ACCOUNTING
\n3090<\/p>\n
INCOME
\nTAX I<\/p>\n
Assignment
\n2<\/p>\n
MULTIPLE
\nCHOICE<\/p>\n
1. Tina, Terri, and
\nTricia operate Capstone Fashions an exclusive boutique. Based on advice from
\nTina\u00e2\u0080\u0099s sister, a CPA, the three form a partnership. Tina owns 50% and Terri and
\nTricia each own 25%. For the year, Capstone fashions reports the following:<\/p>\n
Sales revenues<\/p>\n
$ 600,000 <\/p>\n
Business expenses<\/p>\n
(320,000)<\/p>\n
Investment expenses<\/p>\n
(2,000)<\/p>\n
Short-term capital gains<\/p>\n
6,000 <\/p>\n
Long-term capital losses<\/p>\n
(14,000)<\/p>\n
Taxable income<\/p>\n
$
\n 270,000 <\/p>\n
For tax purposes, what
\namount will Capstone Fashions report to Tina as her ordinary income from the
\npartnership?<\/p>\n
a.<\/p>\n
$135,000<\/p>\n
b.<\/p>\n
$136,000<\/p>\n
c.<\/p>\n
$138,500<\/p>\n
d.<\/p>\n
$139,000<\/p>\n
e.<\/p>\n
$140,000<\/p>\n
2. The legislative grace
\nconcept dictates that business expenses are grouped into certain categories
\nthat include<\/p>\n
I.<\/p>\n
Personal expenses.<\/p>\n
II.<\/p>\n
Trade or business expenses.<\/p>\n
III.<\/p>\n
Expenses for the production of income.<\/p>\n
a.<\/p>\n
Statements I and II are correct.<\/p>\n
b.<\/p>\n
Statements I and III are correct.<\/p>\n
c.<\/p>\n
Statements I, II, and III are correct.<\/p>\n
d.<\/p>\n
Statements II and III are correct.<\/p>\n
3. Louise,
\na schoolteacher in Duluth, Minnesota,
\nowns a rental house in Scottsdale,
\n Arizona. She travels to Arizona during spring
\nbreak to inspect her property and discuss property improvements with the tenant
\nand property manager. Louise\u00e2\u0080\u0099s brother, Brian, lives in Scottsdale. She stays at his house during her
\nweek in Arizona
\nand borrows his car to travel across town for her one day of meetings. Her trip
\naccomplishes several objectives: a visit with her brother, a trip away from Minnesota\u00e2\u0080\u0099s winter
\nweather, and a review of her investment property. The expenses of traveling to
\nScottsdale<\/p>\n
I.<\/p>\n
have a dominant business purpose.<\/p>\n
II.<\/p>\n
are deductible as expenses for the
\n production of income.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
4. Leslie owns 2 rental
\nproperties. She hires her 21 year old son, who is a junior at State
\n College, to obtain tenants, negotiate leases, make arrangements
\nfor repairs, and pay expenses related to the properties.<\/p>\n
I.<\/p>\n
Leslie\u00e2\u0080\u0099s sale of the properties at a gain
\n will result in a capital gain.<\/p>\n
II.<\/p>\n
Leslie\u00e2\u0080\u0099s sale of the properties at a loss
\n results in a current-year loss deduction of no more than $3,000.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
5. In
\nthe current year, Paul acquires a car for $16,000. He uses the car in his
\nadvertising business and for personal purposes. His records indicate the car is
\nused 75% for business and that the total operating expenses, including
\ndepreciation, are $4,700. Paul expects to use the car for 5 years in his
\nbusiness. What amount can Paul deduct as the operating costs of the car?<\/p>\n
a.<\/p>\n
$ – 0 –<\/p>\n
b.<\/p>\n
$ 3,525<\/p>\n
c.<\/p>\n
$ 2,400<\/p>\n
d.<\/p>\n
$ 4,700<\/p>\n
e.<\/p>\n
$12,000<\/p>\n
6. Which of the following is a
\ncurrently deductible trade or business expense.<\/p>\n
a.<\/p>\n
$5,000 trustee fees paid to a bank to
\n manage tax-exempt securities.<\/p>\n
b.<\/p>\n
$10,000 fee paid to a marketing firm for
\n a market analysis for a new business.<\/p>\n
c.<\/p>\n
$25,000 fee paid to a TV station to
\n advertise a new product.<\/p>\n
d.<\/p>\n
$120,000 to acquire a new printing press.<\/p>\n
e.<\/p>\n
All of the above are currently deductible
\n expenses.<\/p>\n
7. Which of the following
\nis notdeductible?<\/p>\n
a.<\/p>\n
Expenses related to earning dividends on
\n a portfolio of \u00e2\u0080\u009cblue chip\u00e2\u0080\u009d stocks.<\/p>\n
b.<\/p>\n
Expenses related to interest income
\n from municipal bonds.<\/p>\n
c.<\/p>\n
Legal expenses related to rental real
\n estate property.<\/p>\n
d.<\/p>\n
Medical expenses of the taxpayer\u00e2\u0080\u0099s
\n dependent child.<\/p>\n
8. Which of the following
\nproduction of income expenses would be deductible:<\/p>\n
I.<\/p>\n
Interest expense to acquire City of Indianapolis bonds.<\/p>\n
II.<\/p>\n
Interest expense to acquire IBM Corporate
\n bonds.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
9. Sandra pays the
\nfollowing expenses for her dependent daughter while the daughter was ill during
\nthe current year:<\/p>\n
Real estate taxes on daughter\u00e2\u0080\u0099s house<\/p>\n
$3,000<\/p>\n
Principal on daughter\u00e2\u0080\u0099s home mortgage<\/p>\n
1,000<\/p>\n
Interest on the daughter\u00e2\u0080\u0099s home mortgage<\/p>\n
8,000<\/p>\n
Interest on daughter\u00e2\u0080\u0099s car<\/p>\n
800<\/p>\n
Daughter\u00e2\u0080\u0099s medical expenses<\/p>\n
6,000<\/p>\n
How much of the above expenditures may Sandra use
\nin computing her itemized deductions?<\/p>\n
a.<\/p>\n
$ – 0 –<\/p>\n
b.<\/p>\n
$ 6,000<\/p>\n
c.<\/p>\n
$ 7,800<\/p>\n
d.<\/p>\n
$14,800<\/p>\n
e.<\/p>\n
$18,800<\/p>\n
10. Sally and Paul own a
\ncabin near Stowe, Vermont. During the current year the cabin
\nis rented for 31 days for $1,800. Sally and Paul used the cabin a total of 12
\ndays during the year. After making the appropriate allocation of expenses
\nbetween personal and rental use, the following rental loss was determined:<\/p>\n
Rental income<\/p>\n
$1,800 <\/p>\n
Property taxes<\/p>\n
(150)<\/p>\n
Mortgage interest<\/p>\n
(950)<\/p>\n
Repairs and maintenance<\/p>\n
(400)<\/p>\n
Utilities<\/p>\n
(300)<\/p>\n
Depreciation<\/p>\n
(200)<\/p>\n
Rental loss<\/p>\n
$
\n (200)<\/p>\n
How should Sally and Paul report the rental
\nincome and expenses for the current year?<\/p>\n
a.<\/p>\n
Include the $1,800 in gross income, but
\n no deductions are allowed.<\/p>\n
b.<\/p>\n
Report the $200 loss for AGI.<\/p>\n
c.<\/p>\n
Only expenses up to the amount of $1,800 rental
\n income may be deducted in the current year.<\/p>\n
d.<\/p>\n
Report the interest ($950) and taxes
\n ($150) as itemized deductions and the other expenses for AGI.<\/p>\n
e.<\/p>\n
No reporting for the rental activity
\n should be reported.<\/p>\n
11. Marlene is a single
\ntaxpayer with an adjusted gross income of $140,000. In addition to her personal
\nresidence, Marlene owns a ski cabin in Vail. She uses the cabin for 40 days
\nduring the current year and rents it out to unrelated parties for 80 days,
\nreceiving rent of $10,000. Marlene\u00e2\u0080\u0099s costs before any allocation related to the
\ncabin are as follows:<\/p>\n
Mortgage interest and property taxes<\/p>\n
$9,000<\/p>\n
Utilities, maintenance, and repairs<\/p>\n
4,500<\/p>\n
Depreciation<\/p>\n
6,000<\/p>\n
Based on the above information, what is her
\nallowable depreciation deduction?<\/p>\n
a.<\/p>\n
$ – 0 –<\/p>\n
b.<\/p>\n
$1,000<\/p>\n
c.<\/p>\n
$3,000<\/p>\n
d.<\/p>\n
$4,000<\/p>\n
e.<\/p>\n
$6,000<\/p>\n
12. Helena
\nis a technical sales consultant for Interactive Systems Corporation (ISC) based
\nin Tacoma.
\nWhile on business in Boise,
\nshe entertains several clients at a cost of $800. When she returns to Tacoma, Helena
\ngives ISC receipts and other information to account for the entertainment
\nexpense. ISC reimburses Helena
\n$800. How much can Helena and ISC deduct?<\/p>\n
Helena ISC<\/p>\n
a.<\/p>\n
$- 0 – $- 0 –<\/p>\n
b.<\/p>\n
$- 0 – $400<\/p>\n
c.<\/p>\n
$- 0 – $800<\/p>\n
d.<\/p>\n
$400 $- 0 –<\/p>\n
e.<\/p>\n
$800 $400<\/p>\n
13. Donna is an audit supervisor with the IRS and she uses her car in
\nthe following manner.<\/p>\n
Personal residence to her office at the
\n IRS.<\/p>\n
8 miles<\/p>\n
IRS office to X Corp to supervise new
\n audit activities.<\/p>\n
10 miles<\/p>\n
X Corp to Y Corp to supervise ongoing
\n audit activities<\/p>\n
5 miles<\/p>\n
From Y Corp. to personal residence<\/p>\n
7 miles<\/p>\n
What amount of Donna\u00e2\u0080\u0099s mileage for this day is
\nqualified business mileage?<\/p>\n
a.<\/p>\n
10 miles.<\/p>\n
b.<\/p>\n
15 miles.<\/p>\n
c.<\/p>\n
17 miles.<\/p>\n
d.<\/p>\n
22 miles.<\/p>\n
e.<\/p>\n
30 miles.<\/p>\n
14. Walker, an employee of Lakeview Corporation,
\ndrives his automobile 18,000 business miles during 2014, 1,500 miles per
\nmonth. He pays tolls of $145 while traveling on
\nbusiness. What amount can Walker
\ndeduct as unreimbursed transportation expenses before considering any
\nlimitations on itemized deductions?<\/p>\n
a.<\/p>\n
$ 10,080 for AGI.<\/p>\n
b.<\/p>\n
$ 10,225 for AGI.<\/p>\n
c.<\/p>\n
$ 10,080 from AGI.<\/p>\n
d.<\/p>\n
$ 10,225 from AGI.<\/p>\n
15. Julie travels to Mobile to meet with a
\nclient. While in Mobile,
\nshe spends 4 days meeting with the client and one-day sightseeing. Her husband
\nHarry goes with her and spends all 5 days sightseeing and playing golf. The
\ncost of the trip is as follows:<\/p>\n
Airfare<\/p>\n
$ 540 for each person.<\/p>\n
Lodging at hotel<\/p>\n
$ 150\/day (Single Occupancy Rate = $125).<\/p>\n
Meals<\/p>\n
$ 75\/day for each person.<\/p>\n
Incidental expenses<\/p>\n
$ 20\/day for Julie. $15\/day for Harry.<\/p>\n
If Julie is self-employed, what is the amount of
\nthe deduction she may claim for the trip?<\/p>\n
a.<\/p>\n
$
\n 730<\/p>\n
b.<\/p>\n
$1,270<\/p>\n
c.<\/p>\n
$1,370<\/p>\n
d.<\/p>\n
$1,420<\/p>\n
e.<\/p>\n
$1,520<\/p>\n
16. Jason travels to Miami to meet with a client. While in Miami, he spends 2 days
\nmeeting with his client and 3 days sightseeing. Mary, his wife, goes with him
\nand spends all 5 days sightseeing and shopping. The cost of the trip is as
\nfollows:<\/p>\n
Airfare<\/p>\n
$540 for each person.<\/p>\n
Lodging at hotel<\/p>\n
$150 per day (same rate for single and
\n double rooms).<\/p>\n
Meals<\/p>\n
$ 75 per day for each person.<\/p>\n
Incidental expenses<\/p>\n
$ 20 per day for Jason. Mary kept no
\n records.<\/p>\n
If Jason is self-employed, what is the amount of
\nthe deduction he may claim for the trip?<\/p>\n
a.<\/p>\n
$
\n – 0 –<\/p>\n
b.<\/p>\n
$
\n 415<\/p>\n
c.<\/p>\n
$
\n 490<\/p>\n
d.<\/p>\n
$
\n 955<\/p>\n
e.<\/p>\n
$1,765<\/p>\n
17. Juliana operates a
\nwholesale grocery business. To show her appreciation to her 10 best customers,
\nshe sends a box of fancy chocolate (costing $55 each) to each of them. How much
\nof the cost of the chocolates can Juliana deduct as a business gift?<\/p>\n
a.<\/p>\n
$- 0 –<\/p>\n
b.<\/p>\n
$125<\/p>\n
c.<\/p>\n
$250<\/p>\n
d.<\/p>\n
$275<\/p>\n
e.<\/p>\n
$550<\/p>\n
18. Which of the following
\ninformation is not required for substantiation of business entertainment
\nexpenditures?<\/p>\n
a.<\/p>\n
Time and place of event.<\/p>\n
b.<\/p>\n
Specific business purpose of the event.<\/p>\n
c.<\/p>\n
Receipt to provide evidence of amount of
\n expenditure.<\/p>\n
d.<\/p>\n
Identity of, and business relationship
\n to, those persons attending the event.<\/p>\n
e.<\/p>\n
All of the above information is
\n required to substantiate business entertainment.<\/p>\n
19. Aaron is a full-time
\nstudent at Henderson
\n State University
\nmajoring in accounting. He works 12 to 20 hours per week at a local CPA firm
\ninputting data for spreadsheets to prepare monthly financial statements for the
\nfirm\u00e2\u0080\u0099s clients. Aaron\u00e2\u0080\u0099s tuition, fees, books, and supplies related to his
\neducation are $3,000 for the current year.<\/p>\n
I.<\/p>\n
The educational costs are deductible from
\n AGI because they prepare him for a new trade or business.<\/p>\n
II.<\/p>\n
The education costs are deductible
\n because it is part of a program that will qualify Aaron to enter a new
\n profession.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
20. Garcia is a
\nself-employed chiropractor and a cash basis taxpayer. During the most recent
\ntax year, he provides patient services totaling $800,000. Of that total amount,
\nhe estimates $20,000 will never be collected. How much can Garcia deduct as a
