Question 1

Research and experimental expenditures do not include expenditures for ordinary testing of materials for quality control.

Accepted Answer

A) True 
 B)False

Question 2

Cream, Inc.'s taxable income for 2012 before any deduction for an NOL carryforward of $30,000 is $70,000.Cream's qualified production activities income (QPAI) is $60,000.What is the amount of Cream's domestic production activities deduction (DPAD) for 2012?

Accepted Answer

A) $1,200. 
B) $1,800. 
C) $2,400. 
D) $3,600. 
E) None of the above. 
A) $1,200. 
B) $1,800. 
C) $2,400. 
D) $3,600. 
E) None of the above.

Question 3

If an election is made to defer deduction of research expenditures, the amortization period is based on the expected life of the research project if less than 60 months.

Accepted Answer

A) True 
 B)False

Question 4

On February 20, 2011, Bill purchased stock in Pink Corporation (the stock is not small business stock) for $1,000.On May 1, 2012, the stock became worthless.During 2012, Bill also had an $8,000 loss on § 1244 small business stock purchased two years ago, a $9,000 loss on a nonbusiness bad debt, and a $5,000 long-term capital gain.How should Bill treat these items on his 2012 tax return?

Accepted Answer

A) $4,000 long-term capital loss and $9,000 short-term capital loss. 
B) $4,000 long-term capital loss and $3,000 short-term capital loss. 
C) $8,000 ordinary loss and $3,000 short-term capital loss. 
D) $8,000 ordinary loss and $5,000 short-term capital loss. 
E) $8,000 long-term capital loss and $6,000 short-term capital loss. 
A) $4,000 long-term capital loss and $9,000 short-term capital loss. 
B) $4,000 long-term capital loss and $3,000 short-term capital loss. 
C) $8,000 ordinary loss and $3,000 short-term capital loss. 
D) $8,000 ordinary loss and $5,000 short-term capital loss. 
E) $8,000 long-term capital loss and $6,000 short-term capital loss.

Question 5

Neal, single and age 37, has the following items for 2012:
   Determine Neal's taxable income for 2012.

Accepted Answer

The answer of Neal, single and age 37, has the...

Question 6

In 2011, Robin Corporation incurred the following expenditures in connection with the development of a new product:
   In 2012, Robin incurred the following additional expenditures in connection with the development of the product:
   In October 2012, Robin began receiving benefits from the project.If Robin elects to expense research and experimental expenditures, determine the amount and year of the deduction.

Accepted Answer

Deductibility of research and experiment

Question 7

Last year, Green Corporation incurred the following expenditures in the development of a new plant process:   During the current year, benefits from the project began being realized in May.If Green Corporation elects a 60 month deferral and amortization period, determine the amount of the deduction for the current year.

Accepted Answer

A) $48,000. 
B) $50,400. 
C) $54,667. 
D) $57,067. 
E) None of the above. 
A) $48,000. 
B) $50,400. 
C) $54,667. 
D) $57,067. 
E) None of the above.

Question 8

In 2011, Tan Corporation incurred the following expenditures in connection with the development of a new product:
   Tan began selling the product in November, 2011. If Tax elects to amortize research and experimental expenditures, determine Tan's deduction for 2012.

Accepted Answer

@#IMG-DLM& [($92,000

Question 9

Losses on rental property are classified as deductions from AGI (itemized deductions).

Accepted Answer

A) True 
 B)False

Question 10

A personal casualty loss deduction may be allowed for losses resulting from termites.

Accepted Answer

A) True 
 B)False

Question 11

Two years ago, Gina loaned Tom $50,000. Tom signed a note the terms of which called for monthly payments of $2,000 plus 6% interest on the outstanding balance. Last year, when the balance owing on the loan was $18,000, Tom defaulted on the note. As of the end of last year, there appeared to be no reasonable prospect of Gina recovering the $18,000. As a consequence, Gina claimed the $18,000 as a nonbusiness bad debt. Last year, Gina had AGI of a negative $6,000 which included $5,000 net long-term capital gains and $4,000 of qualified dividends. Gina did not itemize her deductions. During the current year, Tom paid Gina $13,000 in final settlement of the loan. How should Gina account for the payment in the current year?

