AB256 Week 10 Final Exam

AB256 Week 10 Final Exam

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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

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

Gross income is income from whatever source derived less exclusions.

Student ResponseValueCorrect Answer

True 100% True

Score:1/1

Comments:

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:

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:

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:

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:

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)

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%

Score:1/1

Comments:

4.24i 1.1-41

Charlotte pays $16,000 in tax deductible property taxes. Charlotte’s marginal tax rate is 30%, effective tax rate is 28% and average rate is 25%. Charlotte’s tax savings from paying the property tax is

Student ResponseValueCorrect AnswerFeedback

A. $4,800.0%

B. $4,000.0%

C. $11,200.0%

D. $4,480.0%

Score:1/1

Comments:

5.24i 1.1-42

Anne, who is single, has taxable income for the current year of $38,000 while total economic income is $43,000 resulting in a total tax of $5,822. Anne’s average tax rate and effective tax rate are, respectively,

Student ResponseValueCorrect AnswerFeedback

A. 11.58% and 13.65%.0%

B. 13.54% and 15.32%.0%

C. 15.3% and 13.65%.0%

D. 15.32% and 13.54%.0%

Score:1/1

Comments:

6.24i 1.1-45

Paul makes the following property transfers in the current year:

– $22,000 cash to his wife

– $34,000 cash to a qualified charity

– $220,000 house to his son

– $3,000 computer to an unrelated friend

The total of Paul’s taxable gifts, assuming he does not elect gift splitting with his spouse, subject to the unified transfer tax is

Student ResponseValueCorrect AnswerFeedback

A. $207,000.0%

B. $279,000.0%

C. $245,000.0%

D. $223,000.0%

Score:1/1

Comments:

7.24i 1.1-51

Denzel earns $120,000 this year through his job as a sales manager. What is his FICA tax?

Student ResponseValueCorrect AnswerFeedback

A. $8,362.0% (106,800 × .062) + (120,000 × .0145) = $8,362.

B. $8,170.0%

C. $8,064.0%

D. $9,180.0%

Score:1/1

Comments:

8.24i 1.1-60

Which of the following is not a taxpaying entity?

Student ResponseValueCorrect AnswerFeedback

A. Trust0%

B. Partnership0%

C. Corporation0%

D. Individual0%

Score:1/1

Comments:

9.24i 1.1-66

Which of the following is not an advantage of a limited liability company (LLC)?

Student ResponseValueCorrect AnswerFeedback

A. limited liability for all members of a LLC0%

B. double taxation0%

C. ability to choose between taxation as a partnership or corporation0%

D. All of the above are advantages of an LLC.0%

Score:1/1

Comments:

10.24i 1.1-71

Which of the following steps, related to a tax bill, occurs first?

Student ResponseValueCorrect AnswerFeedback

A. consideration by the Senate0%

B. signature or veto by the President of the United States0%

C. consideration by the Joint Conference Committee0%

D. consideration by the House Ways and Means Committee0%

Score:1/1

Comments:

11.24i 1.1-72

A tax bill introduced in the House of Representatives is then

Student ResponseValueCorrect AnswerFeedback

A. forwarded to the Senate Finance Committee for consideration.0%

B. referred to the House Ways and Means Committee for hearings and approval.0%

C. voted upon by the full House.0%

D. referred to the full House for hearings.0%

Score:1/1

Comments:

12.24i 1.1-74

The Senate equivalent of the House Ways and Means Committee is the Senate

Student ResponseValueCorrect AnswerFeedback

A. Joint Conference Committee.0%

B. Ways and Means Committee.0%

C. Finance Committee.0%

D. Joint Committee on Taxation.0%

Score:1/1

Comments:

13.24i 1.1-75

When returns are processed, they are scored to determine their potential for yielding additional tax revenues. This program is called

Student ResponseValueCorrect AnswerFeedback

A. Discriminant Function System.0%

B. Standard Audit Program.0%

C. Field Audit Program.0%

D. Taxpayer Compliance Measurement Program.0%

Score:1/1

Comments:

14.24i 1.1-77

Alan files his 2009 tax return on April 1, 2010. His return contains no misstatements or omissions of income. The statute of limitations for changes to the return expires

Student ResponseValueCorrect AnswerFeedback

A. April 15, 2013.0%

B. April 15, 2016.0%

C. The statute of limitations never expires.0%

D. April 1, 2012.0%

Score:1/1

Comments:

15.24i 1.1-78

Peyton has adjusted gross income of $20,000,000 on his 2009 tax return, filed April 15, 2010. He accidentally failed to include $200,000 that he received for a television advertisement. How long does the IRS have to audit Peyton’s federal tax return?

Student ResponseValueCorrect AnswerFeedback

A. until April 15, 20160%

B. until April 15, 20130%

C. until April 15, 20120%

D. The IRS can audit Peyton’s return at any future date.0%

Score:1/1

Comments:

16.24i 1.1-82

What are the correct monthly rates for calculating failure to file and failure to pay penalties?

Student ResponseValueCorrect AnswerFeedback

A. Failure to file Failure to pay

5.0% 0.5% 0%

B. Failure to file Failure to pay

0.5% 0.5% 0%

C. Failure to file Failure to pay

0.5% 5.0% 0%

D. Failure to file Failure to pay

5.0% 5.0% 0%

Score:1/1

Comments:

17.24i 1.1-83

Which is not a component of tax practice?

Student ResponseValueCorrect AnswerFeedback

A. tax research0%

B. compliance0%

C. providing clients tax refund advance loans0%

D. tax planning and consulting0%

Score:1/1

Comments:

18.24i 1.1-81

Kate files her tax return 36 days after the due date. When she files the return, she sends a check for $2,000 which is the balance of the tax owed by her. Kate’s penalty for failure to file a return will be

Student ResponseValueCorrect AnswerFeedback

A. 20% per month (or factor thereof).0%

B. 5% per month (or factor thereof) up to a maximum of 25%.0%

C. 0.5% per month (or factor thereof) up to a maximum of 25%.0%

D. none of the above0%

Score:1/1

Comments:

19.24i 1.1-67

What is a limited liability partnership?

Student ResponseValueCorrect AnswerFeedback

A. All partners have unlimited liability.0%

B. It is the same as a limited partnership where the general partner has unlimited liability.0%

C. All partners have limited liability regarding all partnership activities.0%

D. Partners have unlimited liability arising from his or her own acts of negligence or misconduct or similar acts of any person under his or her direct supervision.0%

Score:0/1

Comments:

20.24i 1.1-52

Martha is self-employed in 2010. Her business profits are $140,000. What is her self-employment tax?

Student ResponseValueCorrect AnswerFeedback

A. $21,4200%

B. $16,3400%

C. $17,3030%

D. None of the above.0%

Score:1/1

Comments:

Total score:20/20 = 100% Total score adjusted by 0.0 Maximum possible score: 20

1.24i 1.2-31

Taxable income for an individual is defined as:

Student ResponseValueCorrect AnswerFeedback

A. total income reduced by the standard deduction.0%

B. AGI reduced by personal and dependency exemptions.0%

C. AGI reduced by deductions from AGI and personal and dependency exemptions.0%

D. AGI reduced by itemized deductions.0%

Score:1/1

Comments:

2.24i 1.2-32

All of the following items are generally excluded from income except

Student ResponseValueCorrect AnswerFeedback

A. interest on corporate bonds.0%

B. child support payments.0%

C. life insurance proceeds paid by reason of death.0%

D. interest on state and local government bonds.0%

Score:1/1

Comments:

3.24i 1.2-33

All of the following items are included in gross income except

Student ResponseValueCorrect AnswerFeedback

A. child support payments received.0%

B. alimony received.0%

C. interest earned on a bank account.0%

D. rent income.0%

Score:1/1

Comments:

4.24i 1.2-34

All of the following items are deductions for adjusted gross income except

Student ResponseValueCorrect AnswerFeedback

A. state and local income taxes.0%

B. trade or business expenses.0%

C. rent and royalty expenses.0%

D. alimony paid.0%

Score:1/1

Comments:

5.24i 1.2-35

All of the following items are deductions for (not from) adjusted gross income except

Student ResponseValueCorrect AnswerFeedback

A. moving expenses.0%

B. one-half of self-employment taxes paid.0%

C. qualifying contributions to individual retirement accounts.0%

D. unreimbursed employee business expenses.0%

Score:1/1

Comments:

6.24i 1.2-36

Which of the following credits is considered a refundable credit?

