Question 1. Francois purchases land for $100,000. He incurs legal fees of $1,000 associated with the purchase. He subsequently incurs additional legal fees of $6,500 in having the land rezoned from agricultural to residential. He subdivides the land and installs streets and sewers at a cost of $200,000. What is Francois's basis for the land and the improvements?
a. $100,000.
b. $300,000.
c. $301,000.
d. $307,500.
e. None of the above.
Question 2. Mack elects to treat the cutting of timber as a sale or exchange under § 1231. Mack purchased the land for $120,000 and the timber for $200,000 several years ago. On the first day of 2004, the timber was appraised at $230,000 and in September 2004 it was cut and sold for $238,750. What is Mack's ordinary income from this transaction?
a. $0.
b. $8,750.
c. $30,000.
d. $38,750.
e. None of the above.
Question 3. The Federal income tax applicable to corporations:
a. Requires the determination of adjusted gross income.
b. Allows a deduction for dependency exemptions.
c. Allows a deduction for personal exemptions.
d. Allows a deduction for the standard deduction.
e. None of the above