Question 1: Anne LLC purchased computer equipment (5-year property) on August 29 with a basis of $30,000 and used the half-year convention. During the current year, which is the fourth year Anne LLC owned the property, the property was disposed of on January 15. What is the maximum depreciation expense?
A. $1,728
B. $1,874
C. $432
D. $3,456
Question 2: The sale of machinery for more than the original cost basis (before depreciation), used in a trade or business, and held for more than one year results in the following types of gain or loss:
A. Ordinary only
B. Capital and Section 1231
C. Capital and ordinary
D. Section 1245 and Section 1231
Question 3: Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss?
A. $200,000 ordinary and $200,000 Section 1231 gain
B. $400,000 ordinary gain
C. $40,000 ordinary and $360,000 Section 1231 gain
D. $400,000 capital gain
Question 4: Generally, which of the following does not correctly categorize the type of income?
A. Salary - active income/loss
B. Dividends - portfolio income/loss
C. Rental real estate - passive income/loss
D. Capital losses - passive income/loss
Question 5: Which of the following would be considered portfolio income?
A. Salary for part-time job
B. Dividends
C. Rental real estate income
D. Self-employment income for a business
Question 6: On the sale of a passive activity, any suspended losses can be used to offset income from
A. capital gains
B. wages and tips
C. other passive activities
D. All answers are correct.
Question 7: Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $20,000 of qualified nonrecourse debt and $20,000 of debt she is not responsible to repay because she is a limited partner. Sue is allocated a 10 percent share of both types of debt. During the year, ABC LP generated a ($90,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount?
A. $2,000 disallowed because of her at-risk amount
B. $2,000 disallowed because of her tax basis
C. Zero; all of her loss is allowed to be deducted.
D. $7,000 disallowed because of her tax basis
Question 8: What is the correct order of the loss limitation rules?
A. at-risk amount, tax basis, passive loss limits
B. Passive loss limits, at-risk amount, tax basis
C. Tax basis, at-risk amount, passive loss limits
D. Tax basis, passive loss limits, at-risk amount
Question 9: Harvey rents his second home. During 2009, Harvey reported a net loss of $35,000 from the rental. If Harvey is an active participant in the rental and his AGI is $80,000, how much of the loss can he deduct against ordinary income in 2009?
A. $25,000
B. $5,000
C. $35,000
D. $0