Question 1

All of the following losses are deductible except

Accepted Answer

A)  abandonment of business property. 
B)  decline in value of securities. 
C)  total worthlessness of securities. 
D)  a net operating loss.

Question 2

A sole proprietor contributes to the election campaign of a state governor. The candidate has promised to change a law that severely limits the growth of the sole proprietor's business. Given the direct benefit, the sole proprietor can deduct the contribution.

Accepted Answer

A) True 
 B)False

Question 3

David acquired an automobile for $30,000 for use in his unincorporated business at the beginning of 2018 and used the standard mileage rate method in 2018. He plans to switch to the actual expense method for 2019. The automobile was used 25,000 miles in 2018. What is the amount of the adjusted basis of the automobile for purposes of computing depreciation in 2019?

Accepted Answer

A)  $20,000 
B)  $16,625 
C)  $30,000 
D)  $23,750

Question 4

Westin paid the following taxes this year:  What amount can Arun deduct as an itemized deduction on his tax return?

Accepted Answer

A)  $28,500 
B)  $10,000 
C)  $14,500 
D)  $10,500

Question 5

Form 4868, a six- month extension of time to file, allows a taxpayer to

Accepted Answer

A)  avoid interest on underpayment of taxes due. 
B)  extend the filing date of the return but the estimated amount of tax due must still be paid by the original due date of the return. 
C)  extend the filing date only at the discretion of the IRS. 
D)  extend the filing date of the return as well as payment of the tax due.

Question 6

Lena owns a restaurant which was damaged by a tornado. The following assets were partially destroyed:   Lena has AGI of $50,000. What is the amount of Lena's deductible casualty loss?

Accepted Answer

A)  $54,900 
B)  $70,000 
C)  $60,000 
D)  $180,000

Question 7

The earned income credit is refundable only if a tax has been withheld.

Accepted Answer

A) True 
 B)False

Question 8

Latashia reports $100,000 of gross income on her 2018 tax return, filed on the April 17, 2019 due date. She omits $30,000 of income, but the error was not fraudulent. When does the statute of limitations for examining her tax return expire?

Accepted Answer

A)  April 17, 2022 
B)  April 17, 2021 
C)  April 17, 2025 
D)  It never expires.

Question 9

Residential rental property is defined as property from which more than 80% of the gross rental income is rental income from dwelling units.

Accepted Answer

A) True 
 B)False

Question 10

Identify which of the following statements is false.

Accepted Answer

A)  Members from both the House and the Senate are on the Conference Committee. 
B)  Records of committee hearings are helpful in determining Congressional intent. 
C)  When tax advisors speak of the "tax law," they usually have in mind just the Internal Revenue Code. 
D)  All of the above are false.

Question 11

Candice owns a mutual fund that reinvests her dividends and capital gains earned during the year. The mutual fund reported to her that her share of earnings was: $500 in dividends, $1,500 in short- term net capital gains, and $1,300 in long- term net capital gains. She reported the items on her tax return and paid the appropriate tax on these earnings. If her basis in the fund was $25,000 at the beginning of the year, what is her basis at the end of the year?

Accepted Answer

A)  $25,000 
B)  $27,000 
C)  $28,300 
D)  $25,500

Question 12

Jana reports the following income and loss:  Activities A, B, and C are all passive activities. Based on this information, Jana will recognize

Accepted Answer

A)  salary of $120,000, passive income of $60,000, and passive loss carryovers of $100,000. 
B)  adjusted gross income of $80,000. 
C)  salary of $120,000 and deductible net losses of $40,000. 
D)  salary of $120,000 and net passive losses of $40,000 that will be carried over.

Question 13

A corporation is owned 70% by Jones and 30% by Smith. Jones owns 70 shares with a cost of $100 each. Smith owns 30 shares with a cost of $100 per share. The company redeems 5 shares from Smith at a redemption price of $400 per share. No stock is redeemed from Jones. This is not a redemption to pay death taxes, and it is not a partial liquidation. What is the tax impact on Smith?

Accepted Answer

A)  $1,500 capital gain 
B)  $1,500 dividend 
C)  $2,000 capital gain 
D)  $2,000 dividend

Question 14

Ezinne transfers land with an adjusted basis of $50,000 and a FMV of $95,000 to a new business in exchange for a 50% ownership interest. The land is subject to a $60,000 mortgage which the business will assume. The business has no other liabilities outstanding. Indicate the amount of gain recognized by Ezinne due to this exchange if the building is transferred to (1) a corporation and (2) a partnership. Assume Sec. 351 is satisfied in the case of the corporation and Sec. 721 is satisfied in the case of the partnership.

Accepted Answer

A)   
B)   
C)   
D)

Question 15

A business provides $45,000 of group- term life insurance to all workers, including the partners who work in the business. All of the workers can exclude the value of this fringe benefit from their gross income.

Accepted Answer

A) True 
 B)False

Question 16

Which of the statements is inaccurate regarding requirements for nonrecognition of gain or loss upon the transfer of assets to a corporation in exchange for stock?

Accepted Answer

A)  The transferor- shareholders must be in control (80%) of the corporation immediately after the exchange. 
B)  Depreciation recapture applies to a transfer which falls under Sec. 351. 
C)  Property must be transferred to the corporation solely in exchange for stock of the corporation. 
D)  If property or money is received by the transferor, gain (but not loss) is recognized to the extent of the lesser of the boot received or the realized gain.

Question 17

A Technical Advice Memorandum is usually

Accepted Answer

A)  part of a Tax Court decision. 
B)  issued by the national office in response to an audit request. 
C)  requested by the taxpayer before entering into a taxable transaction. 
D)  an internal IRS document describing alternative legislative proposals.

Question 18

Indicate for each of the following the most favorable filing status for the 2018 tax year.
a. Kenny died on March 2, 2017. Marge, his wife, and Bart, their son, survive. Marge filed a joint return in 2017. age 18 in 2018, is a full- time college student and continues to live at home with his mother. He works part- time, earning $3,200. What is Marge's filing status in 2018?
b. Alan Spaulding is single and provides over 50% support of his niece Alicia who lives with him all year long. maintains the household and claims Alicia as a dependent. Alicia makes $3,600 at a part- time job. She is a full- ti student, age 18. What is Alan's filing status?
c. Lily, who was divorced on July 27, 2018, provides 100% of the support for her parents who live in a nursing Kansas and have no income. What is Lily's filing status?
d. Holly was abandoned by her husband Fletcher in September of the current year. She has not seen or commu with him since then. What is Holly's filing status?
e. Rick, whose wife died in December 2015, filed a joint tax return for 2015. He did not remarry, but has continued to maintain his home in which his two dependent children live. What is Rick's filing status for 2018?

Accepted Answer

The answer of Indicate for each of the following the...

Question 19

AB Partnership earns $500,000 in the current year. Partners A and B are equal partners who do not receive any distributions during the year. How much income does partner A report from the partnership?

Accepted Answer

A)  $0 
B)  $500,000 
C)  $250,000 
D)  None of the above.

Question 20

All of the following statements are true with regard to personal residences except:

Accepted Answer

A)  Houseboats, house trailers, and condominium apartments may qualify as a principal residence. 
B)  Temporarily renting property that was formerly the taxpayer's principal residence does not automatically preclude the use of Sec. 121. 
C)  To qualify for favorable tax treatment under Sec. 121, the residence must be either the taxpayer's principal residence or a secondary residence. 
D)  In the case of married taxpayers, an individual may claim the exclusion even if the individual's spouse used the exclusion within the past two years.

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

All of the following losses are deductible except

A sole proprietor contributes to the election campaign of a state governor. The candidate has promised to change a law that severely limits the growth of the sole proprietor's business. Given the direct benefit, the sole proprietor can deduct the contribution.

Westin paid the following taxes this year: What amount can Arun deduct as an itemized deduction on his tax return?

Form 4868, a six- month extension of time to file, allows a taxpayer to

Lena owns a restaurant which was damaged by a tornado. The following assets were partially destroyed: Lena has AGI of $50,000. What is the amount of Lena's deductible casualty loss?

The earned income credit is refundable only if a tax has been withheld.

Latashia reports $100,000 of gross income on her 2018 tax return, filed on the April 17, 2019 due date. She omits $30,000 of income, but the error was not fraudulent. When does the statute of limitations for examining her tax return expire?

Residential rental property is defined as property from which more than 80% of the gross rental income is rental income from dwelling units.

Identify which of the following statements is false.

Jana reports the following income and loss: Activities A, B, and C are all passive activities. Based on this information, Jana will recognize

A business provides $45,000 of group- term life insurance to all workers, including the partners who work in the business. All of the workers can exclude the value of this fringe benefit from their gross income.

Which of the statements is inaccurate regarding requirements for nonrecognition of gain or loss upon the transfer of assets to a corporation in exchange for stock?

A Technical Advice Memorandum is usually

AB Partnership earns $500,000 in the current year. Partners A and B are equal partners who do not receive any distributions during the year. How much income does partner A report from the partnership?

All of the following statements are true with regard to personal residences except: