Question 1

A taxpayer receives permission for a voluntary change in accounting method, resulting in a negative adjustment to income. The taxpayer would like to recognize the full negative adjustment in the current year in order to maximize tax savings and time value of money. In order to recognize the full adjustment this year, the adjustment must not exceed

Accepted Answer

A)  $25,000. 
B)  $3,000. 
C)  $10,000. 
D)  Adjustments must be spread over a period of two to four years.

Question 2

In January of 2018, Brett purchased a Porsche for $100,000 to be used in his business. Brett drove the car 83 percent of the time for business. What is the maximum amount that Brett may deduct in 2018?

Accepted Answer

The answer of In January of 2018, Brett purchased a...

Question 3

All of the following are classified as flow- through entities for tax purposes except

Accepted Answer

A)  C corporations. 
B)  limited liability companies. 
C)  S corporations. 
D)  partnerships.

Question 4

A taxpayer's home in California is destroyed by wildfires which have been declared a federal disaster. The home's destruction results in a large casualty loss deduction exceeding the taxpayer's income. The taxpayer will be allowed to carry forward a net operating loss due to this personal loss.

Accepted Answer

A) True 
 B)False

Question 5

Greg Corporation, an accrual method taxpayer, had accumulated earnings and profits of $300,000 as of Decembe year. For its current tax year, Greg's books and records reflect the following:  Based on the above, what is the amount of Greg Corporation's current earnings and profits for this year?

Accepted Answer

A)  $120,400 
B)  $128,900 
C)  $122,900 
D)  $124,900

Question 6

Gina is an instructor at State University in Birmingham. Her university has asked her if she would be interested in taking a temporary assignment at their Montgomery campus. In addition to her salary, the University would pay her living expenses while in Montgomery. What should Gina consider with regard to taxes in deciding whether or not to accept the offer?

Accepted Answer

The answer of Gina is an instructor at State University...

Question 7

A taxpayer does not have to impute interest on a receivable from sales if payment is to be made within six months.

Accepted Answer

A) True 
 B)False

Question 8

Ivan's AGI is about $100,000 this year, and his typical medical expenses average about $4,000 per year. He will be in the 24% tax bracket. Ivan plans to partially retire next year at age 60 so he expects about a $60,000 reduction in AGI and his marginal tax rate to drop. Ivan will have about $1,000 of non- emergency dental work done in the next few months. Ivan should get the dental work done this year so he can enjoy tax savings at the higher tax rate.

Accepted Answer

A) True 
 B)False

Question 9

A taxpayer may deduct suspended losses of a passive activity when the taxpayer completely terminates his or her ownership of the activity.

Accepted Answer

A) True 
 B)False

Question 10

How long must a capital asset be held to qualify for long- term treatment?

Accepted Answer

A)  6 months 
B)  same trade date one year from purchase 
C)  one year and one day 
D)  one year

Question 11

In order to avoid the imputation of interest, the stated interest on a transaction must be at least equal to 100% of the Federal Reserve funds rate.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is true about future qualified distributions from a Roth IRA by a person who will be 65 years old at the time the distributions begin? Assume the individual opened the account before age 60.

Accepted Answer

A)  The entire amount of the distributions will be tax- free. 
B)  The entire amount of the distribution will be taxable. 
C)  Only the previous contributions will be tax- free. 
D)  Only the accumulated earnings will be tax- free.

Question 13

Will exchanges a building with a basis of $35,000, and subject to a liability of $30,000, for land with a FMV of $50,000 owned by Jane. Jane takes the land subject to the liability. The amount realized by Will is

Accepted Answer

A)  $30,000. 
B)  $80,000. 
C)  $35,000. 
D)  $50,000.

Question 14

Businesses can recognize a loss on abandoned property. What types of factors would indicate that property had been abandoned?

Accepted Answer

The answer of Businesses can recognize a loss on abandoned...

