Question 1

Kole owns a warehouse used in his business which has an adjusted basis of $240,000 and is subject to a mortgage with an $80,000 principal balance. Kole exchanges the warehouse for land worth $320,000. In addition, he receives cash of $40,000. What is Kole's realized gain?

Accepted Answer

A)  $80,000 
B)  $200,000 
C)  $120,000 
D)  $190,000

Question 2

Joan bought a business machine for $15,000. In a later year, she sold the machine for $12,800 when the total allowable depreciation is $8,500. The depreciation actually taken on the tax returns totaled $8,000. Joan must recognize a gain (or loss) of

Accepted Answer

A)  no gain or loss. 
B)  $6,300. 
C)  ($3,200). 
D)  $6,800.

Question 3

"Working condition fringe benefits," such as memberships in professional organizations paid for by the employer, are generally excluded from the employee's gross income.

Accepted Answer

A) True 
 B)False

Question 4

If at least 50% of the aggregate basis of all new personal property for the tax year is placed in service during the last three months of the year, the mid- quarter convention is required.

Accepted Answer

A) True 
 B)False

Question 5

In October 2018, Jonathon Remodeling Co., an accrual- method taxpayer, remodels and renovates an office building for Dale and bills him $30,000. Dale signs a note for the debt. Dale keeps delaying payment and files bankruptcy in 2019. Creditors are informed that no assets are available for payment. Jonathon Remodeling Co. will report

Accepted Answer

A)  $30,000 income in 2018 and a bad debt deduction of $30,000 in 2019. 
B)  $30,000 income in 2018 and then must amend last year's return to show $0 income when advised of the bankruptcy. 
C)  $30,000 income in 2018 and a STCL of $30,000 in 2019 limited to $3,000 after netting. 
D)  $0 income in both years.

Question 6

The phrase "Entered under Rule 155" indicates that

Accepted Answer

A)  the computation of the exact amount of the tax deficiency has been left to the litigating parties. 
B)  only one Tax Court judge reviewed the case. 
C)  the parties have agreed not to appeal the decision. 
D)  the court has not reached a decision concerning the appropriate tax treatment of an issue.

Question 7

If a corporation owns less than 20% of the stock of the distributing corporation, the dividends- received deduction is not allowed for the recipient corporation.

Accepted Answer

A) True 
 B)False

Question 8

Sophie owns an unincorporated manufacturing business. In 2018, she purchases and places in service $2,507,000 of qualifying five- year equipment for use in her business. Her taxable income from the business before any Sec. 179 deduction is $940,000. Sophie elects to expense the maximum under Sec. 179 and does not apply bonus depreciation. What is Sophie's maximum total cost recovery deduction for 2018?

Accepted Answer

A)  $940,000 
B)  $1,242,800 
C)  $1,301,400 
D)  $993,000

Question 9

Trixt Inc., an S corporation, reports the following for the current year:  On its tax return, in addition to separately stated items, Trixt will report ordinary income of

Accepted Answer

A)  $220,000. 
B)  $250,000. 
C)  $210,000. 
D)  $660,000.

Question 10

Sometimes taxpayers should structure a transaction to avoid the application of like- kind provisions. Which of the following conditions is likely to cause a taxpayer to avoid like- kind treatment?

Accepted Answer

A)  expected higher tax rates in the future 
B)  a decline in the value of the asset being disposed of 
C)  less accelerated depreciation provisions expected in the future 
D)  None of the above.

Question 11

In the Deferred Model, investment earnings are taxed at the end of the investment period.

Accepted Answer

A) True 
 B)False

Question 12

During 2018, Richard and Denisa, who are married and have two dependent children, have the following incom losses:  Compute Richard and Denisa's taxable income for the year. (Show all calculations in good form.)

Accepted Answer

The answer of During 2018, Richard and Denisa, who are...

Question 13

Linda was injured in an automobile accident caused by another driver. Her son, Matthew, was in the automobile but not physically injured. The other driver's insurance company was required by a court to pay Linda $75,000 to cover medical bills relating to her injuries, $30,000 to compensate her for emotional distress attributable to the injuries and $40,000 of punitive damages. Matthew was paid $15,000 to compensate him for emotional distress attributable to his witnessing his mother's injuries. What is the amount taxable to Linda?

Accepted Answer

A)  $145,000 
B)  $30,000 
C)  $40,000 
D)  $105,000

Question 14

Sam retired last year and will receive annuity payments for life from his employer's qualified retirement plan of $30,000 per year starting this year. During his years of employment, Sam contributed $130,000 to the plan on an after- tax basis. Based on IRS tables, his life expectancy is 260 months. This year, Sam will include what amount in income?

Accepted Answer

A)  0 
B)  $24,000 
C)  $6,000 
D)  $30,000

Question 15

Subject to net equity and dollar limitations, a taxpayer may deduct interest on a home equity loan, secured by the residence, used to purchase an automobile.

Accepted Answer

A) True 
 B)False

Question 16

The qualified business deduction is calculated and applied at the partner, not the partnership, level.

Accepted Answer

A) True 
 B)False

Question 17

Assessments made against real estate for the purpose of funding new street lights are not deductible in the year paid but rather should be added to the cost basis of the property.

Accepted Answer

A) True 
 B)False

Question 18

Marguerite and Josephus have two children, ages 13 and 10. Their modified AGI is $410,500. What is their child tax credit?

Accepted Answer

A)  $4,000 
B)  $2,900 
C)  $1,450. 
D)  $2,000

Question 19

Discuss briefly the options available for avoiding double taxation for the U.S. citizen earning income from sources outside the United States.

Accepted Answer

The answer of Discuss briefly the options available for avoiding...

Question 20

John transfers assets with a $200,000 FMV (basis $160,000) and $170,000 of business- related liabilities to a corporation in exchange for 100% of the corporation's stock with a FMV of $130,000. The corporation assumes the $170,000 mortgage. The transfer qualifies under Sec. 351. What is the corporation's basis in the property?

Accepted Answer

A)  $200,000 
B)  $160,000 
C)  $190,000 
D)  $170,000

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

Kole owns a warehouse used in his business which has an adjusted basis of $240,000 and is subject to a mortgage with an $80,000 principal balance. Kole exchanges the warehouse for land worth $320,000. In addition, he receives cash of $40,000. What is Kole's realized gain?

Joan bought a business machine for $15,000. In a later year, she sold the machine for $12,800 when the total allowable depreciation is $8,500. The depreciation actually taken on the tax returns totaled $8,000. Joan must recognize a gain (or loss) of

"Working condition fringe benefits," such as memberships in professional organizations paid for by the employer, are generally excluded from the employee's gross income.

If at least 50% of the aggregate basis of all new personal property for the tax year is placed in service during the last three months of the year, the mid- quarter convention is required.

The phrase "Entered under Rule 155" indicates that

If a corporation owns less than 20% of the stock of the distributing corporation, the dividends- received deduction is not allowed for the recipient corporation.

Trixt Inc., an S corporation, reports the following for the current year: On its tax return, in addition to separately stated items, Trixt will report ordinary income of

Sometimes taxpayers should structure a transaction to avoid the application of like- kind provisions. Which of the following conditions is likely to cause a taxpayer to avoid like- kind treatment?

In the Deferred Model, investment earnings are taxed at the end of the investment period.

During 2018, Richard and Denisa, who are married and have two dependent children, have the following incom losses: Compute Richard and Denisa's taxable income for the year. (Show all calculations in good form.)

Subject to net equity and dollar limitations, a taxpayer may deduct interest on a home equity loan, secured by the residence, used to purchase an automobile.

The qualified business deduction is calculated and applied at the partner, not the partnership, level.

Assessments made against real estate for the purpose of funding new street lights are not deductible in the year paid but rather should be added to the cost basis of the property.

Marguerite and Josephus have two children, ages 13 and 10. Their modified AGI is $410,500. What is their child tax credit?

Discuss briefly the options available for avoiding double taxation for the U.S. citizen earning income from sources outside the United States.