Rebecca is a calendar year taxpayer

Question 1.1. Which of the following types of itemized deductions are included in the category of miscellaneous expenses that are deductible only if the aggregate amount of such expenses exceeds 2% of the taxpayer's adjusted gross income? (Points : 5)

[removed] unreimbursed employee business expenses
[removed] charitable contributions
[removed] medical expenses
[removed] home mortgage interest expense

Question 2.2. Charlie makes the following gifts in the current year: $40,000 to his spouse, $30,000 to his church, $18,000 to his nephew, and $25,000 to a friend. Assuming Charlie does not elect gift splitting with his wife, his taxable gifts in the current year will be (Points : 5)

[removed] $13,000.
[removed] $17,000.
[removed] $25,000.
[removed] $40,000.

Question 3.3. All of the following items are included in gross income except (Points : 5)

[removed] alimony received.
[removed] rent income.
[removed] interest earned on a bank account.
[removed] child support payments received.

Question 4.4. In 2011 the standard deduction for a married taxpayer filing a joint return and who is 67 years old with a spouse who is 65 years old is (Points : 5)

[removed] $11,600.
[removed] $12,750.
[removed] $13,900.
[removed] $14,500.

Question 5.5. Norah, who gives music lessons, is a calendar year taxpayer using the cash basis method of accounting. On October 1 of this year, she received $1,200 for a one-year contract beginning on that date to provide 10 lessons. She gave 6 lessons this year. How much should Norah include in income this year? (Points : 5)

[removed] $0
[removed] $360
[removed] $720
[removed] $1,200

Question 6.6. Amy's employer provides her with several fringe benefits. Which of the following are included in her taxable income? (Points : 5)

[removed] Christmas bonus check
[removed] group term life insurance premium paid by employer for $40,000 coverage for Amy
[removed] employee discount
[removed] employer's contribution to retirement plans on Amy's behalf

Question 7.7. CT Computer Corporation, an accrual basis taxpayer, sells service contracts on the computers it sells. At the beginning of January of this year, CT Corporation sold contracts with service to begin immediately:

One for three months

$200

One for 20 months

800

One for 48 months

4,000

The amount of income CT Corporation must report for this year is (Points : 5)

[removed] $200.
[removed] $1,000.
[removed] $1,680.
[removed] $5,000.

Question 8.8. Which of the following advance payments cannot qualify for income tax deferral? (Points : 5)

[removed] advance collection for services
[removed] advance collection for merchandise
[removed] advance collection of rent without associated services
[removed] advance collection of rent with associated services

Question 9.9. Bella transfers a $150,000 life insurance policy on her life to a partnership in which she is a partner. Subsequent to Bella's transfer, the partnership pays $10,000 of premiums before Bella's death. How much of the insurance proceeds of $150,000 is includable in income? (Points : 5)

[removed] $-0-
[removed] $75,000
[removed] $140,000
[removed] $150,000

Question 10.10. Sarah receives a $15,000 scholarship from City University. The university specifies that $8,000 is for tuition, books, supplies, and equipment for classes. The other $7,000 is for room and board. Sarah works ten hours per week as a grader, for which she is paid $7,500 for the year. Of the total amount received, Sarah must include the following amount in gross income (Points : 5)

[removed] $7,000.
[removed] $7,500.
[removed] $14,500.
[removed] $22,500.

Question 11.11. Rebecca is the beneficiary of a $500,000 insurance policy on her husband's life. She elects to receive $52,000 per year for 10 years rather than receive the entire amount in a lump sum. Of the amount received each year (Points : 5)

[removed] $2,000 is taxable income.
[removed] $50,000 is taxable income.
[removed] $52,000 is taxable income.
[removed] $5,000 per year is tax free as a death benefit.

Question 12.12. David has been diagnosed with cancer and is expected to live less than 18 months. David is covered by a life insurance policy with a $400,000 face amount. David cashes in the policy early under a special option and receives 80% of the face amount or $320,000. In the year of collection, David will report (Points : 5)

[removed] no income.
[removed] $80,000.
[removed] $320,000.
[removed] $400,000.

Question 13.13. Dale gave property with a basis of $16,000 to Sarah when it had a FMV of $12,000. Sarah later sold the property for $22,000 resulting in a recognized gain of (Points : 5)

[removed] $-0-.
[removed] $4.000.
[removed] $6,000.
[removed] $12,000.

Question 14.14. Edward purchased stock last year as follows:

Month

Shares

Total Cost

March

100

$ 270

July

200

600

October

600

$1,200

In April of this year, Edward sells 80 shares for $250. Edward cannot specifically identify the stock sold. The basis for the 80 shares sold is (Points : 5)

[removed] $160.
[removed] $184.
[removed] $216.
[removed] $240.

