REG More Missed ?s

On June 1, year 1, Nord Corp. engaged Milo & Co., CPAs, to perform certain management advisory services for 9 months for a $45,000 fee. The terms of their oral agreement required Milo to commence performance any time before October 1, year 1. On June 30, year 2, after Milo completed the work to Nord's satisfaction, Nord paid Milo $30,000 by check. Nord conspicuously marked on the check that it constituted payment in full for all services rendered. Nord has refused to pay the remaining $15,000 arguing that, although it believes the $45,000 fee is reasonable, it had received bids of $30,000 and $38,000 from other firms to perform the same services as Milo. Milo endorsed and deposited the check. If Milo commences an action against Nord for the remaining $15,000, Milo will be entitled to recover

$15,000 because it is the balance due under the agreement.

On July 1, Year 8, Mr. Grey formed Dover Corporation. The same date Grey paid $100,000 cash and transferred land with an adjusted basis of $50,000 to Dover in exchange for 3,000 shares of its common stock. The land had a fair market value of $85,000 on the date of the exchange. Dover had no other shares of common stock outstanding on July 1, Year 8. As a result of the above transaction, Grey's basis in his stock and Dover's basis in the land, respectively, are

$150,000 and $50,000. Since Grey has transferred land to an at least 80% owned corporation solely in exchange for stock, no gain is recognized. -and this causes land basis to be 50,000

Stein, an unmarried taxpayer, had adjusted gross income of $80,000 for the year, and qualified to itemize deductions. Stein had no charitable contribution carryovers and only made one contribution during the year. Stein donated stock, purchased seven years earlier for $17,000, to a tax-exempt educational organization. The stock was valued at $25,000 when it was contributed. What is the amount of charitable contributions deductible on Stein's current year income tax return?

$24,000 Although Stein can deduct the fair market value (FMV) of $25,000 for the stock contributed, the deduction is limited to 30% of his AGI, $80,000.

The minimum accumulated earnings credit

$250,000 for nonservice corporations only.

Jackson owns two residences. The second residence, which has never been used for rental purposes, is the only residence that is subject to a mortgage. The following expenses were incurred for the second residence during the current year: Mortgage interest$5,000 Utilities1,200 Insurance6,000 For regular income tax purposes, what is the maximum amount allowable as a deduction for Jackson's second residence during the current year?

$5,000 as an itemized deduction $5,000 of mortgage interest on the second residence is qualified residence interest and is deductible as an itemized deduction. In contrast, the $1,200 of utilities expense and $6,000 of insurance expense are nondeductible personal expenses.

What is the maximum amount of capital losses in excess of capital gains that a C corporation may deduct in a year?

0 A corporation cannot deduct a net capital loss. Instead, the net capital loss is carried back three years and forward five years as a short-term capital loss to offset capital gains in the carryback and carryforward years

Stone's basis in Ace Partnership was $70,000 at the time he received a nonliquidating distribution of partnership capital assets. These capital assets had an adjusted basis of $65,000 to Ace, and a fair market value of $83,000. Ace had no unrealized receivables, appreciated inventory, or properties which had been contributed by its partners. What was Stone's recognized gain or loss on the distribution?

0 Gain will be recognized by a distributee partner in a nonliquidating distribution if the amount of money received exceeds the partner's basis for the partnership interest.

Hall, a divorced person and custodian of her 12-year-old child, filed her 2020 federal income tax return as head of a household. She submitted the following information to the CPA who prepared her 2020 return: In June 2020, Hall's mother gifted her 100 shares of a listed stock. The donor's basis for this stock, which she bought in 1988, was $4,000, and market value on the date of the gift was $3,000. Hall sold this stock in July 2020 for $3,500. The donor paid no gift tax. What was Hall's reportable gain or loss in 2020 on the sale of the 100 shares of stock gifted to her?

0 A donee basis in property acquired by gift usually equals the donor's basis in the property plus the gift tax paid. However, if the fair market value of the gifted property at the time of the gift is less than the donor's basis in the property, the donee assumes the fair market value of the property at the time of the gift as its basis for computing losses. The donee still uses the donor's basis in the property plus the gift tax paid in computing gains

Doris and Lydia are sisters and also are equal partners in the capital and profits of Agee & Nolan. The following information pertains to 300 shares of Mast Corp. stock sold by Lydia to Agee & Nolan. Year of purchase2009 Year of sale2018 Basis (cost)$9,000 Sales price (equal to fair market value)$4,000 The amount of long-term capital loss that Lydia recognized in Year 6 on the sale of this stock was

0 A loss is disallowed if incurred in a transaction between a partnership and a person owning (directly or constructively) more than a 50% capital or profits interest. Although Lydia directly owns only a 50% partnership interest, she constructively owns her sister's 50% partnership interest. Since Lydia directly and constructively has a 100% partnership interest, her $5,000 loss is disallowed.

The following information pertains to Carr's admission to the Smith & Jones partnership on July 1, Year 4: Carr's contribution of capital: 800 shares of Ed Corp. stock bought in 2006 for $30,000; fair market value $150,000 on July 1, Year 4. Carr's interest in capital and profits of Smith & Jones: 25%. Fair market value of net assets of Smith & Jones on July 1, Year 4, after Carr's admission: $600,000. Carr's gain in Year 4 on the exchange of the Ed Corp. stock for Carr's partnership interest was

0 Generally no gain or loss is recognized on the transfer of property to a partnership in exchange for a partnership interest. Since Carr's gain is not recognized, there will be a carryover basis of $30,000 for the stock to the partnership, and Carr will have a $30,000 basis for the 25% partnership interest received.

Robert Hall served in the U.S Army and received a full medical discharge and was declared 100% disabled. Robert had accrued $35,000 in student loans prior to his service in the military. During the current year, the student loan was completely forgiven. The loan has an applicable federal interest rate of 5.9%. How much of the loan and interest must Robert include in gross income?

0 Gross income does not include debt forgiveness for student loans that are forgiven because of the death or disability of the debtor.

Good, a C corporation, sells an automobile to its sole shareholder for $4,500. Good's adjusted basis in the automobile is $12,000, and the fair market value is $5,000. What is the amount of loss that is recognized by Good?

0 Related party rule

In 2020, Roe Corp. purchased and placed in service a used machine to be used in its manufacturing operations. This machine cost $2,600,000. What portion of the cost may Roe elect to treat as an expense rather than as a capital expenditure?

1,030,000 This answer is correct. For 2020, Sec. 179 permits a taxpayer to elect to treat up to $1,040,000 of the cost of qualifying depreciable personal property as an expense rather than as a capital expenditure. However, the $1,040,000 maximum is reduced dollar for dollar by the cost of qualifying property placed in service during the taxable year that exceeds $2,590,000. Here, the maximum amount that can be expensed is [$1,040,000 - ($2,600,000 - $2,590,000)] = $1,030,000

Gail and Jeff Payne are married and filed a joint return for 2020. During 2020 they paid the following doctors' bills for Gail's mother, who received over half of her support from Gail and Jeff, but who does not live in the Payne household, and who earned $3,500 in 2020 for babysitting.$700 Their unmarried 26-year-old son, who earned $4,800 in 2020, but was fully supported by his parents. He is not a full-time student. $500 Disregarding the adjusted gross income percentage test, how much of these doctors' bills may be included on the Payneses' joint return in 2020 as qualifying medical expenses?

1,200

Alex and Myra Burg, married and filing joint income tax returns, derive their entire income from the operation of their retail candy shop. Their Year 9 adjusted gross income was $54,142. The Burgs itemized their deductions on Schedule A for Year 9. The following unreimbursed cash expenditures were among those made by the Burgs during Year 9: State income tax$1,200Self-employment tax7,650 What amount should the Burgs deduct for taxes in their itemized deductions on Schedule A for Year 9?

1,200 The $1,200 of state income tax paid by the Burgs is deductible as an itemized deduction. However, the $7,650 of self-employment tax is not deductible as an itemized deduction. Instead, a portion of the self-employment tax is deductible from gross income in arriving at the Burgs' adjusted gross income.

Charles and Marcia are married cash-basis taxpayers. In Year 3, they had interest income as follows: $500 interest on federal income tax refund $600 interest on state income tax refund $800 interest on federal government obligations $1,000 interest on state government obligations What amount of interest income is taxable on Charles and Marcia's Year 3 joint income tax return?

1,900

On July 1, 2019, in connection with a recapitalization of Yorktown Corporation, Robert Moore exchanged 1,000 shares of stock which cost him $95,000 for 1,000 shares of new stock worth $108,000 and bonds in the principal amount of $10,000 with a fair market value of $10,500. What is the amount of Moore's recognized gain during 2019?

10,500 Since a recapitalization is a reorganization, a realized gain is recognized only to the extent that consideration other than stock or securities is received, including the FMV of an excess of the principal amount of securities received over the principal amount of securities surrendered. Since no securities were surrendered, the excess principal amount of securities received is $10,000, and Moore's realized gain of $23,500 [($108,000 + $10,500) — $95,000] is recognized to the extent of the $10,500 FMV of the excess principal amount of securities received.

For the year ended December 31, Year 6, Maple Corp.'s book income, before federal income tax, was $100,000. Included in this $100,000 were the following: Provision for state income tax$1,000 Interest earned on U.S. Treasury Bonds6,000 Interest expense on bank loan to purchase U.S. Treasury Bonds2,000 Maple's taxable income for Year 6 was

100,000

Dove Corp. began operating a hardware store in the current year after constructing a building at a total cost of $100,000 on land previously acquired for $50,000. In the current year, the land had a fair market value of $60,000. Dove paid real estate taxes of $5,000 in the current year. What is the total depreciable basis of Dove's business property?

