An Individual Had the Following Gains and Losses During 2018

question 63

Multiple Choice

An individual had the following gains and losses during 2018 on property held for the long-term holding period: sale of Orange common stock ($8,000 gain) ? sale of real property used in the taxpayer's business ($1,800 loss) ? destruction of real property used in the taxpayer's business by fire ($1,000 loss) . Which of the following statements is correct?

• A) The fire loss would reduce the real property sale loss.
• B) The fire loss would reduce the stock sale gain.
• C) The sale of real property loss would be netted against the stock sale gain.
• D) The sale of real property is a § 1231 loss.
• E) None of the above.

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Definitions:

Trade-In Allowance

The value offered for an old item when it is traded for a new item, reducing the purchase price of the new item.

Book Value

Book Value refers to the net value of a company or an asset calculated by total assets minus intangible assets (patents, goodwill) and liabilities, used to estimate the value of a company on its balance sheet.

Commercial Substance

A characteristic of transactions that indicates a change in future cash flows as a result of economic activities, leading to a real economic impact.

Asset Improvements

Expenditures made to increase the useful life, efficiency, or productive capacity of an asset, typically capitalized and amortized over time.