the year. He received $350,500 of taxable income from the stock sale. What is the maximum taxable amount of Sheldon's Social Security benefits?
Exam wording
$9,962
Q80.Latrice and Jackson's divorce decree requires Jackson to pay Latrice $250 per month of child support and $1,500 per month of alimony. Their divorce was final on January 13, 2025. Jackson makes all his child support and alimony payments on time during the year. How much of these payments is Latrice required to report as taxable income on her 2025 return?
Exam wording
$0
Q81.Which of the following types of debt would not be classified as qualified principal residence indebtedness, for the purposes of the QPRI exclusion?
Exam wording
Secured debt on a residence that a taxpayer's dependent parent lives in. The taxpayer lives in his own home but pays the mortgage and all the expenses for his parents' home.
Q82.Bastien received a Form 1099-DIV from his brokerage firm, showing that he earned $1,200 of ordinary dividends. He received no other investment income during the year. How should this income be handled on Bastien's tax return?
Exam wording
He can report the dividend income on page one of his Form 1040, taxable as ordinary income.
Q83.Miguel deposited $4,000 of his own funds and also borrowed $12,000 from the bank to buy a nine-month certificate of deposit for $16,000. The certificate earned $375 at maturity in 2025, and Miguel received $175, which represented the $375 he earned minus $200 of interest charged on the $12,000 loan. The bank gives Miguel a Form 1099-INT showing the $375 interest he earned. The bank also issues him a statement showing that he paid $200 in interest. How should Miguel report these amounts on his tax return?
Exam wording
He should report $375 of interest income and can deduct $200 on his Schedule A (if taking itemized deductions), subject to the net investment income limit.
Q84.Nondividend distributions are:
Exam wording
Usually considered a return of capital, but potentially capital gain income.
Q85.Six years ago, Derrick bought a U.S. Series EE savings bond and decided to report the interest earned each year until maturity. This year, he bought another Series EE savings bond. How should Derrick report the interest on this new bond?
Exam wording
He must report the interest earned each year until maturity.
Q86.On May 3, 2025, Brigit purchased 1,000 shares of Equity Industries, Inc. for $5,100, including the broker's commission. On August 14, 2025, she sold 500 shares for $3,300. What is the adjusted basis of the stock she sold?
Exam wording
$2,550
Q87.Which of the following statements is correct about the basis of assets?
Exam wording
The cost basis of an asset generally includes sales tax and other expenses connected with the original purchase.
Q88.Four years ago, Rahul paid $1,050 for 100 shares of Silverton Corporation stock, plus an additional broker's commission of $50. During the year, Rahul received ten additional shares of Silverton stock as a nontaxable stock dividend. What is the adjusted basis of Rahul's stock at the end of the year?
Exam wording
$10 per share.
Q89.Mackenzie purchases an empty lot at auction for $50,000. She puts down $15,000 in cash and finances the remaining $35,000 with a bank loan. The lot has a $4,000 tax lien against it for unpaid property taxes, which she also agrees to pay as a condition of the sale. What is Mackenzie's basis in the lot?
Exam wording
$54,000
Q90.Manish buys a work truck for $15,000 to use in his carpentry business. He pays $5,000 as a down payment and takes out a five-year auto loan for the remaining $10,000. In addition, he pays sales taxes and delivery fees of $1,300 and spends an extra $250 for a protective bedliner. What is Manish's basis for the depreciation on the truck?
Exam wording
$16,550
Q91.During the year, Kaylie bought 52 total shares of Deerfield Corporation stock for $624. That cost included a $40 broker commission. Three months later, Deerfield Corporation issued a 2-for-1 stock split. What is her basis per share after the split?
Exam wording
$6 per share.
Q92.Which of the following is added to a property's basis instead of deducted on the tax return?
Exam wording
The cost of demolishing a building.
Q93.Which of the following is not added to the basis of property?
Exam wording
Points on a loan.
Q94.McCoy bought one share of Sugar City Media, Inc. on January 1 for $45. On December 20, the corporation distributed two new shares of common stock for each share held. After the split, McCoy had three shares of common stock. What is McCoy's new basis per share?
Exam wording
$15
Q95.Flora gifted her grandson, Clifford, a residential rental property. She purchased the property ten years ago for $120,000 and claimed $18,000 in depreciation. The fair market value of the rental house on the day of transfer was $144,000. Assuming no gift tax was paid, what is Clifford's basis in the property?
Exam wording
$102,000
Q96.Timothy and Susie divorced in 2025. As part of their divorce settlement, Susie transferred ownership of an expensive watch to Timothy. The watch cost $12,000, but the fair market value of the watch was $29,000 on the date of the transfer. What happens to the adjusted basis of the watch when it is transferred from Susie to Timothy due to their divorce?