Question 15.15. Which one of the following does not affect the adjusted basis of a house held as rental property? (Points : 5)

[removed] depreciation deduction
[removed] adding a new room to the house
[removed] painting of more than 50% of the rooms in the home
[removed] installation of a completely new plumbing system

Question 16.16. Richard exchanges a building with a FMV of $75,000, a basis of $35,000, and subject to a liability of $25,000 for land with a FMV of $50,000 owned by Bill. What is the amount of Richard's realized gain? (Points : 5)

[removed] $0
[removed] $15,000
[removed] $25,000
[removed] $40,000

Question 17.17. Laura, the controlling shareholder and an employee of Southwest Corporation, receives an annual salary of $750,000. Based on several factors including the size of the corporation's operations and a comparison of salary received by officers of comparably-sized corporations, the IRS contends that Laura's salary should be no higher than $600,000. The Court upheld the IRS's position. As a result, which of the following is true? (Points : 5)

[removed] $600,000 is deductible by the corporation; $600,000 is taxable to Laura.
[removed] $600,000 is deductible by the corporation; $750,000 is taxable to Laura.
[removed] $750,000 is deductible by the corporation; $750,000 is taxable to Laura.
[removed] $750,000 is deductible by the corporation; $600,000 is taxable to Laura.

Question 18.18. During the current year, the United States files criminal and civil actions against Joe, the CEO of Box Corporation, and Jane, the president of Cable Corporation, for price fixing. Both enter pleas of no contest and appropriate judgments are entered. Subsequent to this action, Square Corporation sues both Box and Cable for treble damages of $6,000,000. In settlement, Box and Cable each pay Square $1,200,000. What is the maximum amount that Box and Cable may each deduct? (Points : 5)

[removed] $400,000
[removed] $1,200,000
[removed] $2,000,000
[removed] $6,000,000

Question 19.19. To be tax deductible, an expense must be all of the following except (Points : 5)

[removed] ordinary and necessary.
[removed] paid in cash.
[removed] reasonable in amount.
[removed] an expense of the taxpayer.

Question 20.20. During 2011 and 2012, Danny pays property taxes of $3,500 each year on a piece of land. During 2011, the land is vacant and unproductive. In 2012 Danny uses the land as a parking lot and generates $16,000 in income. Which of the following is true regarding the property taxes? (Points : 5)

[removed] Capitalize $3,500 each year.
[removed] Deduct $3,500 each year.
[removed] Capitalize $3,500 in 2011 and deduct $3,500 in 2012.
[removed] Either B or C is acceptable.

Question 21.21. Mr. and Mrs. Thibodeaux, who are filing a joint return, have adjusted gross income of $100,000. During the tax year, they paid the following medical expenses for themselves and for Mrs. Thibodeaux's mother, Mrs. Watson. Mrs. Watson provided over one-half of her own support.

Prescription drugs for Mr. Thibodeaux

$3,600

General vitamins for Mrs. Thibodeaux

$ 100

Hospital bill for Mrs. Watson

$2,200

Doctor bill for Mrs. Thibodeaux

$4,000

Doctor bill for Mr. Thibodeaux

$1,800

Mr. and Mrs. Thibodeaux received no reimbursement for the above expenditures. What is the amount of their deductible itemized medical expenses? (Points : 5)

[removed] $1,900
[removed] $2,000
[removed] $4,100
[removed] $9,400

Question 22.22. The following taxes are deductible as itemized deductions with the exception of (Points : 5)

[removed] state income taxes.
[removed] federal income taxes.
[removed] foreign real property taxes.
[removed] local personal property taxes.

Question 23.23. All of the following statements are true except (Points : 5)

[removed] investment interest expense is deductible to the extent of a taxpayer's net investment income.
[removed] short-term capital gains meet the definition of net investment income.
[removed] investment interest expense includes interest expense to purchase or carry tax-exempt securities.
[removed] net investment income is the taxpayer's investment income in excess of investment expenses.

Question 24.24. When both borrowed and owned funds are mingled in the same account, for purposes of categorizing interest expense, a repayment of the debt is allocated first to (Points : 5)

[removed] personal expenditures.
[removed] trade or business expenditures.
[removed] investment expenditures.
[removed] passive activity expenditures in real estate.

Question 25.25. Caleb's medical expenses before reimbursement for the year include the following:

Medical premiums

$11,000

Doctors, hospitals

3,500

Prescriptions

600

Caleb's AGI for the year is $50,000. Caleb also receives a reimbursement for medical expenses of $1,000. Caleb's deductible medical expenses that will be added to the other itemized deduction will be (Points : 5)

[removed] $10,350.
[removed] $11,350.
[removed] $14,500.
[removed] $15,100.

Question 26.26. Joseph has AGI of $170,000 before considering the $20,000 rental loss for property which he actively manages. How much of the rental loss can he deduct? (Points : 5)

[removed] $0
[removed] $10,000
[removed] $20,000
[removed] $25,000

Question 27.27. Justin has AGI of $110,000 before considering his $30,000 loss from rental property, which he actively manages. How much of the rental loss can Justin deduct this year?(Points : 5)

[removed] $10,000
[removed] $20,000
[removed] $25,000
[removed] $30,000

Question 28.28. Nancy reports the following income and loss in the current year.

