Question 1

With respect to charitable contributions by corporations, all of the following rules apply with the exception of

Accepted Answer

A)  unused contributions are carried forward 5 years. 
B)  contributions are limited to 10% of taxable income, computed without regard to the charitable contribution deduction, NOL and capital loss carrybacks, or the dividends- received deduction. 
C)  accrual- basis corporations may accrue a contribution deduction in the year preceding payment if the board of directors authorizes such payment prior to the end of the tax year, and the payment is actually made within two and one- half months following the end of the tax year. 
D)  the amount of the contribution deduction is always the adjusted basis of the property contributed.

Question 2

A taxpayer's rental activities will be considered a trade or business, rather than a passive activity, if

Accepted Answer

A)  more than half of the taxpayer's personal services performed in all business activities during the year are spent managing the rental properties. 
B)  the taxpayer performs more than 500 hours of work during the year managing the rental properties. 
C)  the taxpayer performs more than 750 hours of work during the year managing the rental properties. 
D)  conditions A and C, but not B, are satisfied.

Question 3

Which of the following credits is considered a refundable credit?

Accepted Answer

A)  adoption expense credit 
B)  credit for elderly and disabled 
C)  earned income credit 
D)  lifetime learning credit

Question 4

Rachel holds 110 shares of Argon Mutual Fund. She is planning to sell 90 shares. Her record of the share purchas noted below. What could be her basis for the 90 shares to be sold for purposes of determining gain?

Accepted Answer

A)  $9,409 
B)  $9,500 
C)  $9,000 
D)  Any of the above could be used as basis for the 90 shares sold.

Question 5

Kuda owns a parcel of land she acquired on June 1, 2012, as an investment. She exchanges the land on July 5, 2018, for a storage building to be used in her business and marketable securities to be held as an investment. The marketable securities' holding period begins on

Accepted Answer

A)  July 5, 2018 
B)  July 6, 2018 
C)  June 2, 2012 
D)  June 1, 2012

Question 6

Net long- term capital gains receive preferential tax treatment if they exceed net short- term capital losses.

Accepted Answer

A) True 
 B)False

Question 7

Explain the legislative reenactment doctrine.

Accepted Answer

The answer of Explain the legislative reenactment doctrine....

Question 8

Timothy and Alice, who are married with modified AGI of $90,000, are sending their daughter to her first year of college. Their total tuition and related payments during the year amounted to $13,000. In addition, their daughter received a $10,000 scholarship to cover tuition. They have not taken advantage of any other type of tax benefit related to educational expenses. Their American Opportunity Tax Credit is

Accepted Answer

A)  $2,500. 
B)  $2,250. 
C)  $3,000. 
D)  $2,000.

Question 9

Under the terms of a divorce agreement dated January 1, 2018, Edmond was to pay his wife Donna $3,000 per m alimony and $500 per month in child support. Payments began on January 1, 2018. In addition, Donna received t family residence with a cost basis of $210,000 and a fair market value of $260,000.
a. What is the amount that Donna must include in income for the twelve- month period ended December 31, 2
b. What is the basis in the home which Donna received as a result of the divorce?

Accepted Answer

The answer of Under the terms of a divorce agreement...

Question 10

Michelle purchased her home for $150,000, and subsequently added a garage costing $25,000 and a new porch costing $5,000. Repairs to the home's plumbing cost $1,000. The adjusted basis in the home is

Accepted Answer

A)  $180,000. 
B)  $150,000. 
C)  $181,000. 
D)  $151,000.

Question 11

Which of the following criteria is not required to be met under the tax concept of income?

Accepted Answer

A)  Cash must be received. 
B)  Income must be realized. 
C)  There must be economic benefit. 
D)  Income must be recognized.

Question 12

Tobey receives 1,000 shares of YouDog! stock as part of his compensation package. Tobey's employment contract with YouDog!, Inc., states that if he leaves before completion of three years of employment, he will forfeit the stock. The stock currently has a fair market value of $12 per share. Which of the following statements regarding Tobey's choices is not true?

Accepted Answer

A)  Tobey may elect to report the $12,000 FMV of the stock as ordinary income in the current year. 
B)  Tobey must report $12,000 as income due to the receipt of the stock in the current year. 
C)  Tobey does not have to recognize any income from receiving the stock until his rights to the stock are fully vested. 
D)  If Tobey elects to report $12,000 as income in the current year and the stock price falls to $5 per share when his rights to the stock are vested, Tobey is not allowed to deduct a loss.

Question 13

The income of a single member LLC is taxed to its owner under the sole proprietorship rules if no election to be taxed as a corporation is made.

Accepted Answer

A) True 
 B)False

Question 14

Theresa owns a boat that is held for personal use and has a $100,000 basis. The boat is destroyed by a storm and Theresa collects $120,000 from the insurance company. She purchases a new $150,000 boat for personal use and elects to defer any gain on the transaction. What is the basis of the new boat?

Accepted Answer

The answer of Theresa owns a boat that is held...

Question 15

Jorge contributes $5,000 to a traditional nondeductible IRA in the current year and makes no subsequent contributions. Assume that the investment in the IRA yields 6% per year and that Jorge allows his investment to accumulate for 20 years. At the end of twenty years, he withdraws all of the amounts from the IRA when his marginal tax rate is 30%. What is his after- tax accumulation?

Accepted Answer

The answer of Jorge contributes $5,000 to a traditional nondeductible...

Question 16

In 2018, Richard's Department Store changes its inventory method from FIFO to LIFO. Richard's uses the simplified LIFO method. Richard's year- end inventory under FIFO is as follows: 2017 - $300,000; 2018 - $350,000. The 2017 price index is 110% and the 2018 index is 120%. The 2018 ending inventory after adopting the LIFO method is

Accepted Answer

A)  $381,818. 
B)  $320,833. 
C)  $322,727. 
D)  $350,000.

Question 17

Identify which of the following statements is true.

Accepted Answer

A)  The Internal Revenue Code contains chapters, which are further subdivided into titles. 
B)  Before 1939, tax statutes were codified or compiled into one document. 
C)  Paragraph references are most commonly used when citing or referring to the tax statutes. 
D)  Title 26 of the United States Code and the Internal Revenue Code of 1986 are synonymous.

Question 18

Tina purchases a personal residence for $278,000, but subsequently converts the property to rental property when its FMV is $275,000. Assume depreciation of $65,000 has been deducted after conversion to rental use. If Tina sells the property for $200,000, her realized gain or loss will be

Accepted Answer

A)  ($78,000) loss. 
B)  ($75,000) loss. 
C)  ($13,000) loss. 
D)  ($10,000) loss.

Question 19

Earl invests $7,000 in a tax- exempt bond yielding 4% which matures in 15 years. What is Earl's after- tax accumulation at maturity?

Accepted Answer

The answer of Earl invests $7,000 in a tax- exempt...

Question 20

Martin Corporation granted a nonqualified stock option to employee Caroline on January 1, 2013. The option price was $150, and the FMV of the Martin stock was also $150 on the grant date. The option allowed Caroline to purchase 1,000 shares of Martin stock. The option itself does not have a readily ascertainable FMV. Caroline exercised the option on August 1, 2017, when the stock's FMV was $250. If Caroline sells the stock on September 5, 2018, for $300 per share, she must recognize

Accepted Answer

A)   
B)   
C)   
D)

Exam 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals