Question 1

The transfer of property to a partnership in exchange for a partnership interest will generally be a nontaxable event.

Accepted Answer

A) True 
 B)False

Question 2

Daniel plans to invest $20,000 in either a corporate bond paying 5% or a tax- exempt bond with a 4% interest rate. The bonds have an equivalent level of risk. Daniel has a 35% marginal tax rate and wants to maximize his after- tax earnings. Daniel should

Accepted Answer

A)  allocate his money equally between the two investments. 
B)  invest in the tax- exempt bond since its yield is more than the after- tax return on the corporate bond. 
C)  invest in the corporate bond due to its higher stated interest rate. 
D)  invest in the corporate bond because its after- tax earnings are more than the return on the tax- exempt bond.

Question 3

If an activity produces a profit for at least two years during a consecutive five- year period, the burden of proof shifts to the IRS to show that the activity is not profit- motivated.

Accepted Answer

A) True 
 B)False

Question 4

All of the following statements are true except

Accepted Answer

A)  the net income of C corporation is subject to double taxation because it is taxed at the entity level and dividends paid from the C corporation to individual shareholders is also taxed. 
B)  the net income earned by a sole proprietorship is reported on the owner's individual income tax return. 
C)  LLCs are generally taxed as partnerships. 
D)  the net income of an S corporation is subject to double taxation because it is taxed at the entity level and dividends paid from the S corporation to individual shareholders are also taxed.

Question 5

Reva is a single taxpayer with a taxable pension of $24,000, tax- exempt interest of $8,000, and Social Security benefits of $10,000. What is the amount of her taxable Social Security benefits?

Accepted Answer

A)  $10,000 
B)  $8,500 
C)  $5,000 
D)  $7,050

Question 6

Replacing a building with land qualifies as replacement property under the involuntary conversion rules relevant to a casualty.

Accepted Answer

A) True 
 B)False

Question 7

Interest expense on debt incurred to purchase or carry tax- exempt securities is not tax deductible.

Accepted Answer

A) True 
 B)False

Question 8

Maria pays the following legal and accounting fees during the year:  What is the total amount of her for AGI deduction for these fees?

Accepted Answer

A)  $8,100 
B)  $6,000 
C)  $11,200 
D)  $4,000

Question 9

The building used in Terry's business was condemned by the city of St. Louis. Terry received a condemnation award of $125,000. He paid $1,200 in lawyer's fees and $800 for an appraisal of the property. Terry's adjusted basis in the building was $60,000. Terry reinvests in similar property costing $110,000, and Terry makes the proper election regarding the property. What is the amount of Terry's recognized gain on the condemnation?

Accepted Answer

A)  $15,000 
B)  $63,000 
C)  $50,000 
D)  $13,000

Question 10

Anna is supported entirely by her three sons John, James, and Joseph who provide for her support in the followi percentages: John: 10%, James: 40%, Joseph: 50%
Assuming a multiple support declaration exists, which of the brothers may claim his mother as a dependent?

Accepted Answer

A)  James or Joseph 
B)  any of the sons 
C)  Joseph only 
D)  None of them.

Question 11

Indicate whether each of the following assets are capital assets, Sec. 1231 assets, or ordinary income property (pr which, if sold, results in ordinary income). Assume that all of the property is held for more than one year.
a. XYZ Corporation owns land used as an employee parking lot. How is the parking lot classified for tax purpo
b. Montana Corporation owns land held as an investment. How is the land classified for tax purposes?
c. John, a self- employed electrician, owns an automobile he uses strictly for personal use. How is the automobi classified for tax purposes?
d. Jan, a self- employed contractor, owns a truck she uses exclusively in her trade or business. How is the truck classified for tax purposes?
e. Leslie owns an office building where her accounting practice is located. What is the classification of the build
f. Yvonne owns a computer for use in her job as a sales representative. She does not use the computer for perso purposes. How is the computer classified for tax purposes?

Accepted Answer

The answer of Indicate whether each of the following assets...

Question 12

For a taxpayer who is not insolvent nor under bankruptcy proceedings, the discharge of debt is generally

Accepted Answer

A)  nontaxable. 
B)  partially taxable. 
C)  taxable. 
D)  None of the above.

Question 13

If a medical expense reimbursement is received in a year after a deduction has been taken on a previous year's return, the previous year's return must be amended to eliminate the reimbursed expense.

Accepted Answer

A) True 
 B)False

Question 14

Unrecaptured 1250 gain is the amount of long- term capital gain which would be taxed as ordinary income if Sec. 1250 provided for the recapture of all depreciation and not just additional depreciation.

Accepted Answer

A) True 
 B)False

Question 15

Jamahl and Indira are married and live in a common law state. They jointly own real property with an adjusted basis of $200,000. When the property has a FMV of $450,000, Jamahl dies leaving all of the property to Indira. If she later sells the property for $700,000, what is Indira's gain on the sale?

Accepted Answer

A)  $500,000 
B)  $375,000 
C)  $250,000 
D)  $475,000

Question 16

The straight- line method may be elected for depreciating tangible personal property placed in service after 1986.

Accepted Answer

A) True 
 B)False

Question 17

A corporation has a minimum tax credit carryover from 2017. It will be able to apply the MTC to offset up to 50% of its 2018 regular income tax liability.

Accepted Answer

A) True 
 B)False

Question 18

There are several different types of qualified retirement plans. One common criteria across qualified retirement plans is that employers deduct the contributions and employees include the contributions in taxable income in the same period.

Accepted Answer

A) True 
 B)False

Question 19

In the current year, Andrew received a gift of property from his uncle. At the time of the gift, the property had a FMV of $115,000 and an adjusted basis to his uncle of $70,000. After deducting the annual exclusion, the amount of the gift was $100,000. Andrew's uncle paid a gift tax on the property of $24,000. What is the amount of Andrew's basis in the property?

Accepted Answer

A)  $115,000 
B)  $80,800 
C)  $94,000 
D)  $70,000

Question 20

Final regulations have almost the same legislative weight as the IRC.

Accepted Answer

A) True 
 B)False

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

The transfer of property to a partnership in exchange for a partnership interest will generally be a nontaxable event.

Daniel plans to invest $20,000 in either a corporate bond paying 5% or a tax- exempt bond with a 4% interest rate. The bonds have an equivalent level of risk. Daniel has a 35% marginal tax rate and wants to maximize his after- tax earnings. Daniel should

If an activity produces a profit for at least two years during a consecutive five- year period, the burden of proof shifts to the IRS to show that the activity is not profit- motivated.

All of the following statements are true except

Reva is a single taxpayer with a taxable pension of $24,000, tax- exempt interest of $8,000, and Social Security benefits of $10,000. What is the amount of her taxable Social Security benefits?

Replacing a building with land qualifies as replacement property under the involuntary conversion rules relevant to a casualty.

Interest expense on debt incurred to purchase or carry tax- exempt securities is not tax deductible.

Maria pays the following legal and accounting fees during the year: What is the total amount of her for AGI deduction for these fees?

Anna is supported entirely by her three sons John, James, and Joseph who provide for her support in the followi percentages: John: 10%, James: 40%, Joseph: 50% Assuming a multiple support declaration exists, which of the brothers may claim his mother as a dependent?

For a taxpayer who is not insolvent nor under bankruptcy proceedings, the discharge of debt is generally

If a medical expense reimbursement is received in a year after a deduction has been taken on a previous year's return, the previous year's return must be amended to eliminate the reimbursed expense.

Unrecaptured 1250 gain is the amount of long- term capital gain which would be taxed as ordinary income if Sec. 1250 provided for the recapture of all depreciation and not just additional depreciation.

The straight- line method may be elected for depreciating tangible personal property placed in service after 1986.

A corporation has a minimum tax credit carryover from 2017. It will be able to apply the MTC to offset up to 50% of its 2018 regular income tax liability.

There are several different types of qualified retirement plans. One common criteria across qualified retirement plans is that employers deduct the contributions and employees include the contributions in taxable income in the same period.

Final regulations have almost the same legislative weight as the IRC.