Salary

$ 60,000

Income from activity A

18,000

Loss from activity B

( 9,000)

Loss from activity C

( 13,000)

All three activities are passive activities with respect to Nancy. Nancy also has $21,000 of suspended losses attributable to activity C carried over from prior years. During the year, Nancy sells activity C and realizes a $15,000 taxable gain. What is Nancy's AGI as a result of these transactions? (Points : 5)

[removed] $50,000
[removed] $55,000
[removed] $64,000
[removed] $71,000

Question 29.29. A fire totally destroyed office equipment and furniture which Monica uses in her business. The equipment had an adjusted basis of $15,000 and a FMV of $10,000 before the fire. The furniture's adjusted basis was $5,000 and its FMV was $2,000 before the fire. Monica's AGI for the year is $60,000. Monica does not have insurance on the destroyed assets. How much is Monica's deductible casualty loss? (Points : 5)

[removed] $5,900
[removed] $12,000
[removed] $13,900
[removed] $20,000

Question 30.30. Stacy, who is married and sole shareholder of ABC Corporation, sold all of her stock in the corporation for $100,000. Stacy had organized the corporation in 1999 by contributing $225,000 and receiving all of the capital stock of the corporation. ABC Corporation is a domestic corporation engaged in the manufacturing of ski parkas. The stock in ABC Corporation qualified as Sec. 1244 stock. The sale results in a (n) (Points : 5)

[removed] ordinary loss of $125,000.
[removed] long-term capital loss of $125,000.
[removed] long-term capital loss of $100,000 and ordinary loss of $25,000.
[removed] ordinary loss of $100,000 and long-term capital loss of $25,000.

Question 31.31. Jan, who is an employee, drove her automobile a total of 40,000 business miles in 2011. She also has receipts for business-related use as follows:

Parking

$500

Fuel

900

Tolls

200

Jan receives no reimbursement from her employer. Jan has an AGI for the year of $50,000 and no other itemized deductions. If Jan uses the standard mileage method, she can deduct from AGI (after limitations) (Points : 5)

[removed] $19,600.
[removed] $20,100.
[removed] $21,000.
[removed] $22,000.

Question 32.32. Steven is a representative for a textbook publishing company. Steven attends a convention which will also be attended by many potential customers. During the week of the convention, Steven incurs the following costs in entertaining potential customers.

Meal costs

$ 1,500

Entertainment of customers

3,500

Having recently been to a company seminar on the new tax laws, Steven makes sure that business is discussed at the various dinners, and that the entertainment is on the same day as the different dinners. Steven is reimbursed $2,000 by his employer under an accountable plan. Steven's AGI for the year is $50,000, and while he itemizes deductions, he has no other miscellaneous itemized deductions. What is the amount and character of Steven's deduction after any limitations? (Points : 5)

[removed] $500 from AGI
[removed] $500 for AGI
[removed] $2,000 from AGI
[removed] $2,000 for AGI

Question 33.33. In which of the following situations is the taxpayer not
allowed a deduction for moving expenses? (Points : 5)

[removed] Pam moves from Phoenix to Los Angeles to take a new job. She works at the Los Angeles job for 45 weeks before starting a new job in Las Vegas.
[removed] Paul moves from Boston to Miami to start a new business selling t-shirts. The business is not successful and Paul returns to Boston after 52 weeks.
[removed] Phyllis opens a coffee bar after moving from Seattle to San Francisco. She still owns the coffee bar and lives in San Francisco 90 weeks after her move.
[removed] Marva moves from Dallas to Washington D.C. in her job as an IRS agent. She is still working at the IRS Washington office after one year.

Question 34.34. Allison, who is single, incurred $4,000 for unreimbursed employee expenses, $10,000 for mortgage interest and real estate taxes on her home, and $500 for investment counseling fees. Allison's AGI is $80,000. Allison's allowable deductions from AGI are (after limitations have been applied) (Points : 5)

[removed] $10,500.
[removed] $12,900.
[removed] $14,000.
[removed] $14,500.

Question 35.35. Brett, an employee, makes the following gifts, none of which are reimbursed:

Brett's supervisor

$30

Brett's secretary

40

4 customers ($27 each)

108

Gift wrapping customer gifts

10

What amount of the gifts is deductible before application of the 2% of AGI floor for miscellaneous itemized deductions? (Points : 5)

[removed] $135
[removed] $150
[removed] $170
[removed] $180

1.

On Form 1040, deductions for adjusted gross income include the amounts paid for all of the following except

Student ResponseValueFeedback

A. home mortgage interest.

B. student loan interest.0%

C. alimony.0%

D. moving expenses.0%

Score:1/1

Comments:

2.

Deductions for adjusted gross income include all of the following except

Student ResponseValueCorrect AnswerFeedback

A. contributions to certain retirement plan arrangements.0%

B. unreimbursed employee business expenses.0%

C. expenses attributable to production of rental income.0%

D. alimony.0%

Score:1/1

Comments:

3.

Self-employed individuals may claim, as a deduction for adjusted gross income, 50 percent of their

Student ResponseValueCorrect AnswerFeedback

A. traditional IRA contributions.0%

B. health insurance premiums.0%

C. disability insurance premiums.0%

D. self-employment tax.0%

Score:1/1

Comments:

4.

Charles is a single person, age 35, with no dependents. In 2010, Charles has gross income of $75,000 from his sole proprietorship. Charles also incurs $80,000 of deductible business expenses in connection with his proprietorship. He has interest and dividend income of $22,000. Charles has no itemized deductions. Charles's taxable income is

Student ResponseValueCorrect AnswerFeedback

A. $13,350.0%

B. $17,000.0%

C. $7,650.0% Interest and dividend income $22,000

Gross income from business $75,000

Minus: Business deductions 80,000 ( 5,000)

Adjusted gross income $17,000

Minus: Standard deduction ( 5,700)

Minus: Exemption ( 3,650)

Taxable income $ 7,650

D. $11,300.0%

Score:1/1

Comments:

5.

In 2010, Sean, who is single and age 44, received $55,000 of gross income and had $5,000 of deductions for AGI and $4,600 of itemized deductions. Sean's taxable income is

Student ResponseValueCorrect AnswerFeedback

A. $45,400.0%

B. $44,300.0%

C. $46,350.0%

D. $40,650.0%

Score:1/1

Comments:

6.

In 2010, Venkat, who is single and age 37, received $60,000 of gross income and had $6,000 of itemized deductions. Venkat's taxable income is

Student ResponseValueCorrect AnswerFeedback

A. $50,000.0%

B. $54,000.0%

C. $50,350.0%

D. $56,350.0%

Score:1/1

Comments:

7.

Liz, who is single, lives in a single family home and owns a second single family home that she rented for the entire year at a fair rental rate. Liz had the following items of income and expense during the current year.

Income:

Gross salary and commissions from Ace Corporation $50,000

Rent received from tenant in Liz's rental house 13,000

Dividends received on her portfolio of stocks 5,000

Expenses:

Unreimbursed professional dues 200

Subscriptions to newsletters recommending stocks 900

Taxes, interest and repair expenses on rental house 3,500

Depreciation expense on rental house 2,300

What is her adjusted gross income for the year?

Student ResponseValueCorrect AnswerFeedback

A. $62,2000%

B. $53,7500%

C. $61,1000%

D. $68,0000%

Score:1/1

Comments:

8.

Deductions for AGI may be located

Student ResponseValueCorrect AnswerFeedback

A. on the front page of Form 1040.0%

B. on Schedule E as a deduction.0%

C. on Schedule C as a deduction.0%

D. All of the above are true.0%

Score:1/1

Comments:

9.

To be tax deductible, an expense must be all of the following except

Student ResponseValueCorrect AnswerFeedback

A. paid in cash.0% .

B. reasonable in amount.0%

C. an expense of the taxpayer.0%

D. ordinary and necessary.0%

Score:1/1

Comments:

10.

Which of the following is not required for an expenditure to be deductible as a business or investment expense?

Student ResponseValueCorrect AnswerFeedback

A. recurring in nature0%

B. reasonable in amount0%

C. ordinary and necessary0%

D. incurred by the taxpayer0%

Score:1/1

Comments:

11.

Which of the following expenditures is tax deductible?

Student ResponseValueCorrect AnswerFeedback

A. expenses related to tax-exempt income0%

B. expenses that are illegal or in violation of public policy0%

C. capital expenditures0%

D. expenses related to a trade or business0%

Score:1/1

Comments:

12.

Maria pays the following legal and accounting fees during the year:

Legal fees in connection with trade or business $4,000

Legal fees related to purchase of personal residence 2,600

Legal fees related to tax deficiency related to Schedule A

itemized deductions 500

Tax return preparation fees:

Allocable to preparation of Schedule C 2,000

Allocable to preparation of remainder of return 2,100

What is the total amount of her for AGI deduction for these fees?

Student ResponseValueCorrect AnswerFeedback

A. $6,0000%

B. $8,1000%

C. $4,0000%

D. $11,2000%

Score:1/1

Comments:

13.

Leigh pays the following legal and accounting fees during the year:

Legal fees in connection with a contract dispute in her trade or business $8,800

Legal fees related to resolving a tax deficiency related to business 4,000

Tax return preparation fees:

Allocable to Schedules A and B 1,000

Allocable to Schedule C 1,200

Legal fees incident to a divorce 5,000

What is the total amount of her for AGI deduction for these fees?

Student ResponseValueCorrect AnswerFeedback

A. $14,0000%

B. $15,0000%

C. $20,0000%

D. $10,8000%

Score:1/1

Comments:

14.

During the current year, Martin purchases undeveloped land as an investment. Martin intends to rent the land as pastureland and hopefully sell it later for a profit. In the current year, Martin receives no rent but he does pay taxes of $2,800, mortgage interest of $900 and liability insurance of $500. How much of these expenses can Martin deduct (before any limitations) on his current tax return?

Student ResponseValueCorrect AnswerFeedback

A. $1,4000%

B. $00%

C. $4,2000%

D. $3,7000%

Score:1/1

Comments:

15.

Pamela was an officer in Green Restaurant which subsequently went bankrupt. Pamela started a new restaurant and, to establish goodwill, paid off the debts of $100,000 of Green Restaurant. She was under no obligation to do so. The $100,000 is

Student ResponseValueCorrect AnswerFeedback

A. deductible currently as a trade or business expense since the expenses are considered ordinary and necessary business expenses.0%

B. capitalized now and amortized over a period of not less than 15 years.0%

C. capitalized now because the expenses are not ordinary. No future amortization is permitted.0%

D. deductible currently as an itemized deduction.0%

Score:1/1

Comments:

16.

