Question 1

Taxpayers are entitled to a depletion deduction if they have an economic interest in the natural resource property.

Accepted Answer

A) True 
 B)False

Question 2

Ronna is a professional golfer. In order to correct her vision, Ronna has eye surgery. The costs of the surgery and subsequent medical care are not covered by insurance. What tax issues should Ronna consider?

Accepted Answer

The answer of Ronna is a professional golfer. In order...

Question 3

In the current year, Marcus reports the following casualty gains and losses on personal- use property. Assets X and Y are destroyed in the first casualty while Z is destroyed in a second casualty.Both casualties were the result of federal disasters.  As a result of these losses and insurance recoveries, Marcus must report

Accepted Answer

A)  a long- term capital gain of $5,000 on asset X; a short- term capital loss of $900 on asset Y; and a short- term capital loss of $200 on asset Z. 
B)  a long- term capital gain of $5,000 on asset X; a short- term capital loss of $900 on asset Y; and a short- term capital loss of $300 on asset Z. 
C)  a long- term gain of $4,900 on asset X; a short- term capital loss of $900 on asset Y; and a short- term capital loss of $200 on asset Z. 
D)  a net gain of $3,700.

Question 4

Under a qualified pension plan, the employer's deduction is usually deferred until the employee recognizes income.

Accepted Answer

A) True 
 B)False

Question 5

An accrual- basis taxpayer receives advance payment for services to be provided over three future years. The taxpayer can recognize the income over the three- year period as services are provided, consistent with its financial statements.

Accepted Answer

A) True 
 B)False

Question 6

On January 1 of the current year, Dentux Corp. purchases a patent from another corporation for $600,000. The patent has a remaining life of 10 years. The patent is the only asset purchased from that corporation. Also on January 1, Dentux purchases all of the assets of Fenton Corp. Included in the Fenton assets acquired is a patent worth $300,000 that has a 10- year remaining life. What is the allowable amortization deduction on the two patents?

Accepted Answer

A)  $160,000 
B)  $60,000 
C)  $90,000 
D)  $80,000

Question 7

The general business credits are refundable credits.

Accepted Answer

A) True 
 B)False

Question 8

The excess business loss limitations apply at the partner, not partnership, level.

Accepted Answer

A) True 
 B)False

Question 9

Investigation of a tax problem that involves a closed- fact situation means that

Accepted Answer

A)  future events may be planned and controlled. 
B)  the client's transactions have already occurred and the tax questions must now be resolved. 
C)  the client's tax return has yet to be filed. 
D)  research is primarily concerned with applying the law to the facts as they exist.

Question 10

Sari transferred an office building with a $500,000 FMV and a $300,000 adjusted basis to the Oak Partnership in exchange for a one- quarter ownership interest. Sari had acquired the building three years earlier and had used it in her sole proprietorship. Sari's holding period for her partnership interest

Accepted Answer

A)  will depend on the election she files. 
B)  will include the holding period of the transferred building. 
C)  will begin the day after she acquires the partnership interest. 
D)  None of the above.

Question 11

Hui pays self- employment tax on her sole proprietorship income, supplemental Medicare surtaxes on excess wages and self- employment income (the .09% tax), and supplemental Medicare taxes on investment income (the 3.8% tax). Which of the following statements is correct regarding the deductibility of these taxes?

Accepted Answer

A)  One- half of the self- employment tax is deductible for AGI, and the .09% and 3.8% taxes are itemized deductions. 
B)  All three of the taxes are deductible as itemized deductions. 
C)  None of the taxes are allowed as a deduction. 
D)  One- half of the self- employment tax is deductible for AGI, but the .09% and 3.8% taxes are not allowed as deductions.

Question 12

When a spouse dies, the surviving spouse for the year of death

Accepted Answer

A)  must file a tax return using the single filing status. 
B)  may file a married filing jointly return only if the death occurred in the last half of the year. 
C)  may file a married filing jointly return. 
D)  must file a tax return using the head of household filing status.

