Question
\n1
\nParent
\nand Subsidiary Corporations have filed calendar-year consolidated tax returns
\nfor several years. Parent Corporation uses the cash method of accounting while
\nSubsidiary Corporation uses the accrual method of accounting. If Parent lends
\nSubsidiary money,
\nAnswer
\nthe
\ninterest expense is deductible when accrued.
\nthe
\ninterest expense and interest income may be reported in different consolidated
\nreturn years.
\nthe
\ninterest income is reported when the interest expense is accrued by Subsidiary.
\nthe
\ninterest expense deduction is taken when Parent reports the interest income.
\nQuestion
\n2
\nA
\nconsolidated return’s tax liability is owed by
\nAnswer<\/p>\n
all
\ngroup members in equal portions.
\nthe
\ngroup member responsible for that portion of the tax liability.
\nall
\ngroup members who are severely liable.
\nthe
\nparent corporation.
\nQuestion
\n3
\nAlbert
\ncontributes a Sec. 1231 asset to a partnership on June 1 of this year in
\nexchange for a 10% partnership interest. He had purchased the asset on March 1,
\n2002. His holding period for the partnership interest begins
\nAnswer
\nMarch
\n1, 2002.
\nMarch
\n2, 2002.
\nJune
\n1 of the current year.
\nJune
\n2 of the current year.
\nQuestion
\n4
\nMeg
\nand Abby are equal partners in the AM Partnership, which earns $40,000 ordinary
\nincome, $6,000 long-term capital gain (LTCG), and $2,000 Sec. 1231 loss during
\nthe current year. What is the amount and character of income that must be
\nreported on Abby’s tax return for this year’s partnership operations?
\nAnswer
\n$20,000
\nordinary income, $3,000 LTCG, $1,000 Sec. 1231 loss
\n$19,000
\nordinary income, $3,000 LTCG
\n$23,000
\nordinary income, $1,000 Sec. 1231 loss
\n$22,000
\nordinary income
\nQuestion
\n5
\nAllen
\ncontributed land, which was being held for sale to Allen’s customers, to a
\npartnership in exchange for a 20% interest. The partnership uses the land in
\nits business for three years and then sells the property. When the property was
\ncontributed, it had a basis in Allen’s hands of $500,000 and an FMV of
\n$600,000. The partnership sells the land for $700,000. The gain reported by the
\npartnership is
\nAnswer
\n$100,000
\nof ordinary income and $100,000 of Sec. 1231 gain.
\n$100,000
\nof Sec. 1231 gain and $100,000 of capital gain.
\n$200,000
\nof ordinary income.
\n$200,000
\nof Sec. 1231 gain.
\nQuestion
\n6
\nThe
\nAB Partnership has a machine with an FMV of $25,000 and a basis of $20,000. The
\npartnership has taken an $8,000 depreciation on the machine. The unrealized
\nreceivable related to the machine is
\nAnswer
\n$0.
\n$5,000.
\n$8,000.
\n$20,000.
\nQuestion
\n7
\nThe
\ndefinition of “inventory” for purposes of Sec. 751 includes
\nAnswer
\ncash.
\nland
\nheld for investment.
\nmarketable
\nsecurities not held by dealers.
\ndepreciation
\nrecapture potential on Sec. 1231 assets.
\nQuestion
\n8
\nAn
\nS corporation is not treated as a corporate taxpayer with
\nrespect to which one of the following fringe benefits?
\nstock
\noptions
\nqualified
\nretirement plans
\ngroup
\nterm life insurance premiums
\nnonqualified
\ndeferred compensation
\nQuestion
\n9
\nWhich
\none of the following individuals or entities is ineligible to be an S
\ncorporation shareholder?
\nAnswer
\nan
\nestate
\nresident
\nalien of the United States
\na
\nvoting trust where all of the beneficiaries are U.S. citizens
\na
\npartnership where all of the partners are U.S. citizens
\nQuestion
\n10
\nThe
\nrecognition period for the built-in gains tax extends for how many years after
\nthe S election takes effect?
\nAnswer
\none
\nyear
\nthree
\nyears
\nfive
\nyears
\nten
\nyears
\nQuestion
\n11
\nIn
\n1998, Delores made taxable gifts to her son of property with an FMV of
\n$200,000. In the current year when Delores dies, the property is worth
\n$800,000. The amount included in Delores’s estate tax base because of the 1998
\ngift is
\nAnswer
\n$0
\n$189,000
\n$200,000
\n$800,000
\nQuestion
\n12
\nHu
\nmakes a gift of his home to a local homeless shelter (a 501(c)(3) charity). Hu
\nwill retain his home for 10 years, after which the homeless shelter will take
\npossession. The value of Hu’s 10-year interest is $30,000 and the remainder
\ninterest is valued at $120,000. Which of the following statements is correct?
\nAnswer
\nHu
\nis allowed a charitable deduction on his gift tax return for $150,000 in the
\ncurrent year.
\nHu
\nis allowed an exclusion of $12,000 on his gift of $120,000 to the charity.
\nHu
\nis not allowed to deduct the contribution until the charity takes possession in
\n10 years.
\nHu
\nhas a charitable contribution deduction of $120,000 on his current gift tax
\nreturn
\nQuestion
\n13
\nGordon
\ndied on January 1 and by his will left land with an adjusted basis of $60,000
\nand an FMV of $100,000 to Becky. Becky disclaims the property on December 31 of
\nthe year of death, when the land was still worth $100,000. Becky has made a
\ngift (before the annual gift tax exclusion) of
\nAnswer
\n$100,000.
\n$60,000.
\n$50,000.
\n$0.
\nQuestion
\n14
\nIn
\n2012, Paul transfers $1,000,000 to a trust benefiting his three children. As
\ntrustee, he has the power to determine the amount of distributions each year.
\nPaul dies in the current year when the trust has a value of $1,200,000. How
\nmuch of the trust’s value is included in Paul’s estate?
\nAnswer
\n$0
\n$400,000
\n$1,000,000
\n$1,200,000
\nQuestion
\n15
\nFollowing are the
\nfair market values of Wilma’s assets at her date of death:
\nPersonal effects
\nand jewelry $150,000 <\/p>\n
Land which Wilma
\nbought and held as a joint tenant 800,000<\/p>\n
with right of
\nsurvivorship with her sister
\nThe executor of
\nWilma’s estate did not elect the alternate valuation date. The amount
\nincludible in Wilma’s gross estate is
\nAnswer
\n$150,000.
\n$550,000.
\n$800,000.
\n$950,000.
\nQuestion
\n16
\nFour
\nyears ago, David gave land to Mike that he purchased for $70,000, which is
\npresently worth $100,000. Three years ago, Mike exchanged the land (then worth
\n$150,000) along with a $100,000 cash contribution made by David for a new piece
\nof land worth $250,000. The new land is titled with David and Mike as joint
\ntenants with the right of survivorship. When Mike dies this year, the land is
\nworth $300,000. Mike’s estate will include
\nAnswer
\n$0.
\n$150,000.
\n$180,000.
\n$300,000.
\nQuestion
\n17
\nAdministration
\nexpenses incurred by an estate
\nare
\ndeductions in respect of a decedent and may be deducted on both the estate tax
\nreturn (Form 706) and the estate income tax return (Form 1041).
\nan
\nexecutor must elect where to deduct administration expenses (Form 706 or
\nForm 1041).
\nsuch
\nexpenses are only deductible on Form 706.
\nsuch
\nexpenses are only deductible on Form 1041
\nQuestion
\n18
\nThe
\nconduit approach for fiduciary income tax means
\nAnswer
\nthe
\ndistributed income has the same character in the hands of the beneficiary as it
\nhas to the trust.
\nthe
\ndistributed income goes to all beneficiaries proportionately.
\nthe
\ndistributed income is determined by the trustee annually.
\nthe
\ndistributed income of a remainder interest is determined by the property.
\nQuestion
\n19
\nWhich
\nof the following activities is protected by accountant-client privilege?
\nAnswer
\nwritten
\ncommunications between a CPA and a corporation regarding a tax shelter
\ncommunications
\nrelated to tax return preparation
\ncommunications
\nrelated to criminal tax evasion
\nadvice
\ngiven regarding tax issues in a divorce
\nQuestion
\n20
\nTerry
\nfiles his return on March 31. The return shows taxes of $6,000, and Terry pays
\nthis entire amount when he files his return. By what time must he file a claim
\nof refund?
\nAnswer
\nthe
\nlater of two years from the return filing or three years from the date the tax
\nis paid
\nthe
\nlater of three years from the return due date or two years from the date the
\ntax is paid
\ntwo
\nyears from the payment of tax date, if the IRS mails a notice of deficiency in
\nthe third year following the due date of the return
\nfour
\nyears from the payment of tax date, if the IRS mails a notice of deficiency
\nQuestion
\n21
\nGerald
\nrequests an extension for filing his last year’s individual income tax return.
\nHis tax liability is $10,000, of which $8,000 was withheld, leaving a balance
\ndue of $2,000 when he files on August 1 of the current year. His penalty for
\nfailure to pay the tax on time is
\nAnswer
\n$0
\n$40
\n$300
\n$400
\nQuestion
\n22
\nU.S.
\ncitizen Barry is a bona fide resident of a foreign country for all of 2013.
\nBarry uses a calendar year as his tax year and receives $158,000 in salary and
\nallowances from his employer. Included in the $158,000 is a $25,000 housing
\nallowance. Barry’s housing costs are $30,000. The base housing amount for the
\ncurrent year is $15,616. What amount related to his housing can Barry exclude
\non his Form 2555?
\nAnswer
\n$14,384
\n$25,000
\n$30,000
\n$13,545
\nQuestion
\n23
\nU.S.
\ncitizen who has a calendar tax year establishes a tax home and residence in a
\nforeign country and qualifies for the foreign-earned income exclusion for 60
\ndays in 2010; 365 days in 2011; and 60 days this year, 2012. The maximum earned
\nincome exclusion for this year is?
\nAnswer
\n$13,733
\n$16,044
\n$13,151
\n$17,522
\nQuestion
\n24
\nWhat
\nare the carryback and carryforward periods for the foreign tax credit?
\nAnswer
\nback
\ntwo years; forward five years
\nback
\nthree years; forward ten years
\nback
\none year; forward ten years
\nback
\ntwo years; forward twenty years
\nQuestion
\n25
\nCharitable
\ncontributions made by a fiduciary
\nAnswer
\nare
\nlimited to 50% of fiduciary income.
\nmust
\nbe authorized in the trust instrument in order to be deductible.
\nflows
\nthrough to be deducted on the beneficiary’s tax return.
\nare
\nsubject to the 2% floor.
\nQuestion
\n26
\nAdministration
\nexpenses incurred by an estate
\nAnswer
\nare
\ndeductions in respect of a decedent and may be deducted on both the estate tax
\nreturn (Form 706) and the estate income tax return (Form 1041).
\nan
\nexecutor must elect where to deduct administration expenses (Form 706 or
\nForm 1041).
\nsuch
\nexpenses are only deductible on Form 706.
\nsuch
\nexpenses are only deductible on Form 1041.<\/p>\n","protected":false},"excerpt":{"rendered":"
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