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1.Which of the following nominal rates does not apply to a C
corporation?
corporation?
10%
15%
25%
35%
Which of the following is never included in gross income?
Loss on stock sale
Social security benefits
Unemployment benefits
Gifts
3.What is George’s gross income if he has the following: Salary = $78,000; Dividends = $4,000; interest on city of San Francisco bonds = $2,000; a gain of $14,000 on a stock sale and a $4,000 loss on a small
sole proprietorship that he owns.
a.$78,000
$84,000
$92,000
$96,000
Coral Corporation (a C corporation) sold $100,000 of merchandise for which it paid $40,000. It also paid $35,000 of other expenses. All transactions were in cash. What is Coral Corporation’s after tax net cash inflow?
$100,000
$60,000
$25,000
$21,250
5
. Crispen Corporation can invest in a project that costs $400,000. The
project is expected to have an after
tax return of $250,000 in each of
years 1 and 2. Crispen normally uses a 10 percen
t discount rate to
evaluate projects but feels it should use 12 percent to compensate for
inflation. How much difference does the rate make in the after
tax
net present value of the project?
$50,000
$22,500
$20,000
$11,250
A decision in the small case division of the Tax Court can be appealed only to
Court of Appeals
Supreme Court
Regular Tax Court
Federal District Court
None of the above
Sheryl sold 100 shares of ABC stock for $2,100 and 300 shares of XYZ stock for $8,900. She purchased the ABC stock four years ago for $1,200 and the XYZ stock two years ago for $9,100. What is the net effect of these sales on Sheryl’s income?
$200 net gain
$700 net gain
$900 net gain
$1,100 net gain
Abdo Corporation received permission to change its tax year end from December 31 to August 31 in 2013. Its income from January 1 through August 31 is $278,000. What is Abdo’s tax liability?
$91,670
$94,520
$108,420
$141,780
Cora owns 6,000 shares of KLM stock, 2,000 shares of BBT Mutual fund, and 10,000 shares of Centex Corporation. Her 1099DIV forms from these investments showed the following:
KLM: $3 per share distribution all reinvested in KLM
BBT Mutual fund: $5 per share distribution, $1 of which
represents a capital gain distribution; none of this is reinvested. Centex: $2 per share distribution, all of which represents a return of capital.
How much must Cora include in her income in the current year?
$48,000
$28,000
$22,000
$20,000
Wilma is CEO of and owns 100 percent of WT Enterprises, a cash basis, calendar year corporation. The company has always been profitable but over the last five years Wilma’s salary has increased from over $400,000 per year to over $1,000,000 and it has failed to pay dividends. Which of the following will not occur if the IRS determines
that $500,000 of her salary is unreasonable?
Wilma will pay an additional tax on the $500,000 recharacterized as dividend.
Wilma will be eligible for a refund of Medicare taxes.
WT will lose a $500,000 deduction for the recharacterized
dividend.
WT will be eligible for a refund of a portion of FICA taxes paid.
What are Susie’s deductible moving expenses for 2013 if she spends $4,000 for packing and moving household goods, $1,200 to break the lease on her apartment, and $1,500 to store the household goods for 45
days? In April she drove her car 1,400 miles to her new home and spent $250 for motels and $80 for meals while traveling to the new home.
$4,586
$5,586
$6,166
$7,286
Carl, age 44, wants to contribute the maximum allowed to a Roth IRA. He is single and his AGI is $116,000. How much can he contribute to the Roth IRA?
$5,500
$4,033
$2,000
$1467
In April 2013, Tobias was assigned to a job in the next county for the day. He drove 75 miles each way to the job, paid $4 in tolls, $7 for parking and $9 for lunch. What is his allowable business expense deduction?
$84.70
$95.75
$100.25
$104.75
14.How much may Chico Corporation, a calendar
year accrual basis corporation, deduct if it paid $3,000 on April 1 for an insurance policy for the next three years, prepaid six months interest of $450 on November 1, and paid $2,000 rent for December and January on
December 1.
$1,900
$2,450
$2,600
$5,450
In 2012, Jasmin loaned her friend Janelle $5,000 to invest in various stocks. Janelle signed a note to repay the principal with interest. In 2013, the stock market plunged and Janelle incurred large losses. In late 2013, Janelle declared personal bankruptcy and Jasmin was unable to
collect any of her loan. Jasmin had no other gains or losses in 2012 or 2013. Her income from wages in both 2012 and 2013 was $50,000. The result is:
Jasmin deducts a business bad debt of $5,000 in 2013.
Jasmin deducts a $5,000 capital loss in 2013.
Jasmin deducts a business bad debt of $3,000 in 2013 and carries $2,000 over to subsequent years.
Jasmin deducts a $3,000 capital loss in 2013 and carries $2,000 over to subsequent years.
Jasmin must amend her 2012 tax return to deduct the loss.
Joan gives an asset valued at $12,000 with a basis of $10,000 to Mary; Joan dies six months later leaving an asset valued at $10,000 with a basis of $12,000 to Larry. What are Mary’s’ and Larry’s bases in these assets?
Mary = $12,000; Larry = $12,000
Mary = $12,000; Larry = $10,000
Mary = $10,000; Larry = $12,000
Mary = $10,000; Larry = $10,000
The first and last years of MACRS depreciation
deductions for a 5 year asset costing $10,000 using the half
year convention are:
$2,000 and $2,000
$2,000 and $1,152
$2,000 and $576
$2,000 and $1,000
Zachary purchased a new car on August 1, 2013 for $14,500. His records indicate that he uses the car 45 percent for business and 55 percent for personal use. What are his cost recovery deductions for 2013 and 2014?
$653; $1,305
$1,377; $2,205
$1,305; $2,088
$798; $1,595
Alpha Corporation had income from operations of $
30,000. What is the corporation’s taxable income including the following property transactions: Gain on investment stock = $8,000; loss on machinery held three years = $6,000; $4,000 loss on equipment held 10 months;
$4,000 gain on land used for six years for storage of trucks.
$25,000
$27,000
$30,000
$32,000
.
Angel sells the following depreciable assets from her sole proprietor ship:Asset Cost Age Gain/Loss Office furniture $10,000 4 years ($2,400) Truck $20,000
5 years 3,100 Bakery equipment $25,000 9 months
(4,500). What should Angel report on her income tax return relative to these property transactions?
$3,800 capital loss
$3,100 Section 1245 recapture; $2,400 Section 1231 loss; $4,500 ordinary loss.
$3,800 ordinary loss
$700 Section 1231 gain; $4,500 ordinary loss
None of the above
Abby has a $10,000 loss on some collectibles, a $5,000 Sec. 1202 gain, and an $11,000 gain on some securities. If all gains and losses are long term and Abby is in the 25 percent tax bracket, how is her net gain taxed?
$5,000 at 25%; $1,000 at 15%
$6,000 at 15%
$5,000 at 28%; $1,000 at 15%
$6,000 at 28%
None of the above
James corporation exchanges a building (fair market value = $800,000, adjusted basis = $600,000) that has a $100,000 mortgage for another building owned by Pete Corporation (fair market value = $1,100,000, adjusted basis = $600,000) that is encumbered by a $400,000 mortgage. Each party assumed the mortgage on the building received. What are James’s and Pete’s realized gains on this
exchange, respectively?
$200,000, $500,000
$200,000, $600,000
$500,000, $600,000
$500,000, $500,000
None of the above
Wally’s investment real estate was condemned on November 14, 2013. On February 14, 2014, he received $250,000 for the property that had a basis of $210,000. What is the last date that Wally can acquire replacement property to avoid gain recognition?
November 14, 2016
February 14, 2017
December 31, 2016
December 31, 2017
None of the above
Juan owned a small rental property, which was condemned by the county to expand a local park. His adjusted basis in the property was $40,000 and he received a payment of $75,000 from the county. A year later he purchased a similar piece of real estate for $70,000.What is Juan’s recognized gain on the involuntary conversion of his rental property?
0
$5,000
$10,000
$30,000
$35,000
Jude received a $25,000 distribution from BC Corporation that the corporation identified as $15,000 dividend and $10,000 return ofcapital. What effect does this distribution have on Jude’s taxable income if his basis in the stock of BC is $8,000?
Increase of $25,000
Increase of $17,000
Increase of $15,000
Increase of $10,000
BarBRanch has had taxable income of $450,000, $570,000, $760,000 and $680,000 in years 20
10through 2013, respectively. What were the equal
minimum quarterly estimated tax payments for 2013 that Barb Ranch should have made in 2013to avoid any penalty?
$57,676
$57,800
$64,600
$170,000
28.Which of the following is not a separately stated item on a partnership’s Schedule K?
A $5,000 long
term capital loss
$20,000 of Section 1245 recapture
$3,000 charitable contribution
$5,000 bond interest
All are separately stated.
29.Stewart is a 30 percent general partner in STP Partnership. His basis in his partnership interest at the beginning of the year was $40,000. During the year, the partnership reported a $30,000 loss and paid off a $120,000 recourse debt. What is Stewart’s yearend basis in his partnership interest?
0
$4,000
$31,000
$67,000
Samantha and Ashley form the MAS General Partnership. Samantha contributed $20,000 cash in exchange for her 50 percent partnership interest. During the first year of partnership operations, the partnership
reported net taxable income of $10,000, Samantha withdrew $8,000 cash from the partnership, and the partnership took out an $18,000 loan on the last day of the year. Samantha's adjusted basis for her partnership interest at year end is:
$38,000
$30,000
$26,000
$25,000
$20,000
$17,000
15%
25%
35%
Which of the following is never included in gross income?
Loss on stock sale
Social security benefits
Unemployment benefits
Gifts
3.What is George’s gross income if he has the following: Salary = $78,000; Dividends = $4,000; interest on city of San Francisco bonds = $2,000; a gain of $14,000 on a stock sale and a $4,000 loss on a small
sole proprietorship that he owns.
a.$78,000
$84,000
$92,000
$96,000
Coral Corporation (a C corporation) sold $100,000 of merchandise for which it paid $40,000. It also paid $35,000 of other expenses. All transactions were in cash. What is Coral Corporation’s after tax net cash inflow?
$100,000
$60,000
$25,000
$21,250
5
. Crispen Corporation can invest in a project that costs $400,000. The
project is expected to have an after
tax return of $250,000 in each of
years 1 and 2. Crispen normally uses a 10 percen
t discount rate to
evaluate projects but feels it should use 12 percent to compensate for
inflation. How much difference does the rate make in the after
tax
net present value of the project?
$50,000
$22,500
$20,000
$11,250
A decision in the small case division of the Tax Court can be appealed only to
Court of Appeals
Supreme Court
Regular Tax Court
Federal District Court
None of the above
Sheryl sold 100 shares of ABC stock for $2,100 and 300 shares of XYZ stock for $8,900. She purchased the ABC stock four years ago for $1,200 and the XYZ stock two years ago for $9,100. What is the net effect of these sales on Sheryl’s income?
$200 net gain
$700 net gain
$900 net gain
$1,100 net gain
Abdo Corporation received permission to change its tax year end from December 31 to August 31 in 2013. Its income from January 1 through August 31 is $278,000. What is Abdo’s tax liability?
$91,670
$94,520
$108,420
$141,780
Cora owns 6,000 shares of KLM stock, 2,000 shares of BBT Mutual fund, and 10,000 shares of Centex Corporation. Her 1099DIV forms from these investments showed the following:
KLM: $3 per share distribution all reinvested in KLM
BBT Mutual fund: $5 per share distribution, $1 of which
represents a capital gain distribution; none of this is reinvested. Centex: $2 per share distribution, all of which represents a return of capital.
How much must Cora include in her income in the current year?
$48,000
$28,000
$22,000
$20,000
Wilma is CEO of and owns 100 percent of WT Enterprises, a cash basis, calendar year corporation. The company has always been profitable but over the last five years Wilma’s salary has increased from over $400,000 per year to over $1,000,000 and it has failed to pay dividends. Which of the following will not occur if the IRS determines
that $500,000 of her salary is unreasonable?
Wilma will pay an additional tax on the $500,000 recharacterized as dividend.
Wilma will be eligible for a refund of Medicare taxes.
WT will lose a $500,000 deduction for the recharacterized
dividend.
WT will be eligible for a refund of a portion of FICA taxes paid.
What are Susie’s deductible moving expenses for 2013 if she spends $4,000 for packing and moving household goods, $1,200 to break the lease on her apartment, and $1,500 to store the household goods for 45
days? In April she drove her car 1,400 miles to her new home and spent $250 for motels and $80 for meals while traveling to the new home.
$4,586
$5,586
$6,166
$7,286
Carl, age 44, wants to contribute the maximum allowed to a Roth IRA. He is single and his AGI is $116,000. How much can he contribute to the Roth IRA?
$5,500
$4,033
$2,000
$1467
In April 2013, Tobias was assigned to a job in the next county for the day. He drove 75 miles each way to the job, paid $4 in tolls, $7 for parking and $9 for lunch. What is his allowable business expense deduction?
$84.70
$95.75
$100.25
$104.75
14.How much may Chico Corporation, a calendar
year accrual basis corporation, deduct if it paid $3,000 on April 1 for an insurance policy for the next three years, prepaid six months interest of $450 on November 1, and paid $2,000 rent for December and January on
December 1.
$1,900
$2,450
$2,600
$5,450
In 2012, Jasmin loaned her friend Janelle $5,000 to invest in various stocks. Janelle signed a note to repay the principal with interest. In 2013, the stock market plunged and Janelle incurred large losses. In late 2013, Janelle declared personal bankruptcy and Jasmin was unable to
collect any of her loan. Jasmin had no other gains or losses in 2012 or 2013. Her income from wages in both 2012 and 2013 was $50,000. The result is:
Jasmin deducts a business bad debt of $5,000 in 2013.
Jasmin deducts a $5,000 capital loss in 2013.
Jasmin deducts a business bad debt of $3,000 in 2013 and carries $2,000 over to subsequent years.
Jasmin deducts a $3,000 capital loss in 2013 and carries $2,000 over to subsequent years.
Jasmin must amend her 2012 tax return to deduct the loss.
Joan gives an asset valued at $12,000 with a basis of $10,000 to Mary; Joan dies six months later leaving an asset valued at $10,000 with a basis of $12,000 to Larry. What are Mary’s’ and Larry’s bases in these assets?
Mary = $12,000; Larry = $12,000
Mary = $12,000; Larry = $10,000
Mary = $10,000; Larry = $12,000
Mary = $10,000; Larry = $10,000
The first and last years of MACRS depreciation
deductions for a 5 year asset costing $10,000 using the half
year convention are:
$2,000 and $2,000
$2,000 and $1,152
$2,000 and $576
$2,000 and $1,000
Zachary purchased a new car on August 1, 2013 for $14,500. His records indicate that he uses the car 45 percent for business and 55 percent for personal use. What are his cost recovery deductions for 2013 and 2014?
$653; $1,305
$1,377; $2,205
$1,305; $2,088
$798; $1,595
Alpha Corporation had income from operations of $
30,000. What is the corporation’s taxable income including the following property transactions: Gain on investment stock = $8,000; loss on machinery held three years = $6,000; $4,000 loss on equipment held 10 months;
$4,000 gain on land used for six years for storage of trucks.
$25,000
$27,000
$30,000
$32,000
.
Angel sells the following depreciable assets from her sole proprietor ship:Asset Cost Age Gain/Loss Office furniture $10,000 4 years ($2,400) Truck $20,000
5 years 3,100 Bakery equipment $25,000 9 months
(4,500). What should Angel report on her income tax return relative to these property transactions?
$3,800 capital loss
$3,100 Section 1245 recapture; $2,400 Section 1231 loss; $4,500 ordinary loss.
$3,800 ordinary loss
$700 Section 1231 gain; $4,500 ordinary loss
None of the above
Abby has a $10,000 loss on some collectibles, a $5,000 Sec. 1202 gain, and an $11,000 gain on some securities. If all gains and losses are long term and Abby is in the 25 percent tax bracket, how is her net gain taxed?
$5,000 at 25%; $1,000 at 15%
$6,000 at 15%
$5,000 at 28%; $1,000 at 15%
$6,000 at 28%
None of the above
James corporation exchanges a building (fair market value = $800,000, adjusted basis = $600,000) that has a $100,000 mortgage for another building owned by Pete Corporation (fair market value = $1,100,000, adjusted basis = $600,000) that is encumbered by a $400,000 mortgage. Each party assumed the mortgage on the building received. What are James’s and Pete’s realized gains on this
exchange, respectively?
$200,000, $500,000
$200,000, $600,000
$500,000, $600,000
$500,000, $500,000
None of the above
Wally’s investment real estate was condemned on November 14, 2013. On February 14, 2014, he received $250,000 for the property that had a basis of $210,000. What is the last date that Wally can acquire replacement property to avoid gain recognition?
November 14, 2016
February 14, 2017
December 31, 2016
December 31, 2017
None of the above
Juan owned a small rental property, which was condemned by the county to expand a local park. His adjusted basis in the property was $40,000 and he received a payment of $75,000 from the county. A year later he purchased a similar piece of real estate for $70,000.What is Juan’s recognized gain on the involuntary conversion of his rental property?
0
$5,000
$10,000
$30,000
$35,000
Jude received a $25,000 distribution from BC Corporation that the corporation identified as $15,000 dividend and $10,000 return ofcapital. What effect does this distribution have on Jude’s taxable income if his basis in the stock of BC is $8,000?
Increase of $25,000
Increase of $17,000
Increase of $15,000
Increase of $10,000
BarBRanch has had taxable income of $450,000, $570,000, $760,000 and $680,000 in years 20
10through 2013, respectively. What were the equal
minimum quarterly estimated tax payments for 2013 that Barb Ranch should have made in 2013to avoid any penalty?
$57,676
$57,800
$64,600
$170,000
28.Which of the following is not a separately stated item on a partnership’s Schedule K?
A $5,000 long
term capital loss
$20,000 of Section 1245 recapture
$3,000 charitable contribution
$5,000 bond interest
All are separately stated.
29.Stewart is a 30 percent general partner in STP Partnership. His basis in his partnership interest at the beginning of the year was $40,000. During the year, the partnership reported a $30,000 loss and paid off a $120,000 recourse debt. What is Stewart’s yearend basis in his partnership interest?
0
$4,000
$31,000
$67,000
Samantha and Ashley form the MAS General Partnership. Samantha contributed $20,000 cash in exchange for her 50 percent partnership interest. During the first year of partnership operations, the partnership
reported net taxable income of $10,000, Samantha withdrew $8,000 cash from the partnership, and the partnership took out an $18,000 loan on the last day of the year. Samantha's adjusted basis for her partnership interest at year end is:
$38,000
$30,000
$26,000
$25,000
$20,000
$17,000
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