100,000 The depreciable basis of business property would consist of the $100,000 cost of the building. Land is NOT depreciable property, and the $5,000 of real estate taxes that Dove paid would be deductible as an ordinary business expense.

Don and Cynthia Wallace filed a joint return for Year 8 in which they reported adjusted gross income of $35,000. During Year 8, they made the following contributions to qualified organizations: Land held 3 years (stated at fair market value) donated to church for new building site $22,000 Cash contributions to church 300 Cash contributions to the local community college 200 Assuming that the Wallaces did not elect to reduce the deductible amount of the land contribution by the property's appreciation in value, how much can they claim as a deduction for charitable contributions in Year 8?

11,000 Since the cash gifts of $300 to church and $200 to the community college are only subject to the 60% of AGI limitation, they are fully deductible. The deduction for the gift of land is limited to 30% of AGI (30% × $35,000 = $10,500) because the land is appreciated capital gain property. Therefore, the total deduction for charitable contributions is $11,000.

In return for a 20% partnership interest, Skinner contributed $5,000 cash and land with a $12,000 basis and a $20,000 fair market value to the partnership. The land was subject to a $10,000 mortgage that the partnership assumed. In addition, the partnership had $20,000 in recourse liabilities that would be shared by partners according to their partnership interests. What amount represents Skinner's basis in the partnership interest?

13,000 Cash$ 5,000 Basis of land12,000 Mortgage assumed by partnership(10,000) Skinner's share of mortgage (20%)2,000 Skinner's share of recourse liabilities 4,000 = $13,000

On April 15, 2017 Wren Corp., an appliance wholesaler, was petitioned involuntarily into bankruptcy under Chapter 7. When the petition was filed, Wren's creditors included: Fifth Bank—first mortgage on warehouse owned by Wren: $50,000 Hart Manufacturing Corporation—perfected purchase money security interest in inventory: $30,000 TVN Computers, Inc.—perfected security interest in office computers: $15,000 computers were sold for $12,000, How much will TVN receive from the trustee following the sale of secured property and the liquidation described?

13,500 TVN—computers sold for $12,000 plus half of the remaining $3,000 for total of $13,500. The $3,000 is the difference between the value of the computers and what they were sold for.

Paul and Lois Lee, both age 53, are married and will file a joint return for 2020. Their 2020 adjusted gross income is expected to be $85,000, including Paul's $75,000 salary. Lois has no income of her own. Neither spouse is covered by an employer-sponsored pension plan. What amount can the Lees contribute to IRAs for 2020 to take advantage of their maximum allowable IRA deduction in their 2020 return?

14,000

Prime Corporation's building was destroyed by a tornado. The fair market value of the building at the time of the tornado was $400,000 and its adjusted basis was $350,000. The insurance proceeds totaled $500,000 as follows: $400,000 for the building. $100,000 for lost profits during rebuilding. Prime does not defer any gain under the involuntary conversion provisions of Code Sec. 1033. What amount of the insurance proceeds is taxable to Prime?

150,000

During the current year, Dr. Ernest Griffiths, a cash-basis taxpayer, incorporated his medical practice. No liabilities were transferred. The following assets were transferred to the corporation: Cash$20,000 Equipment: Adjusted basis$140,000 Fair market value$180,000 Immediately after the transfer, Griffiths owned 100% of the corporation's stock. The corporation's total basis for the transferred assets is

160,000 The cash and equipment were transferred by Griffiths in a nontaxable, Sec. 351 transfer to a controlled corporation. The corporation's basis for the assets would be the same as Griffiths's basis, increased by any gain recognized by Griffiths. Since Griffiths did not receive any boot, no gain was recognized by him. Thus, the corporation's total basis for the assets transferred is $160,000 ($20,000 + $140,000).

Jared purchases an apartment building on January 1, Year 1, for $500,000. The building is depreciated using Modified Accelerated Cost-Recovery System (MACRS) straight-line depreciation. The apartment building is sold on December 31, Year 12, for $620,000, when its adjusted tax basis is $320,000 (assume that $180,000 of depreciation has been claimed). How much gain from the sale of the building is subject to the 25% rate?

180,000 Total gain on the sale is $300,000 ($620,000 − $320,000) The straight-line depreciation was $180,000 so the first $180,000 of gain is taxed at 25%. The remaining gain of $120,000 is taxed as Section 1231 gain.

Robert had adjusted gross income of $100,000 and potential itemized deductions as follows: Medical expenses (before percentage limitations)$12,000 State income taxes4,000 Real estate taxes3,500 Qualified housing and residence mortgage interest10,000 Home equity mortgage interest (used to consolidate personal debts)4,500 Charitable contributions (cash)5,000 What are Robert's itemized deductions that are allowable for alternative minimum tax purposes?

19,500 For purposes of computing an individual's AMT, no deduction is allowed for personal, state, and local taxes, and home mortgage interest if the loan proceeds were not used to buy, build, or substantially improve the home. Additionally, unreimbursed medical expenses are allowed only to the extent in excess of 10% of adjusted gross income. Here, Robert's allowable itemized deductions for AMT purposes consist of medical expenses of $12,000 − (10% × $100,000) = $2,000, qualified mortgage interest of $10,000, and charitable contributions of $5,000, resulting in a total of $19,500.

Cole earned $3,000 in wages, incurred $1,000 in unreimbursed employee business expenses, paid $400 as interest on a student loan, and contributed $100 to a charity. What is Cole's adjusted gross income?

2,600 The itemized deduction for unreimbursed employee business expenses has been suspended for years 2018-2025. The charitable contribution is an itemized deduction and does not affect the computation of adjusted gross income. AGI equals the $3,000 of wages less student loan interest of $400, or $2,600

For the current year, Shady Corporation had net income per books of $2,000,000. Included in the determination of net income were the following items: Interest income on municipal bonds$60,000 Damages received from settlement of patent infringement lawsuit125,000 Interest paid on loan to purchase municipal bonds22,000 Provision for federal income tax796,000 What should Shady report as its taxable income for the current year?

2,758,000 2,000 + 796 - 60 + 22

Sara Harding is a cash-basis taxpayer who itemized her deductions. The following information pertains to Sara's state income taxes for the taxable year Year 3: Withheld by employer in Year 3$2,000 Payments on Year 3 estimate: 4/15/03 $300 6/15/03 300 9/15/03 300 1/15/04 300 1,200 Total paid and withheld $3,200 Actual tax, per state return 3,000 Overpayment $ 200 There was no balance of tax or refund due on Sara's Year 2 state tax return. How much is deductible for state income taxes on Sara's Year 3 federal income tax return?

2,900

During the current year, Aca Corp. adopted a plan of complete liquidation. Distributions to stockholders during the current year, under this plan of complete liquidation, included marketable securities purchased in 2016 with a basis of $100,000 and a fair market value of $120,000 at the date of distribution. In Aca's current-year return, what amount should be reported as long-term capital gain?

20,000 Generally, a corporation will recognize gain or loss on the distribution of its property in liquidation just as if the property were sold to the distributee at its fair market value.

Darien Corp. was a calendar-year S corporation. Darien's S status terminated on February 1, Year 9, when Aspar Corp. became a shareholder. During Year 9 (365-day calendar year), Darien had nonseparately computed income of $274,500. If no election is made by Darien, what amount of the income, if any, would be allocated to the S short year for Year 9?

23,312 264,500 / 365 = 752 752 x 31 = 23,312 If no special election is made, income is allocated on a daily basis

The following information pertains to the acquisition of a six-wheel truck by Sol Barr, a self-employed contractor: Cost of original truck traded in$20,000 Book value of original truck at trade-in date4,000 List price of new truck25,000 Trade-in allowance for old truck6,000 Business use of both trucks100% The basis of the new truck is

25,000 Beginning in 2018, only real property exchanged for real property qualifies under the like-kind exchange rules. Barr's transaction is not a like-kind exchange, and his realized gain must be recognized. His recognized gain is $2,000. He received a truck worth $25,000, and his basis in the assets given up is $23,000 ($4,000 truck + $19,000 cash). His basis in the new truck is its FMV of $25,000.

Smith and James were partners in S and J Partnership. The partnership agreement stated that all profits and losses were allocated 60% to Smith and 40% to James. The partners decided to terminate and wind up the partnership. The following was the balance sheet for S and J on the day of the windup: Cash$40,000 Accounts receivable 12,000 Property and equipment 38,000 Total assets $90,000Accounts payable $24,000 Smith, capital 30,000 James, capital 36,000T otal liabilities and capital $90,000 Of the total accounts receivable, $10,000 was collected and the remainder was written off as bad debt. All liabilities of S and J were paid by the partnership. The property and equipment are sold for $32,000. Under the Uniform Partnership Act, what amount of cash was distributed to Smith?

25,200 Smith would receive the amount in his capital account adjusted for the losses on the sale of assets, or $25,200 {$30,000 − [60% × ($2,000 loss on receivables + $6,000 loss on property and equipment)]}

Fred and Ethel (brother and sister), residents of a noncommunity property state, own unimproved land that they hold in joint tenancy with rights of survivorship. The land cost $100,000 of which Ethel paid $80,000 and Fred paid $20,000. Ethel died when the land was worth $300,000, and $240,000 was included in Ethel's gross estate. What is Fred's basis for the property after Ethel's death?

260,000 Since Ethel furnished 80% of the land's purchase price, 80% of its $300,000 fair market value, or $240,000 is included in Ethel's estate. Thus, Fred's basis is $240,000 plus the $20,000 of purchase price that he furnished, a total of $260,000.