Question 15

A taxpayer wishes to take a deduction for a worthless debt. Without proper documentation, the taxpayer faces the risk that the IRS will assert that

Accepted Answer

A)  the debt is not yet worthless, disallowing the deduction. 
B)  the debt became worthless in an earlier period, and the statute of limitations prevents the taxpayer from amending that earlier return. 
C)  both of the above. 
D)  none of the above.

Question 16

When accounting for long- term contracts (other than those for services), all of the following accounting methods may be acceptable with the exception of

Accepted Answer

A)  the completed contract method. 
B)  the percentage of completion method. 
C)  the modified percentage of completion method. 
D)  the allocated completion method of accounting.

Question 17

Tina, whose marginal tax rate is 32%, has the following capital gains this year:  What is the increase in income tax caused by these items (ignore the Medicare tax on net investment income)?

Accepted Answer

The answer of Tina, whose marginal tax rate is 32%,...

Question 18

Corporate taxpayers may offset capital losses only against capital gains and may carry excess losses back three years and then forward five years.

Accepted Answer

A) True 
 B)False

Question 19

On June 11, two years ago, Gia sold land with a cost of $15,000 for $45,000. Gia collected $20,000 initially and is scheduled to receive $5,000 each year for five years starting last year plus an acceptable rate of interest. This year, Gia decided to sell one installment note to a bank that agreed to pay $4,100. As a result of the sale of the note, Gia must report

Accepted Answer

A)  $1,667 gain. 
B)  ($900) loss. 
C)  $2,433 gain. 
D)  $0.

Question 20

The general business credit may not exceed the net income tax minus the greater of the tentative minimum tax or

Accepted Answer

A)  25% of the net regular tax liability above $25,000. 
B)  25% of the net regular tax liability above $20,000. 
C)  20% of the net regular tax liability above $20,000. 
D)  20% of the net regular tax liability above $25,000.

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

In January of 2018, Brett purchased a Porsche for $100,000 to be used in his business. Brett drove the car 83 percent of the time for business. What is the maximum amount that Brett may deduct in 2018?

All of the following are classified as flow- through entities for tax purposes except

A taxpayer's home in California is destroyed by wildfires which have been declared a federal disaster. The home's destruction results in a large casualty loss deduction exceeding the taxpayer's income. The taxpayer will be allowed to carry forward a net operating loss due to this personal loss.

Greg Corporation, an accrual method taxpayer, had accumulated earnings and profits of $300,000 as of Decembe year. For its current tax year, Greg's books and records reflect the following: Based on the above, what is the amount of Greg Corporation's current earnings and profits for this year?

A taxpayer does not have to impute interest on a receivable from sales if payment is to be made within six months.

A taxpayer may deduct suspended losses of a passive activity when the taxpayer completely terminates his or her ownership of the activity.

How long must a capital asset be held to qualify for long- term treatment?

In order to avoid the imputation of interest, the stated interest on a transaction must be at least equal to 100% of the Federal Reserve funds rate.

Which of the following is true about future qualified distributions from a Roth IRA by a person who will be 65 years old at the time the distributions begin? Assume the individual opened the account before age 60.

Will exchanges a building with a basis of $35,000, and subject to a liability of $30,000, for land with a FMV of $50,000 owned by Jane. Jane takes the land subject to the liability. The amount realized by Will is

Businesses can recognize a loss on abandoned property. What types of factors would indicate that property had been abandoned?

A taxpayer wishes to take a deduction for a worthless debt. Without proper documentation, the taxpayer faces the risk that the IRS will assert that

When accounting for long- term contracts (other than those for services) , all of the following accounting methods may be acceptable with the exception of

Tina, whose marginal tax rate is 32%, has the following capital gains this year: What is the increase in income tax caused by these items (ignore the Medicare tax on net investment income)?

Corporate taxpayers may offset capital losses only against capital gains and may carry excess losses back three years and then forward five years.

The general business credit may not exceed the net income tax minus the greater of the tentative minimum tax or