ACCOUNTING 3090<\/p>\n
INCOME TAX I<\/p>\n
Assignment 2<\/p>\n
MULTIPLE CHOICE<\/p>\n
1. Tina, Terri, and Tricia operate Capstone Fashions an
\nexclusive boutique. Based on advice from Tina\u00e2\u0080\u0099s sister, a CPA, the three form a
\npartnership. Tina owns 50% and Terri and Tricia each own 25%. For the year,
\nCapstone 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
$ 270,000<\/p>\n
For tax purposes, what amount will Capstone Fashions report
\nto Tina as her ordinary income from the partnership?<\/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 concept dictates that business
\nexpenses are grouped into certain categories that 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, a schoolteacher in Duluth, Minnesota, owns a
\nrental house in Scottsdale, Arizona. She travels to Arizona during spring break
\nto inspect her property and discuss property improvements with the tenant and
\nproperty manager. Louise\u00e2\u0080\u0099s brother, Brian, lives in Scottsdale. She stays at
\nhis house during her week in Arizona and borrows his car to travel across town
\nfor her one day of meetings. Her trip accomplishes several objectives: a visit
\nwith her brother, a trip away from Minnesota\u00e2\u0080\u0099s winter weather, and a review of
\nher investment property. The expenses of traveling to Scottsdale<\/p>\n
I.<\/p>\n
have a dominant business purpose.<\/p>\n
II.<\/p>\n
are deductible as expenses for the 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 properties. She hires her 21 year
\nold son, who is a junior at State College, to obtain tenants, negotiate leases,
\nmake arrangements for repairs, and pay expenses related to the properties.<\/p>\n
I.<\/p>\n
Leslie\u00e2\u0080\u0099s sale of the properties at a gain will result in a
\ncapital gain.<\/p>\n
II.<\/p>\n
Leslie\u00e2\u0080\u0099s sale of the properties at a loss results in a
\ncurrent-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 the current year, Paul acquires a car for $16,000. He
\nuses the car in his advertising business and for personal purposes. His records
\nindicate the car is used 75% for business and that the total operating
\nexpenses, including depreciation, are $4,700. Paul expects to use the car for 5
\nyears in his business. What amount can Paul deduct as the operating costs of
\nthe 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 currently deductible trade or
\nbusiness expense.<\/p>\n
a.<\/p>\n
$5,000 trustee fees paid to a bank to manage tax-exempt
\nsecurities.<\/p>\n
b.<\/p>\n
$10,000 fee paid to a marketing firm for a market analysis
\nfor a new business.<\/p>\n
c.<\/p>\n
$25,000 fee paid to a TV station to 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 expenses.<\/p>\n
7. Which of the following is notdeductible?<\/p>\n
a.<\/p>\n
Expenses related to earning dividends on a portfolio of
\n\u00e2\u0080\u009cblue chip\u00e2\u0080\u009d stocks.<\/p>\n
b.<\/p>\n
Expenses related to interest income from municipal bonds.<\/p>\n
c.<\/p>\n
Legal expenses related to rental real estate property.<\/p>\n
d.<\/p>\n
Medical expenses of the taxpayer\u00e2\u0080\u0099s dependent child.<\/p>\n
8. Which of the following production of income expenses
\nwould 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 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 following expenses for her dependent
\ndaughter while the daughter was ill during the 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 in
\ncomputing 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 cabin near Stowe, Vermont. During
\nthe current year the cabin is rented for 31 days for $1,800. Sally and Paul
\nused the cabin a total of 12 days during the year. After making the appropriate
\nallocation of expenses between personal and rental use, the following rental
\nloss 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
$ (200)<\/p>\n
How should Sally and Paul report the rental income and
\nexpenses for the current year?<\/p>\n
a.<\/p>\n
Include the $1,800 in gross income, but no deductions are
\nallowed.<\/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 income may
\nbe deducted in the current year.<\/p>\n
d.<\/p>\n
Report the interest ($950) and taxes ($150) as itemized
\ndeductions and the other expenses for AGI.<\/p>\n
e.<\/p>\n
No reporting for the rental activity should be reported.<\/p>\n