Question 13

Chana made a $75,000 interest- free loan to her son, Trey, who used the money to retire a mortgage on his personal residence. Trey's only source of income was salary of $50,000 and $940 interest income on a savings account. The relevant Federal interest rate was 5% and the loan was outstanding all year long. What amount must Chana include as interest income as a result of this transaction?

Accepted Answer

A)  $2,810 
B)  $0 
C)  $3,750 
D)  $940

Question 14

If a capital asset held for one year or more is sold at a gain, the gain is classified as long- term capital gain.

Accepted Answer

A) True 
 B)False

Question 15

Small case procedures of the U.S. Tax Court requires that the amount in dispute not exceed

Accepted Answer

A)  $10,000. 
B)  $100,000. 
C)  $5,000. 
D)  $50,000.

Question 16

In 2018, Sela traveled from her home in Flagstaff to San Francisco to seek specialized medical care. Because she w unable to travel alone, her father accompanied her. Total expenses included:  The total medical expenses deductible before the 7.5% limitation are

Accepted Answer

A)  $2,680. 
B)  $2,500. 
C)  $2,080. 
D)  $1,600.

Question 17

John has $55,000 of self- employment earnings from a sole proprietorship. John is also employed part- time by a major corporation and is paid $25,000. John's self- employment tax for 2018 is

Accepted Answer

A)  $7,771. 
B)  $3,886. 
C)  $8,415. 
D)  $4,208.

Question 18

When a taxpayer leases an automobile for 100% business purposes, the entire lease payment is deductible.

Accepted Answer

A) True 
 B)False

Question 19

Ron transfers assets with a $100,000 FMV (basis $60,000) and $70,000 of business- related liabilities to a corporation in exchange for 100% of the corporation's stock with a FMV of $30,000. The corporation assumes the $70,000 mortgage. The transfer qualifies under Sec. 351. What is the adjusted basis of the stock received?

Accepted Answer

A)  $60,000 
B)  $30,000 
C)  $70,000 
D)  $0

Question 20

Sarah receives a $15,000 scholarship from City University. The university specifies that $8,000 is for tuition, books, supplies, and equipment for classes. The other $7,000 is for room and board. Sarah works ten hours per week as a grader, for which she is paid $7,500 for the year. Of the total amount received, Sarah must include the following amount in gross income

Accepted Answer

A)  $7,500. 
B)  $22,500. 
C)  $14,500. 
D)  $7,000.

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

Taxpayers are entitled to a depletion deduction if they have an economic interest in the natural resource property.

Ronna is a professional golfer. In order to correct her vision, Ronna has eye surgery. The costs of the surgery and subsequent medical care are not covered by insurance. What tax issues should Ronna consider?

Under a qualified pension plan, the employer's deduction is usually deferred until the employee recognizes income.

An accrual- basis taxpayer receives advance payment for services to be provided over three future years. The taxpayer can recognize the income over the three- year period as services are provided, consistent with its financial statements.

The general business credits are refundable credits.

The excess business loss limitations apply at the partner, not partnership, level.

Investigation of a tax problem that involves a closed- fact situation means that

When a spouse dies, the surviving spouse for the year of death

If a capital asset held for one year or more is sold at a gain, the gain is classified as long- term capital gain.

Small case procedures of the U.S. Tax Court requires that the amount in dispute not exceed

In 2018, Sela traveled from her home in Flagstaff to San Francisco to seek specialized medical care. Because she w unable to travel alone, her father accompanied her. Total expenses included: The total medical expenses deductible before the 7.5% limitation are

John has $55,000 of self- employment earnings from a sole proprietorship. John is also employed part- time by a major corporation and is paid $25,000. John's self- employment tax for 2018 is

When a taxpayer leases an automobile for 100% business purposes, the entire lease payment is deductible.