Accepted Answer

A) File an amended tax return for last year. 
B) Report no income for the current year. 
C) Report $8,000 of income for the current year. 
D) Report $12,000 of income for the current year. 
E) None of the above. 
A) File an amended tax return for last year. 
B) Report no income for the current year. 
C) Report $8,000 of income for the current year. 
D) Report $12,000 of income for the current year. 
E) None of the above.

Question 12

If an account receivable written off during the current year is subsequently collected during the current year, the write-off entry is reversed.

Accepted Answer

A) True 
 B)False

Question 13

John files a return as a single taxpayer.In 2012, he had the following items:   Determine John's AGI for 2012.

Accepted Answer

A) ($5,000). 
B) $0. 
C) $45,000. 
D) $51,000. 
E) None of the above. 
A) ($5,000). 
B) $0. 
C) $45,000. 
D) $51,000. 
E) None of the above.

Question 14

A cash basis taxpayer can deduct the cost of a product sold even though the purchaser of the product ultimately does not pay the purchase price.

Accepted Answer

A) True 
 B)False

Question 15

Tonya had the following items for last year:
   For the current year, Tonya had the following items:
   Determine Tonya's adjusted gross income for the current year.

Accepted Answer

The answer of Tonya had the following items for last...

Question 16

If rental property is completely destroyed, the amount of the loss is the adjusted basis of the property at the time of the destruction reduced by $100 and 10% of AGI.

Accepted Answer

A) True 
 B)False

Question 17

Depreciation on a building used for research may be a research and experimental expense.

Accepted Answer

A) True 
 B)False

Question 18

How is qualified production activities income (QPAI) calculated?

Accepted Answer

QPAI is calculated as follows:

Question 19

In 2012, Morley, a single taxpayer, had an AGI of $30,000 before considering the following items:   Determine the amount of Morley's itemized deduction from the losses.

Accepted Answer

A) $0. 
B) $2,900. 
C) $5,120. 
D) $5,600. 
E) None of the above. 
A) $0. 
B) $2,900. 
C) $5,120. 
D) $5,600. 
E) None of the above.

Question 20

A father cannot claim a casualty on his daughter's personal use property.

Accepted Answer

A) True 
 B)False

Exam 7: Deductions and Losses: Certain Business Expenses and Losses

Research and experimental expenditures do not include expenditures for ordinary testing of materials for quality control.

Cream, Inc.'s taxable income for 2012 before any deduction for an NOL carryforward of $30,000 is $70,000.Cream's qualified production activities income (QPAI) is $60,000.What is the amount of Cream's domestic production activities deduction (DPAD) for 2012?

If an election is made to defer deduction of research expenditures, the amortization period is based on the expected life of the research project if less than 60 months.

Neal, single and age 37, has the following items for 2012: Determine Neal's taxable income for 2012.

In 2011, Tan Corporation incurred the following expenditures in connection with the development of a new product: Tan began selling the product in November, 2011. If Tax elects to amortize research and experimental expenditures, determine Tan's deduction for 2012.

Losses on rental property are classified as deductions from AGI (itemized deductions).

A personal casualty loss deduction may be allowed for losses resulting from termites.

If an account receivable written off during the current year is subsequently collected during the current year, the write-off entry is reversed.

John files a return as a single taxpayer.In 2012, he had the following items: Determine John's AGI for 2012.

A cash basis taxpayer can deduct the cost of a product sold even though the purchaser of the product ultimately does not pay the purchase price.

Tonya had the following items for last year: For the current year, Tonya had the following items: Determine Tonya's adjusted gross income for the current year.

If rental property is completely destroyed, the amount of the loss is the adjusted basis of the property at the time of the destruction reduced by $100 and 10% of AGI.

Depreciation on a building used for research may be a research and experimental expense.

How is qualified production activities income (QPAI) calculated?

In 2012, Morley, a single taxpayer, had an AGI of $30,000 before considering the following items: Determine the amount of Morley's itemized deduction from the losses.

A father cannot claim a casualty on his daughter's personal use property.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

A: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S: Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Income Taxation of Trusts and Estates

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