1) Ben Chase needs to pay off some of his debts over the next few
months. Which item on his balance sheet would help him decide what
amounts are due in the near future?
2) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of
3) A budget deficit would result when a person's or family's
4) The tax base for an individual tax return is
5) All of the following are for AGI deductions EXCEPT
6) Which of the following series of inequalities is generally most accurate?
7) Which of the following has the lowest authoritative weight?
8) Josephine is considering taking a 6-month rotation in Paris for her
job. Which type of authority may be especially helpful in determining
the tax consequences of Josephine's job in Paris?
9) Which of the following has the highest authoritative weight?
10) Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because
11) Hector is a married self-employed taxpayer, and this year he paid
$3,000 for his health insurance premiums. Under which of the following
alternative conditions can Hector deduct the cost of the premiums for
AGI?
12) Graham has accepted an offer to do graduate work in the chemistry
department at State University. The chemistry department offered Graham a
scholarship that will pay $5,000 toward his tuition, $500 toward his
university fees, and $3,500 toward the cost of room and meals. Under the
terms of the scholarship, Graham must work in the chemistry labs during
the summer. What amount must Graham include in his gross income?
13) After a meeting with a prospective client, Holly paid for dinner.
After dinner, Holly took the prospective client to the theatre. Holly
paid $290 for the meal and $250 for the tickets, amounts that were
reasonable under the circumstances. What amount of these expenditures
can Holly deduct as a business expense?
14) Rhianna and Jay are married filing jointly in 2009. They have six
children for whom they may claim the child tax credit. Their AGI was
$123,440. What amount of child tax credit may they claim on their 2009
tax return?
15) Which of the following taxes will not qualify as an itemized deduction?
16) Bateman Corporation sold an office building that it used in its
business for $800,000. Bateman bought the building ten years ago for
$600,000 and has claimed $200,000 of depreciation expense. What is the
amount and character of Bateman's gain or loss?
17) The sale of machinery for more than the original cost basis (before
depreciation), used in a trade or business, and held for more than one
year results in the following types of gain or loss:
18) Winchester LLC sold the following business assets during the
current year: (1) automobile, $30,000 cost basis, $12,000 depreciation,
proceeds $20,000; (2) machinery, $25,000 cost basis, $20,000
depreciation, proceeds $10,000; (3) furniture, $15,000 cost basis,
$10,000 depreciation, proceeds $4,000; (4) computer equipment, $25,000
cost basis, $6,000 depreciation, proceeds $10,000; (5) Winchester had
unrecaptured Section 1231 losses of $3,000 in the prior 5 years. What is
the amount and character of Winchester's gains and losses before the
1231 netting process?
19) On the sale of a passive activity, any suspended losses can be used to offset income from
20) Which of the following would be considered passive income?
21) Which of the following would be considered active income?
22) Sue invested $5,000 in the ABC Limited Partnership and received a
10 percent interest in the partnership. The partnership had $20,000 of
qualified nonrecourse debt and $20,000 of debt she is not responsible to
repay because she is a limited partner. Sue is allocated a 10 percent
share of both types of debt. During the year, ABC LP generated a
($90,000) loss. How much of Sue's loss is disallowed due to her tax
basis or at-risk amount?
23) Harvey rents his second home. During 2009, Harvey reported a net
loss of $35,000 from the rental. If Harvey is an active participant in
the rental and his AGI is $80,000, how much of the loss can he deduct
against ordinary income in 2009?
24) What happens when a taxpayer experiences a net loss from a rental home?
25) What is the minimum ownership percentage an owner must have in the
entity to avoid gain recognition when property is contributed?
26) What is the tax impact to a taxable corporation or an S corporation when it makes a property distribution to a shareholder?
27) What item(s) affect the tax basis of a shareholder in a taxable corporation?
28) Antoine transfers property with a tax basis of $500 and a fair
market value of $600 to a corporation in exchange for stock with a fair
market value of $550 in a transaction that qualifies for deferral under
Section 351. The corporation assumed a liability of $50 on the property
transferred. What is Antoine's tax basis in the stock received in the
exchange?
29) Which of the following requirements do not have to be met in a Section 351 transaction?
30) Inez transfers property with a tax basis of $200 and a fair market
value of $300 to a corporation in exchange for stock with a fair market
value of $250 in a transaction that qualifies for deferral under Section
351. The corporation assumed a liability of $50 on the property
transferred. What is the corporation's tax basis in the property
received in the exchange?
31) Au Sable Corporation reported taxable income of $800,000 in 2010
and paid federal income taxes of $272,000. Not included in the
computation was a disallowed penalty of $25,000, life insurance proceeds
of $100,000, and an income tax refund from 2009 of $50,000. Au Sable is
an accrual basis taxpayer. The corporation's current earnings and
profits for 2010 would be
32) BTW Corporation has taxable income in the current year that can be
offset with an NOL from a previous year. What is the nature of the
book-tax difference created by the net operating loss deduction in the
current year?
33) A calendar-year corporation has negative current E&P of $(500)
and accumulated positive E&P of $1,000. The corporation makes a $600
distribution to its sole shareholder. Which of the following statements
is true?
34) El Toro Corporation declared a common stock dividend to all
shareholders of record on June 30, 2010. Shareholders will receive 1
share of El Toro stock for each 2 shares of stock they already own.
Raoul owns 300 shares of El Toro stock with a tax basis of $60 per
share. The fair market value of the El Toro stock was $100 per share on
June 30, 2010. What are the tax consequences of the stock dividend to
Raoul?
35) Which of the following stock dividends would be tax-free to the shareholder?
36) Which of the following individuals is not considered "family" for
purposes of applying the stock attribution rules to a stock redemption?
37) Which of the following statements is true when property is contributed in exchange for a partnership interest?
38) Which of the following are prohibited from being an S corporation shareholder?
39) Under which of the following circumstances will a partner recognize a loss from an operating distribution?
40) Suppose at the beginning of 2010, Jamaal's basis in his S
corporation stock was $27,000 and that Jamaal has loaned the S
corporation $10,000. During 2010, the S corporation reported an $80,000
ordinary business loss and no separately stated items. How much of the
ordinary loss is deductible by Jamaal if he owns 50% of the S
corporation?
41) Clampett, Inc. has been an S corporation since its inception. On
July 15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in
his Clampett, Inc. stock on January 1, 2011, was $45,000. For 2011, J.D.
was allocated $10,000 of ordinary income from Clampett, Inc. and no
separately stated items. What is J.D.'s basis in his Clampett, Inc.
stock after all transactions in 2011?
42) Clampett, Inc. has been an S corporation since its inception. On
July 15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in
his Clampett, Inc. stock on January 1, 2011, was $45,000. For 2011, J.D.
was allocated $10,000 of ordinary income from Clampett, Inc. and no
separately stated items. What is the amount of income J.D. recognizes
related to Clampett, Inc. in 2011?
43) Erica and Brett decide to form their new motorcycle business as an
LLC. Each will receive an equal profits (loss) interest by contributing
cash, property, or both. In addition to the members' contributions,
their LLC will obtain a $50,000 nonrecourse loan from First Bank at the
time it is formed. Brett contributes cash of $5,000 and a building he
bought as a storefront for the motorcycles. The building has an FMV of
$45,000, an adjusted basis of $30,000, and is secured by a $35,000
nonrecourse mortgage that the business LLC will assume. What is Brett's
outside tax basis in his LLC interest?
44) Under general circumstances, debt is allocated from the partnership to each partner in the following manner:
45) Which of the following statements is true when property is contributed in exchange for a partnership interest?
46) Frank and Bob are equal members in Soxy Socks, LLC. When forming
the LLC, Frank contributed $50,000 in cash and $50,000 worth of
equipment. Frank's adjusted basis in the equipment was $35,000. Bob
contributed $50,000 in cash and $50,000 worth of land. Bob's adjusted
basis in the land was $30,000. On 3/15/04, Soxy Socks sells the land Bob
contributed for $60,000. How much gain (loss) related to this
transaction will Bob report on his X4 return?
47) What form does a partnership use when filing an annual informational return?
48) Vanessa contributed $20,000 of cash and land with a fair market
value of $100,000 and an adjusted basis of $40,000 to Cook, Inc. (an S
corporation) when it was formed. The land was encumbered by a $30,000
mortgage executed two years before. What is Vanessa's tax basis in Cook,
Inc. after formation?
49) The estate and gift taxes share several common features. Which of
the following characteristics are common to both the estate and gift
taxes?
50) The estate and gift taxes share several common features. Which of
the following characteristics are common to both the estate and gift
taxes?
51) The estate and gift taxes share several common features. Which of
the following characteristics are common to both the estate and gift
taxes?
52) This year Samantha gave each of her three nephews birthday gifts of
$10,000 in cash. At Christmas, Samantha gave each of her three nephews
Christmas gifts of an additional $5,000 in cash. What is the amount of
the taxable gifts, if any, made by Samantha this year?
53) Jonathan transferred $90,000 of cash to a trust this year for the
benefit of Hannah, age 10. The trustee has the discretion to distribute
income or corpus (principal) for Hannah's benefit and is required to
distribute all assets to Hannah (or her estate) not later than Hannah's
21st birthday. What is the amount of the taxable gift?
54) This year Natalie transferred $500,000 of bonds to a revocable
trust with directions to the trustee to pay income to her aunt for five
years, after which the corpus is to be distributed to Natalie's niece.
At year-end, the trustee paid $14,000 of income to the aunt. Which of
the following is a true statement?
Click here for the solution: Ben Chase needs to pay off some of his debts over the next few months