\nbad debt expense in the current tax year?<\/p>\n
a.<\/p>\n
$
\n – 0 –<\/p>\n
b.<\/p>\n
$
\n 6,000<\/p>\n
c.<\/p>\n
$10,000<\/p>\n
d.<\/p>\n
$14,000<\/p>\n
e.<\/p>\n
$20,000<\/p>\n
21. Norman loaned $5,000 to his friend Alan in
\n2005. They drew up a formal loan agreement that called for a reasonable rate of
\ninterest. Alan used the loan proceeds to pay expenses during his last year in
\ncollege. Norman
\nwas recently informed that his friend Alan was struck by lightning and died. Norman will never be able
\nto collect the proceeds of this loan because Alan died with no assets. What tax
\nbenefit, if any, will Norman
\nwill be able to claim in 2014, the year that the loan became worthless.<\/p>\n
a.<\/p>\n
$5,000 tax credit.<\/p>\n
b.<\/p>\n
$5,000 ordinary loss.<\/p>\n
c.<\/p>\n
$5,000 short-term capital loss.<\/p>\n
d.<\/p>\n
This is a personal non-deductible loss.<\/p>\n
22. Which of the following
\ntaxes paid by the Jacob Company can be deducted during 2014?<\/p>\n
I.<\/p>\n
Federal taxes withheld from employees.<\/p>\n
II.<\/p>\n
Jacob\u00e2\u0080\u0099s share of employee\u00e2\u0080\u0099s Social
\n Security taxes.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
23. Which of the following legal expenses paid by
\nthe Kerr Corporation can be deducted in the current year?<\/p>\n
I.<\/p>\n
Legal fees to resolve a tax dispute with
\n the Internal Revenue Service.<\/p>\n
II.<\/p>\n
Legal fees to purchase land that will be
\n used to expand its warehouse.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
24. In which of the following circumstances will
\nthe income of a child be taxed at the marginal
\n tax
\nrate of the child\u00e2\u0080\u0099s parent?<\/p>\n
I.<\/p>\n
Martin, age 6, earns $14,000 this year by
\n acting in television commercials.<\/p>\n
II.<\/p>\n
Allen, age 15, has $4,000 of interest
\n income on bonds that he inherited from his grandfather last year.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
25. Which of the following expenses are not
\ndeductible for AGI?<\/p>\n
a.<\/p>\n
Alimony paid.<\/p>\n
b.<\/p>\n
Contributions to an IRA.<\/p>\n
c.<\/p>\n
Moving expenses.<\/p>\n
d.<\/p>\n
Interest on qualified student loans.<\/p>\n
e.<\/p>\n
Interest expense related to an investment.<\/p>\n
26. Aaron is a 34-year-old head of household and
\na self-employed taxpayer. He contributed the maximum amount to his IRA account
\nduring the current year, and his net earnings from his business totaled
\n$29,000. How much can Aaron deduct for AGI this year?<\/p>\n
a.<\/p>\n
$ – 0 –<\/p>\n
b.<\/p>\n
$3,200<\/p>\n
c.<\/p>\n
$3,800<\/p>\n
d.<\/p>\n
$4,000<\/p>\n
e.<\/p>\n
$5,500<\/p>\n
27. Charles is a 54-year-old head of household
\nand a self-employed taxpayer. He contributed the maximum amount to his IRA
\naccount during the current year, and his net earnings from his business totaled
\n$29,000. How much can Charles deduct for AGI this year?<\/p>\n
a.<\/p>\n
$ – 0 –<\/p>\n
b.<\/p>\n
$3,200<\/p>\n
c.<\/p>\n
$4,000<\/p>\n
d.<\/p>\n
$5,000<\/p>\n
e.<\/p>\n
$6,500<\/p>\n
28. Max and Michele, both 42, are married with
\nsalaries of $45,000 and $44,000, respectively. Their combined AGI is $100,000.
\nMichele is an active participant in her company\u00e2\u0080\u0099s qualified pension plan while
\nMax is not. Determine the maximum combined IRA contribution and deduction
\namounts?<\/p>\n
Maximum Maximum<\/p>\n
Contribution
\nDeduction<\/p>\n
a.<\/p>\n
$
\n 5,500 $ 5,500<\/p>\n
b.<\/p>\n
$ 11,000 $ 11,000<\/p>\n
c.<\/p>\n
$ 11,000 $ 5,500<\/p>\n
d.<\/p>\n
$ 11,000 $ 9,900<\/p>\n
e.<\/p>\n
$ 11,000 $ 11,000<\/p>\n
29. David
\npurchased investment realty in 1991 for $20,000. During the current year he
\ncontributes it to the American Heart Association to use as the site for its new
\nlocal headquarters. The realty has a value of $52,000 on the contribution date,
\nand David\u00e2\u0080\u0099s AGI is $100,000. David\u00e2\u0080\u0099s maximum current year contribution
\ndeduction is<\/p>\n
a.<\/p>\n
$
\n – 0 –<\/p>\n
b.<\/p>\n
$
\n 20,000<\/p>\n
c.<\/p>\n
$
\n 30,000<\/p>\n
d.<\/p>\n
$
\n 50,000<\/p>\n
e.<\/p>\n
$
\n 52,000<\/p>\n
30. Dan and Kay, 27 and 28 years old,
\nrespectively, are married and file a joint return. During the current year, Dan
\nhad a salary of $30,000 and Kay had a salary of $36,000. Both Dan and Kay are
\ncovered by an employer-sponsored pension plan. Their adjusted gross income for
\nthe year is $87,000. Determine the maximum IRA contribution and deduction
\namounts.<\/p>\n
Maximum
\nMaximum<\/p>\n
Contribution
\nDeduction<\/p>\n
a.<\/p>\n
$ 11,000 $ 11,000<\/p>\n
b.<\/p>\n
$ 11,000 $ – 0 –<\/p>\n
c.<\/p>\n
$ 11,000 $ 5,500<\/p>\n
d.<\/p>\n
$
\n 5,500 $ -0-<\/p>\n
e.<\/p>\n
$
\n 8,250 $ 8,250<\/p>\n
31. Certain
\ninterest expense can be carried forward if not deductible in the current year.
\nWhich of the following interest can be carried forward and deducted in a future
\nyear?<\/p>\n
a.<\/p>\n
Credit card interest.<\/p>\n
b.<\/p>\n
Personal car loan interest.<\/p>\n
c.<\/p>\n
Interest on a loan to buy common
\n stock.<\/p>\n
d.<\/p>\n
Home equity loan interest.<\/p>\n
32. Which of the following is (are) correct
\nconcerning the time test for deducting moving expenses?<\/p>\n
I.<\/p>\n
Self-employed individuals must work in
\n the new location for 78 weeks during a 2-year period.<\/p>\n
II.<\/p>\n
A transfer of the employee by the
\n employer waives the time requirement.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
33. Kenneth owns all of the stock of Kearney
\nCorporation. Kenneth is also the President of Kearney and works full-time
\nrunning the corporation. During the current year, Kearney has a loss of $40,000 from its
\noperations.<\/p>\n
I.<\/p>\n
If Kearney
\n is an S Corporation, the corporation may carryback the loss 2 years (and
\n obtain a refund of taxes paid) with any remaining loss carried forward 20
\n years.<\/p>\n
II.<\/p>\n
If Kearney
\n is a regular corporation, Kenneth may deduct the loss for AGI on his personal
\n tax return because the corporation is a flow through entity.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
34. Joe, Tom, and Eric are partners in New
\nCommunications Partnership. Joe owns a 50% interest, Tom owns a 35% interest,
\nand Eric owns a 15% interest. During the current year (the first year of
\noperation for the enterprise), the business has a loss. Although the
\npartnership is established as a general partnership, Joe functions as the
\nmanager and performs all of the day-to-day duties of a chief operating officer.
\nTom and Eric are merely investors who receive monthly reports about the
\nbusiness. At the close of the current tax year, each partner will receive a
\nshare of the partnership loss. Which of the partners will be able to deduct his
\n(their) share of the partnership loss?<\/p>\n
I.<\/p>\n
Joe<\/p>\n
II.<\/p>\n
Tom<\/p>\n
III.<\/p>\n
Eric<\/p>\n
a.<\/p>\n
Tom<\/p>\n
b.<\/p>\n
Joe, Tom, and Eric<\/p>\n
c.<\/p>\n
Joe<\/p>\n
d.<\/p>\n
Joe and Tom<\/p>\n
e.<\/p>\n
Tom and Eric<\/p>\n
35. During
\n2014, Marci worked two \u00e2\u0080\u009cjobs.\u00e2\u0080\u009d She performed financial consulting activities
\nfor 1,000 hours and real estate development and rental activities for 1,200
\nhours. Her real estate activities produced a loss of $35,000. Her financial
\nconsulting generated a net business income of $40,000. How much of the loss can
\nMarci deduct against her financial consulting income?<\/p>\n
a.<\/p>\n
$
\n – 0 –<\/p>\n
b.<\/p>\n
$17,500<\/p>\n
c.<\/p>\n
$25,000<\/p>\n
d.<\/p>\n
$35,000<\/p>\n
e.<\/p>\n
$40,000<\/p>\n
36. Karen and Ross equally own rental real
\nestate. The rental property generated a loss of $20,000. Karen is also employed
\nas a part-time Tupperware salesperson and full time as a real estate agent. For
\nher share of the loss to be fully deductible, she must:<\/p>\n
I.<\/p>\n
Not have an adjusted gross income in
\n excess of $100,000.<\/p>\n
II.<\/p>\n
Spend more than 750 hours, in total, in
\n real property trades or businesses.<\/p>\n
III.<\/p>\n
Spend more than 100 hours managing the
\n rental activity, and spend more time then Ross.<\/p>\n
IV.<\/p>\n
She must spend more than 50% of her time
\n in real property trades or businesses and must own more than 5% of the real
\n estate agency.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Statements I and II are correct.<\/p>\n
d.<\/p>\n
Statements II, III, and IV are
\n correct.<\/p>\n
e.<\/p>\n
Statements I, II, III, and IV are
\n correct.<\/p>\n
37. Thomas is a 30% owner of 3 rental houses. He
\nspends 625 hours a year managing the properties. In addition, he owns a 20%
\ninterest in a real estate business to which he devotes 1,800 hours a year. The
\nrental units generate a total loss of $22,000, and Thomas\u00e2\u0080\u0099 adjusted gross
\nincome in the current year, before considering the rental properties, is
\n$120,000. How much of the loss can Thomas deduct?<\/p>\n
a.<\/p>\n
$
\n – 0 –<\/p>\n
b.<\/p>\n
$
\n 4,500<\/p>\n
c.<\/p>\n
$
\n 6,600<\/p>\n
d.<\/p>\n
$15,000<\/p>\n
e.<\/p>\n
$22,000<\/p>\n
38. A passive activity<\/p>\n
I.<\/p>\n
includes an interest in a limited
\n partnership held by a limited partner investor.<\/p>\n
II.<\/p>\n
includes a working interest in an oil and
\n gas deposit.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
39. A passive activity<\/p>\n
I.<\/p>\n
includes any trade or business in which a
\n taxpayer does not materially participate.<\/p>\n
II.<\/p>\n
includes rentals of apartment buildings,
\n rental houses, etc., where no significant personal services are involved.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
40. Which of the following must be classified as
\n\u00e2\u0080\u009cportfolio income?\u00e2\u0080\u009d<\/p>\n
I.<\/p>\n
Dividend income from an investment in
\n Wilmington Corp. common stock.<\/p>\n
II.<\/p>\n
Royalty income from the ownership of the
\n mineral rights on land. The taxpayer does not share the expenses with the
\n extraction company.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
41. Which of the following must be classified as
\n\u00e2\u0080\u009cportfolio income?\u00e2\u0080\u009d<\/p>\n
I.<\/p>\n
Interest income on CDs from First
\n National Bank.<\/p>\n
II.<\/p>\n
Loss realized from the sale of one-half
\n of his stock shares in Lockleed Corp. Lockleed is qualified small business
\n stock.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
42. A taxpayer had the following for the current
\nyear:<\/p>\n
Active<\/p>\n
Portfolio<\/p>\n
Passive<\/p>\n
Income<\/p>\n
Income<\/p>\n
Income<\/p>\n
Income<\/p>\n
$75,000 <\/p>\n
$22,000 <\/p>\n
$ 55,000 <\/p>\n
Deductions<\/p>\n
(45,000)<\/p>\n
(16,000)<\/p>\n
(110,000)<\/p>\n
Income(Loss)<\/p>\n
$30,000 <\/p>\n
$
\n 6,000 <\/p>\n
$(55,000)<\/p>\n
I.<\/p>\n
If the taxpayer is a closely held
\n corporation, taxable income from the three activities is a loss of $19,000.<\/p>\n
II.<\/p>\n
If the taxpayer is an individual and the
\n passive income is not related to a rental real estate activity, taxable
\n income is $36,000.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
43. Cisco owns a passive activity that has a
\nbasis of $44,000 and a suspended loss of $18,000. Cisco\u00e2\u0080\u0099s taxable income from
\nactive and portfolio income is $55,000. If Cisco\u00e2\u0080\u0099s sells the passive activity
\nfor $56,000 how will he report the transaction on his tax return?<\/p>\n
I.<\/p>\n
Cisco will report an ordinary loss of
\n $18,000.<\/p>\n
II.<\/p>\n
Cisco will report a capital gain of
\n $12,000.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
44. Karl has the following income (loss) during
\nthe current year:<\/p>\n
Net business income<\/p>\n
$45,500 <\/p>\n
Dividends and interest<\/p>\n
12,000 <\/p>\n
Actively managed rental property<\/p>\n
(34,000)<\/p>\n
What is Karl\u00e2\u0080\u0099s adjusted gross income for this
\nyear?<\/p>\n
a.<\/p>\n
$23,500<\/p>\n
b.<\/p>\n
$31,400<\/p>\n
c.<\/p>\n
$32,500<\/p>\n
d.<\/p>\n
$45,500<\/p>\n
e.<\/p>\n
$57,500<\/p>\n
45. Nora is the owner of an apartment complex.
\nShe actively participates in the management of the building. During the current
\nyear, it generates a taxable loss of $33,000. Nora\u00e2\u0080\u0099s other sources of income
\nare salary of $104,000 and interest of $16,000. What is Nora\u00e2\u0080\u0099s allowable loss
\nfrom the apartment in the current year?<\/p>\n
a.<\/p>\n
$
\n – 0 –<\/p>\n
b.<\/p>\n
$15,000<\/p>\n
c.<\/p>\n
$16,000<\/p>\n
d.<\/p>\n
$25,000<\/p>\n
e.<\/p>\n
$33,000<\/p>\n
46. Tim owns 3 passive investments. During the
\ncurrent year, he has the following income and loss from each activity:<\/p>\n
Activity 1<\/p>\n
$(7,000)<\/p>\n
Activity 2<\/p>\n
(3,000)<\/p>\n
Activity 3<\/p>\n
4,000 <\/p>\n
What is the amount of suspended loss allocated to
\nActivity 2?<\/p>\n
a.<\/p>\n
$ – 0 –<\/p>\n
b.<\/p>\n
$1,800<\/p>\n
c.<\/p>\n
$3,000<\/p>\n
d.<\/p>\n
$4,200<\/p>\n
e.<\/p>\n
$6,000<\/p>\n
47. Ling owns 3 passive investments. During the
\nlast two years, she has the following income and loss from each activity:<\/p>\n
2013<\/p>\n
2014<\/p>\n
Activity 1<\/p>\n
$(14,000)<\/p>\n
$(6,000)<\/p>\n
Activity 2<\/p>\n
(6,000)<\/p>\n
(1,000)<\/p>\n
Activity 3<\/p>\n
8,000 <\/p>\n
12,000 <\/p>\n
At the end of 2014 what is the amount of
\nsuspended loss allocated to Activity 2 (rounded)?<\/p>\n
a.<\/p>\n
$1,695<\/p>\n
b.<\/p>\n
$1,815<\/p>\n
c.<\/p>\n
$5,185<\/p>\n
d.<\/p>\n
$5,305<\/p>\n
e.<\/p>\n
$7,000<\/p>\n
48. \u00e2\u0080\u009cActive participation\u00e2\u0080\u009d and \u00e2\u0080\u009creal estate
\nprofessional\u00e2\u0080\u009d are both exceptions to the general rule for passive activity
\nlosses with rental real estate.<\/p>\n
I.<\/p>\n
One of the tests that an individual must
\n meet to qualify as a real estate professional is that the taxpayer spends
\n more than 50% of his\/her time in real property trades or businesses.<\/p>\n
II.<\/p>\n
A taxpayer with an AGI of $190,000
\n qualifying under the real estate professional exception may deduct an
\n unlimited amount of rental real estate losses.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
49. Sarah owns a passive activity that has a
\nsuspended loss of $18,000. The activity has a fair market value of $35,000 and
\nher adjusted basis in the activity is $20,000.<\/p>\n
I.<\/p>\n
If Sarah sells the activity, she is
\n allowed to deduct the $18,000 suspended loss.<\/p>\n
II.<\/p>\n
If Sarah gifts the
\n activity, she is only allowed to deduct $15,000 of the suspended loss.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
50. During the current year, Tim has a short-term
\ncapital loss of $9,000 and a long-term capital gain of $1,500. Due to these
\ntransactions Tim reports<\/p>\n
a.<\/p>\n
A capital loss deduction of $3,000
\n and a loss carryforward of $4,500.<\/p>\n
b.<\/p>\n
A capital loss deduction of $3,000 and a
\n loss carryforward of $6,000.<\/p>\n
c.<\/p>\n
A capital loss deduction of $9,000.<\/p>\n
d.<\/p>\n
A capital loss deduction of $3,000 and a
\n loss carryforward of $7,500.<\/p>\n
e.<\/p>\n
A capital loss deduction of $7,500 <\/p>\n
51. Edith, a single taxpayer, owns 2,000 shares
\nof qualifying small business stock that she purchased for $225,000. During the
\ncurrent year, she sells 800 of the shares for $32,000. If this is the only
\nstock Edith sells during the year, what can she deduct as an ordinary and
\ncapital loss?<\/p>\n
Ordinary
\nloss Capital loss<\/p>\n
a.<\/p>\n
$58,000 $ – 0 –<\/p>\n
b.<\/p>\n
$50,000 $ 3,000<\/p>\n
c.<\/p>\n
$50,000 $ 8,000<\/p>\n
d.<\/p>\n
$ – 0 – $
\n 3,000<\/p>\n
e.<\/p>\n
$ – 0 – $58,000<\/p>\n
52. The wash sale provisions apply to which of
\nthe following?<\/p>\n
I.<\/p>\n
Jim bought 500 additional shares of Alfa
\n Gamma stock for $4,000 on December 2, 2012. Jim owned 2,500 shares after that
\n purchase. On December 26, 2012, Jim realizes a loss of $1,500 on the sale of
\n 250 shares of Alfa Gamma stock.<\/p>\n
II.<\/p>\n
Calvin realizes a $8,000 loss on the
\n December 29, 2012, sale of Sloan corporate bonds. Each bond has a face value
\n of $1,000. He replaces the Sloan corporate bonds with the same number of Jackson corporate
\n bonds, each with a face value of $1,000 on January 16, 2013. The Jackson bonds have a
\n different interest rate and maturity date then the Sloan bonds but have the
\n same bond rating (AAA).<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
53. To be a qualifying
\nrelative,an individual must meet certain tests. These tests include,<\/p>\n
I.<\/p>\n
the joint return test.<\/p>\n
II.<\/p>\n
the gross income test.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
54. Allen and Louise are
\nboth 49 years of age and file a joint return. They provide all of the support
\nfor their son, Dylan, who is 20 years old and is at home until he gets called
\ninto the army. His income at part-time jobs is $4,000. Their daughter, Phyllis,
\nis a 23-year-old full-time student at State University.