Exam wording
The adjusted basis remains $12,000.
Q97.Vladimir wishes to sell a home that he inherited from his mother. His mother paid $45,000 for the home fifteen years ago. She put a new roof on the property two years ago at the cost of $10,500. The fair market value of the home on the date of his mother's death was $120,000. An estate tax return was not required for his mother's estate, and the alternate valuation date was not elected. What is Vladimir's basis in the inherited home?
Exam wording
$120,000
Q98.At the beginning of the year, Frantz bought 1,000 shares of Pharmacology Corp. stock for $4 per share. Frantz paid an additional $70 in broker's commissions on the purchase. What is his overall basis in the stock?
Exam wording
$4,070
Q99.Caleb, who files as single, bought ten shares of Atomic Corporation stock on January 1, 2025. He sold all the shares for a $7,000 loss on December 31, 2025. He has no other capital gains or losses. He also earned $20,000 of wage income during the year. How must Caleb treat this transaction on his tax return?
Exam wording
He can deduct $3,000 as a short-term capital loss to offset his wage income on his return. The remaining amount, $4,000, must be carried over to future tax years.
Q100.What is the maximum number of years a taxpayer can carry over an unused capital loss?
Exam wording
Indefinitely.
Q101.Nikhil's adjusted basis in 500 shares of Medico Corporation was $2,550. He owned the shares for six months. If he sells all 500 shares for $3,300, what is the resulting gain or loss?
Exam wording
$750 short-term gain.
Q102.Two years ago, Sunil purchased 100 units of Ethereum, a cryptocurrency, for $9,000. On March 5, 2025, he exchanged all 100 units of Ethereum for 3.47826 units of Bitcoin, another cryptocurrency, worth $160,000 on the date of exchange. What gain, if any, must Sunil report in 2025?
Exam wording
$151,000 long-term capital gain
Q103.Roshan and Tatiana owned a vacation home for 14 months before selling it for $254,000. Their adjusted basis in the home was $232,000, and they incurred $12,500 of selling expenses. Prior to the sale, they did not rent the home. What is the nature and amount of their gain?
Exam wording
$9,500 long-term capital gain.
Q104.Tahir purchased 100 shares in Foresthill Mutual Fund on June 1, 2025, for $750. He also received a capital gain distribution of $120, but he did not sell his shares in the mutual fund during the year. The $120 was reported to him on Form 1099-DIV. How should this be reported on his tax return?
Exam wording
He must report the $120 as a long-term capital gain.
Q105.Rishi purchased his main home five years ago for $150,000. He sold it at a loss, for $115,000 in 2025. Which of the following statements is correct?
Exam wording
Rishi cannot claim a loss for the sale of his home.
Q106.Consuela is unmarried. She purchased 1,000 shares of Hometown Mutual Fund on February 15, 2019, for $15 per share. The fund does poorly, and on April 30, 2025, Consuela sold all her shares for $3.75 per share. She also earned $49,000 of wages in 2025. She has no other transactions during the year. How should the mutual fund sale be reported on her tax return?
Exam wording
She can deduct a $3,000 capital loss on her tax return, and the remainder of the losses will carry forward to subsequent years.
Q107.Colin purchased 100 shares of Entertainment Media, Inc. stock for $1,000 on November 3, 2025, He sold these shares for $750 on December 22, 2025. Colin has seller's remorse, and he regrets selling his shares. So, on January 9, 2026, (the following year), he repurchases 100 shares of Entertainment Media for $800. Which of the following statements is correct?
Exam wording
Colin cannot deduct his stock loss of $250 and must add the disallowed loss to his basis of the shares purchased on January 9, 2026.
Q108.Melissa purchased 1,000 shares of Sunshine Foods, Inc. stock five years ago at $10 per share. She sold 900 shares on January 15, 2025, at $9 per share, resulting in a $900 loss. Melissa's husband, Singh, purchased 900 shares of Sunshine Foods Inc. stock on February 10, 2025. Singh and Melissa keep their finances separate and will file separate tax returns. Which of the following statements is correct?
Exam wording
Melissa has a wash sale, and her loss is not deductible.
Q109.Noah bought two blocks of Acme Corporation stock. Each block was 400 shares. He purchased the first block on May 30, 2023, for $1,200 and the second block on June 8, 2025, for $1,600. On July 12, 2025, he needed money to fix his car, so he sold 400 shares for $1,500 but did not specify which block of stocks he sold. Noah's stock sale results in a:
Exam wording
Long-term gain of $300.
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