Question 1

Mary sells to her father, Robert, her shares in AA Corp for $55,000.The shares cost Mary $80,000.How much loss may Mary claim from the sale?

Accepted Answer

A) $0 
B) $25,000 
C) $55,000 
D) $80,000 
E) None of the above is correct 
A) $0 
B) $25,000 
C) $55,000 
D) $80,000 
E) None of the above is correct

Question 2

What was the original purpose of the alternative minimum tax?

Accepted Answer

The purpose of the original al

Question 3

Amy is a calendar year taxpayer reporting on the cash basis.Indicate which of the following income or expense items should not be included in her 2018 tax return.

Accepted Answer

A) On April 15, 2019, she makes a deductible contribution to an IRA for 2018. 
B) She prepays half a year of interest in advance on her mortgage on the last day of 2018. 
C) She pays all her outstanding invoices for standard business expenses in the last week of December 2018. 
D) She sends out a big bill to a customer on January 1, 2019, even though she did all of the work in December of 2018. 
A) On April 15, 2019, she makes a deductible contribution to an IRA for 2018. 
B) She prepays half a year of interest in advance on her mortgage on the last day of 2018. 
C) She pays all her outstanding invoices for standard business expenses in the last week of December 2018. 
D) She sends out a big bill to a customer on January 1, 2019, even though she did all of the work in December of 2018.

Question 4

Most partnerships, S corporations, and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

Accepted Answer

A) True 
 B)False

Question 5

Household employers are not required to pay FICA taxes on part-time household employees.

Accepted Answer

A) True 
 B)False

Question 6

For purposes of the additional 0.9% Medicare tax on earned income, a single taxpayer having earned income of more than $200,000 is generally subject to the tax.

Accepted Answer

A) True 
 B)False

Question 7

Generally, cash basis taxpayers must deduct payments of prepaid interest using the accrual method.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following itemized deductions may not be deducted in computing the individual alternative minimum tax?

Accepted Answer

A) Qualified home mortgage interest 
B) State income taxes 
C) Medical expenses (limited to 7.5 percent of AGI) 
D) Charitable deductions 
E) All of the above 
A) Qualified home mortgage interest 
B) State income taxes 
C) Medical expenses (limited to 7.5 percent of AGI) 
D) Charitable deductions 
E) All of the above

Question 9

Which of the following types of income is subject to the self-employment tax?

Accepted Answer

A) Interest income 
B) Gain on sale of real estate 
C) Income from a sole proprietor's law practice 
D) Dividends from stock 
E) None of the above 
A) Interest income 
B) Gain on sale of real estate 
C) Income from a sole proprietor's law practice 
D) Dividends from stock 
E) None of the above

Question 10

Which of the following types of income is not subject to the "kiddie tax"?

Accepted Answer

A) Interest income 
B) Dividend income 
C) Salary income 
D) Capital gains on stock sales 
E) All of the above are subject to the "kiddie tax" 
A) Interest income 
B) Dividend income 
C) Salary income 
D) Capital gains on stock sales 
E) All of the above are subject to the "kiddie tax"

Question 11

A parent may elect to include a child's income in the parent's return if:

Accepted Answer

A) No estimated tax has been paid in the name of the child and the child is not subject to backup withholding. 
B) The child's income is only from interest and dividend distributions. 
C) The child's gross income is more than $1,050 and less than $10,500. 
D) All of the above must be met for a parent to elect to include a child's income in the parent's return. 
A) No estimated tax has been paid in the name of the child and the child is not subject to backup withholding. 
B) The child's income is only from interest and dividend distributions. 
C) The child's gross income is more than $1,050 and less than $10,500. 
D) All of the above must be met for a parent to elect to include a child's income in the parent's return.

Question 12

Which of the common deductions below are allowed for both regular tax purposes and for AMT purposes in 2018?