11. Marlene is a single taxpayer with an adjusted gross
\nincome of $140,000. In addition to her personal residence, Marlene owns a ski
\ncabin in Vail. She uses the cabin for 40 days during the current year and rents
\nit out to unrelated parties for 80 days, receiving rent of $10,000. Marlene\u00e2\u0080\u0099s
\ncosts before any allocation related to the cabin 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 allowable
\ndepreciation 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 is a technical sales consultant for Interactive
\nSystems Corporation (ISC) based in Tacoma. While on business in Boise, she
\nentertains several clients at a cost of $800. When she returns to Tacoma,
\nHelena gives ISC receipts and other information to account for the
\nentertainment expense. ISC reimburses Helena $800. How much can Helena and ISC
\ndeduct?<\/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
\nher car in the following manner.<\/p>\n
Personal residence to her office at the IRS.<\/p>\n
8 miles<\/p>\n
IRS office to X Corp to supervise new audit activities.<\/p>\n
10 miles<\/p>\n
X Corp to Y Corp to supervise ongoing 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 qualified
\nbusiness 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, drives his
\nautomobile 18,000 business miles during 2014, 1,500 miles per month. He pays
\ntolls of $145 while traveling on business. What amount can Walker deduct as
\nunreimbursed transportation expenses before considering any limitations on
\nitemized 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 client. While in
\nMobile, she spends 4 days meeting with the client and one-day sightseeing. Her
\nhusband Harry goes with her and spends all 5 days sightseeing and playing golf.
\nThe cost 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 the
\ndeduction she may claim for the trip?<\/p>\n
a.<\/p>\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
\nMiami, he spends 2 days meeting with his client and 3 days sightseeing. Mary,
\nhis wife, goes with him and spends all 5 days sightseeing and shopping. 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 per day (same rate for single and 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 records.<\/p>\n
If Jason is self-employed, what is the amount of the
\ndeduction he may claim for the trip?<\/p>\n
a.<\/p>\n
$ – 0 –<\/p>\n
b.<\/p>\n
$ 415<\/p>\n
c.<\/p>\n
$ 490<\/p>\n
d.<\/p>\n
$ 955<\/p>\n
e.<\/p>\n
$1,765<\/p>\n
17. Juliana operates a wholesale grocery business. To show
\nher appreciation to her 10 best customers, she sends a box of fancy chocolate
\n(costing $55 each) to each of them. How much of the cost of the chocolates can
\nJuliana 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 information is not required for
\nsubstantiation of business entertainment expenditures?<\/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 expenditure.<\/p>\n
d.<\/p>\n
Identity of, and business relationship to, those persons
\nattending the event.<\/p>\n
e.<\/p>\n
All of the above information is required to substantiate
\nbusiness entertainment.<\/p>\n
19. Aaron is a full-time student at Henderson State
\nUniversity majoring in accounting. He works 12 to 20 hours per week at a local
\nCPA firm inputting data for spreadsheets to prepare monthly financial
\nstatements for the firm\u00e2\u0080\u0099s clients. Aaron\u00e2\u0080\u0099s tuition, fees, books, and supplies
\nrelated to his education are $3,000 for the current year.<\/p>\n
I.<\/p>\n
The educational costs are deductible from AGI because they
\nprepare him for a new trade or business.<\/p>\n
II.<\/p>\n
The education costs are deductible because it is part of a
\nprogram that will qualify Aaron to enter a new 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 self-employed chiropractor and a cash basis
\ntaxpayer. During the most recent tax year, he provides patient services
\ntotaling $800,000. Of that total amount, he estimates $20,000 will never be
\ncollected. How much can Garcia deduct as a bad debt expense in the current tax
\nyear?<\/p>\n
a.<\/p>\n
$ – 0 –<\/p>\n
b.<\/p>\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 2005. They
\ndrew up a formal loan agreement that called for a reasonable rate of interest.
\nAlan used the loan proceeds to pay expenses during his last year in college.
\nNorman was recently informed that his friend Alan was struck by lightning and
\ndied. Norman will never be able to collect the proceeds of this loan because
\nAlan died with no assets. What tax benefit, if any, will Norman will be able to
\nclaim 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 taxes paid by the Jacob Company
\ncan 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 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 the Kerr
\nCorporation can be deducted in the current year?<\/p>\n
I.<\/p>\n
Legal fees to resolve a tax dispute with the Internal
\nRevenue Service.<\/p>\n
II.<\/p>\n
Legal fees to purchase land that will be used to expand its
\nwarehouse.<\/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 the income
\nof a child be taxed at the marginal<\/p>\n
tax rate of the child\u00e2\u0080\u0099s parent?<\/p>\n
I.<\/p>\n
Martin, age 6, earns $14,000 this year by acting in
\ntelevision commercials.<\/p>\n
II.<\/p>\n
Allen, age 15, has $4,000 of interest income on bonds that
\nhe 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 deductible for
\nAGI?<\/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 a
\nself-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 and a
\nself-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 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 salaries of
\n$45,000 and $44,000, respectively. Their combined AGI is $100,000. Michele is
\nan active participant in her company\u00e2\u0080\u0099s qualified pension plan while Max is not.
\nDetermine the maximum combined IRA contribution and deduction amounts?<\/p>\n
Maximum Maximum<\/p>\n
Contribution Deduction<\/p>\n
a.<\/p>\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 purchased investment realty in 1991 for $20,000.
\nDuring the current year he contributes it to the American Heart Association to
\nuse as the site for its new local headquarters. The realty has a value of
\n$52,000 on the contribution date, and David\u00e2\u0080\u0099s AGI is $100,000. David\u00e2\u0080\u0099s maximum
\ncurrent year contribution deduction is<\/p>\n
a.<\/p>\n
$ – 0 –<\/p>\n
b.<\/p>\n
$ 20,000<\/p>\n
c.<\/p>\n
$ 30,000<\/p>\n
d.<\/p>\n
$ 50,000<\/p>\n
e.<\/p>\n
$ 52,000<\/p>\n
30. Dan and Kay, 27 and 28 years old, respectively, are
\nmarried and file a joint return. During the current year, Dan had a salary of
\n$30,000 and Kay had a salary of $36,000. Both Dan and Kay are covered by an
\nemployer-sponsored pension plan. Their adjusted gross income for the year is
\n$87,000. Determine the maximum IRA contribution and deduction amounts.<\/p>\n
Maximum Maximum<\/p>\n
Contribution Deduction<\/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
$ 5,500 $ -0-<\/p>\n
e.<\/p>\n
$ 8,250 $ 8,250<\/p>\n
31. Certain interest expense can be carried forward if not
\ndeductible in the current year. Which of the following interest can be carried
\nforward and deducted in a future year?<\/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 stock.<\/p>\n
d.<\/p>\n
Home equity loan interest.<\/p>\n
32. Which of the following is (are) correct concerning the
\ntime test for deducting moving expenses?<\/p>\n
I.<\/p>\n
Self-employed individuals must work in the new location for
\n78 weeks during a 2-year period.<\/p>\n
II.<\/p>\n
A transfer of the employee by the employer waives the time
\nrequirement.<\/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 Corporation.
\nKenneth is also the President of Kearney and works full-time running the
\ncorporation. During the current year, Kearney has a loss of $40,000 from its
\noperations.<\/p>\n
I.<\/p>\n
If Kearney is an S Corporation, the corporation may
\ncarryback the loss 2 years (and obtain a refund of taxes paid) with any
\nremaining loss carried forward 20 years.<\/p>\n
II.<\/p>\n
If Kearney is a regular corporation, Kenneth may deduct the
\nloss for AGI on his personal tax return because the corporation is a flow
\nthrough 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 Communications
\nPartnership. Joe owns a 50% interest, Tom owns a 35% interest, and Eric owns a
\n15% interest. During the current year (the first year of operation for the
\nenterprise), the business has a loss. Although the partnership is established
\nas a general partnership, Joe functions as the manager and performs all of the
\nday-to-day duties of a chief operating officer. Tom and Eric are merely
\ninvestors who receive monthly reports about the business. At the close of the
\ncurrent tax year, each partner will receive a share of the partnership loss.
\nWhich of the partners will be able to deduct his (their) share of the
\npartnership 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 2014, Marci worked two \u00e2\u0080\u009cjobs.\u00e2\u0080\u009d She performed
\nfinancial consulting activities for 1,000 hours and real estate development and
\nrental activities for 1,200 hours. Her real estate activities produced a loss
\nof $35,000. Her financial consulting generated a net business income of
\n$40,000. How much of the loss can Marci deduct against her financial consulting
\nincome?<\/p>\n
a.<\/p>\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 estate. The
\nrental property generated a loss of $20,000. Karen is also employed as a
\npart-time Tupperware salesperson and full time as a real estate agent. For her
\nshare of the loss to be fully deductible, she must:<\/p>\n
I.<\/p>\n
Not have an adjusted gross income in excess of $100,000.<\/p>\n
II.<\/p>\n
Spend more than 750 hours, in total, in real property trades
\nor businesses.<\/p>\n
III.<\/p>\n
Spend more than 100 hours managing the rental activity, and
\nspend more time then Ross.<\/p>\n
IV.<\/p>\n
She must spend more than 50% of her time in real property
\ntrades or businesses and must own more than 5% of the real 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 correct.<\/p>\n
e.<\/p>\n
Statements I, II, III, and IV are correct.<\/p>\n
37. Thomas is a 30% owner of 3 rental houses. He spends 625
\nhours a year managing the properties. In addition, he owns a 20% interest in a
\nreal estate business to which he devotes 1,800 hours a year. The rental units
\ngenerate a total loss of $22,000, and Thomas\u00e2\u0080\u0099 adjusted gross income in the
\ncurrent year, before considering the rental properties, is $120,000. How much
\nof the loss can Thomas deduct?<\/p>\n
a.<\/p>\n
$ – 0 –<\/p>\n
b.<\/p>\n
$ 4,500<\/p>\n
c.<\/p>\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 partnership held by a
\nlimited partner investor.<\/p>\n
II.<\/p>\n
includes a working interest in an oil and 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 taxpayer does not
\nmaterially participate.<\/p>\n
II.<\/p>\n
includes rentals of apartment buildings, rental houses,
\netc., 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 \u00e2\u0080\u009cportfolio
\nincome?\u00e2\u0080\u009d<\/p>\n
I.<\/p>\n
Dividend income from an investment in Wilmington Corp.
\ncommon stock.<\/p>\n
II.<\/p>\n
Royalty income from the ownership of the mineral rights on
\nland. The taxpayer does not share the expenses with the 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 \u00e2\u0080\u009cportfolio
\nincome?\u00e2\u0080\u009d<\/p>\n
I.<\/p>\n
Interest income on CDs from First National Bank.<\/p>\n
II.<\/p>\n
Loss realized from the sale of one-half of his stock shares
\nin Lockleed Corp. Lockleed is qualified small business 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 year:<\/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
$ 6,000<\/p>\n
$(55,000)<\/p>\n
I.<\/p>\n
If the taxpayer is a closely held corporation, taxable
\nincome from the three activities is a loss of $19,000.<\/p>\n
II.<\/p>\n
If the taxpayer is an individual and the passive income is
\nnot related to a rental real estate activity, taxable 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 basis of
\n$44,000 and a suspended loss of $18,000. Cisco\u00e2\u0080\u0099s taxable income from active and
\nportfolio income is $55,000. If Cisco\u00e2\u0080\u0099s sells the passive activity for $56,000
\nhow will he report the transaction on his tax return?<\/p>\n
I.<\/p>\n
Cisco will report an ordinary loss of $18,000.<\/p>\n
II.<\/p>\n
Cisco will report a capital gain of $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 the current
\nyear:<\/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 year?<\/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. She actively
\nparticipates in the management of the building. During the current year, it
\ngenerates a taxable loss of $33,000. Nora\u00e2\u0080\u0099s other sources of income are salary
\nof $104,000 and interest of $16,000. What is Nora\u00e2\u0080\u0099s allowable loss from the
\napartment in the current year?<\/p>\n
a.<\/p>\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 current year,
\nhe 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 Activity
\n2?<\/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 last two
\nyears, 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 suspended loss
\nallocated 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 professional\u00e2\u0080\u009d
\nare both exceptions to the general rule for passive activity losses with rental
\nreal estate.<\/p>\n
I.<\/p>\n
One of the tests that an individual must meet to qualify as
\na real estate professional is that the taxpayer spends more than 50% of his\/her
\ntime in real property trades or businesses.<\/p>\n
II.<\/p>\n
A taxpayer with an AGI of $190,000 qualifying under the real
\nestate professional exception may deduct an unlimited amount of rental real
\nestate 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 suspended loss
\nof $18,000. The activity has a fair market value of $35,000 and her adjusted
\nbasis in the activity is $20,000.<\/p>\n
I.<\/p>\n
If Sarah sells the activity, she is allowed to deduct the
\n$18,000 suspended loss.<\/p>\n
II.<\/p>\n
If Sarah gifts the activity, she is only allowed to deduct
\n$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 capital
\nloss 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 and a loss carryforward
\nof $4,500.<\/p>\n
b.<\/p>\n
A capital loss deduction of $3,000 and a loss carryforward
\nof $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 loss carryforward
\nof $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 of
\nqualifying 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 loss 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 – $ 3,000<\/p>\n
e.<\/p>\n
$ – 0 – $58,000<\/p>\n
52. The wash sale provisions apply to which of the
\nfollowing?<\/p>\n
I.<\/p>\n
Jim bought 500 additional shares of Alfa Gamma stock for
\n$4,000 on December 2, 2012. Jim owned 2,500 shares after that purchase. On
\nDecember 26, 2012, Jim realizes a loss of $1,500 on the sale of 250 shares of
\nAlfa Gamma stock.<\/p>\n
II.<\/p>\n
Calvin realizes a $8,000 loss on the December 29, 2012, sale
\nof Sloan corporate bonds. Each bond has a face value of $1,000. He replaces the
\nSloan corporate bonds with the same number of Jackson corporate bonds, each
\nwith a face value of $1,000 on January 16, 2013. The Jackson bonds have a
\ndifferent interest rate and maturity date then the Sloan bonds but have the
\nsame 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 relative,an individual must meet
\ncertain 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 both 49 years of age and file a
\njoint return. They provide all of the support for their son, Dylan, who is 20
\nyears old and is at home until he gets called into the army. His income at
\npart-time jobs is $4,000. Their daughter, Phyllis, is a 23-year-old full-time
\nstudent at State University. She lived at school 9 months and provided two
\nthirds of her own support with a summer job. How many personal and dependency
\nexemptions can Allen and Louise claim 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 purposes of the relationship test for dependents,
\nwhich of the following does not 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 gross income of $228,000, total
\nitemized deductions of $39,000 and correctly claims 2 personal and 2 dependency
\nexemptions. Which filing status should he use?<\/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 2013. He has not remarried and
\nmaintains a home for himself and his dependent daughter. What is Fred\u00e2\u0080\u0099s filing
\nstatus 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 qualify for the medical expense
\ndeduction?<\/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 income tax refund of $550 in May
\n2014. When she filed her 2013 federal income tax return, she used the standard
\ndeduction amount. Although the all-inclusive income concept would require Anita
\nto report the $550 in her federal gross income for 2014, she may exclude it.
\nWhat tax concept explains why the exclusion 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 home on June 30, 2013. During
\nJanuary 2014, he receives his real estate tax statement for calendar year 2013
\nshowing $1,800 payable. Gerald pays the $1,800 on March 1, 2014. The seller of
\nthe residence had credited Gerald with half of the 2013 taxes on the closing
\nstatement. What is the amount of real estate taxes that Gerald may claim as an
\nitemized deduction in 2014?<\/p>\n
a.<\/p>\n
$ – 0 –<\/p>\n
b.<\/p>\n
$ 450<\/p>\n
c.<\/p>\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, borrowing
\n$725,000 from Century National Bank to finance the purchase. He also pays
\n$7,250 in points and $4,500 in loan origination fees. During the year he pays
\ninterest of $71,000 on the loan. What is Wayne\u00e2\u0080\u0099s allowable interest deduction?<\/p>\n
a.<\/p>\n
$ – 0 –<\/p>\n
b.<\/p>\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
Copyright \u00c2\u00a9 2012-2014 HomeworkMinutes.com Home
\nContact Us Terms of Use Academic Honesty Policy Subscribe to
\nwww.https:\/\/monkessays.com<\/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-127010","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\/127010","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=127010"}],"version-history":[{"count":0,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/127010\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/media?parent=127010"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/categories?post=127010"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/tags?post=127010"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}