Student ResponseValueCorrect AnswerFeedback

A. Lifetime learning credit0%

B. child and dependent care credit0%

C. adoption expense credit0%

D. earned income credit0%

Score:1/1

Comments:

7.24i 1.2-37

A single taxpayer provided the following information for 2010:

Salary $80,000

Interest on local government bonds 4,000

(qualifies as a tax exclusion)

Allowable itemized deductions 13,000

What is taxable income?

Student ResponseValueCorrect AnswerFeedback

A. $63,3500% ($63,350 = $80,000 – $13,000 itemized deductions – $3,650 personal exemption)

B. $67,0000%

C. $70,6500%

D. $61,3000%

Score:1/1

Comments:

8.24i 1.2-38

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?

Student ResponseValueCorrect AnswerFeedback

A. charitable contributions0%

B. home mortgage interest expense0%

C. unreimbursed employee business expenses0%

D. medical expenses0%

Score:1/1

Comments:

9.24i 1.2-40

In 2010 Brett and Lashana (both 50 years old) file a joint tax return claiming as a dependent their son who is blind. Their standard deduction is

Student ResponseValueCorrect AnswerFeedback

A. $13,600.0%

B. $11,400.0%

C. $12,500.0%

D. $12,800.0%

Score:1/1

Comments:

10.24i 1.2-43

The regular standard deduction is available to which one of the following taxpayers?

Student ResponseValueCorrect AnswerFeedback

A. A person who has only unearned income and is a dependent of another.0%

B. An abandoned spouse.0%

C. Married taxpayer filing a separate return where the other spouse itemizes.0%

D. An individual filing a return for a period of less than 12 months. because of a change in accounting period.0%

Score:1/1

Comments:

11.24i 1.2-47

Deborah, who is single, is claimed as a dependent on her parents’ tax return. She had a part-time job during 2010 and earned $850 during the year, which was her only income. What is her standard deduction?

Student ResponseValueCorrect AnswerFeedback

A. $8500%

B. $9500%

C. $1,1500%

D. $5,7000%

Score:1/1

Comments:

12.24i 1.2-48

Cheryl is claimed as a dependent on her parents’ tax return. She had a part-time job during 2010 and earned $4,900 during the year, which was her only income. What is her standard deduction?

Student ResponseValueCorrect AnswerFeedback

A. $9500%

B. $5,4500%

C. $4,9000%

D. $5,2000%

Score:1/1

Comments:

13.24i 1.2-49

A married person who files a separate return can claim a personal exemption for his spouse if the spouse is not the dependent of another and has

Student ResponseValueCorrect AnswerFeedback

A. no taxable income.0%

B. no gross income.0% A married person who files a separate return can claim a personal exemption for his spouse if the spouse has no gross income during the year and the spouse is not the dependent of another taxpayer.

C. adjusted gross income that is less than the personal exemption.0%

D. gross income that is less than the personal exemption.0%

Score:1/1

Comments:

14.24i 1.2-50

Ben, age 67, and Karla, age 58, have two children who live with them and for whom they provide total support. Their daughter is 21 years old, blind, is not a full-time student and has no income. Her twin brother is 21 years old, has good sight, is a full-time student and has income of $3,900. Ben and Karla can claim how many personal and dependency exemptions on their tax return?

Student ResponseValueCorrect AnswerFeedback

A. 50%

B. 40% .

C. 20%

D. 30%

Score:1/1

Comments:

15.24i 1.2-51

Sarah, who is single, maintains a home in which she, her 15-year old brother, and her 21-year-old niece live. Sarah provides the majority of the support for her brother, her niece, and her cousin, age 18, who is enrolled full-time at the university and lives in an apartment. While the niece and cousin have no income, her brother has a part-time job and earns $4,000 per year. How many personal and dependency exemptions may Sarah claim?

Student ResponseValueCorrect AnswerFeedback

A. 10%

B. 20%

C. 30%

D. 40%

Score:1/1

Comments:

16.24i 1.2-52

Anita, who is divorced, maintains a home in which she and her 16 year old daughter live. Anita provides the majority of the support for her daughter and for a son, age 23, who is enrolled part-time at the university and lives in the dorm. The son also works in the campus bookstore and earns spending money of $3,900. How many personal and dependency exemptions may Anita claim?

Student ResponseValueCorrect AnswerFeedback

A. 10%

B. 20%

C. 30%

D. 40%

Score:1/1

Comments:

17.24i 1.2-53

Amber supports four individuals: Erin, her stepdaughter, who lives with her; Amy, her cousin, who lives in another state; Britney, her friend, who lives legally in Amber’s home all year long; and Charlie, her father, who lives in another state. Assume that the dependency requirements other than residence are all met. How many personal and dependency exemptions may Amber claim?

Student ResponseValueCorrect AnswerFeedback

A. 10%

B. 20%

C. 30%

D. 40%

Score:1/1

Comments:

18.24i 1.2-54

John supports Kevin, his cousin, who lived with him all year. John also supports three other individuals who do not live with him:

Donna, who is John’s mother

Melissa, who John’s stepsister

Morris, who is Kevin’s brother.

Assume that Donna, Melissa, Morris and Kevin each earn less than $3,500. How many personal and dependency exemptions may John claim?

Student ResponseValueCorrect AnswerFeedback

A. 20%

B. 30%

C. 40%

D. 50%

Score:1/1

Comments:

19.24i 1.2-55

Julia provides more than 50 percent of the support for three individuals: Theresa, an unrelated child who lives with Julia all year long; Margaret, Julia’s cousin, who lives in another city; and Emma, Julia’s daughter who lives in her own home. How many dependency exemptions can Julia claim on her 2010 tax return?

Student ResponseValueCorrect AnswerFeedback

A. 00%

B. 10%

C. 20%

D. 30%

Score:1/1

Comments:

20.24i 1.2-56

Tony supports the following individuals during the current year: Miranda, his former mother-in-law who lives in her own home and has no gross income; his cousin, Jeff, age 23, who is a full-time student, earns $7,000 during the year, and lives with Tony all year long; and Matt, age 22, who is Tony’s brother, is a full-time student living on campus and earns $8,000 during the year. How many dependency exemptions may Tony claim?

Student ResponseValueCorrect AnswerFeedback

A. 00%

B. 10%

C. 20%

D. 30%

Score:1/1

Comments:

24i 1.3-43

Bill and Hillary, husband and wife, file separate returns. Bill and Hillary live in a community property state that considers separate property income to be community income. Bill’s salary is $82,000 and Hillary’s salary is $80,000. Hillary receives dividend income of $7,000 from stock inherited from her parents. Bill receives interest income of $5,000 from bonds purchased with his salary after marriage. Bill and Hillary receive $10,000 dividend income from stock they purchased jointly. Bill’s income would be

Student ResponseValueCorrect AnswerFeedback

A. $92,000.0%

B. $97,000.0%

C. $94,500.0%

D. $93,000.0% ($41,000 + $40,000 + $3,500 + $2,500 + $5,000 = $93,000.)

Score:1/1

Comments:

24i 1.3-44

All of the following statements are true except

Student ResponseValueCorrect AnswerFeedback

A. Municipal bond interest is taxable.0%

B. Income earned by selling goods on the Internet are taxable.0%

C. Under the cash method, prepaid income such as rent is usually taxed when received rather than when earned.0%

D. Alimony received by the taxpayer is taxable.0%

Score:1/1

Comments:

24i 1.3-45

Examples of income which are constructively received include all of the following except

Student ResponseValueCorrect AnswerFeedback

A. dividends available on December 31; unclaimed dividends will be mailed out.0%

B. interest credited to a savings account.0%

C. a check received after banking hours.0%

D. a paycheck received from employer, when employer does not have funds in the bank to cover the check.0%

Score:1/1

Comments:

24i 1.3-46

Ms. Marple’s books and records for 2010 reflect the following information:

Salary earned this year $65,000

Interest on savings account (credited to her

account in 2010, withdrawn in 2011) 1,000

Interest on county bonds earned and collected in 2010 2,000

What is the amount Ms. Marple should include in her gross income in 2010?

Student ResponseValueCorrect AnswerFeedback

A. $67,0000%

B. $65,0000%

C. $66,0000% .

D. $68,0000%

Score:1/1

Comments:

24i 1.3-47

One of the requirements that must be met in order to defer recognition of income for advance payments for goods is:

Student ResponseValueCorrect AnswerFeedback

A. the goods are produced in the United States.0%

B. the taxpayer’s method of accounting for the sale for tax purposes is the same as the method used for financial reporting purposes.0% .

C. the goods are on the taxpayer’s premises on the last day of the tax year.0%

D. the amount received is more than the taxpayer’s cost of the goods.0%

Score:1/1

Comments:

24i 1.3-48

Which of the following advance payments cannot qualify for income tax deferral?

Student ResponseValueCorrect AnswerFeedback

A. advance collection for merchandise0%

B. advance collection of rent with associated services0%

C. advance collection for services0%

D. advance collection of rent without associated services0%

Score:1/1

Comments:

24i 1.3-49

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. $200.0%

B. $2,000.0%

C. $1,000.0%

D. $1,680.0% .

Score:1/1

Comments:

24i 1.3-50

Alex is a calendar year sole proprietor. He began business on December 1, this year. He uses the accrual method of accounting. Alex had the following collections in December.

Collected $7,000 in December, from clients who paid cash for services to be performed next year.

Collected $5,000 in December, for services performed during December; deposited in an operating

account on December 31, this year.

Collected $12,000 in December; on accounts receivable for services performed in December;

deposited in operating account on January 2, next year.

What is the amount Alex must include in his income for December?

Student ResponseValueCorrect AnswerFeedback

A. $24,0000%

B. $7,0000%

C. $12,0000%

D. $17,0000%

Score:1/1

Comments:

24i 1.3-51

Norah, who gives music lessons, is a calendar year taxpayer using the accrual 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?

Student ResponseValueCorrect AnswerFeedback

A. $3600%

B. $7200%

C. $1,2000%

D. $00%

Score:1/1

Comments:

10.

24i 1.3-52

Amy’s employer provides her with several fringe benefits. Which of the following are included in her taxable income?

Student ResponseValueCorrect AnswerFeedback

A. Christmas bonus check0%

B. employee discount0%

C. employer’s contribution to retirement plans on Amy’s behalf0%

D. group term life insurance premium paid by employer for $40,000 coverage for Amy0%

Score:1/1

Comments:

11.

24i 1.3-53

Which of the following bonds do not generate tax-exempt Federal income?

Student ResponseValueCorrect AnswerFeedback

A. school district bonds0%

B. U.S. Treasury bonds0%

C. bonds issued by port authorities0%

D. bonds issued by fire districts0%

Score:1/1

Comments:

12.

24i 1.3-54

Carla redeemed EE bonds which qualify for the educational exclusion. The redemption consisted of $14,000 principal and $6,000 interest. The net qualifying educational expenses are $10,000. No reduction of the exclusion is required. The taxable interest is

Student ResponseValueCorrect AnswerFeedback

A. $2,400.0%

B. $6,000.0%

C. $0.0%

D. $3,000.0%

Score:1/1

Comments:

13.

24i 1.3-55

In December of this year, Jake and Stockard, a married couple, redeemed qualified Series EE U.S. Savings Bonds which they had purchased in January 1999. The proceeds were used to help pay for their daughter’s college tuition. Jake and Stockard received proceeds of $8,000 representing principal of $5,000 and interest of $3,000. The qualified higher educational expenses they paid this year totaled $6,000. What is the amount of interest income Jake and Stockard can exclude from their income this year?

Student ResponseValueCorrect AnswerFeedback

A. $2,5000%

B. $2,2500%

C. $5,0000%

D. $3,0000%

Score:1/1

Comments:

14.

24i 1.3-56

Jacob, who is single, paid educational expenses of $16,000 in 2010. He redeemed Series EE bonds and received principal of $8,000 and interest of $3,000. Jacob has other adjusted gross income of $74,100. The $3,000 exclusion must be reduced by:

Student ResponseValueCorrect AnswerFeedback

A. $0.0%

B. $1,600.0%

C. $1,400.0%

D. $3,000.0%

Score:1/1

Comments:

15.

24i 1.3-57

In December 2010, Max, a cash basis taxpayer, rents an apartment to Kadeem. Max receives both the first and last months’ rent totaling $1,800 plus a security deposit of $400. The amount of income reported as taxable in 2010 is:

Student ResponseValueCorrect AnswerFeedback

A. $1,300.0%

B. $2,200.0%

C. $400.0%

D. $1,800.0%

Score:1/1

Comments:

16.

24i 1.3-58

Hoyt rented office space two years ago to Harris, receiving the first and last months’ rent plus a security deposit of $1,000. In early January of this year, Harris moves and Hoyt refunds $250 of the deposit and keeps the remainder to cover $500 which is spent for repairs to the office space and one week of unpaid rent that amounts to $250. How would this information be reflected on Hoyt’s tax return this year?

Student ResponseValueCorrect AnswerFeedback

A. $250 income and $500 deduction0%

B. $750 income and no deduction0%

C. $750 income and $500 deduction0%

D. $750 income and $500 deduction0%

Score:1/1

Comments:

17.

24i 1.3-59

Which of the following is not included in gross income when received?

Student ResponseValueCorrect AnswerFeedback

A. amounts received to cancel or modify a lease0%

B. interest received on bank accounts0%

C. royalties paid to an author0%

D. refundable security deposit0%

Score:1/1

Comments:

18.

24i 1.3-60

Ricky has rented a house from Sarah since last year. The rent is usually $900 per month, but Sarah reduced the monthly rent down to $800 for all twelve months this year in exchange for Ricky constructing an addition to the house. The addition has a fair market value of $33,000. How much total rental income must Sarah report this year?

Student ResponseValueCorrect AnswerFeedback

A. $43,8000%

B. $33,0000%

C. $42,6000% .

D. $9,6000%

Score:1/1

Comments:

19.

24i 1.3-61

Distributions from corporations to the shareholders in a nonliquidating distribution will usually be classified as a dividend up to the amount of the corporation’s:

Student ResponseValueCorrect AnswerFeedback

A. taxable income for the year.0%

B. retained earnings.0%

C. earnings and profits.0%

D. stock basis.0%

Score:1/1

Comments:

20.

24i 1.3-62

In 2010, Richard, a single taxpayer, has adjusted gross income of $40,450. His AGI includes $4,000 of qualified dividends. Richard has no dependents and does not itemize deductions. What is his 2010 federal income tax?

Student ResponseValueCorrect AnswerFeedback

A. $5,048.750%

B. $4,246.250%

C. $3,646.250%

D. $4,065.000%

Score:1/1

Comments:

24i 1.4-35

Which of the following is not excluded from income? (Assume that any amounts received by the taxpayer were kept.)

Student ResponseValueCorrect AnswerFeedback

A. public assistance payments.0%

B. gifts and inheritances.0%

C. life insurance proceeds paid by reason of death.0%

D. fair market value of prize won on a game show.0%

Score:1/1

Comments:

24i 1.4-36

During the year, Cathy received the following:

∙ Dividends of $4,000 from Lindsay corporation. Cathy’s father owned the stock and directed the corporation to send the dividends to Cathy.

∙ A car worth $30,000 for being the 100th customer at a car dealership.

∙ $5,500 cash gift from her uncle.

∙ $10,000 inheritance from her grandmother.

What amount must Cathy include in gross income?

Student ResponseValueCorrect AnswerFeedback

A. $30,0000%

B. $34,0000%

C. $49,5000%

D. $39,5000%

Score:1/1

Comments:

24i 1.4-37

Mae Li is beneficiary of a $70,000 insurance policy on her father’s life. Upon his death, she elects to receive the proceeds in installments from the insurance company that carries the policy. She will receive $16,000 per year for five years. What are the tax consequences each year?

Student ResponseValueCorrect AnswerFeedback

A. There is no taxable income.0%

B. $2,000 of the $16,000 payment is taxable each year.0%

C. All $16,000 each year is taxable.0%

D. $10,000 interest is taxable in the first year.0%

Score:1/1

Comments:

24i 1.4-38

Britney is beneficiary of an $150,000 insurance policy on her father’s life. Upon his death, she may elect to receive the proceeds in five yearly installments of $32,000 or may take the $150,000 lump sum. She elects to take the lump sum payment. What are the tax consequences in year one?

Student ResponseValueCorrect AnswerFeedback

A. There is no taxable income.0%

B. $10,000 interest is taxable in the first year.0%

C. All $32,000 each year is taxable.0%

D. The lump sum payment is taxable.0%

Score:1/1

Comments:

24i 1.4-39

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

Student ResponseValueCorrect AnswerFeedback

A. $5,000 per year is tax free as a death benefit.0%

B. $50,000 is taxable income.0%

C. $52,000 is taxable income.0%

D. $2,000 is taxable income.0%

Score:1/1

Comments:

24i 1.4-40

Cameron is the beneficiary of a $300,000 policy on the life of his mother. Cameron sells the policy to his brother, Parker, for $100,000. Parker subsequently pays premiums of $55,000. Upon his mother’s death, how much of the insurance proceeds must Parker include in income?

Student ResponseValueCorrect AnswerFeedback

A. $300,0000%

B. $55,0000%

C. $145,0000%

D. $00%

Score:1/1

Comments:

24i 1.4-41

Greg is the beneficiary of a $100,000 policy on the life of his mother. Greg gives the policy to his brother, Don. Don subsequently pays premiums of $40,000. Upon his mother’s death, how much of the insurance proceeds must Don include in income?

Student ResponseValueCorrect AnswerFeedback

A. $40,0000%

B. $100,0000%

C. $60,0000%

D. $00%

Score:1/1

Comments:

24i 1.4-42

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?

Student ResponseValueCorrect AnswerFeedback

A. $-0-0%

B. $75,0000%

C. $150,0000%

D. $140,0000%

Score:1/1

Comments:

24i 1.4-43

Alana paid $65,000 in premiums on an endowment life insurance policy with a face value of $100,000. Upon reaching 65, Alana collected the face value of the policy. In the year of collection, Alana will report

Student ResponseValueCorrect AnswerFeedback

A. $65,000 of taxable income.0%

B. $100,000 of taxable income.0%

C. $35,000 of taxable income.0%

D. no income.0%

Score:1/1

Comments:

10.

24i 1.4-44

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

Student ResponseValueCorrect AnswerFeedback

A. $400,000.0%

B. $80,000.0%

C. no income.0%

D. $320,000.0%

Score:1/1

Comments:

11.

24i 1.4-45

Julia suffered a severe stroke and has been admitted to a private hospital where she is expected to remain for the rest of her life. She is certified by a licensed health care practitioner as being a “chronically ill individual.” Her hospital expenses amount to $280 per day. She will receive $270 per day from a $500,000 life insurance policy as an accelerated death benefit. In 2010, she was in the hospital for 10 days and received $2,700. How much of this amount is taxable?

Student ResponseValueCorrect AnswerFeedback

A. $00%

B. $2500%

C. $2,0000%

D. $2,2500%

Score:1/1

Comments:

12.