Accepted Answer

A) The standard deduction 
B) Personal and dependency exemptions 
C) State income taxes, property taxes, and all other taxes deducted on Schedule A 
D) Mortgage interest from the acquisition of a residence with a loan balance less than $750,000 
E) Miscellaneous itemized deductions taken on Schedule A 
A) The standard deduction 
B) Personal and dependency exemptions 
C) State income taxes, property taxes, and all other taxes deducted on Schedule A 
D) Mortgage interest from the acquisition of a residence with a loan balance less than $750,000 
E) Miscellaneous itemized deductions taken on Schedule A

Question 13

If a loss from sale or exchange of property between related parties is disallowed and the property is subsequently sold to an unrelated party,

Accepted Answer

A) An amended return may be filed to claim the loss previously disallowed. 
B) The unrelated party may claim the loss previously disallowed. 
C) The disallowed loss may be used to offset gain on the subsequent sale. 
D) The disallowed loss may be used if there is a further loss on the subsequent sale. 
E) The disallowed loss is lost forever. 
A) An amended return may be filed to claim the loss previously disallowed. 
B) The unrelated party may claim the loss previously disallowed. 
C) The disallowed loss may be used to offset gain on the subsequent sale. 
D) The disallowed loss may be used if there is a further loss on the subsequent sale. 
E) The disallowed loss is lost forever.

Question 14

Unearned income of a 16-year-old child may be taxed at trust and estate rates.

Accepted Answer

A) True 
 B)False

Question 15

BOND Corporation is owned 25 percent by Brian, 30 percent by Orville, 20 percent by Nate, and 25 percent by Dart Corporation.Dart Corporation is owned 80 percent by Brian and 20 percent by Nate.Brian and Orville are brothers.Answer each of the following questions about BOND Corporation under the constructive ownership rules of Section 267:
a.What is Brian's constructive ownership percentage for Section 267 purposes?
b.​If Nate sells property to BOND Corporation for a $7,500 loss, what amount of that loss can be recognized for tax purposes (before any annual limitations)?

Accepted Answer

a.75% = 25% + 30% + (80% × 25%

Question 16

William, a cash-basis sole proprietor, had the following receipts and disbursements for the current year: $\begin{array}{llcc}
  \text {  Gross receipts} & \$50,000 \
 \text { Cost of sales } &30,000\
 \text { Other operating expenses } &5,000\
 \text {Personal medical expenses  } &600\
\end{array}$
 For the current year, what amount should William report as net earnings from self-employment?

Accepted Answer

A) $13,400 
B) $14,000 
C) $15,000 
D) $20,000 
E) None of the above 
A) $13,400 
B) $14,000 
C) $15,000 
D) $20,000 
E) None of the above

Question 17

Emily is a self-employed attorney.
a.Assuming that Emily earns $20,000 from her practice, calculate the total amount of her self-employment tax liability for 2018.
b.Assuming that Emily earns $145,000 from her practice, calculate the total amount of her self-employment tax liability for 2018.

Accepted Answer

a.$2,825.91 = ($20,000 × 0.923

Question 18

Countryside Acres Apartment Complex had the following transactions during the year:​ Rental income collected for Apts A-F
12 months prepaid rental from new tenant in Apt $\mathrm { G }$ who moved in on November 1
Operating expenses (except for interest)
Prepaid interest on bank loan, paid in December, for 6 months (including December) Using the accrual method, calculate the net income:​ Rental income Apts A-F
Rental income from new tenant
Total income
Operating expenses (except for interest)
Prepaid interest
Total expenses
Total net income

Accepted Answer

None

Question 19

In 2018, which of the following children would have income taxed at trust and estate rates?

Accepted Answer

A) A 13-year-old child with salary income of $12,000 
B) A 12-year-old child with net unearned income of $3,200 
C) A nonstudent, 19-year-old child with net unearned income of $12,000 
D) A 9-year-old child with salary income of $1,000 
E) All of the above 
A) A 13-year-old child with salary income of $12,000 
B) A 12-year-old child with net unearned income of $3,200 
C) A nonstudent, 19-year-old child with net unearned income of $12,000 
D) A 9-year-old child with salary income of $1,000 
E) All of the above

Question 20

Which of the following is true with respect to the related party rules?

Accepted Answer

A) Bill sells stock to his sister for a $3,000 loss.Bill can deduct the loss on his tax return. 
B) A taxpayer's uncle is a related party for purposes of Section 267. 
C) A disallowed loss on a related party transaction can be used to offset any future gain when the property is sold to an unrelated party. 
D) Under the constructive ownership rules of Section 267, a shareholder owns 10 percent of the stock owned by a corporation in which he or she is a shareholder. 
E) None of the above are true. 
A) Bill sells stock to his sister for a $3,000 loss.Bill can deduct the loss on his tax return. 
B) A taxpayer's uncle is a related party for purposes of Section 267. 
C) A disallowed loss on a related party transaction can be used to offset any future gain when the property is sold to an unrelated party. 
D) Under the constructive ownership rules of Section 267, a shareholder owns 10 percent of the stock owned by a corporation in which he or she is a shareholder. 
E) None of the above are true.

Mary sells to her father, Robert, her shares in AA Corp for $55,000.The shares cost Mary $80,000.How much loss may Mary claim from the sale?

What was the original purpose of the alternative minimum tax?

Amy is a calendar year taxpayer reporting on the cash basis.Indicate which of the following income or expense items should not be included in her 2018 tax return.

Most partnerships, S corporations, and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

Household employers are not required to pay FICA taxes on part-time household employees.

For purposes of the additional 0.9% Medicare tax on earned income, a single taxpayer having earned income of more than $200,000 is generally subject to the tax.

Generally, cash basis taxpayers must deduct payments of prepaid interest using the accrual method.

Which of the following itemized deductions may not be deducted in computing the individual alternative minimum tax?

Which of the following types of income is subject to the self-employment tax?

Which of the following types of income is not subject to the "kiddie tax"?

A parent may elect to include a child's income in the parent's return if:

Which of the common deductions below are allowed for both regular tax purposes and for AMT purposes in 2018?

If a loss from sale or exchange of property between related parties is disallowed and the property is subsequently sold to an unrelated party,

Unearned income of a 16-year-old child may be taxed at trust and estate rates.

Emily is a self-employed attorney. a.Assuming that Emily earns $20,000 from her practice, calculate the total amount of her self-employment tax liability for 2018. b.Assuming that Emily earns $145,000 from her practice, calculate the total amount of her self-employment tax liability for 2018.

In 2018, which of the following children would have income taxed at trust and estate rates?

Which of the following is true with respect to the related party rules?

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income Part 1

Additional Income Part 2

Deductions and Adjustments to Income

Tax Credits

Depreciation and Sale of Business Property

Payroll, Estimated Payments, and Retirement Plans

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 6: Accounting Methods and Taxes

Mary sells to her father, Robert, her shares in AA Corp for $55,000.The shares cost Mary $80,000.How much loss may Mary claim from the sale?

What was the original purpose of the alternative minimum tax?

Amy is a calendar year taxpayer reporting on the cash basis.Indicate which of the following income or expense items should not be included in her 2018 tax return.

Most partnerships, S corporations, and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

Household employers are not required to pay FICA taxes on part-time household employees.

For purposes of the additional 0.9% Medicare tax on earned income, a single taxpayer having earned income of more than $200,000 is generally subject to the tax.

Generally, cash basis taxpayers must deduct payments of prepaid interest using the accrual method.

Which of the following itemized deductions may not be deducted in computing the individual alternative minimum tax?

Which of the following types of income is subject to the self-employment tax?

Which of the following types of income is not subject to the "kiddie tax"?

A parent may elect to include a child's income in the parent's return if:

Which of the common deductions below are allowed for both regular tax purposes and for AMT purposes in 2018?

If a loss from sale or exchange of property between related parties is disallowed and the property is subsequently sold to an unrelated party,

Unearned income of a 16-year-old child may be taxed at trust and estate rates.

Emily is a self-employed attorney. a.Assuming that Emily earns $20,000 from her practice, calculate the total amount of her self-employment tax liability for 2018. b.Assuming that Emily earns $145,000 from her practice, calculate the total amount of her self-employment tax liability for 2018.

In 2018, which of the following children would have income taxed at trust and estate rates?

Which of the following is true with respect to the related party rules?

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income Part 1

Additional Income Part 2

Deductions and Adjustments to Income

Tax Credits

Depreciation and Sale of Business Property

Payroll, Estimated Payments, and Retirement Plans

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters