Response to the following multiple choice questions:
1. Matt and Shanekwa, ages 45 and 44, respectively, file a joint tax return for 2011. They provided all of the support for their 24-year-old son, who had $2,500 of gross income. Their 23-year-old daughter, a full-time student until her graduation on June 14, 2011, earned $6,000, which was 45% of her total support during 2011. Her parents provided the remaining support. Matt and Shanekwa also provided total support for Shanekwa's father who is a citizen and life-long resident of Portugal. How many personal and dependency exemptions can Matt and Shanekwa claim on their 2011 income tax return?
Five
Four
Three
Two
None of the above
2. During 2011, Robin sold the following assets: business equipment for a $6,000 loss, stock investment for a $15,000 loss, and her principal residence for a $14,000 loss. Presuming adequate income, how much of these losses may Robin claim on her 2011 return?
$3,000
$9,000
$21,000
$35,000
None of the above
3. Shaquille operates a drug-running operation and incurred the following expenses:
|
Salaries
|
$200,000
|
|
Illegal kickbacks
|
$32,000
|
|
Bribes to border guards
|
$24,000
|
|
Cost of goods sold
|
$300,000
|
|
Rent
|
$12,000
|
|
Interest
|
$18,000
|
Which of the above amounts reduces his taxable income?
$230,000
$300,000
$386,000
$586,000
None of the above
4. Which, if any, of the following transactions will not accelerate the gain on an installment note?
Gift of the installment note
Sale of the installment note
Cancellation of the installment note
Transfer between spouses
None of the above
5. In the case of a retailer with average annual gross receipts of $900,000:
The installment method can be used to report income from the sale of inventory.
The cash method can be used for sales and cost of goods sold.
The accrual basis must be used for sales and cost of goods sold.
The cash method is required.
None of the above