An individual taxpayer's tax return included the following: Regular tax before tax credits$5,000 Current-year estimated tax payments6,000 Amount paid with current-year extension1,000 Federal income tax withheld1,000 What amount, if any, is the taxpayer's overpaymen

3,000

Partnership P has an operating loss of $10,000 for the year. Partner A had a 50% interest in the partnership, with a basis of $5,000 at the beginning of the year. P distributed $2,000 to A during the year. What amount of loss is deductible by A?

3,000 A's share of the partnership loss is $5,000 ($10,000 × 50%). The ordering rules for computing partnership basis provide that distributions reduce basis before losses. The $2,000 distribution reduces the basis to $3,000 ($5,000 basis − $2,000). Thus, only $3,000 of the loss can be used to reduce the basis to zero. The remaining $2,000 loss is carried forward to future tax years.

The Rites are married, file a joint income tax return, and qualify to itemize their deductions in the current year. Their adjusted gross income for the year was $55,000, and during the year they paid the following taxes: Real estate tax on personal residence $2,000 Ad valorem tax on personal automobile 500 Current-year state and city income taxes withheld from paycheck 1,000 What total amount of the expense should the Rites claim as an itemized deduction on their current-year joint income tax return?

3,500 An individual's itemized deductions include state and local income taxes paid or withheld from paychecks, real estate taxes based on the value of real estate not used in a business, and personal property taxes based on the value of personal property if charged on a yearly basis.

On January 1, Year 8, James Davis was awarded a postdoctorate fellowship grant of $30,000 by a tax-exempt educational organization. Davis is not a candidate for a degree and was awarded the grant to continue his research. The grant was awarded for the period March 1, Year 8 through May 31, Year 9. On March 1, Year 8, Davis elected to receive the full amount of the grant. What amount should be included in his gross income for Year 8?

30,000

Parent Corp. and Subsidiary Corp. file consolidated returns on a calendar-year basis. In January 2019, Subsidiary sold land, which it had used in its operations, to Parent for $75,000. Immediately before this sale, Subsidiary's basis for the land was $45,000. Parent held the land primarily for sale to customers in the ordinary course of business. In July 2020, Parent sold the land to Dubin, an unrelated individual, for $90,000. In determining the consolidated taxable income for 2020, how much should Subsidiary take into account as a result of the 2019 sale of land from Subsidiary to Parent? $45,000 $30,000 $22,500 $15,000

30,000 75,000 - 45,000 Parent would recognize gain of 15,000 (90-75)

During the current year Steve Maslan received a 20% capital interest in Gress Associates, a partnership, in return for services rendered plus a contribution of assets with a basis to Maslan of $15,000 and a fair market value of $20,000. The fair market value of Maslan's 20% interest was $38,000. How much is Maslan's basis for his interest in Gress?

33,000 Since Maslan received a capital interest with a FMV of $38,000 in exchange for property worth $20,000 and services, Maslan must recognize compensation income of $18,000 ($38,000 − $20,000) on the transfer of services for a capital interest. Thus, Maslan's basis for his partnership interest consists of the $15,000 basis of assets transferred plus the $18,000 of income recognized on the transfer of services, a total of $33,000.

PDK, LLC had three members with equal ownership percentages. PDK elected to be treated as a partnership. For the tax year ending December 31, year 1, PDK had the following income and expense items: Revenues$120,000 Interest income6,000 Gain on sale of securities8,000 Salaries36,000 Guaranteed payments10,000 Rent expense21,000 Depreciation expense18,000 Charitable contributions3,000 What would PDK report as nonseparately stated income for year 1 tax purposes?

35,000 Non-separately stated income is the ordinary business income of the LLC, computed as follows: Revenues$120,000 Salaries(36,000) Guaranteed payments(10,000) Rent expense(21,000) Depreciation expense(18,000) = Ordinary income$35,000

Willard, a single taxpayer, had $60,000 in adjusted gross income for Year 4. During Year 4, he contributed $25,000 to his church. He had a $15,000 charitable contribution carryover from his Year 3 church contributions. What was the maximum amount of properly substantiated charitable contributions that Willard could claim as an itemized deduction for Year 4?

36,000 60% of AGI individual taxpayer charitable contributions that could be an itemized deduction

Baker, an individual, owned 100% of Alpha, an S corporation. At the beginning of the year, Baker's basis in Alpha Corp. was $25,000. Alpha realized ordinary income during the year in the amount of $1,000 and a long-term capital loss in the amount of $3,000 for this year. Alpha distributed $30,000 in cash to Baker during the year. What amount of the $30,000 cash distribution is taxable to Baker?

4,000 Calculate basis in an S corporation as follows: The current basis of $25,000 is increased by the $1,000 of income to $26,000, then reduced for the distribution of $30,000 which would reduce the basis to $0 and produce a $4,000 gain. The $3,000 loss is suspended until there is more basis in the future.

Easel Co. has elected to reimburse employees for business expenses under a nonaccountable plan. Easel does not require employees to provide proof of expenses and allows employees to keep any amount not spent. Under the plan, Mel, an Easel employee for a full year, gets $400 per month for business automobile expenses. At the end of the year Mel informs Easel that the only business expense incurred was for business mileage of 12,000 at a rate of 30 cents per mile, the IRS standard mileage rate at the time. Mel encloses a check for $1,200 to refund the overpayment to Easel. What amounts should be reported in Mel's gross income for the year?

4,800 Since this is not an accountable plan, all reimbursements are included in the employee's income ($400 x 12 months = $4,800). The employee business expenses of $3600 are no longer deductible.

Boles Corp., an accrual-basis, calendar-year S corporation, has been an S corporation since its inception and is not subject to the uniform capitalization rules. In the current year, Boles recorded the following: Gross receipts$50,000 Dividend income from investments5,000 Supplies expense2,000 Utilities expense1,500 What amount of ordinary business income should Boles report on its current year Form 1120S, U.S. Income Tax Return for an S Corporation, Schedule K?

46,500 50 - 1.5 - 2

An individual taxpayer earned $10,000 in investment income, $8,000 in noninterest investment expenses, and $5,000 in investment interest expense. How much is the taxpayer allowed to deduct on the current-year's tax return for investment interest expenses?

5,000 Net investment income is defined as investment income ($10,000) less deductible noninterest investment expenses ($0), or $10,000. Noninterest investment expenses are not deductible beginning in 2018. So, the entire $5,000 of interest expense is deductible since it does not exceed the net investment income of $10,000.

An employer having an experience unemployment tax rate of 3.2% in a state having a standard unemployment tax rate of 5.4% may take a credit against a 6.2% federal unemployment tax rate of

5.4% The key is that the overall payments made by the employer should not exceed the overall federal unemployment tax rate of 6.2%. Therefore, all 5.4% of the state's standard unemployment tax rate may be credited against the federal percentage.

John Budd files a joint return with his wife. Budd's employer pays 100% of the cost of all employees' group-term life insurance under a qualified plan. Under this plan, the maximum amount of tax-free coverage that may be provided for Budd by his employer is

50,000

Gladys Peel owns a 50% interest in the capital and profits of the partnership of Peel and Poe. On July 1, Year 8, Peel bought land the partnership had used in its business for its fair market value of $10,000. The partnership had acquired the land five years ago for $16,000. For the year ended December 31, Year 8, the partnership's net income was $94,000 after recording the $6,000 loss on the sale of land. Peel's distributive share of ordinary income from the partnership for Year 8 was

50,000 Although the $6,000 loss that was deducted in arriving at the partnership's net income would also be deductible for tax purposes, it must be separately passed through to partners because it is a Sec. 1231 loss. Thus, the $6,000 loss must be added back to the $94,000 of partnership net income and results in partnership ordinary income of $100,000. Peel's share is $100,000 × 50% = $50,000.

For the current year, Atkinson, Inc. had gross business income of $160,000 and dividend income of $100,000 from unaffiliated domestic corporations that are 20%-owned. Business deductions for the current year amounted to $170,000. What is Atkinson's dividends-received deduction for the current year?

58,500 65% of TI before the DRD Gross business income$ 160,000 Dividend income100,000 =$ 260,000 Less business deductions(170,000) Taxable income before DRD$90,000 DRD ($90,000 × 65%)(58,500) Taxable income$31,500

Dan Farley leased a building to Robert Shelter for a period of fifteen years at a monthly rental of $1,000 with no option to renew. At that time the building had a remaining estimated useful life of twenty years. Prior to taking possession of the building, Shelter made improvements at a cost of $18,000. These improvements had an estimated useful life of twenty years at the commencement of the lease period. The lease expired on June 30, Year 7, at which point the improvements had a fair market value of $2,000. The amount that Farley, the landlord, should include in his gross income for Year 7 is

6,000 A lessor excludes from income any increase in the value of property caused by improvements made by the lessee, unless the improvements were made in lieu of rent. In this case, there is no indication that the improvements were made in lieu of rent. Therefore, for Year 7, Farley should only include the six rent payments in income: 6 × $1,000 = $6,000.

Hart's adjusted basis for his interest in a partnership was $30,000. He received a nonliquidating distribution of $24,000 cash plus a parcel of land with a fair market value and partnership basis of $9,000. Hart's basis for the land is

6,000 If both cash and noncash property are received in a single distribution, the basis for the partner's partnership interest is first reduced by the cash, before the noncash property.

In Year 8, Karen Miller had an alternative minimum tax liability of $20,000. This was the first year that she paid an alternative minimum tax. When she recomputed her Year 8 alternative minimum tax using only exclusion preferences and adjustments, her alternative minimum tax was $9,000. For Year 9, Karen had a regular tax liability of $50,000 and a tentative minimum tax of $45,000. What is the amount of Karen's unused minimum tax credit from Year 9 that will carry over to Year 10?