Laura, the controlling shareholder and an employee of Southwest Corporation, receives an annual salary of $750,000. Based on several factors including the size of the corporation's operations and a comparison of salary received by officers of comparably-sized corporations, the IRS contends that Laura's salary should be no higher than $600,000. The Court upheld the IRS' position. As a result, which of the following is true?

Student ResponseValueCorrect AnswerFeedback

A. $750,000 is deductible by the corporation; $750,000 is taxable to Laura.0%

B. $750,000 is deductible by the corporation; $600,000 is taxable to Laura.0%

C. $600,000 is deductible by the corporation; $600,000 is taxable to Laura.0%

D. $600,000 is deductible by the corporation; $750,000 is taxable to Laura.0%

Score:1/1

Comments:

17.

Carole owns 75% of Pet Foods, Inc. As CEO, Carole must travel extensively and does so on the company jet. In addition, she also uses the jet to take several personal vacations. Carole reports the value of the personal use of the jet, $140,000, as additional compensation. Which of the following is true in terms of the corporation?

Student ResponseValueCorrect AnswerFeedback

A. The corporation takes a deduction of $140,000 for compensation expense.0% .

B. The corporation takes a deduction of $140,000 for dividend expense.0%

C. The corporation includes $140,000 as miscellaneous income.0%

D. The $140,000 has no impact on the corporation's income tax.0%

Score:1/1

Comments:

18.

Mark and his brother, Rick, each own farms. Rick is experiencing severe financial difficulties and cannot afford to buy feed for his cattle. Mark purchases $2,000 of feed and gives Rick one-half of the feed. Mark tells Rick that there is no need to repay him and to consider the feed a gift. Which of the following statements is true?

Student ResponseValueCorrect AnswerFeedback

A. Mark can deduct $1,000 for the feed.0%

B. Rick must report $1,000 as income.0%

C. Mark can deduct $2,000 for the feed.0%

D. Rick can deduct $1,000 for the feed.0%

Score:0/1

Comments:

19.

Which of the following factors is important in distinguishing between capital and revenue expenditures?

Student ResponseValueCorrect AnswerFeedback

A. The expenditure changes the use of the property.0%

B. The expenditure substantially prolongs the useful life of the property.0%

C. The expenditure adds to the value of the property.0%

D. All of the above.0%

Score:1/1

Comments:

20.

During 2010 and 2011, Danny pays property taxes of $3,500 each year on a piece of land. During 2010, the land is vacant and unproductive. In 2011 Danny uses the land as a parking lot and generates $16,000 in income. Which of the following is true regarding the property taxes?

Student ResponseValueCorrect AnswerFeedback

A. Capitalize $3,500 each year.0%

B. Deduct $3,500 each year.0%

C. Capitalize $3,500 in 2010 and deduct $3,500 in 2011.0%

D. Either B or C is acceptable.0%

Score:1/1

Comments:

Antonio owns land held for investment with a basis of $28,000. The city of Lafayette exercises the right of eminent domain and Antonio receives a payment of $48,000. What is Antonio's realized gain?

Student ResponseValueCorrect AnswerFeedback

A. $20,0000%

B. $48,0000%

C. $00%

D. $28,0000%

Score:1/1

Comments:

2.

Will exchanges a building with a FMV of $80,000, a basis of $35,000, and subject to a liability of $30,000 for land with a FMV of $50,000 owned by Jane. The amount realized by Will is

Student ResponseValueCorrect AnswerFeedback

A. $80,000.0%

B. $50,000.0%

C. $30,000.0%

D. $35,000.0%

Score:1/1

Comments:

3.

Richard exchanges a building with a FMV of $75,000, a basis of $35,000, and subject to a liability of $25,000 for land with a FMV of $50,000 owned by Bill. What is the amount of Richard's realized gain?

Student ResponseValueCorrect AnswerFeedback

A. $00%

B. $40,0000%

C. $15,0000%

D. $25,0000%

Score:1/1

Comments:

4.

Jack exchanged land with an adjusted basis of $65,000 subject to a liability of $22,000 for $50,000 (FMV) of stock owned by Hayden. Hayden takes the land subject to the liability. Jack incurs $500 of selling expenses. What is the amount of Jack's realized gain on the exchange?

Student ResponseValueCorrect AnswerFeedback

A. $7,000 gain0%

B. ($14,000) loss0%

C. $6,500 gain0%

D. ($14,500) loss0%

Score:1/1

Comments:

5.

Michelle purchased her home for $150,000, and subsequently added a garage costing $25,000 and a new porch costing $5,000. Repairs to the home's plumbing cost $1,000. The adjusted basis in the home is

Student ResponseValueCorrect AnswerFeedback

A. $151,000.0%

B. $181,000.0%

C. $150,000.0%

D. $180,000.0%

Score:1/1

Comments:

6.

Which one of the following does not affect the adjusted basis of a house held as rental property?

Student ResponseValueCorrect AnswerFeedback

A. depreciation deduction0%

B. installation of a completely new plumbing system0%

C. painting of more than 50% of the rooms in the home0%

D. adding a new room to the house0%

Score:1/1

Comments:

7.

Jordan paid $30,000 for equipment two years ago and has claimed depreciation deductions of $15,600 for the two years. The cost of repairs during the same time period was $2,000 while a major overhaul which extended the life of the equipment cost $7,000. What is Jordan's basis in the equipment at the end of the two-year period?