24i 1.4-46

Bret carries a $200,000 insurance policy on his life and has paid premiums of $10,000 over the years. Dividends on the policy have totaled $8,500. Each year Bret has left the dividends with the insurance company. In the current year, the insurance company credited $800 of interest on the accumulated dividends to Bret’s account. In addition, $600 of dividends was added by the insurance company. In the current year, Bret must report income of

Student ResponseValueCorrect AnswerFeedback

A. $1,400.0%

B. $800.0%

C. $600.0%

D. $0.0%

Score:1/1

Comments:

13.

24i 1.4-47

Benjamin and Jennifer are married and have AGI of $85,000 in 2010. They adopted a child during 2010 who does not have special needs while taking advantage of their employer’s written adoption assistance program. They spent $15,000 in connection with the adoption, all of which was paid by the employer in accordance with the adoption plan. How much of the employer paid adoption costs must be included in their income?

Student ResponseValueCorrect AnswerFeedback

A. $00%

B. $12,1700%

C. $2,8300%

D. $15,0000%

Score:1/1

Comments:

14.

24i 1.4-48

Benjamin and Jennifer are married and have AGI of $150,000. In 2010 they adopted a child who does not have special needs, while taking advantage of their employer’s written adoption assistance program. The adoption cost $9,500, all of which was paid by the employer in accordance with the adoption plan. How much of the employer paid adoption costs may be excluded from their income?

Student ResponseValueCorrect AnswerFeedback

A. $00%

B. $9,5000%

C. $3,6500%

D. $12,1700%

Score:1/1

Comments:

15.

24i 1.4-49

Luke and Paige, a married couple, receive adoption assistance payments of $13,000 from their employer’s qualified plan. They had spent $15,000 in connection with the adoption. The child does not have special needs. If their modified AGI is $190,000 how much may be excluded from income?

Student ResponseValueCorrect AnswerFeedback

A. $13,000.000%

B. $9,894.210%

C. $15,000.000%

D. $2,275.790%

Score:1/1

Comments:

16.

24i 1.4-50

Tim and Theresa, a married couple, receive adoption assistance payments of $10,000 from their employer’s qualified plan. They had spent $5,000 in connection with the adoption of a special-needs child. If their modified AGI is $175,000 how much may be excluded from income?

Student ResponseValueCorrect AnswerFeedback

A. $10,0000%

B. $12,1700% .

C. $5,0000%

D. $00%

Score:1/1

Comments:

17.

24i 1.4-51

Hope receives an $18,500 scholarship from State University. The university specifies that $8,500 is for tuition, books, supplies, and equipment, while $10,000 is for room and board. In addition, Hope works part-time at the campus library and earns $5,000 . Hope’s gross income is

Student ResponseValueCorrect AnswerFeedback

A. $5,000.0%

B. $18,500.0%

C. $23,500.0%

D. $15,000.0%

Score:1/1

Comments:

18.

24i 1.4-52

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:

Student ResponseValueCorrect AnswerFeedback

A. $7,000.0%

B. $7,500.0%

C. $14,500.0%

D. $22,500.0%

Score:1/1

Comments:

19.

24i 1.4-53

Which of the following statements regarding qualified tuition programs is incorrect?

Student ResponseValueCorrect AnswerFeedback

A. Distributions of income are taxed to the donor if the proceeds are not used for higher education expenses.0%

B. Distributions from income earned by a qualified tuition program are tax-free if used for qualified higher education expenses. 0%

C. Contributions to a qualified tuition program are distributed tax-free.0%

D. A qualified tuition program may be established by parents or grandparents.0%

Score:1/1

Comments:

20.

24i 1.4-54

Amanda, who lost her modeling job, sued her employer for age discrimination. She was awarded $75,000 in lost wages, $25,000 for emotional distress, and $150,000 punitive damages. The amount taxable is

Student ResponseValueCorrect AnswerFeedback

A. $-0-.0%

B. $225,000.0%

C. $150,000.0%

D. $250,000.0%

Score:1/1

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