6,000 In this case, Karen's payment of $20,000 of alternative minimum tax in Year 8 generates a minimum tax credit of $20,000 − $9,000 = $11,000, which is carried forward to Year 9. Since Karen's Year 9 regular tax liability of $50,000 exceeded her tentative minimum tax of $45,000, $5,000 of Karen's minimum tax credit would be used to reduce her Year 9 tax liability to $45,000. Therefore, $11,000 − $5,000 = $6,000 of unused minimum tax credit would carry over to Year 10.

Orsen, a U.S. citizen and the sole income beneficiary of a simple trust, is entitled to receive current distributions of the trust income. During the current year, the trust reported: Dividend income $8,000 Accounting fees allocable to income (2,000) Net short-term capital gain allocable to corpus 3,000 What amount of trust income is includible in Orsen's gross income?

6,000 The net short-term capital gain is not included in the trust income since it is allocable to corpus. So the trust income is the $8,000 dividend income less the $2,000 accounting fees.

Feld, the sole stockholder of Maki Corp., paid $50,000 for Maki's stock in Year 5. In Year 10, Feld contributed a parcel of land to Maki but was not given any additional stock for this contribution. Feld's basis for the land was $10,000, and its fair market value was $18,000 on the date of the transfer of title. What is Feld's adjusted basis for the Maki stock?

60,000

Dart Corp., a calendar-year corporation, was formed in 2009 and made an S corporation election in 2011 that is still in effect. Its books and records for 2020 reflect the following information: Accumulated earnings and profits at 1/1/20 $90,000 Accumulated adjustments account at 1/1/20 50,000 Ordinary income for 2020 200,000 Dart Corp. is solely owned by Robert, whose basis in Dart's stock was $100,000 on January 1, 2020. During 2020, Dart distributed $310,000 to Robert. What is the amount of the $310,000 distribution that Robert must report as dividend income for 2020, assuming no special elections were made with regard to the distribution?

60,000 first 250,000 of distribution to be nontaxable and will reduce the balance in the AAA to zero and Robert's stock basis to $50,000 310 - 250

Kari Corp., a manufacturing company, was organized on January 2, Year 9. Its Year 9 federal taxable income was $400,000 and its federal income tax was $84,000. What is the maximum amount of accumulated taxable income that may be subject to the accumulated earnings tax for 9 if Kari takes only the minimum accumulated earnings credit?

66,000 When calculating the accumulated earnings tax, corporations are given a credit, the accumulated earnings credit, of $250,000 ($150,000 for certain service corporations) plus dividends paid within the first 3 1/2 months of the corporation's tax year less accumulated earnings and profits at the end of the preceding tax year. Hence, the maximum amount of accumulated taxable income that may be subject to the accumulated earnings tax for Year 9 if Kari Corp. takes only the minimum accumulated earnings credit is $66,000. This amount is composed of $400,000 in taxable income less both a downward adjustment of $84,000 for federal income taxes and the $250,000 accumulated earnings credit. 250 + 84 + ? = 400

Paul Benson and Arthur Kronk each own one-half of the stock of Bekro Corporation, which has earnings and profits of $15,000. Bekro distributes property with a fair market value of $24,000 to its stockholders, each stockholder receiving property with a fair market value of $12,000. The gross amount reportable by each stockholder as a dividend is

7,500 The $24,000 will be a dividend to the extent of the corporation's earnings and profits of $15,000. 15000 / 2 = 7500 each

Under the terms of the will of Melvin Crane, $10,000 a year is to be paid to his widow and $5,000 a year is to be paid to his daughter out of the estate's income during the period of estate administration. No charitable contributions are made by the estate. The estate made the required distributions to Crane's widow and daughter and for the entire year, the estate's distributable net income was $12,000. What amount of the $10,000 distribution received from the estate must Crane's widow include in her gross income for this year?

8,000 The maximum amount that is taxable to beneficiaries is limited to the estate's distributable net income (DNI). Since distributions to multiple beneficiaries exceed DNI, the estate's $12,000 of DNI must be prorated to distributions to determine the portion of each distribution that must be included in gross income. Since distributions to the widow and daughter totaled $15,000, the portion of the $10,000 distribution that must be included in the widow's gross income equals ($10,000/$15,000) × $12,000 = $8,000.

In the current year, Drake, a disabled taxpayer, made the following improvements: CostPool installation, which qualified as a medical expense and increased the value of the home by $25,000 $100,000 Widening doorways to accommodate Drake's wheelchair. The improvement did not increase the value of his home 10,000 For regular income tax purposes and without regard to the adjusted gross income percentage threshold limitation, what maximum would be allowable as a medical expense deduction in the current year?

85,000 Installation of the pool qualifies as a deductible medical expense to the extent that it does not increase the value of the home

Moseley, a cash method taxpayer, billed Dolphi $1,000 for medical services. Dolphi paid Moseley $500 cash and did some landscaping for Moseley's office in full settlement of the bill. Dolphi does comparable landscaping for $350. What amount should Moseley include in gross income as a result of this transaction?

850

On October 1, Year 7, Lois Rice learned that she was bequeathed 1,000 shares of Elin Corp. common stock under the will of her uncle, Pat Prevor. Pat had paid $5,000 for the Elin stock in Year 2. Fair market value of the Elin stock on October 1, Year 7, the date of Pat's death, was $8,000 and had increased to $11,000 six months later. The executor of Pat's estate elected the alternative valuation for estate tax purposes. Lois sold the Elin stock for $9,000 on December 1, Year 7, the date that the executor distributed the stock to her. Lois's basis for gain or loss on sale of the 1,000 shares of Elin stock is

9,000 Since the alternate valuation was elected for Prevor's estate, but the stock was distributed to Lois within six months of date of death, Lois's basis is the $9,000 FMV of the stock on date of distribution (December 1, Year 7).

Raff died in Year 7 leaving her entire estate to her only child. Raff's will gave full discretion to the estate's executor with regard to distributions of income. For Year 7, the estate's distributable net income (DNI) was $15,000, of which $9,000 was paid to the beneficiary. None of the income was tax-exempt. What amount can be claimed on the estate's Year 7 fiduciary income tax return for the distributions deduction?

9,000 An estate's DNI represents the maximum amount of available distribution deduction, and the maximum amount on which beneficiaries can be taxed. Here, since only $9,000 was distributed to a beneficiary, only $9,000 can be claimed on the estate's fiduciary income tax return as a distribution deduction, and only $9,000 will be taxed to the beneficiary.

A CPA is researching a tax issue and is attempting to understand the intent of Congress. Which of the following would generally be least useful for that purpose? Committee Report of the House Ways and Means Committee A Notice of Proposed Rulemaking A Senate Finance Committee Report The Congressional Record

A Notice of Proposed Rulemaking

Which of the following statements is correct with respect to the differences and similarities between a corporation and a limited partnership?

A corporation and a limited partnership may be created only pursuant to a state statute and a copy of its organizational document must be filed with the proper state agency.

Which one of the following statements concerning Roth IRAs is correct?

A distribution from a Roth IRA is treated as first made from contributions (return of capital).

What term is used to describe a partnership without a specified duration?

A partnership at will

Which one of the following statements is correct with regard to the child tax credit? The credit is $500 per qualifying child. The credit is not subject to income phase out. To qualify for the credit, a dependent child must be less than 14 years old. A qualifying child must be the taxpayer's dependent.

A qualifying child must be the taxpayer's dependent. Individual taxpayers are permitted to take a tax credit based solely on the number of their dependent children under age 17. The amount of credit is $2,000 per qualifying child. The credit phases out when modified adjusted gross income exceeds specified thresholds.

Which of the following is required by the Gramm-Leach Bliley (Financial Modernization) Act of 1999? Accountants are prohibited from providing confidential client information to outsourcing firms. Accountants may provide confidential client information only to outsourcing firms that the accountants have an equity interest in. Accountants are responsible for maintaining the confidentiality of information that is outsourced for processing. Accountants may provide confidential client information only to outsourcing firms that are subject to federal laws and regulations regarding confidentiality.

Accountants are responsible for maintaining the confidentiality of information that is outsourced for processing.

Larson, an unemployed carpenter, files for voluntary bankruptcy on August 14, 2005. Larson's liabilities are listed below. Credit-card charges due May 2, 2004$3,000Bank loan incurred June 2005$5,000Medical expenses incurred June 1998$7,000Alimony due during 2003$1,000 Under the provisions of Chapter 7 of the Federal Bankruptcy Code, Larson's discharge will not apply to the unpaid Credit-card charges. Bank loan. Medical expenses. Alimony.

Alimony

Brenner Corporation is trying to avoid bankruptcy but its four creditors are trying to force Brenner into bankruptcy. The four creditors are owed the following amounts: Anteed Corporation - $7,000 of unsecured debt Bounty Corporation - $5,000 of unsecured debt and $8,500 of secured debt Courtney Corporation - $3,000 of unsecured debt Dauntless Corporation - $2,000 of unsecured debt Which of the creditors must sign the petition to force Brenner into bankruptcy?

All four creditors are needed Since there are fewer than 12 creditors, it is true that only one creditor is needed to file the petition. However, no one creditor is owed at least $16,750 of unsecured debt. Therefore, the claims can be aggregated to total at least $16,750 of unsecured debt. The only way this can be accomplished is by aggregating the claims of all four creditors.

Which of the following is NOT true of a general partnership? Ownership by the partners may be unequal. It is a separate legal entity. An important characteristic is that the partners share in the profits equally. The partner may agree on unequal rights to participate in management.

An important characteristic is that the partners share in the profits equally.

Which of the following will enable a creditor to collect money from a debtor's wages? An order of receivership. An order of garnishment. A writ of execution. A writ of attachment.

An order of garnishment

Which of the following persons is not an insider of a corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements? The president. A member of the board of directors. A shareholder who owns 8% of the outstanding common stock and whose wife owns 4% of the outstanding common stock. An owner of 15% of the total face value of the corporation's outstanding debentures.

An owner of 15% of the total face value of the corporation's outstanding debentures. Securities Exchange Act of 1934, insiders include officers, directors, and beneficial owners of more than 10% of any class of the issuer's equity securities. An owner of 15% of the total face value of the corporation's outstanding debentures therefore does not qualify as an insider.

Nagel and Fields entered into a contract in which Nagel was obligated to deliver certain goods to Fields by September 10. On September 3, Nagel told Fields that Nagel had no intention of delivering the goods required by the contract. Prior to September 10, Fields may successfully sue Nagel under the doctrine of

Anticipatory repudiation. The doctrine of anticipatory repudiation allows a party to either sue at once or wait until after performance is due when the other party indicates s/he will not perform. This doctrine is in effect because Nagel told Fields that Nagel had no intention of delivering the goods (i.e., repudiation of the contract) prior to the date of performance.

Under the position taken by a majority of the courts, to which third parties will an accountant who negligently prepares a client's financial report be liable?

Any foreseen or known third party who relied on the report.

Which of the following can be an advantage of a limited liability company over an S corporation?

Appreciated property can be distributed tax-free to an owner.

Which of the following statements correctly represents the tax effect of the liquidation of an 80% or more owned subsidiary?

Assets transferred to the parent of the liquidating corporation generally have a carryover basis.

The generation-skipping transfer tax is imposed

At the highest tax rate under the transfer tax rate schedule.

Rally Co. has purchased some inventory from Kantar Corporation to sell to customers who will use the inventory primarily for consumer use. Which of the following is not correct? If Kantar sells the inventory to Rally on credit and takes out a security interest using the inventory as collateral, this a purchase money security interest. If Kantar sells the inventory to Rally on credit and takes out a security interest using the inventory as collateral, this is a purchase money security interest in consumer goods. If Kantar sells the inventory to Rally but Rally pays for it by getting a loan from a bank who takes out a security interest using the inventory as collateral, this is a purchase money security interest. If a customer purchases some inventory on credit from Rally for home use and signs a written security agreement presented by Rally that lists the inventory as collateral for the credit, this is a purchase money security interest in consumer goods.

B

Lazur Corp. entered into a contract with Baker Suppliers, Inc. to purchase a used word processor from Baker. Lazur is engaged in the business of selling new and used word processors to the general public. The contract required Baker to ship the goods to Lazur by common carrier pursuant to the following provision in the contract: "FOB Baker Suppliers, Inc. loading dock." Baker also represented in the contract that the word processor had been used for only ten hours by its previous owner. The contract included the provision that the word processor was being sold "as is" and this provision was in a larger and different type style than the remainder of the contract.Assume that Lazur refused to accept the word processor even though it was in all respects conforming to the contract and that the contract is otherwise silent. Under the UCC Sales Article,

Baker may resell the word processor to another buyer.

Lark, CPA, entered into a signed contract with Bale Corp. to perform management advisory services for Bale. If Lark repudiates the contract prior to the date performance is due to begin, which of the following is NOT correct? Bale could successfully maintain an action for breach of contract prior to the date performance is due to begin. Bale can obtain a judgment for the monetary damages it incurred as a result of the repudiation. Bale could successfully maintain an action for breach of contract after the date performance was due to begin. Bale can obtain a judgment ordering Lark to perform.

Bale can obtain a judgement ordering Lark to perform

A plaintiff who proves fraud in the formation of a contract may

Be entitled to punitive damages. (when there is fraud)

On April 5, Anker, Inc. furnished Bold Corp. with Anker's financial statements dated March 31. The financial statements contained misrepresentations which indicated that Anker was solvent when in fact it was insolvent. Based on Anker's financial statements, Bold agreed to sell Anker 90 computers, "FOB—Bold's loading dock." On April 14, Anker received 60 of the computers. The remaining 30 computers are in the possession of the common carrier and in transit to Anker. With respect to the remaining 30 computers in transit, which of the following statements is correct if Anker refuses to pay Bold in cash and Anker is not in possession of a negotiable document of title covering the computers?

Bold may stop delivery of the computers to Anker despite the fact that title had passed to Anker.

Which of the following documents would most likely contain specific rules for the management of a business corporation? Articles of incorporation. Bylaws. Certificate of authority. Shareholders' agreement.

Bylaws bylaws are requirements adopted by the board of directors to guide management in performing its duties

A sole proprietor wants to incorporate and has requested a projection of the first-year tax results as a C corporation and as an S corporation. Taxable income from ordinary operations is projected to be $100,000. The company expects to make a $20,000 charitable contribution and projects a long-term capital loss on stock of $7,000. Which of the following projections is correct?

C corporation, $90,000 taxable income; S corporation, $100,000 ordinary business income; remaining items are separately stated. C corporations can deduct $10,000 of charitable contributions (limited to 10% of taxable income) and none of the capital losses since net capital losses are not deductible.

On March 1, Mirk Corp. wrote to Carr offering to sell Carr its office building for $280,000. The offer stated that it would remain open until July 1. It further stated that acceptance must be by telegram and would be effective only upon receipt. On May 10, Mirk mailed a letter to Carr revoking its offer of March 1. Carr did not learn of Mirk's revocation until Carr received the letter on May 17. Carr had already sent a telegram of acceptance to Mirk on May 14, which was received by Mirk on May 16. Which of the following statements is correct?

Carr's telegram of acceptance was effective on May 16.

Charitable contributions subject to the 60% limit that are not fully deductible in the year made may be Neither carried back nor carried forward. Carried back 2 years or carried forward 20 years. Carried forward 5 years. Carried forward indefinitely until fully deducted.

Carried forward 5 years

Egan contracted with Barton to buy Barton's business. The contract provided that Egan would pay the business debts Barton owed Ness and that the balance of the purchase price would be paid to Barton over a ten-year period. The contract also required Egan to take out a decreasing term life insurance policy naming Barton and Ness as beneficiaries to ensure that the amounts owed Barton and Ness would be paid if Egan died. Which of the following would describe Ness' status under the contract and insurance policy?

Contract: Creditor Beneficiary Insurance Policy: Creditor Beneficiary

Which of the following is required under the Securities Exchange Act of 1934 or the SEC's reporting requirements issued pursuant thereto?

Current reporting by issuers of registered securities of certain specified corporate and financial events within 4 days of occurrence.

Ames, claiming to be an agent of Clar Corporation, makes a contract with Trimon in the name of Clar Corporation. Later, Clar Corporation, for the first time, learns what Ames has done and notifies Trimon of the truth that Ames was not an agent of Clar Corporation. Which of the following statements is incorrect? Clar Corporation may ratify this contract if it does so with the entire contract. Trimon may withdraw from the contract before Clar attempts to ratify it. Clar Corporation may ratify this contract by performing under the contract without stating that it is ratifying. Trimon may enforce this contract even if Clar Corporation does not wish to be bound.

D

An office building owned by Elmer Bass was condemned by the state on January 2, Year 8. Bass received the condemnation award on March 1, Year 9. In order to qualify for nonrecognition of gain on this involuntary conversion, what is the last date for Bass to acquire qualified replacement property?

December 31, year 12 For a condemnation of real property held for productive use in a trade or business or for investment, the replacement period ends three years after the close of the taxable year in which the gain is first realized. Since the gain was realized in Year 9, the replacement period ends December 31, Year 12.

Cobrin, a sole proprietor with no employees, has a Keogh profit-sharing plan to which he may contribute 15% of his annual earned income. For this purpose, "earned income" is defined as net self-employment earnings reduced by the

Deductible Keogh contribution and one-half of the self-employment tax. A self-employed individual may contribute to a qualified retirement plan called a Keogh plan. The maximum contribution to a Keogh profit-sharing plan is the lesser of $56,000 (for 2019) or 25% of earned income

West, Inc. and Barton entered into a contract. After receiving consideration from Egan, West assigned its rights under the Barton contract to Egan. In which of the following circumstances would West not be liable to Egan?

Eagon released Barton

Which of the following is not a deductible itemized deduction? Gambling losses up to the amount of gambling winnings Medical expenses Real estate tax Employee business expenses

Employee business expenses

Which of the following fiduciary entities are required to use the calendar year as their taxable period for income tax purposes?

Estates: NO Trusts (exempt those that are tax exempt): YES

Maxwell was the head cashier of the Amalgamated Merchants Bank. The Excelsior Surety Company bonded Maxwell for $200,000. An internal audit revealed a $1,000 embezzlement by Maxwell. Maxwell persuaded the bank not to report him, and he promised to pay the money back within 10 days. The bank acquiesced and neither the police nor Excelsior was informed of the theft. Maxwell shortly thereafter embezzled $75,000 and fled. Excelsior refuses to pay. Is Excelsior liable? Why?

Excelsior is not liable since the failure to give notice of the first embezzlement is a valid defense.

Which Senate committee considers new tax legislation?

Finance

Donaldson reached the mandatory retirement age as a partner of the Malcomb and Black partnership. Edwards was chosen by the remaining partners to succeed Donaldson. The remaining partners agreed to assume all of Donaldson's partnership liability and released Donaldson from such liability. Additionally, Edwards expressly assumed full liability for Donaldson's partnership liability incurred prior to retirement. Which of the following is correct?