\nShe lived at school 9 months and provided two thirds of her own support with a
\nsummer job. How many personal and dependency exemptions can Allen and Louise
\nclaim on their income tax return?<\/p>\n
a.<\/p>\n
1<\/p>\n
b.<\/p>\n
2<\/p>\n
c.<\/p>\n
3<\/p>\n
d.<\/p>\n
4<\/p>\n
55. For
\npurposes of the relationship test for dependents, which of the following does
\nnot qualify as a relative?<\/p>\n
a.<\/p>\n
Mother.<\/p>\n
b.<\/p>\n
Nephew.<\/p>\n
c.<\/p>\n
Cousin.<\/p>\n
d.<\/p>\n
Grandfather.<\/p>\n
e.<\/p>\n
Stepbrother.<\/p>\n
56. Thomas has adjusted
\ngross income of $228,000, total itemized deductions of $39,000 and correctly
\nclaims 2 personal and 2 dependency exemptions. Which filing status should he
\nuse?<\/p>\n
a.<\/p>\n
Single.<\/p>\n
b.<\/p>\n
Head of household.<\/p>\n
c.<\/p>\n
Married filing a joint return.<\/p>\n
d.<\/p>\n
Married filing separately.<\/p>\n
57. Fred\u00e2\u0080\u0099s wife died in
\n2013. He has not remarried and maintains a home for himself and his dependent
\ndaughter. What is Fred\u00e2\u0080\u0099s filing status for 2014?<\/p>\n
a.<\/p>\n
Single.<\/p>\n
b.<\/p>\n
Head of household.<\/p>\n
c.<\/p>\n
Married, filing separately.<\/p>\n
d.<\/p>\n
Surviving spouse.<\/p>\n
58. Which of the following
\nqualify for the medical expense deduction?<\/p>\n
I.<\/p>\n
Insulin.<\/p>\n
II.<\/p>\n
Medicare insurance premiums.<\/p>\n
a.<\/p>\n
Only statement I is correct.<\/p>\n
b.<\/p>\n
Only statement II is correct.<\/p>\n
c.<\/p>\n
Both statements are correct.<\/p>\n
d.<\/p>\n
Neither statement is correct.<\/p>\n
59. Anita receives a state
\nincome tax refund of $550 in May 2014. When she filed her 2013 federal income
\ntax return, she used the standard deduction amount. Although the all-inclusive
\nincome concept would require Anita to report the $550 in her federal gross
\nincome for 2014, she may exclude it. What tax concept explains why the
\nexclusion is permitted in this case?<\/p>\n
a.<\/p>\n
Wherewithal to pay.<\/p>\n
b.<\/p>\n
Tax benefit rule.<\/p>\n
c.<\/p>\n
Ability to pay.<\/p>\n
d.<\/p>\n
Arm\u00e2\u0080\u0099s-length transaction.<\/p>\n
e.<\/p>\n
Administrative convenience.<\/p>\n
60. Gerald purchases a new
\nhome on June 30, 2013. During January 2014, he receives his real estate tax statement
\nfor calendar year 2013 showing $1,800 payable. Gerald pays the $1,800 on March
\n1, 2014. The seller of the residence had credited Gerald with half of the 2013
\ntaxes on the closing statement. What is the amount of real estate taxes that
\nGerald may claim as an itemized deduction in 2014?<\/p>\n
a.<\/p>\n
$
\n – 0 –<\/p>\n
b.<\/p>\n
$
\n 450<\/p>\n
c.<\/p>\n
$
\n 900<\/p>\n
d.<\/p>\n
$1,800<\/p>\n
e.<\/p>\n
$2,700<\/p>\n
61. Wayne purchases a new home during the year,
\nborrowing $725,000 from Century National Bank to finance the purchase. He also
\npays $7,250 in points and $4,500 in loan origination fees. During the year he
\npays interest of $71,000 on the loan. What is Wayne\u00e2\u0080\u0099s allowable interest deduction?<\/p>\n
a.<\/p>\n
$
\n – 0 –<\/p>\n
b.<\/p>\n
$
\n 7,250<\/p>\n
c.<\/p>\n
$71,000<\/p>\n
d.<\/p>\n
$78,250<\/p>\n
e.<\/p>\n
$82,750<\/p>\n","protected":false},"excerpt":{"rendered":"
ACCOUNTING 3090 INCOME TAX I Assignment 2 MULTIPLE CHOICE 1. Tina, Terri, and Tricia operate Capstone Fashions an exclusive boutique. Based on advice from Tina\u00e2\u0080\u0099s\u2026<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7641,8827,10535,10533,10534,10531,10529,6744,10532,10530,7741],"tags":[10553,10549,10616,10615,7687,10254,10627,10104,10247,8857,10552,10295,10900,2984,3903,10548,10622,8901,10551,8907],"class_list":["post-127008","post","type-post","status-publish","format-standard","hentry","category-australia-essay-writers","category-australia-essays","category-do-my-university-assignment-for-me","category-essay-pro-dissertation-writers","category-homework-help-services-best-websites","category-i-need-help-writing-a-page-paper-assignment","category-masters-essays","category-nursing-studybay","category-pay-someone-to-write-a-paper-for-you","category-website-that-writes-assignments","category-studybay","tag-1-assignment-help-online-service-for-students-in-the-usa","tag-ai-plagiarism-free-essay-writing-tool","tag-australian-best-tutors","tag-best-trans-tutors","tag-buy-essay-uk","tag-can-someone-write-my-assignment-for-me","tag-cheap-dissertation-writer","tag-essypro","tag-help-me-write-my-dissertation","tag-help-with-writing-an-essay","tag-help-write-my-paper-ai-free","tag-homework-for-you","tag-nursing-bay","tag-nursing-essay","tag-nursing-study-bay","tag-online-essay-writers","tag-phd-essays","tag-studbay","tag-write-my-assignment-help-for-college-students","tag-write-my-essay-for-me"],"_links":{"self":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/127008","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/comments?post=127008"}],"version-history":[{"count":0,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/127008\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/media?parent=127008"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/categories?post=127008"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/tags?post=127008"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}