Student ResponseValueCorrect AnswerFeedback

A. $16,4000%

B. $21,4000%

C. $14,4000%

D. $30,0000%

Score:1/1

Comments:

8.

Allison buys equipment and pays cash of $50,000, signs a note of $10,000 and assumes a liability on the property for $3,000. Also, Allison pays an installation cost of $500 and a delivery cost of $800. Allison's basis in the asset is

Student ResponseValueCorrect AnswerFeedback

A. $64,300.0%

B. $63,500.0%

C. $63,000.0%

D. $60,000.0%

Score:1/1

Comments:

9.

Dennis purchased a machine for use in his business. Mr. Dennis' costs in connection with this purchase were as follows:

Note to seller $33,000

Cash paid to seller 5,000

State sales tax 2,400

Freight to place of business 1,500

Wages paid to workers to install machine 4,200

What is the amount of Mr. Dennis' basis in the machine?

Student ResponseValueCorrect AnswerFeedback

A. $46,1000%

B. $41,9000%

C. $40,4000%

D. $33,0000%

Score:1/1

Comments:

10.

During the current year, Tony purchased new car wash equipment for use in his service station business. Tony's costs in connection with the purchase were as follows:

Cost of the equipment $45,000

Sales tax on the equipment 4,000

Delivery charges 600

Installation and testing charges 3,000

Expenses of operating the equipment 2,000

What is Tony's basis in the car wash equipment?

Student ResponseValueCorrect AnswerFeedback

A. $49,6000%

B. $54,6000%

C. $52,6000%

D. $49,0000%

Score:1/1

Comments:

11.

Edward purchased stock last year as follows:

Month Shares Total Cost

March 100 $ 270

July 200 600

October 600 $1,200

In April of this year, Edward sells 80 shares for $250. Edward cannot specifically identify the stock sold. The basis for the 80 shares sold is

Student ResponseValueCorrect AnswerFeedback

A. $184.0%

B. $240.0%

C. $160.0%

D. $216.0%

Score:1/1

Comments:

12.

Kathleen received land as a gift from her grandfather. At the time of the gift, the land had a FMV of $105,000 and an adjusted basis of $85,000 to Kathleen's grandfather. One year later, Kathleen sold the land for $110,000. What was her gain or (loss) on this transaction?

Student ResponseValueCorrect AnswerFeedback

A. no gain or loss0%

B. $20,0000%

C. $25,0000%

D. ($ 5,000)0%

Score:1/1

Comments:

13.

Kathleen received land as a gift from her grandfather. At the time of the gift, the land had a FMV of $85,000 and an adjusted basis of $110,000 to Kathleen's grandfather. One year later, Kathleen sold the land for $80,000. What was her gain or (loss) on this transaction?

Student ResponseValueCorrect AnswerFeedback

A. ( $5,000)0%

B. $5,0000%

C. $30,0000%

D. no gain or loss0%

Score:1/1

Comments:

14.

Dale gave property with a basis of $16,000 to Sarah when it had a FMV of $12,000. Sarah later sold the property for $22,000 resulting in a recognized gain of

Student ResponseValueCorrect AnswerFeedback

A. $4.000.0%

B. $12,000.0%

C. $-0-.0%

D. $6,000.0%

Score:1/1

Comments:

15.

In the current year, Andrew received a gift of property from his uncle. At the time of the gift, the property had a FMV of $113,000 and an adjusted basis to his uncle of $70,000. After deducting the annual exclusion, the amount of the gift was $100,000. Andrew's uncle paid a gift tax on the property of $24,000. What is the amount of Andrew's basis in the property?

Student ResponseValueCorrect AnswerFeedback

A. $70,0000%

B. $80,3200%

C. $124,0000%

D. $94,0000%

Score:1/1

Comments:

16.

During the current year, Don's aunt Natalie gave him a house. At the time of the gift, the house had a FMV of $143,000 and his aunt's adjusted basis was $133,000. After deducting the annual exclusion, the amount of the gift was $130,000. His aunt paid a gift tax of $20,000 on the house. What is Don's basis in the house for purposes of determining gain?

Student ResponseValueCorrect AnswerFeedback

A. $143,0000%

B. $133,0000%

C. $134,5380% $133,000 + [$20,000 × ($143,000 - $133,000)/$130,000)] = $134,538.

D. $130,0000%

Score:1/1

Comments:

17.

David gave property with a basis of $1,330 to Hannah when the property had a FMV of $1,000 and paid gift taxes of $80. If Hannah later sells the property for $1,400, Hannah's basis (to determine gain) in the property immediately before the sale is

Student ResponseValueCorrect AnswerFeedback

A. $1,000.0%

B. $1,080.0%

C. $1,410.0%

D. $1,330.0%

Score:1/1

Comments:

18.

Joycelyn gave a diamond necklace to her granddaughter Emma. Joycelyn had purchased the necklace in 1980 for $15,000. The FMV of the necklace at the time of the gift was $43,000. After deducting the annual exclusion, the amount of the gift was $30,000. Gift taxes of $10,000 were paid. What is Emma's adjusted basis in the necklace?

Student ResponseValueCorrect AnswerFeedback

A. $24,3330%

B. $15,0000%

C. $43,0000%

D. $25,0000%

Score:1/1

Comments:

19.

Monte inherited 1,000 shares of Corporation Zero stock from his father who died on March 4 of the current year. His father paid $30 per share for the stock on September 2, 1995. The FMV of the stock on the date of death was $50 per share. On September 4 this year, the FMV of the stock was $55 per share. The executor did not elect the alternate valuation date. Monte sold the stock for $65 per share on December 3. What is the amount and nature of any gain or loss?

Student ResponseValueCorrect AnswerFeedback

A. $ 10,000 LTCG0%

B. $ 15,000 STCG0%

C. $ 15,000 LTCG0%

D. $ 10,000 STCG0%

Score:0/1

Comments:

20.

Melody inherited 1,000 shares of Corporation Zappa stock from her mother who died on March 4 of the current year. Her mother paid $30 per share for the stock on September 2, 1995. The FMV of the stock on the date of death was $65 per share. On September 4 of the current year, the FMV of the stock was $70 per share. Melody sold the stock for $85 per share on December 3. The estate qualified for, and the executor elected, the alternate valuation method for these and other assets in the estate. An estate tax return was filed. What was Melody's basis in the stock on the date of the sale?

Student ResponseValueCorrect AnswerFeedback

A. $ 30,0000%

B. $ 70,0000%

C. $ 85,0000%

D. $ 65,0000%

Score:1/1

Comments:

The federal income tax is the dominant form of taxation by the federal government.

Student ResponseValueCorrect Answer

True 0%

Score:1/1

Comments:

2.

Which of the following taxes is regressive?

Student ResponseValueCorrect AnswerFeedback

A. Federal Insurance Contributions Act (FICA)0%

B. gift tax0%

C. property tax0%

D. excise tax0%

Score:1/1

Comments:

3.

Sarah contributes $25,000 to a church. Sarah's marginal tax rate is 35% while her average tax rate is 25%. After considering her tax savings, Sarah's contribution costs

Student ResponseValueCorrect AnswerFeedback

A. $18,750.0%

B. $8,750.0%

C. $6,250.0%

D. $16,250.0%

Score:1/1

Comments:

4.

Gross income is income from whatever source derived less exclusions.

Student ResponseValueCorrect Answer

True 100% True

Score:1/1

Comments:

5.

In 2010 the standard deduction for a married taxpayer filing a joint return and who is 67 years old with a spouse who is 65 years old is

Student ResponseValueCorrect AnswerFeedback

A. $13,600.0%

B. $12,500.0%

C. $11,400.0%

D. $12,800.0%

Score:0/1

Comments:

6.

Which one of the following items is not considered gross income for tax purposes?

Student ResponseValueCorrect AnswerFeedback

A. illegal income0%

B. gambling winnings0%

C. face amount of life insurance received due to the death of the insured0%

D. cash dividends 0%

Score:0/1

Comments:

7.

CT Computer Corporation, an accrual basis taxpayer, sells service contracts on the computers it sells. At the beginning of January of this year, CT Corporation sold contracts with service to begin immediately:

One for three months $200

One for 20 months costing 800

One for 36 months costing 1,000

The amount of income CT Corporation must report for this year is

Student ResponseValueCorrect AnswerFeedback

A. $1,680.0%

B. $2,000.0%

C. $200.0%

D. $1,000.0%

Score:1/1

Comments:

8.

Michael is an employee of StayHere Hotels, Inc. in Washington, DC. On his vacation, Michael travels to San Francisco and stays at a StayHere Hotel for six nights free of charge. The regular rate for a hotel room at StayHere in San Francisco is $300 a night. His ability to stay in the hotel without charge is based on the availability of empty rooms. How much income must Michael report due to the use of the San Francisco hotel room?

Student ResponseValueCorrect AnswerFeedback

A. $00%

B. $1,8000%

C. $3600%

D. $3000%

Score:1/1

Comments:

9.

Connor owes $4 million and has assets of only $1 million. He declares and files personal and business bankruptcy and his creditors approve a payment plan of $.25 per dollar. Connor has a net operating loss carryover of $2 million. The remaining 75 percent of his debt will be canceled. Connor must recognize income of

Student ResponseValueCorrect AnswerFeedback

A. $0.0%

B. $1 million.0%

C. $3 million.0%

D. $2 million.0%

Score:0/1

Comments:

10.

Brad owns 100 shares of AAA Corporation with a basis of $6,000 and a FMV of $24,000. Brad receives 15 stock rights as a nontaxable distribution with a total FMV of $6,000. Brad allows the stock rights to expire. Brad's loss recognized and the basis of the original 100 shares after expiration of the stock rights is

Student ResponseValueCorrect AnswerFeedback

A. ($1,200) and $4,800.0%

B. ($1,200) and $6,000.0%

C. $0 and $6,000.0%

D. $0 and $4,800.0%

Score:0/1

Comments:

11.

24i 1.6-73

In which of the following situations are points paid on a home mortgage loan not deductible in the year of payment?

Student ResponseValueCorrect AnswerFeedback

A. refinance0%

B. construction0%

C. purchase0%

D. improvement0%

Score:1/1

Comments:

12.

24i 1.6-86

Dana purchased an asset from her brother for $15,000. Her brother's basis was $20,000. If Dana sells the asset to an unrelated party for $12,000, she will recognize

Student ResponseValueCorrect AnswerFeedback

A. ($4,000) loss.0%

B. $-0-.0%

C. ($3,000) loss.0%

D. ($1,000) loss.0%

Score:1/1

Comments:

13.

24i 1.7-63

Which of the following is deductible as interest expense?

Student ResponseValueCorrect AnswerFeedback

A. personal credit card interest0%

B. bank service charges on personal account0%

C. interest to purchase tax-exempt bonds0%

D. interest on home equity loan0%

Score:1/1

Comments:

14.

24i 1.8-52

Nancy reports the following income and loss in the current year.

Salary $60,000

Income from activity A 18,000

Loss from activity B ( 9,000)

Loss from activity C ( 13,000)

All three activities are passive activities with respect to Nancy. Nancy also has $21,000 of suspended losses attributable to activity C carried over from prior years. During the year, Nancy sells activity C and realizes a $15,000 taxable gain. What is Nancy's AGI as a result of these transactions?

Student ResponseValueCorrect AnswerFeedback

A. $50,0000%

B. $55,0000%

C. $64,0000%

D. $71,0000%

Score:1/1

Comments:

15.

24i 1.9-62

JoAnn meets with several customers each day in the course of her job and in each case travels to the customer's place of business. JoAnn has kept detailed records of her expenses which show the following:

Automobile expenses $4,500

Tolls and parking $500

Meals (JoAnn eats alone) $1,000

Commute to employer's job location $800

JoAnn is not reimbursed by her employer for any expenses. JoAnn's AGI for the year is $44,000 and she has no other miscellaneous itemized deductions. JoAnn may deduct transportation expenses (after limitations have been applied) of

Student ResponseValueCorrect AnswerFeedback

A. $4,120.0%

B. $6,300.0%

C. $5,500.0%

D. $5,000.0%

Score:0/1

Comments:

16.

24i 1.10-41

Joan bought a business machine for $15,000 on January 1, 2009, and later sold the machine for $12,800 when the total allowable depreciation is $8,500. The depreciation actually taken on the tax returns totaled $8,000. Joan must recognize a gain (or loss) of

Student ResponseValueCorrect AnswerFeedback

A. no gain or loss.0%

B. $6,300.0%

C. $4,300.0%

D. $5,800.0%

Score:1/1

Comments:

17.

24i 1.11-68

On July 25 of this year, Raj sold land with a cost of $15,000 for $40,000. Raj collected $20,000 this year and is scheduled to receive $5,000 each year for four years starting next year plus an acceptable rate of interest. Raj's gain recognized this year is

Student ResponseValueCorrect AnswerFeedback

A. $20,000.0%

B. $12,500.0%

C. $7,500.0%

D. $25,000.0%

Score:0/1

Comments:

18.

24i 1.12-66

Mitchell and Debbie, both 55 years old and married, sell their personal residence to Sophie in 2010. Sophie pays $225,000 and assumes their $70,000 mortgage. To make the sale they pay $4,000 in commissions and $1,000 in legal costs. They have owned and lived in the house for seven years and their tax basis is $125,000. What is the amount of gain recognized on the sale?

Student ResponseValueCorrect AnswerFeedback

A. $170,0000%

B. $-0-0%

C. $165,0000%

D. $100,0000%

Score:0/1

Comments:

19.

24i 1.13-55

Section 1245 recapture applies to all the following except

Student ResponseValueCorrect AnswerFeedback

A. assets sold or exchanged at a loss.0%

B. amortizable intangible personal property.0%

C. depreciable personal property.0%

D. total depreciation or amortization allowed or allowable.0%

Score:1/1

Comments:

20.

24i 1.14-91

With respect to estimated tax payments for a taxpayer with AGI of $150,000 or lower in the prior year, all of the following are generally true with the exception of

Student ResponseValueCorrect AnswerFeedback

A. no penalty is imposed if the estimated tax is less than $1,000.0%

B. no penalty is imposed if the individual has no tax liability for the prior year.0%

C. no underpayment penalty is imposed if the estimated payments total at least 90% of the actual tax liability for the prior year.0%

D. no underpayment penalty is imposed if the estimated payments total at least 90% of the tax due for the current year.0%

Score:1/1

Comments:

24i 1.1-36

Which of the following taxes is progressive?

Student ResponseValueCorrect AnswerFeedback

A. excise tax0%

B. property tax0%

C. income tax0%

D. sales tax0%

Score:1/1

Comments:

2.24i 1.1-37

Which of the following taxes is proportional?

Student ResponseValueCorrect AnswerFeedback

A. Federal Insurance Contributions Act (FICA)0%

B. gift tax0%

C. sales tax0%

D. income tax0%

Score:1/1

Comments:

3.24i 1.1-39

Sarah contributes $25,000 to a church. Sarah's marginal tax rate is 35% while her average tax rate is 25%. After considering her tax savings, Sarah's contribution costs

Student ResponseValueCorrect AnswerFeedback

A. $6,250.0%

B. $8,750.0%

C. $16,250.0%

D. $18,750.0%