Firm creditors are not precluded from asserting rights against Donaldson for debts incurred while she was a partner, the agreements of Donaldson and the remaining partners notwithstanding.

Which one of the following credits is not a component of the general business credit? Disabled access credit. Employer Social Security credit. Foreign tax credit. Work opportunity credit.

Foreign tax credit GBC can be carried back and forward general business credit is composed of the investment credit, work opportunity credit, alcohol fuels credit, research credit, low-income housing credit, enhanced oil recovery credit, disabled access credit, renewable electricity production credit, empowerment zone employment credit, Indian employment credit, employer Social Security credit, orphan drug credit, the new markets credit, the small

Which of the following items must be separately stated on Form 1120S, U.S. Income Tax Return for a Corporation, Schedule K-1?

Gain or loss from the sale of collectibles

Filing a valid petition in bankruptcy acts as an automatic stay of actions to

Garnish debtor's wages: YES Collect alimony from debtor: NO

Yost contracted with Egan for Yost to buy certain real property. If the contract is otherwise silent, Yost's rights under the contract are

Generally Assigned correct because unless the contract terms prohibit assignment, or the rights are personable to the person rendering them, or the assignment will materially increase or alter the risk or duties of the obligor, contract rights are generally assignable.

Fogel purchased a TV set for $900 from Hamilton Appliance Store. Hamilton took a promissory note signed by Fogel and a security interest for the $800 balance due on the set. It was Hamilton's policy not to file a financing statement until the purchaser defaulted. Fogel obtained a loan of $500 from Reliable Finance which took and recorded a security interest in the set. A month later, Fogel defaulted on several loans outstanding and one of his creditors, Harp, obtained a judgment against Fogel which was properly recorded. After making several payments, Fogel defaulted on a payment due to Hamilton, who then recorded a financing statement subsequent to Reliable's filing and the entry of the Harp judgment. Subsequently, at a garage sale, Fogel sold the set for $300 to Mobray. Which of the parties has the priority claim to the set?

Hamilton

For the first taxable year in which a corporation has qualifying research and experimental expenditures, the corporation

Has a choice of either deducting such expenditures as current business expenses, or capitalizing these expenditures.

Wilson, CPA, uses a commercial tax software package to prepare clients' individual income tax returns. Upon reviewing a client's computer-generated year 1 itemized deductions, Wilson discovers that the schedule's deductible investment interest expense is less than the amount paid by the taxpayer and the amount that Wilson entered into the computer. After analyzing the entire tax return, Wilson determines that the computer-generated investment interest expense deduction is correct. Why is the computer-generated investment interest expense deduction correct? I.The client's investment interest expense exceeds net investment income. II.The client's qualified residence interest expense reduces the deductible amount of investment interest expense.

I

Which of the following principals may normally ratify an unauthorized contract made by an agent? I.Fully disclosed principal. II.Partially disclosed principal. III.Undisclosed principal.

I and II

Which of the following debts will not be discharged by bankruptcy even though a general discharge is allowed? I.Debt owed to a corporation because the debtor was caught embezzling from it. II.Money owed to a bank because the debtor was found to have committed fraud about her financial condition to get a loan. III.Damages owed to a major customer because the debtor intentionally breached an important contract.

I and II only

Branson Corporation voluntarily filed a petition in bankruptcy on January 2 of the current year. Branson owes the following debts: I.$500 to an appraiser for help in appraising the assets in the bankruptcy estate. II.Wages of $3,000 to an employee for December of the previous year just concluded. III.Timely claims of general, unsecured creditors of $30,000. IV.State and federal taxes of $10,000 owed. What is the priority from highest to lowest, of these claims in the bankruptcy proceedings?

I, II, IV, III.

Which of the following is(are) a purchase money security interest(s) in consumer goods? I.A department store purchases light fixtures on credit from Rampart Corporation who has a security interest in these light fixtures. The department store plans on selling this inventory primarily to consumers. II.A person purchases a dining room table for consumer use from a retail outlet on credit. The outlet has the consumer sign a security agreement and the set is delivered.

II only This is a purchase money security interest in consumer goods because in the security agreement the item purchased would also be the collateral for the credit given and the table is for consumer use.

Under the UCC Secured Transactions Article, what is the order of priority for the following security interests in store equipment? I. Security interest perfected by filing on April 15, 2016 II. Security interest attached on April 1, 2016. III. Purchase money security interest attached April 11, 2016, and perfected by filing on April 20, 2016.

III, I, II All perfected interests take priority over unperfected interests, regardless of when they arose, so II will be last. If more than one perfected interest exists, then the first to be perfected takes priority. Interests I and III are both perfected. The first is obviously perfected on April 15, 2016, and the third is not perfected by filing until April 20, 2016. An exception to the first in time is first in priority rule is when you have a PMSI in collateral other than livestock or inventory (here the collateral is store equipment) where a second in time of perfection takes place before or within twenty (20) days after the debtor takes possession of the collateral.

According to the Securities Act of 1933, which of the following statements is correct regarding an issuer of securities?

If an issuer sells a security and fails to meet certain disclosure requirements, the purchaser may sell it back to the issuer and recover the price paid.

A common carrier bailee generally would avoid liability for loss of goods entrusted to its care if the goods are Stolen by an unknown person. Negligently destroyed by an employee. Destroyed by the derailment of the train carrying them due to railroad employee negligence. Improperly packed by the party shipping them

Improperly packed by the party shipping them

Robbe, a cash-basis single taxpayer, reported $50,000 of adjusted gross income last year and claimed itemized deductions of $13,350, consisting solely of $10,000 of state income taxes paid last year and $3,350 of charitable contributions. Robbe's itemized deduction amount, which exceeded the standard deduction available to single taxpayers for last year by $1,150, was fully deductible and it was not subject to any limitations or phase-outs. In the current year, Robbe received a $1,500 state tax refund relating to the prior year. What is the proper treatment of the state tax refund?

Include $1,150 in income in the current year.

Under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code, certain property acquired by the debtor after the filing of the petition becomes part of the bankruptcy estate. An example of such property is

Inheritances received by the debtor within 180 days after the filing of the petition.

Ketchum Builders, Inc. contracted with Samson to construct a high-rise office building for $800,000. Ketchum inadvertently used materials which were not in accordance with the contract specifications. Although the breach resulted in minor damages, Samson has refused to pay Ketchum the $100,000 balance due on the contract. Ketchum

Is entitled to the $100,000 less damages. under the doctrine of substantial performance, if it can be shown that the defect in the performance was only minor in nature, that a good-faith effort was made to conform completely with the terms of the agreement, and that the price is decreased by the value of the defect, the contractual obligation will be discharged.

Unger owes a total of $50,000 to eight unsecured creditors and one fully secured creditor. Quincy is one of the unsecured creditors and is owed $6,000. Quincy has filed an involuntary bankruptcy petition against Unger under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code. Unger has been unable to pay debts as they become due. Unger's liabilities exceed Unger's assets. Unger has filed papers opposing the bankruptcy petition. Which of the following statements regarding Quincy's petition is correct?

It will be dismissed because Unger's debt to Quincy alone is less than the required amount to bring an involuntary petition. 16,750

On May 25, Fresno sold Bronson, a minor, a used computer. On June 1, Bronson reached the age of majority. On June 10, Fresno wanted to rescind the sale. Fresno offered to return Bronson's money and demanded that Bronson return the computer. Bronson refused, claiming that a binding contract existed. Bronson's refusal is

Justified, because Fresno must perform under the contract regardless of Bronson's minority.

In June, Mullin, a general contractor, contracted with a town to renovate the town square. The town council wanted the project done quickly and the parties placed a clause in the contract that for each day the project extended beyond 90 working days, Mullin would forfeit $100 of the contract price. In August, Mullin took a three-week vacation. The project was completed in October, 120 working days after it was begun. What type of damages may the town recover from Mullin?

Liquidated damages because of the clause in the contract.

On June 1, Year 1, Ben Rork sold 500 shares of Kul Corp. stock. Rork had received this stock on May 1, Year 1, as a bequest from the estate of his uncle, who died on February 1, Year 1. Rork's basis was determined by reference to the stock's fair market value on February 1, Year 1. Rork's holding period for this stock was

Long-term Property received from a decedent is deemed to be held long term regardless of the actual period of time that the decedent or beneficiary actually held the property and is treated as held for more than twelve months.

On May 1, Dix and Wilk entered into an oral agreement by which Dix agreed to purchase a small parcel of land from Wilk for $450. Dix paid Wilk $100 as a deposit. The following day, Wilk received another offer to purchase the land for $650, the fair market value. Wilk immediately notified Dix that Wilk would not sell the land for $450. If Dix sues Wilk for specific performance, Dix will

Lose, because the agreement was not in writing and signed by Wilk. Contains real personal property (price is irrelevant) so Statute of frauds is not confirmed

Which of the following is not a power of the board of directors? May select the officers of the corporation. May declare the dividends to be paid to the shareholders. May amend the Articles of Incorporation. All of the listed choices are powers of the board of directors.

May amend Article of Incorporation this is power of shareholders by vote

Winslow, Inc. intends to make a $450,000 common-stock offering under Rule 504 of Regulation D of the Securities Act of 1933. Winslow

May sell the stock to an unlimited number of investors. Rule 504 does not set a limit on the overall number of investors. So long as a company's total offerings for a year are under $5MM, and the company is not an investment company, Rule 504 may be used.

Which one of the following is a corporate reorganization as defined in the Internal Revenue Code?

Mere change in place of organization of one corporation

Which of the following securities is exempt from registration under the Securities Act of 1933? Municipal bonds. Securities sold by a discount broker. Preincorporation stock subscriptions. One-year notes issued to raise working capital.

Municipal bonds Exempt securities include securities from the gov

Which of the following is not a requirement for a corporation to elect S corporation status (Subchapter S)? Must be a member of a controlled group Must confine stockholders to individuals, estates, and certain qualifying trusts Must be a domestic corporation Must have only one class of stock

Must be a member of a controlled group

Which of the following is(are) true concerning internal auditors? I.Internal auditors must be independent from the entire corporation or entity they are auditing. II Internal auditors must have a CPA license.

Neither

Which of the following is(are) among the requirements to enable a taxpayer to be classified as a "qualifying widow(er)"? I.A dependent has lived with the taxpayer for six months. II.The taxpayer has maintained the cost of the principal residence for six months.

Neither Qualifying widow(er) filing status is available for the two years following the year of a spouse's death if (1) the surviving spouse was eligible to file a joint return in the year of the spouse's death, (2) does not remarry before the end of the current year, and (3) the surviving spouse pays over 50%of the cost of maintaining a household that is the principal home for the entire year of the surviving spouse's dependent child.

In 2020, Alan Kott provided more than half the support for his following relatives, none of whom qualified as a member of Alan's household: Cousin Niece Foster parent None of these relatives had any income, nor did any of these relatives file an individual or joint return. All of these relatives are U.S. citizens. Which of these relatives could be claimed as a dependent in 2020?

Niece

CPA Lurie placed a disclaimer in his engagement letter with tax client Wert. The disclaimer essentially stated that Wert promised not to sue Lurie for any errors Lurie might make. If problems arise and Wert seeks to sue Lurie, which of the following types of claims will be barred by the disclaimer? Breach of contract Negligence Fraud None of the above.

None Most courts will not allow professionals to escape liability for their professional wrongs by use of such a contractual provision.

On February 28, Master, Inc. had total assets with a fair market value of $1,200,000 and total liabilities of $990,000. On January 15, Master made a monthly installment note payment to Acme Distributors Corp., a creditor holding a properly perfected security interest in equipment having a fair market value greater than the balance due on the note. On March 15, Master voluntarily filed a petition in bankruptcy under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code. One year later, the equipment was sold for less than the balance due on the note to Acme. Master's payment to Acme could

Not be set aside as a preferential transfer because Acme was over secured The trustee has the power to set aside preferential transfers made to a creditor within 90 days before the filing of the bankruptcy petition while the debtor is insolvent. To be a preferential transfer, it must be a transfer for an antecedent debt that enables the creditor to receive more than s/he otherwise would have in a Chapter 7 liquidation. Since the creditor already had a perfected security interest in the equipment, he did not receive a preferential transfer because at that time the equipment had a fair market value greater than the note. This is true because perfected security interests have a priority above all others in the bankruptcy proceedings.

Aqua, Inc., a Florida corporation, entered into a contract for $30,000 with Sing, Inc., to perform plumbing services in a complex owned by Sing in Virginia. After the work was satisfactorily completed, Sing discovered that Aqua violated Virginia's licensing law by failing to obtain a plumbing license. Virginia's licensing statute was regulatory in nature, serving to protect the public against unskilled and dishonest plumbers. Upon Sing's request, independent appraisals of Aqua's work were performed, which indicated that the complex was benefited to the extent of $25,000. Sing refuses to pay Aqua. If Aqua brings suit it may recover

Nothing

Ordinary and necessary administration expenses paid by the fiduciary of an estate are deductible

On the fiduciary income tax return only if the estate tax deduction is waived for these expenses.

All of the following taxes may be deductible as itemized deductions by a self-employed taxpayer except Sales taxes. Foreign income taxes. Personal property taxes. One-half of self-employment taxes.

One-half of self-employment taxes

Hart and Ruck formed a limited partnership in which Hart was a general partner and Ruck was a limited partner. A certificate of limited partnership was filed with the secretary of state. Which of the following is correct under the Revised Uniform Limited Partnership Act?

Only Hart's name must appear on the certificate of limited partnership. The certificate of limited partnership requires the names of the general partners, but not the limited partners

Which of the following statements is correct regarding the formation of a unilateral contract? A unilateral contract may be formed without consideration. A unilateral contract does not require performance. Only one party to a unilateral contract makes a promise. Only one party to a unilateral contract receives a benefit or suffers a detriment.

Only one party to a unilateral contract makes a promise.

Park purchased from Derek Truck Sales a truck which had serious mechanical problems. Park learned of the defects 6 months after the date of sale. Five years after the date of sale Park commenced an action for breach of warranty against Derek. Derek asserts the statute of limitations as a defense. Which of the following statements made by Derek is correct?

Park was required to bring the action within the statute of limitations as measured from Derek's tender of delivery.

The self-employment tax is

Partially deductible from gross income in arriving at adjusted gross income.

Bond purchased a painting from Wool, who is not in the business of selling art. Wool tendered delivery of the painting after receiving payment in full from Bond. Bond informed Wool that Bond would be unable to take possession of the painting until later that day. Thieves stole the painting before Bond returned. The risk of loss

Passed to Bond at Wool's tender of delivery.

Egan contracted with Barton to buy Barton's business. The contract provided that Egan would pay the business debts Barton owed Ness and that the balance of the purchase price would be paid to Barton over a ten-year period. The contract also required Egan to take out a decreasing term life insurance policy naming Barton and Ness as beneficiaries to ensure that the amounts owed Barton and Ness would be paid if Egan died. Barton's contract rights were assigned to Vim, and Egan was notified of the assignment. Despite the assignment, Egan continued making payments to Barton. Egan died before completing payment and Vim sued Barton for the insurance proceeds and the other payments on the purchase price received by Barton after the assignment. To which of the following is Vim entitled?

Payments on purchase price: YES Insurance proceeds: YES

Under the UCC Secured Transactions Article, if a debtor is in default under a payment obligation secured by goods, the secured party has the right to

Peacefully repossess the goods without judicial process: YES Reduce the claim to a judgement: YES Sell the goods and apply the proceeds toward the debt: YES

In which of the following statements concerning a CPA firm's action is scienter or its equivalent absent?

Performance of substandard auditing procedures.

The Federal Unemployment Tax Act

Permits the employer to take a credit against the federal tax if contributions are made to a state unemployment fund.

The rule limiting the deductibility of passive activity losses and credits applies to

Personal service corporations The passive activity limitations apply to individuals, estates, trusts, closely held C corporations, and personal service corporations -A personal service corporation is a corporation (1) whose principal activity is the performance of personal services and (2) such services are substantially performed by owner-employees.

Which of the following items should be included on the Schedule M-1, Reconciliation of Income (Loss) per Books with Income per Return, of Form 1120, US Corporation Income Tax Return to reconcile book income to taxable income? Cash distributions to shareholders Premiums paid on key-person life insurance policy Corporate bond interest Ending balance of retained earnings

Premiums paid on key-person life insurance policy

Grove is seeking to avoid performing a promise to pay Brook $1,500. Grove is relying on lack of consideration on Brook's part. Grove will prevail if Grove can establish that Prior to Grove's promise, Brook had already performed the requested act. Brook's only claim of consideration was the relinquishment of a legal right. Brook's asserted consideration is only worth $400. The consideration to be performed by Brook will be performed by a third party.

Prior to Grove's promise, Brook had already performed the requested act Past actions cannot count as consideration for current promises. For consideration to exist, a contract must be a bargained for exchange

Under the Securities Act of 1933, an accountant may be held liable for any materially false or misleading financial statements, including an omission of a material fact therefrom, provided the purchaser

Proves a false statement or omission existed and the specific securities were the ones offered through the registration statement.

Under Chapter 11 of the Federal Bankruptcy Code, which of the following actions is necessary before the court may confirm a reorganization plan?

Provision for full payment of administration expenses.

Which of the following actions requires an agent for a corporation to have a written agency agreement?

Purchasing an interest in undeveloped land for the principal Oral agency agreements are generally valid, unless the agent's activities are covered by certain parts of the Statute of Frauds. When an interest in real property is transferred, the Statute of Frauds requires a writing.

Pursuant to a plan of corporate reorganization adopted in the current year, Myra Eber exchanged 1,000 shares of Faro Corp. common stock that she had purchased for $75,000, for 1,800 shares of Judd Corp. common stock having a fair market value of $86,000. As a result of this exchange, Eber's recognized gain and her basis in the Judd stock should be

Recognized Gain: 0 Basis: 75,000 No gain or loss is recognized if stock is exchanged solely for stock in a corporation that is a party to the reorganization.

The term active participation for a passive activity loss is relevant in relation to

Rental real estate activities. An owner of rental real estate can deduct up to $25,000 of rental real estate losses against other income if he actively participates in managing the real estate.

Sand Corp. sold and delivered a photocopier to Barr for use in Barr's business. According to their agreement, Barr may return the copier within 30 days. During the 30-day period, if Barr has not returned the copier or indicated acceptance of it, which of the following statements is correct with respect to risk of loss and title?

Risk of loss and title remain with Sand.

The following sequence of events occurred between Barbara (B) and Samantha (S): Day 1: S sends B the following: "I offer to sell you my McKenzie-Childs desk and chair for $300." Day 2: B receives the offer and sends S the following: "Would you consider taking $275?" Day 3: S sends B a letter revoking the offer. Day 4: B contacts S and says, "I'll take the desk and chair for $300." Day 4 (later): B receives the S revocation. Day 4 (later): S calls B and says, "You can't accept. I revoked that offer. And I got your counteroffer for $275 so that called it off anyway." Which of the following statements is correct?

