Question 1

Assuming extensions are not filed, tax returns for calendar- year S corporations and partnerships are both due on April 15.

Accepted Answer

A) True 
 B)False

Question 2

An S corporation distributes land to its shareholders. The land has a $60,000 basis and a $90,000 FMV. The basis of the land to the shareholder is

Accepted Answer

A)  $90,000. 
B)  $0. 
C)  $60,000. 
D)  $30,000.

Question 3

During the current year, a corporation sells equipment for $300,000. The equipment cost $270,000 when purchased and placed in service two years ago and $60,000 of depreciation deductions were allowed. The results of the sale are

Accepted Answer

A)  ordinary income of $60,000 and LTCG of $30,000. 
B)  ordinary income of $60,000 and Sec. 1231 gain of $30,000. 
C)  ordinary income of $90,000. 
D)  Sec. 1231 gain of $90,000.

Question 4

Annie, a single taxpayer, has taxable income of $600,000 and a regular tax liability of $187,690 in 2018. She also has positive AMT adjustments of $100,000 due to incentive stock options and limitations on itemized deductions and tax preferences of $25,000. What is Annie's AMT for 2018?

Accepted Answer

The answer of Annie, a single taxpayer, has taxable income...

Question 5

This year, Lauren sold several shares of stock held for investment. The following is a summary of her capital transactions for 2018:  What are the amounts of Lauren's capital gains (losses) for this year?

Accepted Answer

A)   
B)   
C)   
D)

Question 6

Richard, a self- employed business consultant, traveled from New Orleans to New York for both business and va He spent 4 days conducting business and some days vacationing. He incurred the following expenses:

Accepted Answer

The answer of Richard, a self- employed business consultant, traveled...

Question 7

Nancy reports the following income and loss in the current year.  All three activities are passive activities with respect to Nancy. Nancy also has $21,000 of suspended losses attrib activity C carried over from prior years. During the year, Nancy sells activity C and realizes a $15,000 taxable ga What is Nancy's AGI as a result of these transactions?

Accepted Answer

A)  $71,000 
B)  $55,000 
C)  $64,000 
D)  $50,000

Question 8

Martha, an accrual- method taxpayer, has an accounting practice. In 2017, she performs tax analyses for Arnold and sends him an invoice for $10,000. In 2018, Martha sells her practice and all accounts to David. Arnold's debt becomes worthless that year after David has purchased the practice. The result is

Accepted Answer

A)  Martha deducts a business bad debt in 2018. 
B)  David deducts a nonbusiness bad debt in 2018. 
C)  David deducts a business bad debt in 2018. 
D)  Martha deducts a nonbusiness bad debt in 2018.

Question 9

Taquin, age 67 and single, paid home mortgage interest of $5,000, charitable contributions of $5,000 and property taxes of $4,000 in 2018. He has no dependents. In addition to the personal exemption, Taquin will claim a deduction from AGI of

Accepted Answer

A)  $14,000. 
B)  $13,600. 
C)  $15,300. 
D)  $15,600.

Question 10

Joy is a material participant in a partnership. Her basis in her partnership interest is $150,000. Due to a major expansion, the partnership will generate a significant loss this year, and Joy's share is expected to be $200,000. The partners expect the partnership to report a large profit next year. Joy is in the top tax bracket this year, and she expects to be in a lower tax bracket next year. Due to her higher marginal tax rate this year, Joy would like to deduct her full share of the partnership loss this year. What strategies can she employ before year- end to assure full deduction of this year's loss?

Accepted Answer

A)  As a material participant, Joy will be entitled to deduct her full share of the partnership loss this year. 
B)  Joy can make a loan to the partnership before year- end. 
C)  Joy can contribute capital to the partnership before year- end. 
D)  Either Response B or Response C will allow Joy to deduct her full share of the loss.

Question 11

Any distribution from a qualified tuition plan not used for qualified higher education expenses is both included in income and subject to a 10% penalty.

Accepted Answer

A) True 
 B)False

Question 12

A consulting firm, organized as partnership and owned by 20 individual partners, reports about $40 million of gross receipts per year. The partnership must use the accrual method.

Accepted Answer

A) True 
 B)False

Question 13

Identify which of the following statements is false.

Accepted Answer

A)  The small cases procedure of the U.S. Tax Court allows a less formal hearing but provides for no appeal. 
B)  The IRS may retroactively revoke an acquiescence. 
C)  Letter rulings are binding only with respect to the taxpayer requesting the ruling. 
D)  The acquiescence policy was adopted by the U.S. Tax Court to permit litigating parties to agree on the exact amount of the tax due.

Question 14

If estimated tax payments equal or exceed 100% of the actual tax liability for the prior year, there is generally (assuming AGI less than or equal to $150,000) no penalty for underpayment of estimated taxes.

Accepted Answer

A) True 
 B)False

Question 15

Individual taxpayers can offset portfolio income with passive losses.

Accepted Answer

A) True 
 B)False

Question 16

On July 25 of this year, Raj sold land with a cost of $15,000 for $40,000. Raj collected $20,000 this year and is scheduled to receive $5,000 each year for four years starting next year plus an acceptable rate of interest. Raj's gain recognized this year is

Accepted Answer

A)  $25,000. 
B)  $12,500. 
C)  $20,000. 
D)  $7,500.

Question 17

Which of the following is not a social objective of the tax law?

Accepted Answer

A)  creation of tax- favored pension plans 
B)  a deduction for charitable contributions 
C)  prohibition of a deduction for illegal bribes, fines and penalties 
D)  an exclusion for interest earned by large businesses

Question 18

Helen, who is single, is considering purchasing a residence that will provide an $18,000 tax deduction for property taxes and mortgage interest. If her marginal tax rate is 24% and her effective tax rate is 20%, what is the amount of Helen's tax savings from purchasing the residence?

Accepted Answer

A)  $3,200 
B)  $3,600 
C)  $4,320 
D)  $18,000

Question 19

Cheryl is claimed as a dependent by her parents. She had a part- time job during 2018 and earned $4,900 during the year, in addition to $600 of interest income. What is her standard deduction?

Accepted Answer

A)  $1,050 
B)  $12,000 
C)  $4,900 
D)  $5,250

Question 20

Which of the following statements is not correct regarding the residential energy efficient property (REEP) credit?

Accepted Answer

A)  The taxpayer's basis in the property is reduced by the credit. 
B)  Only solar property qualifies for the credit. 
C)  Credits earned but not used in the current year can be carried forward to the next year. 
D)  All of the above statements regarding the REEP credit are correct.

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

Assuming extensions are not filed, tax returns for calendar- year S corporations and partnerships are both due on April 15.

An S corporation distributes land to its shareholders. The land has a $60,000 basis and a $90,000 FMV. The basis of the land to the shareholder is

During the current year, a corporation sells equipment for $300,000. The equipment cost $270,000 when purchased and placed in service two years ago and $60,000 of depreciation deductions were allowed. The results of the sale are

Annie, a single taxpayer, has taxable income of $600,000 and a regular tax liability of $187,690 in 2018. She also has positive AMT adjustments of $100,000 due to incentive stock options and limitations on itemized deductions and tax preferences of $25,000. What is Annie's AMT for 2018?

This year, Lauren sold several shares of stock held for investment. The following is a summary of her capital transactions for 2018: What are the amounts of Lauren's capital gains (losses) for this year?

Richard, a self- employed business consultant, traveled from New Orleans to New York for both business and va He spent 4 days conducting business and some days vacationing. He incurred the following expenses:

Taquin, age 67 and single, paid home mortgage interest of $5,000, charitable contributions of $5,000 and property taxes of $4,000 in 2018. He has no dependents. In addition to the personal exemption, Taquin will claim a deduction from AGI of

Any distribution from a qualified tuition plan not used for qualified higher education expenses is both included in income and subject to a 10% penalty.

A consulting firm, organized as partnership and owned by 20 individual partners, reports about $40 million of gross receipts per year. The partnership must use the accrual method.

Identify which of the following statements is false.

If estimated tax payments equal or exceed 100% of the actual tax liability for the prior year, there is generally (assuming AGI less than or equal to $150,000) no penalty for underpayment of estimated taxes.

Individual taxpayers can offset portfolio income with passive losses.

On July 25 of this year, Raj sold land with a cost of $15,000 for $40,000. Raj collected $20,000 this year and is scheduled to receive $5,000 each year for four years starting next year plus an acceptable rate of interest. Raj's gain recognized this year is

Which of the following is not a social objective of the tax law?

Helen, who is single, is considering purchasing a residence that will provide an $18,000 tax deduction for property taxes and mortgage interest. If her marginal tax rate is 24% and her effective tax rate is 20%, what is the amount of Helen's tax savings from purchasing the residence?

Cheryl is claimed as a dependent by her parents. She had a part- time job during 2018 and earned $4,900 during the year, in addition to $600 of interest income. What is her standard deduction?

Which of the following statements is not correct regarding the residential energy efficient property (REEP) credit?