Questions -
Q1. 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
b. $84,000
c. $92,000
d. $96,000
Q2. 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 percent 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?
a. $50,000
b. $22,500
c. $20,000
d. $11,250
Q3. 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?
a. $200 net gain
b. $700 net gain
c. $900 net gain
d. $1,100 net gain
Q4. 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?
a. $48,000
b. $28,000
c. $22,000
d. $20,000
Q5. 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.
a. $4,586
b. $5,586
c. $6,166
d. $7,286
Q6. 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?
a. $84.70
b. $95.75
c. $100.25
d. $104.75
Q7. 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.
a. $1,900
b. $2,450
c. $2,600
d. $5,450
Q8. 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:
a. Jasmin deducts a business bad debt of $5,000 in 2013.
b. Jasmin deducts a $5,000 capital loss in 2013.
c. Jasmin deducts a business bad debt of $3,000 in 2013 and carries $2,000 over to subsequent years.
d. Jasmin deducts a $3,000 capital loss in 2013 and carries $2,000 over to subsequent years.
e. Jasmin must amend her 2012 tax return to deduct the loss.
Q9. 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?
a. Mary = $12,000; Larry = $12,000
b. Mary = $12,000; Larry = $10,000
c. Mary = $10,000; Larry = $12,000
d. Mary = $10,000; Larry = $10,000
Q10. 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?
a. $5,000 at 25%; $1,000 at 15%
b. $6,000 at 15%
c. $5,000 at 28%; $1,000 at 15%
d. $6,000 at 28%
e. None of the above
Q11. 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?
a. November 14, 2016
b. February 14, 2017
c. December 31, 2016
d. December 31, 2017
e. None of the above
Q12. 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?
a. 0
b. $5,000
c. $10,000
d. $30,000
e. $35,000
Q13. Jude received a $25,000 distribution from BC Corporation that the corporation identified as $15,000 dividend and $10,000 return of capital. What effect does this distribution have on Jude's taxable income if his basis in the stock of BC is $8,000?
a. Increase of $25,000
b. Increase of $17,000
c. Increase of $15,000
d. Increase of $10,000
Q14. BarBRanch has had taxable income of $450,000, $570,000, $760,000 and $680,000 in years 2010through 2013, respectively. What were the equal minimum quarterly estimated tax payments for 2013 that Barb Ranch should have made in 2013 to avoid any penalty?
a. $57,676
b. $57,800
c. $64,600
d. $170,000
Q15. Which of the following is not a separately stated item on a partnership's Schedule K?
a. A $5,000 long term capital loss
b. $20,000 of Section 1245 recapture
c. $3,000 charitable contribution
d. $5,000 bond interest
e. All are separately stated.
Q16. 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?
a. 0
b. $4,000
c. $31,000
d. $67,000