S and B have a contract

Sable Corp. has $500,000 of outstanding accounts receivable. On July 10, Sable assigned a $50,000 account receivable due from Baker, one of Sable's customers, to Rich Bank for value. On July 15, Baker paid Sable the $50,000. On July 17, Rich notified Baker of the July 10 assignment from Sable to Rich. Rich is entitled to collect $50,000 from

Sable only A debtor who does not have knowledge of a creditor's assignment of his/her right to receive payment can extinguish all of his/her liability regarding the debt by paying the assignor. It is the duty of the assignee to notify the debtor of the assignment.

Ivor and Associates, CPAs, audit the financial statements of Jaymo Corporation. As a result of Ivor's negligence in conducting the audit, the financial statements include material misstatements.Ivor was unaware of this fact. The financial statements and Ivor's unqualified opinion are included in a registration statement and prospectus for an original public offering of stock by Jaymo. Thorp purchases shares in the offering. Thorp receives a copy of the prospectus prior to the purchase, but does not read it. The shares decline in value as a result of the misstatements in Jaymo's financial statements becoming known. Under which of the following Acts is Thorp most likely to prevail in a lawsuit against Ivor?

Securities Act of 1933, Section 11: YES Securities Exchange Act of 1934, Section 10(b), Rule 10b-5: NO

Article 9 of the UCC which governs security interests has added some items that now are covered by security interests law. Which of the following is true?

Security interests in tort claims already assessed by a court of law are covered. Security interests in tort claims are covered under the Revised UCC Secured Transactions Article; this is not true of after-acquired commercial tort claims.

Link Corp. is subject to the reporting provisions of the Securities Exchange Act of 1934.Which of the following situations would require Link to be subject to the reporting provisions of the 1934 Act?

Shares listed on a national securities exchange: YES More than one class of stock: NO

Smith and Jones, both US citizens, died in 2020. Neither made any lifetime taxable gifts. At the dates of death, Smith's gross estate was $4,800,000, and Jones' gross estate was $11,600,000. The unified credit equivalent for 2020 is $11,580,000. A federal estate tax return must be filed for

Smith: NO Jones: YES

In Year 5, Iris King bought shares of stock as an investment, at a cost of $10,000. During Year 8, when the fair market value was $8,000, Iris gave the stock to her daughter, Ruth. Ruth's holding period of the stock for purposes of determining her loss

Started in Year 8 If property is received as a gift, and the property's FMV on date of gift is used to determine a loss, the donee's holding period begins when the gift was received. Thus, Ruth's holding period starts in Year 8.

Stearn was one of the promoters of Lehman Company which was not yet incorporated. On January 2, Stearn made a contract with Stanley Corporation to have Stanley provide 6,000 electrical parts for Lehman Company at fixed prices beginning on July 15 and lasting for 5 more months. Stanley was not told and was unaware that Lehman Company had not been formed. On April 10, Lehman Company was formed under the relevant statutes. On July 15, Stanley delivered 1,000 of the 6,000 parts as agreed and Lehman accepted them. On August 15, when Stanley tried to deliver a

Stern is personally liable on this K

Stewart, CPA, was engaged to complete the audit of Wilson Company. In performing the audit Stewart made a mistake in judgment regarding some evidence. As a result an embezzlement of funds by an employee was not discovered. The mistake did not rise to the level of negligence. Which of the following statements is true regarding Stewart's liability in this case?

Stewart likely will not be held liable.

In Year 4, Ross was granted an incentive stock option (ISO) by her employer as part of an executive compensation package. Ross exercised the ISO in Year 7 and sold the stock in Year 9 at a gain. Ross was subject to regular tax for the year in which the ISO was granted. ISO was exercised. Stock was sold. Employer claimed a compensation deduction for the ISO.

Stock was sold

CPA Sobel engages in insider trading of the shares of an audit client. She is caught. The SEC brings a civil action and forces Sobel to give up her insider-trading profits and pay a civil fine of three times the amount of the profits. Sobel thought she had been punished sufficiently, but then the DOJ began an investigation. Which of the following is true?

The DOJ can choose to bring criminal charges to supplement the SEC's civil action.

An accountant compiled the unaudited financial statements for Taylor Company, a nonissuer company. The financial statements contained a material misstatement that was not discovered in the compilation. The accountant issued a report that stated that the financial statements were fairly stated based on the limited evidence that he collected. Which of the following is true about the accountant's liability to a third party who relies on the financial statements?

The accountant will likely be held liable because an appropriately worded report was not issued. Report overstated accountant's level of work

An S corporation may deduct

The amortization of organizational expenditures.

Maco Corp. develops shopping centers and regularly engages real estate brokers to act on its behalf in acquiring parcels of land. The brokers are authorized to enter into such contracts but are instructed to do so in their own names, without disclosing Maco's identity or Maco's relationship to the transaction. If a broker enters into a contract with a seller on Maco's behalf,

The broker will have the same authority as he would have had if Maco's identity had been disclosed. Although the broker does not have apparent authority, the broker does have the same actual authority as if there had been disclosure.

When a common stock offering requires registration under the Securities Act of 1933,

The issuer would be acting unlawfully if it were to sell the common stock without providing the investor with a prospectus.

Which of the following statements is correct concerning the voluntary filing of a petition in bankruptcy? If the debtor has 12 or more creditors, the unsecured claims must total at least $5,000. The debtor must be insolvent. If the debtor has fewer than 12 creditors, the unsecured claims must total at least $5,000. The petition may be filed jointly by spouses.

The petition may be filed jointly by spouses

Sharif, Hirsch, and Wolff formed a limited partnership with Sharif and Hirsch as general partners. Wolff was the limited partner. They failed to agree upon a profit-sharing plan but put in capital contributions of $120,000, $140,000, and $150,000, respectively. At the end of the first year how should they divide the profits? Sharif and Hirsch each receives half and Wolff receives none. Each of the three partners receives one-third. The profits are shared in proportion to their capital contribution. None of the listed choices.

The profits are shared in proportion to their capital contribution Under the Revised Uniform Limited Partnership Act, when the partners do not agree how to split profits, the split is made in proportion to their capital contributions.

Which of the following statements concerning the prospectus required by the Securities Act of 1933 is correct?

The prospectus is a part of the registration statement.

Which of the following transactions is subject to registration requirements of the Securities Act of 1933?

The public sale by a corporation of its negotiable ten-year notes. 1933 Act applies to sales of securities, including stocks, bonds and notes that are issued for periods over 9 months.

On July 8, Ace, a refrigerator wholesaler, purchased 50 refrigerators. This comprised Ace's entire inventory and was financed under an agreement with Rome Bank that gave Rome a security interest in all refrigerators on Ace's premises, all future acquired refrigerators, and the proceeds of sales. On July 12, Rome filed a financing statement that adequately identified the collateral. On August 15, Ace sold one refrigerator to Cray for personal use and four refrigerators to Zone Co. for its business. Which of the following statements is correct?

The refrigerator sold to Cray will not be subject to Rome's security interest. Even though the interest is perfected, Cray still gets to keep the refrigerator. A buyer in the ordinary course of business takes goods free from a security interest, even if the buyer has knowledge of the security agreement.

Under the federal Bankruptcy Code, which of the following rights or powers does a trustee in bankruptcy NOT have? The power to prevail against a creditor with an unperfected security interest. The power to require persons holding the debtor's property at the time the bankruptcy petition is filed to deliver the property to the trustee. The right to use any grounds available to the debtor to obtain the return of the debtor's property. The right to avoid any statutory liens against the debtor's property that were effective before the bankruptcy petition was filed.

The right to avoid any statutory liens against the debtor's property that were effective before the bankruptcy petition was filed.

Which of the following contract rights can generally be assigned? The right to receive personal services. The right to receive a sum of money. The right of an insured to coverage under a fire insurance policy. A right whose assignment is prohibited by statute.

The right to receive a sum of money

In deciding whether consideration necessary to form a contract exists, a court must determine whether

There is mutuality of consideration.

Which one of the following statements concerning the American Opportunity credit is not correct? The credit is available for the first four years of postsecondary education program. The credit is available on a per-student basis. To be eligible for the credit, the student must be enrolled full-time for at least one academic period during the year. If a parent claims a child as a dependent, any qualified expenses paid by the child are deemed to be paid by the parent.

To be eligible for the credit, the student must be enrolled full-time for at least on academic period during the year

Which one of the following statements is not correct with regard to the child tax credit? The credit is $2,000 per qualifying child. The amount of credit is reduced if modified adjusted gross income exceeds certain thresholds. To qualify for the credit, a dependent child must be less than 16 years old. A qualifying child must be a U.S. citizen or resident.

To qualify for credit, dependent child must be less than 16 years old The age is 17

A homestead exemption ordinarily could exempt a debtor's equity in certain property from postjudgment collection by a creditor. To which of the following creditors will this exemption apply?

Valid home mortgage lien: NO Valid IRS tax lien: NO

Peters owned 500 shares of common stock in Kidsmart, Inc. Accordingly, Peters had the right to

Vote for the election and removal of BOD

On July 1, Silk, Inc. sent Blue a telegram offering to sell Blue a building for $80,000. In the telegram, Silk stated that it would give Blue 30 days to accept the offer. On July 15, Blue sent Silk a telegram that included the following statement: "The price for your building seems too high. Would you consider taking $75,000?" This telegram was received by Silk on July 16. On July 19, Tint made an offer to Silk to purchase the building for $82,000. Upon learning of Tint's offer, Blue, on July 27, sent Silk a signed letter agreeing to purchase the building for $80,000. This letter was received by Silk on July 29. However, Silk now refuses to sell Blue the building. If Blue commences an action against Silk for breach of contract, Blue will

Win, because Blue effectively accepted Silk's offer of July 1.