EA Part 1: Individuals

Five elements must be proven with respect to business meal expenses. Two of the elements are the amount and the purpose of the expense. Which of the following is NOT one of the other three elements? A) The duration of the meal B) The time/date of the meal C) The place of the meal D) The business relationship of the person(s) involved

A

Which of the following is the true regarding a nonbusiness bad debt? A) It is deductible as a STCL B) It is not deductible C) It is deductible only if you itemize D) It is deductible as a LTCL

A

Which of the following items is NOT an allowable deduction on a decedent's estate tax return? A) Bequest to a surviving ex-spouse B) Property taxes accrued before death but not paid until after death C) Executor's fees for administering the estate D) None of the above

A

A married couple has a $40,000 STCL, a $20,000 collectible LTCG, and a $25,000 LTCG subject to the 15% rate. What are the amount and the character of their capital gain (loss) after netting the gains and losses? A) $5,000 LT gain @ 28% B) $5,000 LT gain @ 15% C) $(20,000) ST loss and $25,000 LT gain taxed at 15% D) $0

B

Which of the following examples of property may qualify for a like-kind exchange? A) Inventories B) Rental house C) Accounts receivable D) Raw materials

B

During 2019, Mr. and Mrs. X paid the following expenses for their son, John: Medical ins premiums $1,500 Contacts. $210 Household help per Doc rec, $2,200 For 2019, John had gross income of $9,850. Bc John had GI of $9,850, the X's cannot claim him as a dependent. How much of Johns medical expenses can Mr. and Mrs. X deduct on their return? A) $3,910 B) $1,710 C) $1,500 D) $0

B. (Doc rec is not deductible)

Mr. Jones had a student loan for a qualified higher education expenses on which interest was due. The loan payments were required from July 1, 2012, until December 31, 2019. The interest payments were $1,200 per year. How much may he deduct in arriving at AGI in 2019? A) $0 B) $600 C) $1,200 D) $2,500

C

On 2-4- Year 1, Smith made a gift in an amount sufficient to require the filing of a federal gift tax return. On 10-5-Year 1, Smith died. No estate tax return will need to be filed for Smith. Assuming extensions have not been obtained, the gift tax return, Form 709, must be filed by: A) April 15, Year 1 B) March 15, Year 2 C) April 15, Year 2 D) July 5, Year 2

C

On 6-15-2019, Marlo made a transfer by gift in an amount sufficient to require the filing of a gift tax return. If Marlo did not request an extension of time for filing the 2019 gift tax return, the due date for filing was A) December 31, 2019 B) March 15, 2020 C) April 15, 2020 D) June 17, 2020

C

You incurred the following expenditures in connection with your rental property. Which of them should be capitalized? A) New roof B) Install new cabinets C) Pave driveway D) All of the above

D

Donna received land as gift from her grandfather. At the time of the gift, the land had a FMV of $80,000 and an adjusted basis of $100,000 to Donna's grandfather. One year later, Donna sold the land for $105,000. What was her gain or loss on this transaction? A) $5,000 B) $15,000 C) $20,000 D) No gain or loss

A

The Minimum Tax Credit (MTC) allocable for the current year is limited to: A) Current-year gross regular tax (reduced by certain credits) minus current-year tentative minimum tax. B) Current-year gross regular tax (without regard to any credits) minus current-year tentative minimum tax. C) Current-year gross regular tax (reduced by certain credits) plus current-year tentative minimum tax. D) Current-year gross regular tax (reduced by certain credits) minus previous-year tentative minimum tax.

A (The MTC allowable is limited to current year gross regular tax, reduced by certain credits, minus current-year tentative minimum tax)

During the year, Ms. Gonzo paid $2,000 for local real estate taxes on property she rents to others and $3,425 real estate taxes on her residence. In addition, she paid gift taxes of $650 and $1,250 for state income taxes to New Jersey. What amount Can Ms. Gonzo deduct as an itemized deduction on her return? A) $4,675 B) $5,325 C) $6,675 D) $7,325

A (local re taxes and income taxes)

Elton declared bankruptcy in the current year. Included in the liabilities discharged in the bankruptcy was a $15,000 personal loan Elton had received from his friend, Edward, 2 years ago. How would Edward treat this for tax purposes? A) Ordinary loss on Form 4797 B) LTCL on Schedule D C) STCL on Schedule D D) Investment expense

C

Which of the following is deductible as medical insurance? A) Medical portion of auto insurance policy that provides coverage for all persons injured in or by the taxpayer's car B) Insurance policy that pays you $50 a day if you are unable to work due to illness or injury C) Medicare Part B D) None of the above

C

Mr. X purchased a small office building during the year. Included in his costs were the following: - Cash down payment $50,000 - Mortgage on property assumed $300,000 - Title Insurance. $2,000 - Fire insurance premiums $2,000 - Attorney fees. $1,000 - Rent to former owner to allow Mr. X to occupy the office building prior to closing $4,000 What is Mr. X basis in the property? A) $359,000 B) $355,000 C) $353,000 D) $350,000

C (50,000 + 300,000 + 2,000 title + 1,000)

Geena paid $10,000 for stock in a start-up company. A few months after she bought it, she sold the stock to her brother Henry for $8,000, its current value. Later, he sold the stock to an unrelated party for $15,000. What gain or loss should Geena and Henry recognize on their tax returns in the year of sale? A) Geena recognizes $2,000 loss; Henry recognizes $7,000 gain. B) Geena recognizes $2,000 loss; Henry recognizes $5,000 gain. C) Geena recognizes $0 loss; Henry recognizes $7,000 gain. D) Geena recognizes $0 loss; Henry recognizes $5,000 gain.

D

Generally, which of the following should be included in gross income? A) Life insurance proceeds B) Child support payments C) Cash rebate from a dealer when a car is purchased D) Reimbursements from the U.S. military of a moving expense the military member/taxpayer properly deducted on last year's tax return

D

If the FMV of Sec. 1245 property is greater than its basis, which of the following transactions will give rise to Sec. 1245 income? A) Disposition at death B) Disposition by gift C) A Sec. 351 exchange with a newly formed corp for all its stock. D) None of the above

D

The acknowledgement a person needs from any charitable org to claim a deduction for any cash contribution of $250 or more in a single donation must include which of the following? A) The reason for the contribution B) The returned check showing the donation amount C) A description of past contributions and any plans for future ones D) A written receipt

D

Which of the following tax credits are allowed on an estate tax return (Form 706)? A) Credit for foreign death taxes B) Credit for federal gift taxes C) Credit for tax on prior transfers D) All of the above

D

All of the following are true EXCEPT: A) A brother-in-law must live with the taxpayer the entire year to be claimed as a dependent even if the other tests are met B) A son, age 21, was a full-time student who earned $4,300 from his part time job. The money was used to buy a car. Even though he earned $4,300, his parents can claim him as a dependent if the other dependency tests were met. C) For each person claimed as a dependent, the SSN, adoption taxpayer IN, or individual taxpayer IN must be listed. D) If a married person files a separate return, s(he) cannot claim his or her spouse as a dependent even if the spouse had no gross income and was not the dependent of another taxpayer.

A

All of the following items can be claimed as deductions against a decedent's estate EXCEPT: A) Specific bequest to son B) Executor's fees C) Legal fees to settle estate D) Charitable bequests

A

A contribution to a traditional IRA is deductible for tax year 2019 in which of the following situations? A) The individuals employer does not have a retirement plan at any time during 2019 B) The contribution is made on August 15,2020, under a property filed accepted extension

A

A gain on the disposition of Sec. 1245 property is treated as ordinary income to the extent of: A) Depreciation allowed or allowable B) Excess of the accelerated depreciation allowed or allowable over the depreciation figured for the same period using the straight-line method. C) Excess of the appreciated value over depreciation allowed or allowable using the straight-line method. D) The difference between the amount realized over the cost of the property

A

All of the following are requirements for a payment to be alimony EXCEPT A) Payments can be in cash or property B) Payments cannot be a transfer of services C) Payments are required by a divorce or separation instrument D) Payments are not required after death of the recipient spouse

A

Chester is preparing the estate tax return, Form 706, for his deceased brother John. John died in December of the current year. Which of the following will NOT be included in John's gross estate? A) Real estate tat will be passed to John when his parents die B) Stocks and bonds owned by John at his death C) Land that John had signed a contract to sell, but the sale of which was not completed. D) Property jointly owned by John and his spouse

A

Ed and Donna were married. Ed had established a trad IRA to which he made contributions and had taken no distributions. The total value of the IRA was $50,000., of which $20,000 was nondeductible contributions. As the spousal beneficiary, which of the following applies to Donna? A) Ed's $20,000 basis in the IRA may be treated as basis to Donna B) When Donna receives the distribution, she may not roll it over to her own traditional IRA C) Donna must begin receiving periodic distributions by December 31 of the fifth year following Ed's death D) Donna must pay a 10% penalty on the funds in the IRA if she revives an immediate distribution after Ed's death

A

For the current year, for purposes of the Earned Income Credit, which of the following amounts qualifies as earned income? A) Earnings from self-employment B) Excluded combat-zone pay C) Unemployment comp D) Value of meals or lodgings provided by an employer for the convenience of the employer

A

Form 706, was filed for the estate of John Doe. The gross estate tax was $250,000. Which of the following items cannot be credited against the gross estate tax to determine the net estate tax payable? A) Credit for marital deduction B) Credit for gift taxes C) Credit for foreign death taxes D) Credit for tax on prior transfers

A

If a person died in 2019, an estate tax return must be filed if the value of the gross estate at the date of death was more than: A) $11,400,000 B) $11,180,000 C) $5,450,000 D) $5,490,000

A

In which of the following circumstances would a gift tax return be due? A) Check for $25,000 to son B) Transfer of stock valued at $30,000 to spouse C) Payment of a friend's $16,000 tuition expense D) None of the above

A

Jane acquired an acre of land as a gift. At the time of the gift, the acre had a FMV of $20,000. The donor's adjusted basis in the land was $15,000. No gift tax was paid on the gift. No events occurred to increase or decrease her basis in the property. Jane later sold the acre for $10,000. What is Jane's gain or loss on the sale? A) $5,000 loss B) $10,000 loss C) $0 D) $10,000 gain

A

Jerry received 2 acres of land valued at $10,000 as a gift. The donor's adjusted basis was $12,000. Jerry subsequently sold the land for $20,000. For purposes of computing his gain, what is Jerry's basis in the land? A) $12,000 B) $10,000 C) $8,000 D) $2,000

A

John and Mary reinvested $4,000 of MF dividends and $5,000 of CD interest, corp stock dividends of $12,000 that they received and spent, and interest of $2,000 that had accrued on a loan to a friend was not paid until the following year. What is the amount of interest and dividends currently taxable to them? A) $21,000 B) $14,000 C) $16,000 D) $23,000

A

John has a heart ailment. On his doctors advice, he installed an elevator in his home so that he would not have to climb stairs. The cost of the elevator was $7,000. An appraisal shows thet the elevator increased the FMV of the home by $5,000. John can claim a medical deduction of: A) $2,000 B) $5,000 C) $7,000 D) $0

A

Listed below are the gifts Joan made during 2019: - $25,000 gift to a nonprofit home for the underprivileged - $15,000 gift to her daughter - $15,000 in contributions to a historical museum - $40,000 gift to her spouse What is the amount of taxable gifts to be reported on Form 709 for 2019? A) $0 B) $40,000 C) $55,000 D) $80,000

A

Maggie trades stock in ABC company with an adjusted basis of $7,000 for DEF Co stock with a FMV of $10,000. She had no other transactions during the year. What is the amount realized and what is her gain or loss on this transaction? A) The amount realized is $10,000, and the amount of gain is $3,000 B) The amount realized is $10,000, and the amount of loss is $3,000 C) The amount realized is $7,000, and the amount of gain is $4,000 D) The amount realized is $17,000, and the amount of gain is $3,000

A

Mary bought an apartment building on January 1, 1986, for $200,000. The building was depreciated using the straight-line method. On December 31 of the current year, the building was sold for $210,000 when the asset basis net of accumulated depreciation was $140,000. On her current-year tax return, Brown should report: A) Section 1231 gain of $70,000 B) Ordinary income of $70,000 C) Section 1231 gain of $60,000 and ordinary income of $10,000 D) Section 1231 gain of $10,000 and ordinary income of $60,000

A

Mr and Mrs. Garden filed a joint return for the year. Mr. Garden received $8,000 in SS and Mrs. Garden received $4,000. Their income also included $10,000 taxable pension income and interest income if $2,000. What part of their SS will be taxable? (The base amount for MFJ is $32,000 for the year) A) $0 B) $6,000 C) $24,000 D) $12,000

A

Mr. Hines received a $6,200 grant from a local university for the fall of the current year. Mr. Hines was a candidate for a degree and was required to be a research assistant, for which services he received payment under the grant. The $6,200 grant provided the following: Tuition $3,600 Books and supplies $500 Pay for services as research assistant $2,100 Mr. Hines spent the entire $6,200 on tuition, books, and supplies. What amount must Mr. Hines include in his income for the current year? A) $2,100 B) $2,600 C) $3,600 D) $6,200

A

Mr. Park died on December 1 of the current year. The alternate valuation method was not elected. The assets in his estate were valued as of the date of death as follows: - Home $5,400,000 - Car $30,000 - Stocks, bonds, and savings $350,000 - Jewelry $25,000 - Dividends date of record 11-15, not paid as of 12-1 $5,000 - Accrued interest on savings as of Dec 1. $2,500 - Life insurance $300,000 What is the amount of Mr. Park's gross estate? A) $6,112,500 B) $6,110,000 C) $6,105,000 D) $5,812,500

A

Mrs. X made deductible contributions to a traditional IRA for several years. She decides to withdraw $10,000 from one of her accounts in 2019. She is 61 years old. How does this transaction affect her tax return for 2019? A) Mrs. X must report the entire $10,000 B) Does not have to report anything because > 59.5 years old C) Does not have to report anything because its not a Roth IRA D) Must report all $10,000, but can elect to use the 10-year option

A

Ms. Maple, a single woman age 65, retired in 2019. Prior to her retirement, she received a $6,000 bonus plus a $4,850 in wages. After her retirement, she received $9,000 in Social Security benefits. Which of the following is true? A) Ms. Maple does not have to file a 2019 income tax return B) Ms. Maple has to file a 2019 income tax returns C) Ms. Maple has to file a 2019 income tax return but may exclude the $6,000 D) Ms. Maple has to file a 2019 income tax return but may exclude the $9,000 in Social Security benefits from income.

A

Ms. N, who is married, wants to file as HOH for the current year. Which of the following will prevent her from filing as HOH? A) Her spouse lived in her home for the final 6 months of the current year. B) She and her husband did not commingle funds for support purposes. C) She paid more than half the cost of keeping up her home for the tax year. D) Her home was, for more than 6 months of the year, the principle home of her son, whom she can claim as a dependent.

A

Nancy's books and records reflect the following for the year. Which transactions would require filing Form 709, United States Gift Tax Return? A) Gratuitously transferred a vehicle with a FMV of $22,000 to her fiancé a month before they were married B) Donated $16,000 to a qualified political organization C) Paid $22,000 to St. Francis Hospital for her aunt's unreimbursed medical expenses D) Paid $16,000 to State University for her brothers tuition

A

On Feb 10 of the current year. Rose was in a car accident on her way to work. The doctor made her stay home for 6 months due to injuries. On Feb 25, she filed a lawsuit. On July 20, Rose returned to work. On Dec 15, the lawsuit settled and Rose received: Compensation for lost wages $25,000 Personal injury damages awarded (not punitive) $40,000 How much of the settlement must Rose include in ordinary income on her current year tax return? A) $0 B) $25,000 C) $40,000 D) $65,000

A

Ruby Diaz is a commissioned salesperson. She is a cash-method taxpayer. At the end of the current year, her earnings for the year were $75,000. During the year, she also received $10,000 in advances on future commissions and repair $8,000. How much income should Ruby report for the current year? A) $77,000 B) $75,000 C) $87,000 D) $85,000

A

To qualify for a medical expense deduction as your dependent, a person must be your dependent either at the time the medical services were provided or at the time you paid the expenses. A person generally qualifies as your dependent for purposes of the medical expense deduction if: A) The person would qualify as a dependent except for the amount of gross income B) The person was a foreign student staying briefly at your home C) The person is your siblings unmarried adult child D) The person is the unrelated caregiver for your elderly parents

A

Which IRA distributions made to a taxpayer before age 59.5 are NOT subject to the 10% penalty tax? A) Distributions made to pay medical expenses in excess of 7.5% of AGI B) Distributions up to $100,000 used for qualified first-time homebuyer expenses C) Distributions used for qualified day care expenses for the taxpayers child D) All IRA distributions made to a taxpayer < 59.5 years old are subject to the 10% penalty tax

A

Which of the following entities are required to file Form 709, United States Gift Tax Return? A) An individual B) An estate or trust C) A corporation D) An individual, an estate or trust, and a corporation

A

Which of the following expenses are deductible on Form 1040 School A in 2019? A) Gambling losses up to the amount of winnings B) Fees paid to a broker to collect taxable bond interest or dividends on shares of stock C) Repayment $3,000 of ordinary income that had been included in taxable income in an earlier year D) Damages paid to a former employer for a breach of employment contract, when the damages are attributable to pay received from that employer.

A

Which of the following is NOT rental income in the year received? A) Security deposit, equal to 1 month rent, to be refunded at the end of the lease if the building passes inspection B) Payment to cancel the remaining lease C) Repairs paid by the tenant in lieu of rent D) January 2020 rent received December 2019

A

Which of the following statements concerning the consequences of income being classified as "income in respect of a decedent" is true? A) It receives no step up in basis upon the decedents death B) It is all treated as ordinary income to the recipient C) It is all taxable to the decedents estate D) It must be included in the decedents final return

A

Which of the following statements is NOT a requirement that must be met before married taxpayers filing jointly can elect to exclude up to $500,000 of the gain on the sale of a personal residence? A) Either taxpayer must be age 55 or over at the date of the sale. B) Either spouse must have owned the home as a principal residence for 2 of the 5 previous years C) Both spouses must have used the home as a principal residence for 2 of the 5 previous years D) Neither spouse is ineligible for the exclusion by virtue of a sale or exchange of a residence within the last 2 years

A

On June 1, 2019, Kirk received a gift of income-producing real estate having a donor's adjusted basis of $50,000 at the date of the gift. The FMV of the property at the date of the gift was $40,000. Kirk sold the property for $46,000 on August 1, 2019. How much gain or loss should Kirk report for 2019? A) No gain or loss B) $4,000 STCL C) $4,000 ordinary loss D) $6,000 STCG

A (Since it is resold at more than the FMV on the date of the gift but less than the donor's basis on the date of the gift, no gain or loss is recognized)

In 2017, Mary purchased 10 shares of Acom Corp common stock fo $100 per share. In 2018, Mary purchased an additional 10 shares of Acom Corp common stock for $200 per share. At the end of 2019, Acom Corp declared a 2-for-1 common stock split. What is Marys total basis in her Acom CS? A) $3,000 B) $4,000 C) $5,000 D) $6,000

A (10 shares * $100) / (10 shares * $200)

Dennis and Martha sell their lake house (which they have owned for 10 years and spend each summer in) for $250,000. Their original cost was $175,000, and they had improvements of $25,000. They have never used the house as a business or rental property. They agreed to take $50,000 down and finance the balance. Monthly payments are to begin next year. How much capital gain must they report in the year of sale? A) $10,000 B) $50,000 C) $15,000 D) $0

A (GP % 20% * $50,000)

Steve and Karen, a married couple. Purchased a new residence on May 1, 2017. They sold their prior home on July 1, 2018, and realized a gain of $250,000, all of which they excluded, They sold the new home on August 1, 2019, because they wanted to live in a condo. What is the maximum amount of the gain they may exclude in 2019? A) $0 B) $135,417 C) $270,833 D) $500,000

A (The max amount of gain that may be excluded when a personal residence is sold within 2 years)

John donated $100 to United Way, $200 to veterans if foreign wars, and $300 to his neighbor whose home was destroyed ny a tornado. How much of a charitable cont. can John deduct? A) $300 B) $400 C) $500 D) $600

A ($100 united way + $200 veterans)

Rev. Brown is a full time minister at the Downtown Church. The church allows her to use the parsonage that has an annual fair rental value of $4,800. The church pays an annual salary of $13,200, of which $1,200 is designated for utility costs. Her utility costs during the year were $1,000. What is Rev. Brown's income for SE tax purposes? A) $18,000 B) $13,200 C) $12,200 D) $13,400

A ($13,200 salary + 4,800 fair rental value)

Mrs. Lynn has AGI of $30,000. She donates $9,000 to her church, $10,000 to qualified public charities, and a painting she has owned for 8 years with a FMV of $16,000 and a $4,000 basis to her city library. What is the amount Mrs. Lynn can deduct as a charitable cont? A) $18,000 B) $19,000 C) $23,000 D) $35,000

A ($30,000 AGI * 60% CC limit)

For purposes of claiming the Child Tax Credit, which of the following is NOT true for a qualifying child? A) Child must be under age 16 at the end of the year B) Child must be a citizen or resident of the U.S. C) Child must be claimed as your dependent D) Child may be an eligible foster child

A (CTC must be under the age of 17, not 16)

A taxpayer paid $7,000 of interest in 2019 on the mortgage given upon acquiring her first home. The taxpayer received a mortgage credit certificate (MCC), which specifies a 30% credit rate. How much of a credit is the taxpayer entitled to in 2019? A) $2,000 B) $2,100 C) $5,000 D) $7,000

A (Limited to 2,000)

During 2019, Ted, a self employed taxpayer, drives his car 5000 miles to visit clients, 10,000 miles to get to his office, and 500 miles to attend business-related seminars. He also spent $300 for airfare to another business seminar and $200 for parking at his office. Using $0.58 per mile, what is his deductible transportation expense? A) $300 B) $3,490 C) $3,690 D) $9,290

B

Each other the following would be one of the requirements for a payment to be alimony under instruments executed after 1984 but before 2019 EXCEPT A) Payments are not made to and from spouses in the same household at the date of payment B) Payments are from spouses filing a joint return C) Payments are not designated in the instrument as not alimony D) Payments are cash equivalents

B

Edwin gave his grandson Todd $30,000. Todd is 15 years old and lives with his parents. Which of the following statements regarding the generation-skipping transfer tax is true? A) Because the gift is subject to the generation-skipping transfer tax, it is not subject to the regular gift tax. B) The gift is subject to both the regular gift tax and the generation-skipping transfer tax.

B

Employer contributions to an Archer MSA are: A) Not included in the income of the employee and not included on the employees W-2 B) Not included in the income of the employee unless made through a cafeteria plan and included on the employee's W-2 C) Included in income D) None of the above

B

Generally, which of the following is a prohibited transaction concerning your traditional IRA? A) Withdraw funds for qualified higher education expenses B) Pledge your IRA account as security for your mortgage C) Withdraw funds for qualified medical expenses D) Withdraw funds to purchase your first home

B

Herb files single and had the following capital gains and losses in 2019: - $500 loss on the sale of stock he purchased on January 14, 2019, and sold on August 10, 2019 - $5,000 loss on the sale of stock purchased October 1, 2018, and sold November 1, 2019 - $1,000 gain on the sale of a vacant lot held for 5 years How should Herb's capital gains and losses be initially reported on Schedule D? A) $4,500 LT loss B) $4,000 LT loss and $500 ST loss C) $4,500 LT loss and $1,000 ST loss D) $5,500 LT loss and $1,000 ST gain

B

If 100 shares of stock are purchased on Feb 14, 2019, what is the earliest date on which the stock can be sold and the gain or loss can qualify for the LT holding period? A) August 14, 2020 B) February 15, 2020 C) February 14, 2020 D) August 15, 2020

B

In December 2016, Gall worked for ABC Co. and participated in its retirement plan. On 2-1-2019, Gall was employed by XYZ Corp, which has a qualified retirement plan. On 3-1-2019, the ABC Co plan administrator distributed to Gall her vested share of the plan. Gall was 42 years old at the time of the distribution. Which of the following will allow Gall to avoid paying taxes and penalties on her withdrawal? A) Deposit the plan funds in a local bank B) Contribute the distribution to the XYZ Corp. plan within 60 days C) Donate the plan funds to a charity D) None of the above

B

In December, Mr Stone cashed qualified series EE US Savings bonds, which he had purchased 10 years ago. The proceeds were used for his sons college education. All of the following statements are true concerning the exclusion of interest received EXCEPT: A) He cannot file as MFS B) Eligible expenses include room and board C) If proceeds are more than the expenses, he will be able to exclude only part of the interest. D) Before he figures his interest exclusion, he must reduce his qualified higher educational expenses by certain benefits

B

In May of the current year, Auto Inc sold land with a basis to Auto of $10,000 to Jack, its 60% shareholder, for $8,000. In July, Jack sold the land to an unrelated party for $11,000. What is the amount of Jack's recognized gain? A) $0 B) $1,000 C) $2,000 D) $3,000

B

In meeting the gross income test for claiming his father as a dependent, Doug considered the income received by his father. This income included gross rents of $4,000 (expenses were $2,000), municipal bond interest of $1,200, dividends of $1,400, and Social Security of $4,000. What is Doug's father's gross income for dependency test purposes? A) $3,400 B) $5,400 C) $9,400 D) $8,600

B

In the current year, Sam Dunn provided more than half the support for his wife, his uncle, and his cousin. Sam's wife was the only relative who was a member of Sam's household. None of the relatives had any income, nor did any of them file an individual or a joint return. All of these relatives are U.S. citizens. Which of these relatives should be claimed as a dependent or dependents on Sam's current year joint return? A) Only his wife B) Only his uncle C) Only his cousin D) His wife, his father's brother, and his cousin

B

Joe purchased 100 additional shares of stock for $30 each. On the dividend pmt date, the FMV of the shares was $32 per share. What must Joe report? A) $0. B) $200 as ordinary income, based on the difference between the amount Joe paid and the FMV of the shares C) $200 of STCG income D) $200 of LTCG income

B

John made the following transfers during tax year 2019: - His neighbor in the amount of $19,000 - His nephew in the amount of $16,000 - His uncle in the amount of $17,000 All of the transfers are gifts that qualify for the annual exclusion. John files one Form 709. What is the total annual exclusion amount for gifts listen on John's 2019 Form 709 filing? A) $52,000 B) $45,000 C) $15,000 D) $14,000

B

Johnny has been divorced for 5 years. He failed to make his alimony and support payments. The court ordered him to pay $1,500 as interest on the bank alimony and support payments. He paid interest of $1,000 on a car loan, $2,500 on his outstanding credit card balance, $6,000 on a home equity loan that was not used to substantially improve his residence and $10,000 on his mortgage. Other interest payments amounted to $2,500 on various appliance loan payments. How much is Johnny's deductible interest? A) $18,500 B) $10,000 C) $23,500 D) $17,500

B

Shannon and Dan Smith purchased Section 1244 (small business) stock in 2019. Which of the following statements is true? A) If they incurred a loss on Section 1244 stock, they can deduct the loss as a capital loss rather than as an ordinary loss. B) If the stock becomes worthless, they can claim an ordinary loss limited to $50,000 individually of $100,000 together on a joint return, per year. C) If the loss is $60,000 and Shannon does not have any other losses, Dan can only deduct $50,000 as ordinary loss on the joint return. D) If they incurred a gain on Section 1244 stock, they should treat it as ordinary gain..

B

When Joe's financial institution offered substantial discount of $5,000 for early payment of his home mortgage, he borrowed from a family member to take advantage of this offer. How should Joe treat this discount transaction? A) No actions or reporting required B) Report $5,000 on line 8, Other income, on Form 1040 (Schedule 1) C) Reduce his home mortgage interest deduction by $5,000 D) Report $5,000 original issue discount as interest income

B

Which dependent relative does NOT have to live in the same household as the taxpayer claiming head of household status? A) Daughter B) Mother C) Uncle D) Sister or brother

B

Which of the following does NOT have to be included in gross income? A) Unemployment comp B) Damages from personal injury suit involving back injuries C) Prize from church raffle D) Free tour from travel agency for organizing a group of tourists

B

Which of the following is NOT a characteristic of a skip person as it pertains to the GSTT tax? A) A natural person B) A person only one generation below the generation of the donor C) A person two or more generations below the generation of the donor. D) A donee of a gift

B

Which of the following is NOT a deductible transportation expense for a SE taxpayer? A) Cost of round trip transportation between an individual's home and a temporary training site in the same city B) Cost of round trip transportation between an individual's home and office if the taxpayer is conducting business on his or her car phone C) Cost of round trip transportation between an individuals qualifying office in the home and his or her client's place of business D) Cost of round trip transportation between an individual's office and his or her client's place of business

B

Which of the following is NOT considered a day of personal use of a dwelling unit for determine if it is used as a home? A) A day on which the dwelling unit is rented to a relative at a fair rental price B) A day on which a related person uses the dwelling unit as her main dwelling and pays fair rental value C) A day on which an unrelated person uses the dwelling unit as her main dwelling and pays less than fair rental value D) A day on which an unrelated co-owner uses the dwelling unit for personal purposes

B

Which of the following items are included in QBI? A) Pre-2018 previously disallowed losses or deductions that are allowed in the current year. B) Allocable losses associated with a qualified trade or business. C) Short-term capital losses D) Guaranteed payments paid for services rendered with respect to a qualified trade or business

B

Which of the following statements regarding gift splitting is true? A) The couple must have been married at the time the gift was given, but either or both spouses may be remarried during the year. B) The couple must have been married at the time the gift was given, and neither spouse may remarry during the year. C) The couple must be married at all times during the year.

B

Which of the following statements regarding the annual exclusion for gift taxes is true? A) The gift of a present interest to more than one donee as joint tenants qualifies for only one annual exclusion. B) A gift of a future interest cannot be excluded under the annual exclusion C) The annual exclusion amount for 2019 is $16,000 D) None of the above

B

Which of the following would disqualify points from being fully deductible in the year paid? A) The points were computed as a percentage of the amount of the mortgage B) The loan proceeds were used to purchase a second home C) The payment of points is common in your area D) The points are clearly stated on the settlement statement

B

With regard to excess contributions to an IRA, which of the following statements is false? A) A taxpayer may deduct fin gross income, in the first year available, the amount of the excess contribution in the IRA, from the preceding years up to the difference between the maximum amount that is deductible in the year and the amount actually contributed during the year. B) If the excess contribution for a year is not withdrawn by the date a taxpayer's return is due, the taxpayer is subject to an 8% tax. C) An excess contribution is the amount contributed to an IRA that is more than the smaller of the following amounts: (1) a taxpayer's taxable compensation or (2) $6,000 ($7,000 if age 50 or older)

B

With respect to an employer's reimbursement of employee business expenses, which of the following statements is NOT a requirement of an accountable plan? A) The expenses incurred by the employee must have a business purpose B) The reimbursement of business meal expenditures is limited to 50% of the amount incurred C) The employee must provide an accounting to the employer within a reasonable period of time D) The employee must return any excess reimbursement or allowance to the employer within a reasonable period of time

B

Juan received a gift of property from his uncle. When the gift was made in 2019, the property had a FMV of $100,000 and an adjusted basis to his uncle of $40,000. Gift tax on the transfer, completely paid by Juan's uncle, was $14,500. What is Juan's basis in the property? A) $40,000 B) $50,235 C) $60,000 D) $110,235

B (100,000 - 40,000 )/(100,000 - 15,000) * (14,500) (= 10,235) ($40,000 + 10,235)

All of the following are true about Health Savings Accounts EXCEPT A) A HSA can be a tax-exempt trust B) A HSA can be a custodial account set up with a U.S. financial institution C) The amount that may be contributed to a taxpayer's HSA does not depend on the nature of the taxpayer's coverage and age D) The taxpayer need not have the insurance for the whole year to contribute the full amount

C

All of the following concerning extension of time to file are correct EXCEPT: A) An automatic 6-month extension can be requested by filing Form 4868 B) If the required payment is made by credit card by the regular due date for the return, the return can be filed any time before the 6-month extension period ends C) Requesting an automatic 6-month extension before the regular due date for the return postpones the requirement to make payments of any tax due D) A U.S. citizen or resident who is on military or naval duty outside the U.S. on April 15 is given an automatic 2-month extension without the necessity of filing Form 4868

C

An employee who had had Social Security tax withheld in an amount greater than the maximum for a particular year may claim? A) Such excess as either a credit or an itemized deduction, at the election of the employee, if that excess resulted from correct withholding by two or more employers. B) Reimbursements of such excess from his or her employers if that excess resulted from correct withholding by two or more employers C) The excess as a credit against income tax. If that excess resulted from correct withholding by two or more employers

C

Bernie is a self-employed accountant. He reported net income of $54,150 on his Schedule C. During the year, Bernie paid the following: $5,200 in child support, $5,000 in alimony (pre 2019), $6,000 in medical insurance premiums, SE tax of $7,650, and $2,000 to his IRA plan. What amounts are deductible in arriving at AGI? A) $22,025 B) $20,025 C) $16,825 D) $25,850

C

Carl died on June 1, 2019. After determining that an estate tax return will be required, his executor decided to use the alternate valuation date for valuing the gross estate. Which of the following dates will be the alternate valuation date? A) April 15, 2020 B) December 31, 2019 C) December 1, 2019 D) On or before the due date of the United States Estate Tax Return

C

Dave, age 40, had an IRA with.a $40,000 balance at the beginning of 2019. All of Daves contributions have been tax deductible. On 7-1-2019, Dave borrowed $20,000 from the IRA account. Which of the following would be a correct statement regarding the effects of this transaction? A) This would not be a prohibited transaction, provided that the loan called for periodic payments and an interest rate at least equal to the applicable federal rate. B) Dave would be required to include $20,000 in income as a distributions in 2019 C) Dave would be required to include $40,000 in income as a distribution in 2019

C

During the year, Dan had the following expenses for his rental house: 1. Replaced a screen in the storm door 2. Replaced the heating system 3. Sowed grass seed in some bare spots on the lawn 4. Built a detached two-car garage 5. Installed a new dishwasher 6. Bought a welcome mat for the front stoop Which of these items must be depreciated rather than deducted as an expense in his Schedule E? A) 1, 3, 4, and 5 B) 2, 4, 5, and 6 C) 2, 4, and 5 D) 3, 4, and 6

C

Each of the following situations would be considered a disposition of an installment obligation EXCEPT A) An installment obligation that you give as a gift. B) An installment obligation for which you accept part payment on the balance of the buyer's installment debt to you and forgive the rest of the debt. C) An installment obligation assumed by a new buyer at a rate of interest higher than the rate paid by the original buyer. D) An installment obligation that has become unenforceable.

C

Elsie had the following nonbusiness bad debts for the current year: Loan to sister-in-law to buy gifts, forgiven. $250 Loan to neighbor made in 2014 with a note. $1,500 Loan to son to pay college tuition $1,200 Back rent due from tenants for 3 months. $600 What is the amount Elsie may claim as nonbusiness bad debts for the current year? A) $600 B) $1,450 C) $1,500 D) $2,100

C

For 2018 and 2019, a married couple, paid health insurance premiums of $3,000 each year ($1,500/each). Malcom was self-employed and his net profit was $70,000 in 2018 and $80,000 in 2019. Julie was unemployed in 2018, but worked in 2019. She had the option to join a subsidized health plan for the family with her employer but declined. Since this is not deductible on Schedule C, what amount can they deduct elsewhere as a business expense on their 2018 and 2019 joint returns? A) 2018: $0; 2019: $0 B) 2018: $0; 2019: $3,000 C) 2018: $3,000; 2019: $0 D) 2018: $3,000; 2019: $3,000

C

For 2019, Jane is unmarried and paid more than half the cost of keeping up her home. All of the following dependents would qualify Jane to file as HOH except: A) Jane's grandson, who lived with her but was absent from her home for 9 months in 2019 while attending boarding school. B) Jane's father, whom she can claim as a dependent and whose main home for 2019 was a home for the elderly for which Jane paid more than one-half the cost. C) Jane's married son, who could properly be claimed as a dependent on his fathers return only. D) Jane's sister, whom Jane can claim as a dependent and who lived with Jane until she died in May 2019.

C

For a pre 2019 divorce, the recapture rule for alimony may apply to a taxpayer if the taxpayers alimony payments decrease or cease during the first: A) 5 years B) 4 years C) 3 years D) 2 years

C

For calendar year 2019, if a gift tax return is required to be filed and the donor is not decreased, what is the due date of the return excluding extensions? A) Within 75 days of making the gift B) On or before December 31, 2019 C) No earlier than January 1, 2020, and no later than April 15, 2020 D) Within 180 days of making the gift

C

Form 709, United States Gift Tax Return, is required to be filed for: A) A transfer of a present interest that is not more than the annual exclusion ($15,000). B) A qualified transfer for educational or medical expenses C) A transfer of a future interest that Is not more than the annual exclusion ($15,000). D) A transfer to your spouse that qualifies for the unlimited marital deduction

C

Frank and Anne's home was completely destroyed by a fire in a federally declared disaster. They had no insurance. Which of the following forms would they report their loss? A) Form 4684, Casualties and Thefts, and Form 1040 as an adjustment to AGI B) Schedule A C) Form 4684, Casualties and Thefts, and Schedule A D) Form 4684 Casualties and Thefts

C

Gene had the following transactions. How much, should be included on his return? $200 credited to his savings account. He did not withdrawal it. $2,000 withheld from his paycheck by his employer, to satisfy garnishments by his doctor $1,000 discount from his bank when he paid off his mortgage 5 years early $500 check received from an individual for one of Gene's drawings. Gene did not cash or deposit the check until 2020. A) $1,700 B) $2,700 C) $3,700 D) $3,200

C

Generally, an IRA contribution is limited to the lesser of $6,000 in 2019 or the taxpayer's compensation. However, which of the following items is NOT treated as compensation for this limitation? A) Wages earned by an individual under the age of 18 B) Taxable alimony C) Self-employment loss D) Commissions

C

Holly and Harp Oaks were divorced in 2018. The divorce decree was silent regarding dependency for their 12 year old daughter, June for 2019. Holly has legal custody of her daughter and did not sign a statement releasing the dependent claim. Holly earned $8,150, and Harp earned $80,000. June had a paper route and earned $5,150. June lived with Harp 4 months of the year and with Holly 8 months. Who may claim the dependent for June in 2019? A) June may, since she had gross income over $4,200 and files her own return. B) Since June lived with both Holly and Harp during the year, they both may claim her as a dependent. C) Holly may, since he earned more than Holly and therefore is presumed to have provided more than 50% of June's support.

C

If your Social Security benefits are considered taxable, the maximum percent of net benefits received that can be included in income is A) 0% B) 50% C) 85% D) 100%

C

In 2016, Tony received a gift of 200 shares of mutual funds stock. The stock was worth $20,000 when Tony received it. The donor had originally paid $10,000 for the stock when he bought it in 2014. Tony sold the stock for $15,000. in 2019. What is Tony's basis in the stock, disregarding gift tax? A) $0 B) $20,000 C) $10,000 D) $15,000

C

In 2019, MaryAnn, a nonworking spouse, files a joint return with Jack, who is not covered by a pension plan at work. Their AGI is $50,000, and Jack plans to contribute $5,500 to a traditional IRA. MaryAnn, who is 51, wishes to contribute to an IRA. What is the maximum amount she can contribute? A) $6,000 B) $5,500 C) $7,000 D) $0

C

In 2019, Rusty paid $5,000 of interest on a qualified education loan. He is not claimed as a dependent by another taxpayer. What is the maximum deduction available to him for the education loan interest? A) $0 B) $2,000 C) $2,500 D) $5,000

C

In January of the current year, Mrs. Black purchased an office building and used office furnishings consisted of chairs, desks, and file cabinets. Of the purchase price, $900,000 was allocated to the office building and $50,000 was allocated to the used office furnishings. According to the General Depreciation System (GDS) under MACRS for depreciation, what recovery period must she use for the purchased items? A) 27 1/2 years for the entire asset, building and furnishings B) 39 years for the building and 5 years for the used office furnishings C) 39 years for the building and 7 years for the used office furnishings

C

In an installment sale, if the buyer assumes a mortgage that is greater than the installment sale basis of the property sold, A) There is never a profit or a loss B) The transaction is disqualified as an installment sale C) The gross profit percentage is always 100% D) The gain is treated as STCG

C

In computing the gain or loss from a sale or trade of property, which statement below best describes the amount you realize? A) The money you actually receive B) The FMV of the property on the transaction date C) Everything you receive for the property D) The value of any services you received

C

In order to qualify as an accountable plan for reimbursement of travel expenses, the employer plan must satisfy all of the following EXCEPT A) The expenses have a business connection B) The employee must make an adequate and timely accounting to the employer C) The employer must pay a per diem for meals D) The employee must timely return any excess reimbursement

C

Jean Blanc, a citizen and resident of Canada, is a NHL player for a U.S. team. Under his contract, he received $68,500 for 165 days of play during the current year. Of the 165 days, 132 days were spent performing services in the United States and 33 playing hockey in Canada. What is the amount to be included in Jean's gross income on his Form 1040NR? A) $0 B) $34,250 C) $54,800 D) $68,500

C

Jean is a U.S. citizen living and working in France for all of 2019. She received wages of $150,000, dividends of $10,000 and alimony (pre 2019 divorce) of $20,000 in 2019. She decides to use the foreign earned income exclusion available to her and file Form 2555. What is the amount of Jean's foreign earned income before any limitations are applied? A) $0 B) $105,900 C) $150,000 D) $180,000

C

Jerry signed a 5 yr lease to rent space to a restaurant. That year the restaraunt paid Jerry $24,000 for the first year rent and $24,000 for the last years rent. Jerry reports his income using the accrual method. How much of the $48,000 is included on CY income? A) $24,000 B) $120,000 C) $48,000 D) $0

C

Jill and John, married filing jointly, have provided more than 50% of the support for two minor children and Jill's mother. The children each had interest income of less than $700. Jill's mother received a taxable pension of $2,750., dividends of $1,500, and interest of $1,000. How many dependents can the taxpayers claim on their 2019 tax return? A) 1 B) 3 C) 2 D) 0

C

Joe had a taxable gain on the sale of his main home, which could not be excluded on his 2019 tax return. He had no business use of the home. Which schedule does he need to submit to report the gain? A) Sch C B) Sch A C) Sch D D) Sch SE

C

John Smith, whose father died June 15, 2019, is the executor of his fathers estate. John is required to file a final income tax return for his father. When is the return due if he does not file for an extension? A) October 15, 2019 B) March 15, 2020 C) April 15, 2020 D) June 15, 2020

C

Julie and Frank were married on March 10. Both are full time teachers, and together they incurred $350 in expenses for books and supplies used in the classroom and were not reimbursed by the school. What amount are they entitled to deduct as an education expense on their joint income tax return? A) $175 B) $250 C) $350 D) $500

C

Kathy paid $8,000 of interest on qualified education loans during 2019. She is not claimed as a dependent by another taxpayer. Since she graduated from med school 7 years ago, she has faithfully paid the minimum interest due each month. What is the maximum deduction available to her for education loan interest in 2019? A) $0 B) $500 C) $2,500 D) $8,000

C

Kathy rented out her summer home for 80 days and used it personally for 20 days. She paid $1,000 for repairs and $2,000 for utilities. Rental income was $8,000. What was Kathy's net rental income? A) $0 B) $5,000 C) $5,600 D) $8,000

C

Kiran brought stock in the Big Bang Corp in 2014 for $2,000. In 2018, Kiran received a return of capital distribution of $100 as a partial return on her investment. In 2019, Kiran sold the stock for $3,000. Her basis in the stock is: A) $3,000 B) $2,100 C) $1,900 D) $2,000

C

Larry purchased stock in 2014 for $100. During 2017, he received a return of capital of $80 on this stock. During 2019, he received another return of capital of $30. Larry had no other stock transactions in 2019. What amount should he report on his 2019 income tax return, and what is his basis in the stock at the end of 2019? A) $30 capital gain, $100 stock basis B) $30 dividend income, $100 stock basis C) $10 capital gain, zero stock basis D) $10 dividend incoe, zero stock basis

C

Marg is fully vested. She will receive SS benefits at retirement but has no other retirement plan coverage. Her present and last employers have not had retirement plans available. In 2019, she files as single, and her earnings are $67,000. Also in 2019, she contributes $6,000 to a traditional IRA. How much of the $6,000 contribution may she deduct? A) $0 B) $4,200 C) $6,000 D) $1,800

C

Mark owned 100% of the stock in Gathers Corp. In 2019, Gathers Corp sold a computer with an adjsusted basis of $5,000 and a FMV of $8,000 to Mark's Uncle Seth for $4,000. What is the amount of Gathers Corp's deductible loss on the sale of this computer in 2019? A) $(4000) B) $(3,000) C) $(1,000) D) $0

C

Mr and Mrs Apple received the following: - $200 in interest on their bank acct - $2,000 in interest received as a beneficiary in a trust - $100 in interest on a bond issued by the state of Georgia - $1,000 bond interest, city of ATL municipal bond How much is taxable interest income must they report? A) $3,300 B) $0 C) $2,200 D) $1,300

C

Mr. H is a foreign student studying for a degree in the United States. There is no income tax treaty between his country and the US. During the 9 months of the school year, Mr. H is employed part-time by a corporation incorporated in his home country doing business in the United States. During summer vacation, Mr. H returns home, where he is employed by the same country. Which of the following statements is true regarding US taxes? A) All income is taxable on a U.S. tax return B) All income is excludable, and filing a U.S. tax return is not required C) Only income earned for services in the United States is taxable D) All income is taxable on a U.S. tax return, and credit is allowed for foreign taxes pain on his summer income.

C

Which of the following is NOT a requirement you must meet to claim HOH filing status? A) Your spouse did not live in your home during the last 6 months of the tax year. B) You paid more than half of the cost of keeping up your home for the entire year. C) Your home was the main home of your foster child for the entire year. D) You are unmarried or considered unmarried on the last day of the year.

C

Which of the following is earned income for Earned Income Credit purposes? A) Unemployment compensation B) Alimony C) The wages of a minister who has an exemption from self-employment tax. D) The wages of an inmate working in the prison laundry

C

Which of the following is the depreciable basis in rental property that is placed in service immediately upon receiving it as a gift if the donor's basis was more than the FMV of the property? A) The FMV on the date of the gift plus or minus any required adjustments to basis B) The FMV of the property on the date of conversion to rental property C) The donor's basis of the property plus or minus any required adjustments to basis D) All of the above

C

Which of the following is true regarding the filing of Form 4868, "Application for Automatic Extension of Time to File U.S. Individual Income Tax Return? A) Filing Form 4868 provides an automatic 2-month extension of time to file and pay income tax. B) Any U.S. citizen who is out of the country on April 15, 2020, is allowed an automatic 6-month extension of time to file his or her 2019 return and pay any federal income tax due. C) Interest is charged on tax not paid by the due date of the return even if an extension is obtained. D) Electronic filing cannot be used to get an extension of time to file.

C

Which of the following items are included in a decedent's gross estate? - The decedent's IRA, where the decedent's spouse is the named beneficiary. - A checking account with the decedent's daughter as a joint return. The daughter's funds were used to set up the account. - Assets held in the decedent's revocable grantor trust. A) All of the assets are included in the decedent's estate. B) The IRA and checking account are included in the decedent's estate. C) The IRA and the assets in the revocable grantor trust are included in the decedent's estate. D) None of the above

C

Which of the following items may be considered alimony for pre-2019 divorce? A) Noncash property settlement B) Payments you made under a written separation agreement for the mortgage and real estate taxes on a home you owned by yourself and in which your former spouse lived rent-free C) Payments made to a third party on behalf of the former spouse for the former spouse's medical expenses. D) Payments made for the 3-month period after the death of the recipient spouse

C

Which of the following statements about qualified business income (loss) in relation to QBID is correct? A) If the net amount of qualified income, gain, deduction, and loss is > 0, the deduction must be carried over to the next year. B) If the net amount of qualified income, gain, deduction, and loss is < 0, the loss must be carried back to the prior year. C) If the net amount of qualified income, gain, deduction, and loss is < 0, the loss must be carried over to the next year D) If the net amount of qualified income, gain, deduction, and loss is always > 0.

C

Which of the following statements concerning gift splitting is false? A) To qualify for gift splitting, a couple must be married at the time the gift is made to a third party. B) Both spouses must consent to the use of gift splitting. C) For gift tax purposes, a husband and wife must file a joint income tax return to qualify for the gift splitting benefits

C

During 2019, Dave gave his daughter Joan the following items: stock with a FMV of $42,000 and an adjusted basis of $45,000, a boat with a FMV of $5,000 and an adjusted basis of $3,000, and a print with a FMV of $12,000 and an adjusted basis of $5,000. What is the gross amount of gifts includible in Dave's gift tax return for 2019? A) $50,000 B) $53,000 C) $59,000 D) $62,000

C (42,000 + 5,000 + 12,000)

For the current year, Gannon Corp had US taxable income of $500,000, which includes $100,000 from a foreign division. Gannon paid $45,000 of foreign income taxes on the income of the foreign division. Assuming Gannon's US income tax for the current year before credits is $170,000, its max Foreign Tax Credit for the current year is: A) $9,000 B) $45,000 C) $34,000 D) $136,000

C (100,000/500,000 * 170,000 = 34,000)

Keith and Marge had AGI of $100,000. They had real estate taxes of $4,000, mortgage interest of $12,000, home equity loan interest of $6,000 used to substantially improved the residence, automobile loan interest of $3,000, second home mortgage interest of $4,000, and credit card interest of $2,000. The total allowable interest deductible is: A) $31,000 B) $24,000 C) $22,000 D) $18,000

C (12,000+6000+4000)

A taxpayer purchases rental property for $160,000. She uses $25,000 cash and obtains a mortgage for $135,000. She pays closing costs of $10,000, which include $5,000 in points on the mortgage and $5,000 for bank fees and title costs. Her initial basis in the property is: A) $35,000 B) $170,000 C) $165,000 D) $160,000

C (160,000 + 5,000 bank fees)

Kramer (age 63) established a trust and named his second wife, Theresa (age 50), as income beneficiary for 20 years. After 20 years, Kramer's son Trevor, (age 40) and nephew Bob (age 25) are to receive lifetime income interests. Trevor died 22 years after the trust was established, and Bob died 34 years after the trust was established. After the death of both Trevor and Bob, the remainder passes equally to Kramer's granddaughter Sara (age 20) and great-granddaughter Hope (age 1). Assuming both Sara and Hope were alive when Bob died, how many times is the generation-skipping transfer tax levied? A) Never B) Once C) Twice D) Three times

B

Marge sold her investment property in March 2019, at a gain of $50,000. Marge expects to owe $10,000 in additional income taxes on this sale. She had a tax liability of $900 for 2018 and will have no withholding for 2019. Marge's first estimated tax payment is due on what date? A) April 30, 2019 B) April 15, 2019 C) January 31, 2020 D) June 15, 2019

B

Mr. and Mrs. Able are investors in a mutual fund that is not part of a qualified retirement plan. For 2019, the fund notified them that it had allocated a $9,500 LTCG to their account. Of this total, only $4,500 was distributed in 2019. In addition, the fund paid $500 federal tax on their behalf. What is the correct amount of LTCG that the Ables should report on their 2019 tax return? A) $10,000 B) $9,500 C) $5,000 D) $4,500

B

Ms. B filed her Year 1 Form 1040 on April 15th, Year 2, but did not pay her tax liability of $3,000. On June 15, Year 3, she paid the tax in full. In Year 4, Ms. B discovered additional deductions for Year 1 that will result in a refund of $1,000. To receive her refund, Ms. B must file an amended income tax return by: A) April 15, Year 5 B) June 15, Year 5 C) April 15, Year 6 D) June 15, Year 6

B

Ms. Guys books and records reflect the following for 2019: Salary $57,000 Interest on money market acct $1,865 Deposit on pending sale of rental prop. $4,000 Interest on savings acct $200 A) $45,865 B) $58,865 C) $62,865 D) $63,065

B

Pastor Green received an annual salary of $20,000 as a full-time minister. The church also paid him $1,000 designated as a housing allowance to pay for his utilities. His church owns a parsonage that has a fair rental value of $6,000 in which he lives rent free. Neither the rental allowance nor the rental value of the parsonage is included in his W-2. All amounts are considered provided for services he renders as a licensed pastor. He is not exempt from self-employment tax. Compute the amount of Pastor Green's income that is subject to income tax on his return. A) $19,000 B) $20,000 C) $27,000 D) $26,000

B

In 2018, Ted and Alice had an alternative minimum tax liability of $19,000. This is the first tax year in which they have ever paid the AMT. They recomputed the AMT using only exclusion preferences and adjustments. This resulted in an $8,500 AMT liability. In 2019, Ted and Alice have a regular tax liability of $45,000. Their tentative minimum tax liability is $42,000. What is the Minimum Tax Credit carryover to 2020? A) $19,000 B) $16,000 C) $7,500 D) $0

C (2018: 19,000 - 8,500 = 10,500 MTC can be carried over to 2019) (45,000 - 42,000 = 3,000) (Therefore, the $10,500 MTC offsets the $3,000 excess, and a $7,500 MTC is carried forward)

Mr. R purchased a home for $200,000. He incurred the following additional expenses: - $200 fire insurance premiums - $500 mortgage insurance premiums - $400 recording fees - $250 owner's title insurance Compute his basis in the property. A) $201,350 B) $200,000 C) $200,650 D) $201,150

C (Cost $200,000 + recording fees $500 + owner's title insurance $250)

George had the following income and expenses: - Interest and dividend income $8,000 - Gross wages of $100,000 - Margin interest of $10,000 - Mortgage interest of $6,000 - Interest on a mobile home used as a second home $3,000 - Credit card interest of $2,000 How much interest can George deduct on Schedule A? A) $21,000 B) $18,000 C) $17,000 D) $19,000

C (Margin interest deduction limited to int/div income) ($8,000 margin interest + 6,000 + 3,000)

Liz incurred qualified adoption expenses of $15,000 in 2019, Liz's AGI for 2019 was $60,000. What is the amount of the credit Liz can take in 2019 for the adoption expenses she incurred? A) $0 B) $7,500 C) $14,080 D) $15,000

C (Max credit for 2019 is $14,080 per child. Liz's AGI is well below the threshold of $211,160)

For which of the following dependent children will a parent NOT be allowed a Child Tax Credit? A) 15 year old daughter B) 12 year old foster child C) 19 year old step child D) 16 year old grand child

C (must be under 17)

Mr and Mrs. X are both over age 65 and file MFJ. During the current year, they received $4,000 in nontaxable benefits from SS. This was their only nontaxable income. Their AGI was $12,000. How much can they claim as tentative credit for the elderly? A) $0 B) $225 C) $375 D) $525

C (the credit for the elderly or disabled allows a credit equal to 15%) (Initial base amount = $7,500 - 4,000 (SS) - 1,000 (AGI limit) = Adjusted amount $2,500 * 15% = $375)

AMT for individual adjustments and preferences. Which of the following is a preference or adjustment item for noncorporate taxpayers? A) Standard deduction B) Incentive stock options C) Tax-exempt interest on certain private bonds D) All of the above

D

Gordon, age 70, is retired and works part time as a security guard earning $8,000. He received $5,000 interest from savings account and $2,500 interest from tax-exempt municipal bonds. His SS benefits were $12,000 and his taxable pension was $6,000. To determine if any of his SS is taxable, Gordon should compare how much of his income to the $25,000 base amount? A) $27,500 B) $21,500 C) $19,000 D) $25,000

A

In year 1, Laura lent Pat $2,000. At that time, Pat signed an enforceable note agreeing to repay the $2,000. The loan was not made in the course of Laura's business. The loan had not been repaid in Year 3 when Pat died insolvent. For Year 3, Laura should report the nonpayment of the loan as a(n) A) Short term capital loss B) Long term capital loss C) Ordinary loss D) Other itemized deductions

A

John and Joanne are the sole support of the following individuals, all U.S. citizens, none of whom lives with them. None of these individuals files a joint return or has any gross income. - Jennie, John's mother - Julie, Joanne's stepmother - Jonathan, father of John's first wife How many dependents may John and Joanne claim on their joint return? A) 3 B) 2 C) 1 D) 0

A

Your divorce decree, which became final in 2018, says that you must pay $400/mo, of which $250 is child support. During 2019, you only pay $4,000, although in no month did you pay less than $250. What amount may you deduct and must your former spouse report as alimony? A) $1,000 B) $1,800 C) $2,500 D) $3,000

A ($250 * 12 = 3000) (4000-3000)

An ordained minister cannot exclude the following from gross income: A) Rental allowance B) Fees for marriages, baptisms, and funerals C) Fair rental value of parsonage D) Actual cost to provide a home

B

Maria had municipal bond interest of $6,000, CD interest of $4,000, reinvested corp bond interest of $2,000, mutual fund municipal bond interest of $7,000, and savings acct interest of $1,000. What is Marias Taxable income? A) $3,000 B) $7,000 C) $20,000 D) $16,000

B

For purposes of the rules that apply to vacation homes and other dwelling units, consider the following information; then compute Kim's allowable depreciation for the current year. - Days rented in current year 120 - Personal-use days 25 - Gross rents received $2,000 Expenses for the current year - Interest and taxes $1,000 - Repairs $500 - Depreciation $8,000 A) $0 B) $500 C) $6,400 D) $8,000

B (2000 - 1000 - 500 - 500)

James (33) and his wife Erica (31) started a Health Savings Acct on February 1, 2019. The annual health plan deducible is $10,000. What is the maximum amount that can be contributed to the HSA? A) $8,000 B) $6,417 C) $7,000 D) $10,000

C ($7000 limit)

Phillip is actively engaged in the oil business and owns several oil leases in the SW. He makes several trips to inspect the wells, and to consult about future wells to be drilled on these sites. As a result of these overnight trips, he paid the following: Plane fares. $4,000 Hotels $1,000 Meals $800 Entertaining lessees $500 Of the $6,300 in expenses incurred, he can claim as deductible expenses? A) $6,300 B) $5,800 C) $5,400 D) $5,000

C (4000 + 1000 + (800*50%)

All of the following are considered "constructive receipt" of income EXCEPT A) Lori was informed her check for services rendered was available, but she did not pick it up. B) Pierre earned income that was received by his agent but was not received by Pierre. C) Jacque bought a 9-month certificate of deposit in November of the current year. It earned $200 interest in the current year. She can withdraw the principal and interest in the current year if she pays a penalty of one month's interest ($100). D) A payment on a sale of real property was placed in escrow pending settlement, at which time title would be conveyed

D

During the current year, Mr. French received state unemployment benefits of $2,500 and $700 of supplemental unemployment benefits from a company-financed fund. The union paid Mr. French an additional $2,000 as strike benefits. What amount must Mr. French include in income for the current year? A) $2,500 B) $3,200 C) $4,500 D) $5,200

D

With regarding to claiming a dependent, all of the following statements are true EXCEPT: A) A person does not meet the member-of-the-household test if at any time during the tax year the relationship between the taxpayer and that person violates local law B) A person who died during the year, but was a member of your household until death, will meet the member-of-the-household test C) To meet the citizenship test, a person must be a U.S. citizen or resident, or a resident of Canada or Mexico D) In calculating a persons total support, do not include tax exempt income used to support the person

D

With respect to the disposition of an installment obligation, which of the following is false? A) No gain or loss is recognized on the transfer of an installment obligation between a husband and wife if incident to a divorce. B) If the obligation is sold, the gain or loss is the difference between the basis in the obligation and the amount realized. C) A gift of an installment obligation is considered a disposition. D) If an installment obligation is canceled, it is not treated as a disposition.

D

You purchased a heating, ventilating and air conditioning (HVAC) unit for your rental property on December 15th. It was delivered on December 28th and was installed and ready for use on January 2nd. When should the HVAC unit be considered placed in service? A) December 15 B) December 28 C) December 31 D) January 2

D

Barry is a lawyer. He owns 10 apartment buildings that are managed by his brothers real estate business. At the end of the year, the apartment buildings resulted in a $40,000 loss. Barry earned $80,000 in wages. His wife, Claire, earned $20,000 from her part-time job. Their other income included $5,000 in dividends from their mutual funds. They had no other income. How much of the rental loss can Barry use, assuming Barry actively participates in the apartment buildings? A) $0 B) $25,000 C) $40,000 D) $22,500

D ($105,000 AGI - $100,000 = $5,000) ($25,000 - ($5,000 * 50%) = $22,500)

All of the following individuals file their income tax returns as single. Which of is required to make estimated tax payments for 2019? A) Ms. Kirk, who had no tax liability for 2018, expects to owe $2,500 self-employment tax for 2019 (she has no withholding tax or credits). B) Mr. Brady, who had $2,000 tax liability for 2018, expects a $2,100 tax liability for 2019 and withholding of $1,900 C) Ms. Evans, who had no tax liability for 2018, expects a tax liability of $4,900 for 2019, with $3,500 withholding. D) Mr. Jones, who had a 2018 tax liability of $9,500, expects a tax liability of $12,400 for 2019, with $8,500 withholding

D

Emily bought 50 shares of stock in year 1 for $500. Year 2, she received a return of capital of $100. She received an additional return of capital of $50 in year 3. What must she report as LTCG on her tax return for year 3? A) $150 B) $50 C) $100 D) $0

D

Following are the FMV of Wald's assets at the date of death: - Personal effects and Jewelry $2,298,000 -Land bought by Walt with Wald's funds 5 years prior to death and held with Wald's sister as joint tenants with right of survivorship $11,490,000 The executor of Wald's estate did not elect the alternate valuation date. The amount includible as Wald's gross estate in the federal estate tax return is: A) $2,298,000 B) $7,660,000 C) $11,490,000 D) $13,788,000

D

Fred died in June of the current year, was entitled to receive a $10,000 acct fee that had not been collected before he died. The executor of Freds estate collected the full $10,000 in July. This $10,000 should appear in: A) Only the decedents final individual income tax return B) Only the estates fiduciary income tax return C) Only the decedents estate tax return D) Both the fiduciary income tax return and the estate tax return

D

Generally, which of the following expenses paid by Kathy, a salesperson, are deductible expenses? A) Chamber of commerce dues B) Cover charges for taking a client to a club C) Country club dues where she entertains clients D) Weekly meals with business associates at local restaurants where business is conducted and a business benefit is expected

D

In 2017, Paul received a boat as a gift from his father. At the time of the gift, the boat had a FMV of $60,000 and an adjusted basis of $80,000 to Paul's father. After Paul received the boat, nothing occurred affecting Paul's basis in the boat. In 2019, Paul sold the boat for $75,000. What is the amount and character of Paul's gain? A) Ordinary income fo $15,000 B) Long-term capital gain of $15,000 C) Long-term capital loss of $5,000 D) Neither a gain nor a loss

D

In 2019, The POTUS declared a federal disaster due to flooding in Minnesota. Lisa lives in that area and lost her home in the flood. What choice does she have regarding when she can claim the loss on her tax return? A) It must be claimed in 2018 if the return has not been filed by the date of the loss B) It must be claimed in 2019 if the loss is > the MAGI C) It may be claimed in 2020 if an election is filed with the 2019 return D) It may be claimed in 2018 or 2019

D

In determining which place of business constitutes an individuals tax home, all of the following factors are taken into account EXCEPT: A) Total time spent at each place of business B) The degree of business activity at each place of business C) The relative income earned at each place of business D) The amount of expense incurred at each place of business

D

In which of the following scenarios must a gift tax return be filed? A) You gave gifts to an individual totaling more than $15,000 B) You gave a gift of a future interest that was less than $15,000 C) You wish to split gifts with your spouse D) All of the above

D

In which situation would local transportation expenses NOT be deductible for a self employed taxpayer? A) From the regular or main job to the second job B) From the regular or main job to a temporary work location C) From the second job to a temporary work location D) From home (residence) to the second job on your day off from your main job

D

Susan received $4800 as interest income and also paid an early W/D penalty of $1200 on a CD she had at a local bank. Which of the following is the correct way for Susan to report these items on her tax return? A) Include $3600 interest in gross income B) Include $4800 interest in gross income C) Include $4800 interest in gross income and deduct $1200 as an itemized deduction D) Include $4800 interest in gross income and deduct $1200 as an adjustment to income

D

Sydney is an outside salesman in several states. His employers main office is in Milwaukee, but Sydney does not go there for business reasons. Sydneys work assignments are temporary, and he has no way of knowing the location of his future assignments. He often stays with a sister in Cleveland or a brother in Chicago over some weekends during the year, but he does not work in those areas. He does not pay his sister or brother for the use of the rooms. Which location is considered Sydney's tax home? A) Milwaukee B) Chicago C) Cleveland D) Sydney does not have a tax home

D

Tammy owns a house at the beach, which she rented from May 1 through October 31. During April, she spent 10 days there on vacation. In November, she spent 5 days at a friends mountain home and paid fair value. The same friend, also paid Tammy a fair rental price for using her beach house for 9 days in December. Also during November, Tammys grandson stayed at the beach house for 3 days for free. How many days would the beach house be considered to have been used for personal purposes when applying the rules to vacation homes and dwellings? A) 0 B) 10 C) 13 D) 22

D

The 50% limit on deductibility of business related expenses applies to which of the following: A) Meals while traveling away from home on business B) Employee's reimbursed expenses under an accountable plan C) Meals to customers at your place of business D) Meals while traveling away from home on business and meals to customers at your place of business

D

The Earned Income Credit is available to: A) Persons with a qualifying child B) Persons without a qualifying child C) Persons who are age 40 D) All of the above

D

The basis in property inherited from a decedent may be determined as follows: A) The decedent's basis plus any inheritance tax paid on the increased value. B) The FMV at the date of death. C) The FMV at an alternate valuation date. D) The FMV at the date of death or the FMV at an alternative valuation date

D

Tom is a sole proprietor of a small company. He recently negotiated a substantial sale. Following the signing of the contract, Tom took the clients to dinner at a cost of $150. What is Tom's deductible meal expense on his Schedule C? A) $112.50 B) $0 C) $150 D) $75

D

Tom, who is married, gave a vase worth $40,000 to his sister, Julie. Tom's basis in the vase is $10,000. What amount will Tom report as the value of the gift on Form 709? A) $10,000 B) $20,000 C) $30,000 D) $40,000

D

What amount of a decedent's taxable estate is effectively tax-free if the maximum applicable credit amount is taken? A) $0 B) $15,000 C) $4,505,800 D) $11,400,000

D

When can a minor's income be taxed at the ordinary and capital gain rates of estates and trusts or the parents marginal rate? A) When a child has any income and is under age 18 B) When a child has net unearned income regardless of his or her age C) When a child has unearned income and is under age 18 D) When a child has a net unearned income and is under age 18 with at least one living parent.

D

When preparing a current-year tax return, which of the following benefits are derived from the use of the previous year's return? I. Prevents gross mathematical errors II. Identifies significant changes III. Increases efficiency A) I and II only B) I and III only C) II and III only D) I, II, and III.

D

Which of the following amounts paid may be claimed as a credit on the estate tax return? A) Charitable contributions B) Generation-skipping transfer tax C) State death taxes paid D) None of the above

D

Which of the following are NOT other itemized deductions? A) Federal estate tax on income in respect of a decedent B) Gambling losses up to the amount of winnings C) Impairment related work expenses of persons with disabilities D) Safety deposit box expenses

D

Which of the following is NOT a payment deductible as alimony for pre-2019 divorces? A) Payments for life insurance premiums required by the divorce decree B) Payments for medical expenses of your spouse under the terms of the divorce decree C) Half of the mortgage payment on a home jointly owned with your ex-spouse when required by the divorce decree D) Payments for child support required by the divorce decree

D

Which of the following is NOT a qualified education expense for purposes of the student loan interest deduction? A) Tuition and fees B) Room and board C) Books, supplies, and equipment D) All of the above

D

Which of the following is NOT a qualifying student for purposes if the Lifetime Learning Credit? A) A student in a graduate program B) A part time student C) A student in a vocational program D) All of the above

D

Which of the following is NOT an adjustment to total income in arriving at AGI? A) Interest paid on student loans B) Portion of health insurance of self employed persons C) Certain contributions to a medical savings account D) Contributions to a Roth IRA

D

Which of the following is a correct statement of the events that may trigger a generation-skipping transfer tax? A) A taxable termination only B) A taxable distribution only C) A taxable termination or a taxable distribution but not a direct skip D) A taxable termination, a taxable distribution, or a direct slip

D

Which of the following is a false statement concerning use of the standard mileage rate in computing deductible transportation expenses? A) You may use up to four cars at a time in the business B) You must own or lease the vehicle C) You may use the vehicle for hire, such as a taxi D) You must use the vehicle over 50% of the time for business

D

Which of the following is compensation for the purposes of contributions to individual retirement accounts? A) Deferred compensation received B) Foreign earned income excluded from income C) Pension or annuity income D) Taxable alimony and separate maintenance

D

Which of the following situations would require the filing of Form 709? A) You and your spouse agree to split your gifts, which total $20,000 B) You gave more than $15,000 during the year to any one donee C) Any of the gifts you made were of a future interest D) All of the above

D

Which of the following statements is true in respect to determining the amount of net gift tax? A) There is a one-time marital deduction of $600,000 B) The annual exclusion is limited to a total of $15,000 per year per donor. C) The applicable credit amount claimed may be used to reduce up to $4,505,800 of gift tax liability per year. D) The applicable credit amount claimed may not exceed the tax for the calendar year.

D

Which of the following will decrease the basis of property? A) Depreciation B) Return of capital C) Recognized losses on involuntary conversions D) All of the above

D

Which one of the following types of individual retirement accounts (IRAs) cannot be established? A) An individual retirement annuity that is purchased from a life insurance company. B) An individual retirement account with a trustee who invests one's money in 1-ounce U.S. gold coins. C) A simplified employee pension account D) An individual retirement account with a trustee who invests one's money in life insurance contracts.

D

Which taxpayer information is necessary to have before preparing a tax return? A) Immigration status B) Age of an individual C) Marital status D) All of the information is needed

D

Who is eligible for an Archer MSA in 2019? A) All individuals who elected coverage in a high-deductible health plan B) A maximum of 750,000 individuals who have elected coverage in a high-deductible health plan and are only self-employed C) All individuals who elected coverage in a high-deductible health plan and are only employed by a small employer with no more than 50 workers when the Archer MSA is established D) A maximum of 750,000 individuals who have elected coverage in a high-deductible health plan and are either SE or employed by a small employer with no more than 50 workers when the Archer MSA is established

D

With regard to business meal expenses, all of the following statements are true EXCEPT: A) Club dues are not allowed as a deduction B) A meal expense must meet one of the two tests: the "directly related" test or the "associated with" test C) The deductible limit on business meal expenses is 50% D) The cost of a Super Bowl ticket where a qualified business meal will be had during the game is deductible

D

Darryl received several acres of land from his mother as a gift. At the time of the gift, the land had a FMV of $95,000. The mother's adjusted basis in the land was $105,000. Two years later, Darryl sold the land for $90,000. No events occurred that increased or decreased Darryl's gain or loss on the sale of the land? A) $(15,000) B) $(5,000) C) $5,000 D) $10,000

B

Yang and May Ling (husband and wife) owned a fashionable handbag store in NY, which they report as a sole proprietorship on their individual return. They had the following types of transactions during the 2019 year: - $600,000 gain from the sale of a rare coin collection May Ling inherited in February of 2018. The sale occured in the month of July. - $100,000 received in accounts receivable dales of 500 bags in November of 2019 - $50,000 gain from sale of stocks held in their personal account that were purchased in 2017 - $5,000 for the purchase of supplies, such as computer paper, invoices, etc., used in the business. From the information provided, what is the proper gross amount and characterization of capital transactions that Yang and May Ling should report for the year 2019? A) $650,000 as LTCG B) $695,000 as ordinary income C) $50,000 as LTCG D) $95,000 as STCG

A

The owner of unimproved land with a basis of $40,000 sold the property for $100,000 in 2014. The seller accepted a note for the entire $100,000 sales price. In 2019, when the buyer still owed $10,000, the note was sold for $9,000 cash. How should the disposition of the note be reported on the seller's 2019 return? A) $5,000 capital gain B) $5,000 ordinary income C) $2,000 capital gain D) $1,000 capital loss

A ($10,000 * (100% - 60%) ($9,000 - $4,000 = $5,000)

Mildred and John purchased 40 acres of undeveloped land 40 years ago for $120,000. They paid personal real estate taxes of $50,000, which they elected to add to the property's basis. They sold the property for $600,000, having total settlement costs of $70,000. The settlement costs are allowable as an expense of sale. Mildred and John received a down payment of $100,000 with the balance to be paid over 15 years. What is their gross profit percentage? A) 60% B) 72% C) 68.33% D) 82%

A ($360,000 gross profit /$600,000 contract price)

During 2019, Judy sold a pleasure boat that had an adj basis to her of $60,000 to Terry for $100,000. Terry paid $20,000 as a down payment and agreed to pay $20,000 per year plus interest for the next 4 years. What is the amount of gain to be included in Judy's gross income for 2019? A) $8,000 B) $16,000 C) $20,000 D) $24,000

A ($40,000 gross profit / $100,000 contract price) * ($20,000)

Ethel and George sold an investment property they purchased 10 years ago for $300,000. The property was sold for $700,000 with a down payment of $140,000. What is the gross profit percentage? A) 57.14% B) 22.86% C) 28.57% D) None of the above

A ($400,000 / $700,000)

In 2010, Sally sold a personal residence on the installment method. She needed cash in 2019, so she sold the note for $7,500 when the balance due was $9,000. Her gross profit percentage was was 47.5%. How much profit must Sally report on the disposition of the obligation? A) $2,775 B) $7,500 C) $0 D) $3,225

A ($7,500 - $4,725 = $2,775) ($9,000 * (1-47.5%) = $4,725)

Anne, who is single, owned and used her house as her main hour from January 2018. She then moved away and rented her home from February 2018 until she sold it in August 2019. Her home sold for $240,000, which included $20,000 of appreciation and $12,000 of selling expenses. Using a zero basis, compute the amount that is excludable from income. A) $208,000 B) $220,000 C) $228,000 D) $240,000

A (240,000 - 12,000 = $228,000) ($228,000 - 20,000 depreciated = $208,000)

Rena, single, 72 year old engineer. Works part-time for a pharm company and earned $22,000 in 2019. Her modified AGI is $36,000. She participates in her employer's pension plan and profit sharing plan. In 2019, she contributed $6,000 to a trad. IRA. How much of her contribution can Rena deduct in 2019? A) $0 B) $1,400 C) $1,600 D) $6,000

A (Older than 70.5 years old, no deduction)

Ernie had an adjusted basis of $15,000 in real estate he had held for investment. Ernie exchanged it for other real estate to be held for investment with a FMV of $12,500, a truck with a FMV of $3,000, and $1,000 cash. What is the total basis of the real estate and the truck? A) $15,500 B) $14,000 C) $15,000 D) $16,500

A (Page 324)

Ernie had an adjusted basis of $15,000 in real estate he held for investment. Ernie exchanged it for other real estate to be held for investment with a FMV of $12,500, a truck with a FMV of $3,000, and $1,000 cash. What is the total basis of the real estate and the truck? A) $15,500 B) $14,000 C) $15,000 D) $16,500

A (Page 324)

Rob bought his home for $150,000 un 2009. Sold it for $350,000 in 2019. 1/5 of the home was an office for his business. Claimed $6,000 depreciation. The $150,000 purchase was assessed at $90,000 building and $60,000 land. What is Robs taxable income as a result of the sale? A) $6,000 B) $38,000 C) $200,000 D) $0

A (The 6k depreciation taken must be reported as income and taxed at 25%)

Which of the following is NOT qualify for exclusion from income of all or part of the gain from the sale of their main home in 2019? A) You sold a personal residence January 1, 2018, and excluded all the gain. You sold another personal residence December 30, 2019. You did not sell because of health problems or a change in employment. B) You owned and lived in your house from January 1, 2015, until February 15, 2016, when you moved out and lived with your friend. You moved back into your house July 12, 2017, and then sold it October 20, 2019. The sale was not due to health problems or a change of employment C) Betty sells her house (that she had owned and lived in since 2009) in February 2019 and gets married 1 month later. Her husband had excluded the gain on the sale of his residence on his 2018 return.

A (The exclusion of gain provided by Sec. 121 may be used only once every 2 years)

Bill purchased a home for his principal residence January 1, 2015. However, from December 31, 2016, to December 31, 2018, another location served as Bill's principal residence. Bill's basis in the home was $300,000 and he sold the home for $600,000 on December 31, 2019. What is Bill's recognized gain on the sale of the home? A) $120,000 B) $250,000 C) $300,000 D) $50,000

A (page 318)

During the current year, Amanda (single), received $110,000 in salary and realized a $30,000 loss from rental real estate activities in which she actively participates. She contributed $2,000 to an IRA. What is amount that Amanda may claim as loss from her current year real estate activities? A) $20,000 B) $21,000 C) $25,000 D) $30,000

A ($110,000 - $100,000 limit) ($10,000 * 50%) ($25,000 - 5,000 = $20,000)

Section 152 of the Code contains two sets of tests, "qualifying relative," either of which may be applied to determine whether an individual has dependency status and may therefore be claimed as a dependent by a taxpayer. Which of the following is NOT a test under both classifications? A) Citizenship test B) Residence test C) Joint return test D) Gross income test

D

A taxpayer may NOT claim the QBI deduction if (s)he has qualified business income from which of the following entities? A) S corp B) C corp C) Sole proprietorships D) Trusts

B

All of the following are deductions allowed in determining the gift tax EXCEPT: A) A gift to the state of Pennsylvania for exclusively public purposes. B) The value of any gift made to one's spouse who is not a United States citizen. C) A gift made to one's spouse, a United States citizen, in excess of $155,000

B

All of the following child and dependent care expenses may qualify as work-related for purposes of the Child and Dependent Care Credit EXCEPT: A) The cost of care provided to a qualifying person outside the home B) The cost of getting a qualifying person from the home to the care location and back C) The cost of household services that are partly for the well-being of a qualifying person D) The cost of sending a child to school if the child is in a grade below kindergarten and the cost is incident to and cannot be separated from the cost of care

B

All of the following may be deducted by a SE taxpayer as a transportation expense EXCEPT A) Getting from one workplace to another in the course of your business or profession B) Commuting expense if you work during the commuting trip using your telephone to make business calls or have business associates ride with you to and from work and you have a business discussion in the car C) Visiting clients or customers after going to your office D) Going to a business meeting away from your regular workplace

B

All of the following statements are true EXCEPT A) The totals for STCG and losses and the totals for LTCG and losses must be figured separately B) When you carry over any capital loss, its character will be LT C) If the total of your capital gains is more than the total of your capital losses, the excess is taxable D) The yearly limit on the amount of the capital loss you can deduct in excess of capital gains is $3,000 ($1,500 if you are MFS)

B

All of the following statements regarding a return of capital distributions based on your stock are true EXCEPT A) A return of capital reduces the basis of your stock B) When the basis of your stock has been reduced to zero, you should report any additional return of capital as a capital loss C) Any liquidating distribution you receive is not taxable to you until you have recovered the basis of your stock D) If the total liquidating distributions you receive are less than the basis of your stock, you may have capital loss

B

Caitlin served as a kindergarten aide for 1,000 hours. She incurred $350 in expenses for books and supplies used in the classroom and was not reimbursed by the school. What amount is Caitlin entitled to as the educator's expense deduction on her income tax return? A) $175 B) $250 C) $350 D) $0

B

Carol, a single taxpayer, received a 1099-DIV from her global mutual fund that showed dividend income of $500 and foreign taxes withheld of $70. This is the only foreign source income she received for the year. Her income tax before any credits is $4,320. On which of the following forms may Carol elect to claim a credit for the foreign tax paid? A) Schedule 3, line 13, "Credit from Form..." B) Schedule 3, line 1, "Foreign tax credit." C) Form 1040, Schedule A, Itemized Deductions, line 6, Other taxes D) Form 1040, Schedule B, by electing to reduce the dividend income by $140 ($70 *2)

B

All of the following statements concerning the basis of property received for services are true EXCEPT: A) If you receive property services, your basis is equal to the FMV of the property received B) If your employer allows you to purchase property at less than FMV, include the FMV of the property in income C) If you receive property for services and the property is subjected to restrictions, your basis in the property is its FMV when it becomes substantially vested D) If your employer allows you to purchase property at less than FMV, your basis in the property is its FMV

B (difference between the FMV and price paid. Thus, even in such a case, the basis is the property's FMV)

Tom who is single, owns a rental apartment building property. This is the only rental property that Tom owns. He actively participates in this rental activity as he collects the rents and performs ordinary and necessary repairs. In 2019, Tom had a loss of $30,000 on this rental activity and had no reportable passive income. His AGI is $60,000. How much of the loss may Tom deduct on his own return? A) $30,000 B) $25,000 C) $0 D) $6,000

B ( AGI < $100,000. Full $25,000 limit is deductible)

During 2019, Julia received a dividend payment from Corp X in the amount of $500 and a distribution (return of capital payment) on the Block B shares in the amount of $800. Julia had originally purchased Corp X stock for $2,000 in 2010 (Block A) and purchased additional Corp X stock for $1,000 (Block B) in 2011. Julia's basis in each of the two blocks of stock at the end of 2019, assuming no other transactions, is: A) Block A $700; Block B $200 B) Block A $2,000; Block B $200 C) Block A $1,466; Block B $734 D) Block A $1,200; Block B $1,000

B ( The $800 return of capital is applied entirely against Block B, the stock purchased in 2011. The dividend represents a return of capital and does not reduce the stock basis)

On June 1, 2017, Mr. Smart purchased investment land. On Jan 31, 2018, Mr. Smart traded the land plus cash for some other investment land in a nontaxable exchange. On August 15, 2019, he sold the land received in the nontaxable exchange for a gain. What is the character of Mr. Smart's gain for 2019? A) STCG B) LTCG C) Part STCG and part LTCG D) Ordinary income

B ( When the prop is sold, the holding period includes the holding period of the property exchanged. And, under Sec. 122, capital assets held more tax 1 year are treated as LT)

Mark sold a building for $100,000 cash plus property with a FMV of $10,000. He had purchased the building 5 years ago for $85,000. He made $30,000 worth of improvements and deducted $25,000 for depreciation. The buyer assumed Mark's real estate taxes of $12,000 and mortgage of $20,000 on the building. What is he amount realized on the sale of the building? A) $110,000 B) $142,000 C) $130,000 D) $145,500

B ($100,000 cash + $10,000 FMV + $32,000 liabilities relieved)

Mr. Smith decided to retire from his business in 2019. Included in his assets was a large delivery truck for which he had paid $35,000 in 2015. Mr. Smith had offers to buy his truck for $25,000 from two local truck dealers. He decided instead to sell his truck for $15,000 to his long-time employee. John Pine, as partial compensation for John's helping Mr. Smith wind up his business. What is John's basis in the truck? A) $35,000 B) $25,000 C) $15,000 D) None of the above

B ($15,000 cash paid +$10,000 income recognized)

Allen purchased a trademark on January 1 of last year for $150,000 and began amortizing it over the required 15-year period. On January 2 of this year, Allen sold the trademark for $200,000. How much of Allen's gain on the sale of the trademark is Sec. 1245 gain? A) $5,000 B) $10,000 C) $50,000 D) $60,000

B ($150,000 / 15)

Larry sold stock with a cost basis of $10,500 to his son for $8,500. Larry cannot deduct the $2,000 loss. His son sold the same stock to an unrelated party for $15,000, realizing a gain. What is his son's reportable gain? A) $6,500 B) $4,500 C) $2,000 D) No gain

B ($6,500 realized gain - $2,000 disallowed loss)

Clark uses a lot in his landscaping business. Clark's sister Lois is a home decorator who uses a similar lot in her business. On December 27, 2018, Clark and Lois exchanged lots. The fair market value of Clark's lot was $7,000 with an adjusted basis of $6,000. The fair market value of Lois's lot was $7,200 with an adjusted basis of $1,000. On December 28, 2019, Clark sold the lot to a third party for $7,200. What is the amount of gain, if any, that Clark has to report on his 2019 return? A) $6,200 B) $1,200 C) $0 D) $1,000

B ($7,200 FMV - $6,000 basis)

Alex bought four shares of CS for $200. Later the corporation distributed a share of preferred stock for every two shares of common. At the date of distribution, the stock had a FMV of $40. What is Alexs basis in the CS and his PS after the nontaxable stock dividend? A) $200 common; $80 preferred B) $150 common; $50 preferred C) $60 common; $80 preferred

B (($240 / $320) * $200 = $150) (($80 / $320 ) * $200 = $50)

Gary and Mabel have been married for many years and file jointly. Gary was born 2-21-47 and Mabel was born 4-10-51. They each received SS benefit payments throughout 2019. Gary earned $7,200 as a part-time security guard in 2019; he was not covered by any type of retirement plan. Mabel has been retired for many years. Gary and Mabel expect their 2019 adjusted gross income to exceed $103,000. What is the amount of Gary and Mabel's largest allowable spouse IRA deduction for 2019? A) $12,000 B) $7,000 C) $6,000 D) $0

B (A spouse who has not reached age 70.5 may still deduct up to $6,000, plus $1,000 if age 50 or older)

Clyde, a single person, sold his principal residence for $700,000. He purchased his home 10 years ago for $150,000 and lived there until he sold it. He paid for capital improvements of $75,000, real estate commissions of $36,000, and other settlement costs of $4,000. How much taxable gain must Clyde report? A) $0 B) $185,000 C) $435,000 D) $225,000

B (Adj Basis $225,000 = $150,000 + $75,000) (Amt real. $660,000 = $700,000 - 36,000 - 4,000) (Gain $185,000 = $435,000 - 250,000)

In Year 1, Nancy bought 100 shares of Trauna Inc, for $5,000 of $50 a share. In Year 2, Nancy bought 100 shares of Trauna stock for $8,000, or $80 a share. In Year 3, Trauna declared a 2-for-1 stock split. Nancy sold 50 shares of the stock she received from the stock split for $2,000. She could not definitely identify the shares she sold. What is the amount of Nancy's net capital gain from this sale for Year 3? A) $0 B) $750 C) $1,625 D) $2,000

B (Amt realized $2,000) (Less: Basis (50*$25) $1,250)

Ariene sold property with an adjusted basis of $35,000 to Sandy for $50,000. Sandy paid cash of $5,000 and assumed an existing mortgage of $20,000. Sandy signed an installment note for the $25,000 balance at 8% interest. Payments on the note were to be made at the rate of $5,000 a year plus interest beginning 1 year after the date of the contract. Ariene did not elect out of the installment method. What is the amount of gain that Ariene should include in the first year after the date of the contract? A) $5,000 B) $2,500 C) $1,500 D) $4,500

B (Contract price = $50,000 price - $20,000 mortgage) (Gross profit ratio = $15,000 / $30,000) ($5,000 payment * GP ratio)

When figuring compensation for purposes of determining the amount of an allowable contribution to a traditional IRA, which of the following is an incorrect statement? A) Pension or annuity income is not considered compensation for an IRA plan. B) Earnings and profits from property, such as rental income, are considered compensation C) Interest and dividends are not considered compensation for an IRA plan

B (Earned income: wages and salaries, commissions, se income, alimony and separate maintenance payments)

In July, Tommy sold for $10,000 a printing press used in his business that originally cost him $10,000. His adj. basis at the time of the sale was $1,000, and Tammy paid $1,000 in selling expenses. What is the amount of the gain that would be ordinary income under Sec. 1245? A) $0 B) $8,000 C) $9,000 D) $10,000

B (Money received $10,000) (Less: adj. basis of press $1,000) (Less: Selling exp $1,000) ( = : Realiz and recognized gain $8,000)

George and Helen are married. During 2019, George gave $36,000 to his brother and Helen gave $30,000 to her niece. George and Helen both agree to split the gifts they made during the year. What is the taxable amount of gifts, after the annual exclusion, each must report on Form 709? A) George and Helen each have taxable gifts of $19,000 B) George and Helen each have taxable gifts of $3,000 C) George has taxable gift of $6,000 and Helen has a taxable gift of zero.

B (Neither must report the gift to the niece. Gave 18,000 to the brother - 15,000)

Mr. Nehru had the following capital transactions during the current year: STCG $1,000 STCL $2,700 LTCG $6.500 LTCL $1,800 What is the amount of Mr. Nehru's capital gain net income (or loss) on his current year Sch. D? A) $7,500 B) $3,000 C) $4,700 D) $(3,000)

B (Net LTCG $6,500 - $1,800 $4,700) (Net STCG $1,000 - $2,700) (1,700) (Capital gain net income $3,000)

Karen, who is single, paid $150,000 for her residence in January 2015 and lived in it until January 2017. She then moved away and rented her home in February 2018. She sold it in August 2019 for $240,000. What amount of gain on the sale of her residence is excludable from income? A) $250,000 B) $70,380 C) $90,000 D) $240,000

B (Owned from Jan 15 - July 19 = 55 mos) (12 most non qualified use ) (43 qual. months / 55 total mos = 78.2%) ($90,000 * 78.2%)

Which of the following statements is false with respect to the identification requirement of like-kind real property? A) You can identify more than one replacement property. B) Money or unlike property received in full payment for property transferred will still qualify as a nontaxable exchange as long as you receive replacement property within 180 days. C) The property to be received must be identified on or before the day the is 45 days after the date you transfer the property given up in the exchange.

B (Page 321)

All of the following types of income would be considered compensation in determining if an individual retirement account could be set up and contributions could be made EXCEPT: A) Tip income B) Net rental income C) Partnership income of an active partner providing services to the partnership. D) Commissions

B (Rental income is treated as passive income)

In 2019, Linda gave her daughter a gift of land that had a FMV of $5,331,000. She made no gifts from 1992 through 2019. In 1991, she used $1,506,800 of her applicable credit to offset gift tax otherwise due. What amount of applicable credit can Linda use to offset gift tax due on the 2019 gift? A) $4,505,800 B) $2,999,000 C) $15,000 D) $0

B (Since Linda used $1,506,800 of credit in previous years. The amount of applicable credit she may use in 2019 is $4,505,800 - $1,506,800)

Richard collected baseball cards as a hobby. Richard had shared his interest in this hobby with his niece Susan, who was also an avid card collector. At the time of his death in 2019, Richards collection had a FMV of $10,000 and an adjusted basis of $2,000, while Susans collection had a FMV of $5,000 and an adjusted basis of $1,000. Upon his death, Richards entire card collection went to Susan. With the death of her uncle, Susan lost interest in the hobby and sold all of the cards for $20,000. What is Susans gain on the sale of these baseball cards? A) $5,000 B) $9,000 C) $13,000 D) $17,000

B ($20,000 - ($10,000 + $1,000)

Mr. X and Ms. Z bought a small apt house in 2012 for $400,000, which they held for investment. Each furnished one-half of the purchase price, and each had a half interest in the income from the property. They held the apartment in joint tenancy with the right of survivorship. They depreciated the apartment house at the rate of $10,000 per year. On December 31, 2019, Mr. X died. At the date of his death, the apartment had an adjusted basis (cost - depreciation) of $320,000 and a FMV of $550,000. What is Ms. Z's basis as of the date of Mr. X's death? A) $500,000 B) $435,000 C) $400,000 D) $320,000

B ($275,000 + 160,000 = $435,000) (Half of $550k = $275,000) (200,000 - 40,000 depr = 160,000

Ruth had wages of $34,000, and her husband John's wages were $27,000. They have three children ages 3, 6, and 9. They paid a total of $7,200 to Creative Child Care School Inc. Assuming a 20% credit rate, what will be their Child Care Credit? A) $1,440 B) $1,200 C) $6,000 D) $7,200

B (max amount of credit is $3,000 for one child/dependent, or $6,000 if two or more are involved. So ($6,000 * 20%)

Charles, the landlord, made several repairs and improvements to his rental house. He spent $1,500 to add carpeting in the hallway, $550 for a stove, $750 for a refrigerator, $170 to replace the broken faucet in the bathroom, and $590 to replace damaged shingles on the roof. How much of these costs must he depreciate? A) $3,560 B) $2,800 C) $1,300 D) $3,390

B ($1,500 + 550 +750)

James owns a business, in May he had the following expenses: - $500 for use of a yacht for a days fishing with two clients - $50 lunch with a client with whom he discusses new products - $200 for dues to a country club, where he plays golf with a client who provides James with 40% of his commissions - $50 for a cheese package given to one of his clients on their bday What is the allowed expense deduction based on these expenses? A) $75 B) $50 C) $800 D) $600

B (($50 lunch * 50%) + ($50 gift * 50%)

Bill took out a $100,000 loan for an apartment building. He spent $25,000 of his own money on repairs before he rented the apartment building to the public. He is single, works full-time, and earns $80,000/year. Bills loss from the rental real estate activity, in which he actively participates, is $30,000. He has no passive income. What amount is Bill at-risk, and how much of Bill's passive loss from his rental activity is deductible? A) $100,000 At-Risk; $25,000 Passive Loss B) $25,000 At-Risk; $25,000 Passive Loss C) $125,000 At-Risk; $30,000 Passive Loss D) $125,000 At-Risk; $25,000 Passive Loss

B (AGI is < $100,000. He is allowed to deduct $25,000 against other income)

In 2019, Jonathan Smith paid his educational expenses at a community college where he completed his freshman year and began his sophomore year. His father, John Smith, provides more than half of the support Jonathan and claims an exemption for him on his tax return. Which of the following is true? A) Jonathan is eligible to take the AOC on his 2019 tax return B) John is eligible to take the AOC on his 2019 tax return C) Jonathan and John may split the AOC between their 2019 returns D) Neither may take the AOC

B (AOC may be taken by a taxpayer who claims a dependent exemption for an eligible student on his tax return)

Taxpayers A and B, filing a joint return, earned box 5 medicare wages of $190,000 and $110,000, respectively. Determine the amount of additional Medicare tax they owe in their final form 1040. A) $0 B) $450 C) $2,700 D) $25,650

B (MFJ owe additional 0.9% of excess income when combined income exceeds $250,000. They have $300,000 income. ($300,000 - 250,000) * 0.9%)

In the current year, Maria paid the following taxes: - Special assessments to provide local benefits. $2,500 - County real estate taxes paid on her vacation home $1,250 - Sales taxes paid when she purchased a new auto mobile $900 - Personal property taxes paid to her local government $350 What amount is allowable as an itemized deduction for the year? A) $1,250 B) $2,500 C) $3,750 D) $5,000

B (Special assessment is not deductible)

Which of the following is the depreciable basis in rental property that is placed in service after receiving it as a gift and treating it as personal property, if on the date of conversation the basis was more than the FMV of the property? A) The FMV on the date of the gift plus or minus any required adjustments to basis. B) The FMV of the property on the date of conversion to rental property C) The donor's basis of the property plus or minus any required adjustments to basis D) All of the answers are correct

B (if converted from personal to business use AFTER receiving it as a gift, basis is lesser of FMV and AB on the date of conversion)

A nontaxable exchange is an exchange in which any gain is not taxed and any loss cannot be deducted. To be nontaxable, the exchange must meet all of the following conditions EXCEPT: A) The property must be business or investment property B) The property must be "like-kind" or "like-class" property C) The property must be intangible property D) The property must not be property held for sale

C

All of the following are included in calculating the total support of a dependent EXCEPT: A) Child care even if the taxpayer is claiming the credit for the expense B) Amounts veterans receive under the GI bill for tuition and allowances while in school C) Medical insurance benefits, including basic and supplementary Medicare benefits received. D) Tax exempt income, savings, or borrowed money used to support a person

C

Mr. and Mrs. Bradshaw own a vacation home at the lake. They are trying to determine their days of personal use for the current year. Which of the following would be considered personal-use days? A) The Bradshaws, their daughter, and grandchildren spend 7 days in May at the vacation home. Mr. Bradshaw spent substantially all of his time painting the interior. Mrs. Bradshaw and the others spent all of their time on recreation B) The Bradshaws rented the house for 4 days in September to their nephew, Jacob. Jacob paid fair rental price C) The Bradshaws rented a mountain cabin from Lucia for 4 days in October. Lucia rented their lake house for 4 days also. They each paid a fair rental price D) Their son, Seth, rented the lake house for 30 days in December. He does not have an interest in the property, and he used it as his main home. Seth paid fair rental price

C

Paula won $5,000 in the lottery in 2019. She also won $200 playing bingo at her lodge hall. She is not a professional gambler. She kept all records of the $6,550 she spent on gambling expenses. How much may she deduct on her Schedule A? A) $0 B) $200 C) $5,200 D) $6,550

C

Peter owned a cottage on the lake that he bought in year 1. In year 2, he rented the cottage for 10 days to a stranger and uses the cottage for 20 days for his own personal use. The cottage was not used the rest if age year. Peter had rental income of $1,000, and he paid $600 for repairs. How should he report these activities on his Year 2 return? A) $1,000 income, $600 expense B) $333 income, $200 expense C) $0 income, $0 expense D) $667 income, $400 expense

C

Ralph gave his aunt an antique clock during tax year 2019. He had purchased the clock for $17,000 in 2015. The FMV at the date of the transfer was $23,000. What amount should be recorded on Form 709 as the value of this gift? A) $17,000 B) $8,000 C) $23,000 D) $2,000

C

Robert sold his Lebec Corp stock to his sister Karen for $8,000. Robert's cost basis in the stock was $15,000. Karen later sold his stock to Dana, an unrelated party, for $15,500. What is Karen's realized gain? A) $500 B) $7,000 C) $7,500 D) $0

C

Sam received a total distribution of $40,000 from his employer's 401(k) plan consisting of $25,000 in cash and land with a FMV of $15,000. If Sam decides to keep the land, what is the total amount that he can roll over to his traditional IRA? A) Sam may substitute $15,000 of his own funds for the property and consider his funds for the property and consider his rollover to be $40,000 in cash. B) Sam can roll over only $15,000, the value of the land he received C) Sam can roll over the $25,000 cash received into his IRA

C

Small business stock under Sec. 1202 is subject to special taxation. Which of the following statements is false regarding this stock? A) There is up to 100% exclusion from gain on stock held more than 5 years. B) The gain may be deferred if reinvested in other qualified small business stock within 60 days of the sale) C) The AMT preference on the small business stock is 50% of the excluded gain. D) C Corp stock is eligible for the small business stock provisions

C

Taxes deductible as an itemized deduction up to $10,000 include all of the follwing EXCEPT: A) State and local real estate taxes based on the assessed value of the property and charged uniformly against all property B) State and local income taxes C) Taxes that the taxpayer paid on property owned by his or her parents or children D) Personal property taxes based on the value of the personal property

C

The Becks own a nursing home. They provide maid service and meals in a common dining room. Where should they report the income and expenses from this? A) Other income Form 1040 and expenses as itemized deductions on Schedule A B) Income and expenses on Schedule E C) Income and expenses on Schedule C D) Short term capital gain on Schedule D

C

The generation skipping transfer tax is imposed: A) Instead of the gift tax B) Instead of the estate tax C) As a separate tax in addition to the gift and estate taxes D) On transfers of future interest to beneficiaries who are more than one generation above the donor's generation.

C

Under Pete's divorce decree, he must pay $500 a month to Laura, his former spouse, for the support of their two children. In 2018, he paid $5,500 instead of the $6,000 he was required to pay. In 2019, he paid $6,000 child support for 2019 and $500 towards child support he neglected to pay in 2018. For purposes of determining whether Pete may claim his children as dependents, which of the following statements accurately represents the amount of support attributable to each year? A) $5,500 for 2018; $6,500 for 2019 B) $6,000 for 2018; $6,000 for 2019 C) $5,500 for 2018; $6,000 for 2019 D) $5,500 for 2018; $6,000 for 2019, $500 for 2017

C

Under the rules governing the existence of a passive activity, which of the following would NOT constitute material participation in a trade or business activity for the current year? A) You participated in the activity for > 500 hours B) You participated in the activity for > 100 hours during the tax year, and you participated at least as much as any other individual for the year. C) You participated in the activity for less than 50 hours during the current year, but you materially participated on a regular, continuous, and substantial basis. D) You participated in the activity for less than 50 hours during the current year, but you materially participated in the activity for 5 of the last 10 preceding years

C

When funds from an Archer MSA are distributed for qualified medical expenses, these funds are: A) Generally included in the income of the taxpayer B) Allocated between contributions made by the employer and the employee, and only the amount attributed to the contributions of the employee are included in income of the taxpayer C) Generally excluded from the income of the taxpayer D) Always included in the income of the taxpayer

C

Which of the following is NOT a requirement that must be met in determining whether a taxpayer is considered unmarried for HOH filing status purposes? A) An individual must file a separate return B) An individual must pay more than one-half the cost of keeping up a home for the tax year. C) An individual's home must be, for the entire year, the main home of his or her child, stepchild, or qualified foster child whom (s)he or the noncustodial parent can properly claim as the dependent. D) An individuals spouse must not have lived in their home for the last 6 months of the tax year.

C

Which of the following statements is true regarding the filing of a Form 4868, "Application for Automatic Extension of Time to File U.S. Individual Income Tax Return" , for your 2019 return? A) Interest is not assessed on any income tax due if a Form 4868 is filed. B) Form 4868 provides the taxpayer with an automatic additional 8-month extension to file. C) Even though you file Form 4868, you will owe interest and may be charged a late payment penalty on the amount you owe if you do not pay the tax due by the regular due date. D) A U.S. citizen who is out of the country on April 15 will be allowed an additional 12 months to file as long as "Out of the Country" is written across the top of Form 4868.

C

Which of the following would be an allowable investment for a traditional IRA? A) Stamps that have been issued by the USPS B) An oil painting certified by an art expert as being an authentic original by a Dutch master artist. C) One-ounce silver coins minted by the U.S. Treasury Dept D) All of the above

C

Which of the follwing is false with respect to setting up a traditional IRA? A) An IRA cannot be set up with joint ownership of husband and wife B) A taxpayer cannot roll over assets from his IRA to his spouse's IRA C) An individual who files a joint return and is not covered by an employer retirement plan can deduct the entire contribution to an IRA, regardless of the amount of his or her adjusted gross income, even if the spouse is covered by an employer's plan

C

Which one of the following could prevent an individual from qualifying for the Child and Dependent Care Credit? A) Unearned income of more than $400 B) Paying for care for more than one qualifying person C) Not identifying the care provider on the tax return D) Paying for child care while looking for work

C

The holding period for determine short term and long term gains and losses includes which of the following? A) The day you acquired the property B) In the case of a bank that repossessed real property, the time between the original sale and the date of repossession C) The donor's holding period in the case of a gift if your basis is the donor's adjusted basis D) All of the above

C ( When prop. is received as a gift. the basis is usually = donor's basis. Basis may increase by a portion of all of the gift tax paid on the transfers. When this occurs, the holding period is carried over from the donor.)

Sam purchased 100 shares of stock in 2009 for $2,500. The company had no earnings or profits in 2018 or 2019. In 2018, Sam received a return of capital distribution on that stock of $2,000, and in 2019, he received a second return of capital distribution on that stock of $2,000. What amount should he report on his 2019 tax return? A) Nothing until the shares are sold B) $1,500 as ordinary dividend income C) $1,500 as LTCG income D) $2,000 as return of capital income

C (Any excess return of capital received is treated as capital gain)

Emma's brother purchased 100 shares of Clockwork Inc, stock for $10/share on Dec. 30 2017. Emma inherited the shares of Clockwork stock from her brother on Sept 15, 2018, when it had a FMV of $15/share. On Dec. 20, 2019, she sold the stock for $20/share. What is the amount and character of her gain? A) The gain of $1,000 is STCG B) The gain of $1,000 is LTCG C) The gain of $500 is LTCG D) The gain of $500 is STCG

C ( Amt realized. $2,000 (100 shares x $20) ( Less: Adj Basis. (1,500) (100 shares x $15) (Gain = $500

Margaret's 2019 Form 709, page 1, has the following: - $1,785,000 tax of current-year gifts - $4,505,800 maximum unified credit - $3,530,800 credit used in prior years Based on this info, what is the balance due on Margaret's Form 709 Gift Tax Return this year? A) $0 B) $1,785,000 C) $810,000 D) $1,745,800

C ($1,785,000 - ($4,505,800 - $3,530,800)

Jim and Jean purchased a vacation home in 2012 for $100,000. They sold the property for $500,000 in 2019 and received a down payment of $200,000. They took a mortgage from the purchaser for the remaining $300,000. What is Jim and Jean's gross profit percentage on this sale? A) 40% B) 60% C) 80% D) None of the above

C ($500,000 - $100,000) / $500,000 * 100)

In Year 1, Ray sold land with a basis of $40,000 for $100,000. He received a $20,000 down payment and the buyer's note for $80,000. In year 2, he received the first of four annual payments of $20,000 each, plus 12% interest. What is the gain to be reported in Year 2? A) None B) $8,000 C) $12,000 D) $20,000

C ($60,000 gross profit / $100,000 contract price) * $20,000)

John is a furniture maker and carpenter. John makes half of his income as an employee of Concept Designs, Inc., a fine furniture manufacturing corp. He makes the other half of his income from a personal business where he purchases, renovates, and then resells houses. In January of 2019, John purchases a house that is not his residence for $50,000. He spends $10,000 in materials renovating the house, which he sells in November of 2019 for $90,000. What is the amount and character of John's gain from this transaction? A) $20,000 ordinary gain B) $30,000 STCG C) $30,000 ordinary gain D) $20,000 STCG

C ($90,000 - ($50,000 + $10,000)

Vanessa inherited 100 shares of stock from her grandmother when her grandmother died on December 10, 2018. At that time, the FMV of the stock was $50 per share. Vanessa's grandmother Paul $40 per share when she purchased the stock July 1, 2018. If Vanessa sells all 100 shares for $60 per share on June 30, 2019, how should she report the sale on her return for 2019? A) $1,000 STCG B) $2,000 STCG C) $1,000 LTCG D) $2,000 LTCG

C (100 * $60 - 100 * $50)

Candace died on January 20, 2019. The assets included in her estate were valued as: -January 20, 2019: House $13,000,000; Stocks $12,850,000 - July 20, 2019: House $12,900,000; Stocks $12,700,000 - October 20, 2019: House $12,700,000; Stocks $13,000,000 The executor sold the house on October 20, 2019, for $12,700,000. The alternate valuation date was properly elected. What is the value of Candace's estate? A) $25,850,000 B) $25,700,000 C) $25,600,000 D) $25,400,000

C (12.9M + 12.7M)

The following transfers were made ny Ed during 2019. What is the gross amount to be included on Ed's 2019 Form 709? - $17,000 to United Way - $15,000 to a political org - $21,000 paid directly to his nephews college for tuition - $16,000 paid directly to his niece for her tuition A) $37,000 B) $16,000 C) $33,000 D) $54,000

C (17 + 16)

In 2019, Ivan was over age 70.5. The balance at the beginning of 2019 of his traditional IRA was $41,000. All of his IRA contributions had been tax deductible. The required minimum distributions for 2019 was $3,000. If Ivan only took a distribution of $1,000, what is the amount of excise tax that Ivan would have to pay on the excess accumulation? A) $120 B) $200 C) $1,000 D) $2,400

C (3,000 - 1,000) * 50%))

Sharon sold two collection during 2019. These were her only sales. Determining the amount and character of her gains (losses) on these sales: - Coin collection she bang as a child with a basis of $1,000, sold for $5,000 - Collection of original short stories she wrote in 2016, sold for $20,000 A) $20,000 LTCG B) $24,000 LTCG C) $4,000 LTCG and $20,000 ordinary income D) $24,000 ordinary income

C (A copyright; a literary, musical, or artistic composition; a letter or memo; or seminary property created by one's personal efforts is an ordinary income asset. Coin collections are listed as capital assets. Thus, it must be recognized as a CG or loss at its sale)

Mr. McCarthy exchanged real estate that he held for investment purposes for other real estate that he will hold for investment purposes. The real estate that he gave up had an adjusted basis of $8,000. The real estate that he received in the exchange had a FMV of $10,000, and he also received cash of $1,000. Mr. McCarthy paid $500 in exchange expenses. What is the amount of gain recognized by Mr. McCarthy? A) $1,000 B) $2,500 C) $500 D) None of the above

C (Page 324)

You sold a residential lot 2 years ago and reported the $20,000 capital gain on the installment method. In the third year of payments, the buyer defaulted and you had to repossess the lot. In the first year you reported $5,000 ($10,000 * 50%) and $3,000 ($6,000 * 50%) in the second year. No payments were received in the third year, and you spend $2,500 in legal fees to repossess the property. What is the taxable gain you must report on the repossession? A) $0 B) $9,500 C) $8,000 D) $4,000

C (Pmts received before repo $16,000; Less: Gain reported $8,000; = Gross profit on sale $20,000; Gain reported $8,000; Plus: Repo costs $2,500; = $10,500; Gross profit $20,000 MINUS $10,500 = $9,500. ANSWER = Lesser of gain on repo or $9,500) ($16,000 - $8,000 = $8,000 <<< $20,000 - $10,500 = $9,500)

Mr. Pickle purchased property from Mr. Apple by assuming an existing mortgage of $12,000 and agreeing to pay an additional $6,000, plus interest, over the next 3 years. Mr. Apple had an adjusted basis of $8,800 in the building and paid selling expenses totaling $1,200. What were the sales price and the contract price in this transaction? A) Sales price $6,000; Contract price $12,000 B) Sales price $18,000; Contract price $9,200 C) Sales price $18,000; Contract price $8,000 D) Sales price $18,000; Contract price $6,000

C (Sales price = $12,000 + $6,000) (Contract price = $6,000 + $3,200 - $1,200 selling exp)

Roy and Joyce were single, and each owned a home as a separate principal residence for a number of years. In August 2018, Roy sold his home and had a gain of $130,000, which he entirely excluded. Roy and Joyce were married in October 2019. Joyce then decided to sell her principal residence for a $350,000 realized gain. They plan on filing a joint return for 2019. How much of the gain from the sale of Joyce's home can be excluded on their joint return? A) $0 B) $100,000 C) $250,000 D) $350,000

C (The amount of the exclusion when one spouse does not qualify for the exclusion.)

Nature Corp declared and distributed a stock dividend of 1 share for each 10 shares held by shareholders. Donna had 10 shares held by shareholders. Donna had 100 shares ($5.50 per share basis) and received 10 additional shares with a FMV of $6.00 per share. Which of the following is most applicable to the stock dividend? A) 100 shares at $5.50 per share basis and 10 shares at zero basis per share. B) 110 shares at $5 per share basis and $55 taxable income C) 110 shares at $5 per share. D) 100 shares at $5 per share and 10 shares at $6 per share basis

C (The total basis in the stock is $550 (100 * $5.50) (With the addition of 10 shares, the per share basis is $5 ($550 / 110 )

During the current year, James exchanged a warehouse he used in his business for a storage facility his sister Donna used in her legal practice. For this to be treated as a nontaxable exchange, how long must James and Donna each hold the property? A) 6 months B) 1 year C) 2 years D) May be sold at any time

C (The waiting period to dispose of the property in a like-kind exchange between related parties)

Bob and Kate are MFJ. Bob has wages of $120,000 and taxable SS of $5,000. Kate actively participated in a rental real estate activity in which she had a $30,000 loss. They had no other income during the year. How much of the rental loss may they deduct on their current-year return? A) $0 B) $12,500 C) $15,000 D) $25,000

C (AGI = $120,000. $20,000 > $100,000 limit... Excess is reduced by 50% and deducted from $25,000 loss limit. So, $25,000 - ($20,000*50%) = $15,000)

John and Fred owned, as joint tenants with right of survivorship, business property that they purchased for $40,000. John furnished one-fourth of the purchase price, and Fred furnished three-fourths of the purchase price. Depreciation deductions allowed before Fred's death were $8,000. Under local law, each had a one-half interest in the income from the property. At the time of Fred's death, the FMV of the property was $80,000, three-fourths of which is includible in Fred's estate. What is John's basis in the property at the date of Fred's death? A) $80,000 B) $60,000 C) $66,000 D) $56,000

C (60,000 + 6,000)

In Year 1, Mr. X received a gift of rental property from Mr. Y. Mr. Y retained the power to transfer this property to his son in his will. At the time of the gift, Mr. Y's adjusted basis in the property was $18,000., and the property FMV was $24,000. No gift tax was paid in Year 1 and Year 2, Mr. X deducted a total of $2,000 of depreciation. In Year 3, Mr. Y died but did not exercise his power to transfer the property. The rental property given to Mr. X was included in the gross estate as a revocable transfer. The value of the rental property for estate tax purposes was the FMV at Mr. Y's death, $28,000. What is Mr. X's basis in the property after Mr. Y's death? A) $18,000 B) $22,000 C) $26,000 D) $28,000

C (FMV at death $28,000 - 2,000 depr)

Joe and Jean, a married couple, purchased their primary residence in 1993 for $100,000. While they lived there, they made renovations at a cost of $125,000. They lived there until July 1, 2016. On June 15, 2019, the residence was sold for $800,000. From July 1, 2016, until June 15, 2019, the home was unoccupied. Joe and Jean file a joint return, and they have never excluded a gain from the sale of another home. What is their taxable gain? A) $575,000 B) $0 C) $75,000 D) $200,000

C (page 317)

Bob and Jane are both lawyers, they contribute $ to various organizations each year. They file MFJ and their AGI is $100,000. They contributed the following - $5,000 to Alta Sierra Country Club - $10,000 to prevent cruelty to animals - $2,000 to state bar association - $12,000 to cancer research - Donated clothing to the Salvation Army that cost $1,000 but has a FMV of $50. How much can Bob and Jane deduct as a contribution? A) $29,050 B) $25,000 C) $22,050 D) $24,000

C (10,000 + 12,000 + 50)

Jerry has two dependent children, Greg and Mandy, who are attending an accredited college in 2019. Greg, a 5th year since January 1, spent $7,000 fir tuition and fees. Mandy, a freshman with no prior post secondary education, had tuition expenses of $4,000. Jerry meets all the income and filing status requirements for the education credits. There is no tax-free assistance to pay these expenses. Jerry's tax liability before credits equals $14,000. What is the maximum credit that Jerry may claim on his 2019 tax return? A) $2,200 Lifetime Learning Credit B) $5,000 AOC C) $2,500 AOC and $1,000 Lifetime Learning Credit D) $2,500 AOC and $1,400 Lifetime Learning Credit

D

Jim sells stock that he purchased in 2006 to his brother John for a $500 loss. He also sells a truck purchased in 2017 to ABC Corp, his 100%-owned C Corp, for a profit of $800, including $500 of depreciation recapture. What is the effect of these transactions on Jim's 2019 tax return? A) A loss of $500 on the stock and no gain on the truck. B) A disallowed loss on the stock, $500 ordinary gain, and $300 LTCG on the truck. C) A loss of $500 on the stock and $800 ordinary gain on the stock. D) A disallowed loss on the stock and $800 ordinary gain on the truck.

D

Joe is 37. His wife died during the tax year, and he has not remarried. His deceased wife had no income. He has two minor children living with him. Joe paid all of the costs for keeping up his home for the tax year, and he has paid for all of the support of his wife and these children. The filing status with the lowest tax rate for which Joe qualifies is. A) Qualifying widower with dependent child B) MFS C) HOH D) MFJ

D

Joe was single and no kids. When he died, he left all of his assets, including his traditional IRA, to his nephew, David. What is David allowed to do with the inherited IRA? A) He could make additional direct contributions to the IRA, treating it as his own. B) He could roll over amounts out of the inherited IRA ti another IRA tax-free C) He could make additional contributions, which were rollovers from Roth IRAs D) None of the above

D

John and Linda Smith are a childless married couple with no other dependents who lived apart for all of the current year. On December 31 of the current year, they were legally separated under a decree of separate maintenance. Based on the facts, which of the following is the only filing-status choice available to them for the current year? A) MFJ B) MFS C) HOH D) Single

D

Kelley's employer gave her stock in the current year for services performed with the condition that she would have to return the stock unless she completed 3 years of service. At the time of the transfer, her employer's basis in the stock was $6,000, and its fair market value was $8,000. Kelley did not make the Sec. 83(b) election. How much should she include in her income for the current year, and what would be her basis in the stock? A) Income of $8,000; basis of $8,000 B) Income of $6,000; basis of $6,000 C) Income of $8,000; basis of $3,000 D) Kelley would not report any income or have any basis in the stock until she has completed 3 years of service.

D

Martin, age 35, made an excess contribution to his traditional IRA in 2019 of $1,000, which he withdrew by April 15. 2020. Also in 2019, he withdrew the $50 income that was earned on the $1,000. Which of the following statements is true? I) Margin must include the $50 in his gross income in 2019 II) Martin would have to pay the 6% excise tax on the $1,050 III) Martin would have to pay the 10% additional tax on the $50 as an early distribution IV) Martin would have to pay the 10% additional tax on the $1,000 because he made a withdrawal A) I only B) I, II, and III only C) III and IV only D) I and III only

D

Morris, a single taxpayer, is not covered by a qualified plan at his place of employment. He wishes to establish an IRA and contribute $6,000 for 2019. An IRA may be invested in all of the following accounts EXCEPT: A) Bank CD B) Mutual fund C) Annuity D) Artwork

D

Mr. Todd, who is 43, has lived apart from his wife since May 2019. For 2019, his two children, whom he can claim as dependents, lived with him the entire year, and he paid the entire cost of maintaining the household. Assuming that Mr. Todd cannot qualify to file a joint return for 2019, he must, nevertheless, file a return if his gross income is at least: A) $5 B) $24,400 C) $12,200 D) $18,350

D

Mrs. Brown had taxable income of $600, SS benefits of $1,800., and tax exempt interest of $200. She used all of these amounts for her own support. Her son paid the rest of her support. Which of the following amounts of support test to allow him to claim Mrs. Brown as a dependent? A) $900 B) $1,800 C) $2,100 D) $2,700

D

Ms. Miller set up a computer system for Mr. Town's business. In return, Mr. Town gave Ms. Miller a storage facility. Ms. Miller plans to use this facility was $50,000. Mr. Town's basis in the storage facility was $30,000. How should Ms. Miller treat the transaction, and what is her depreciable basis for the property? A) Ms. Miller should include the $50,000 in income and use $30,000 as the depreciable basis for the storage facility she received. B) Mr. Town should include the $30,000 in his income and use the $50,000 as the depreciable basis for the storage facility C) Ms. Miller should include $30,000 in income and $50,000 as the depreciable basis for the storage facility D) Ms. Miller should include $50,000 in income and use $50,000 as the basis for the storage facility

D

Ms. X is a cash method taxpayer, received notice from her mutual fund that it has realized a long term capital gain on her behalf in the amount of $2,500. It also advised her that it has paid a tax of $500 on this gain. The mutual fund indicated that it will not distribute the net amount but will credit the amount to her account. All of the following statements are true EXCEPT A) X must report a LT CG of $2,500 B) X is allowed a $500 credit for the tax since it is considered paid by X. C) X is allowed to increase her basis in the stock by $2,000 D) X does not report a LT CG because nothing was paid to her

D

Pat lent money to Scarlet in year 1. Scarlet signed a loan agreement and made the agreed-upon monthly payments until May of year 3, when she stopped making payments. Pat called Scarlet and wrote her a letter requesting payment but received no response. Then Pat read in the newspaper that Scarlet had filed for bankruptcy with no assets. Pat can take a deduction for a bad debt: A) Only on her timely filed Year 3 return B) By amending her Year 3 return within 3 years C) By amending her year 1 return D) On her timely filed year 3 return or by amending her year 3 return within 7 years

D

Larry purchased 100 shares of stock on May 31, Year 1, for $100/share. On October 28, Year 1, he sold the 100 shares for $90/share. On November 22, Year 1, his wife (Vickie) purchased 100 shares of the same stock for $80/share. His wife held the stock until September 30, Year 2. On that date, she sold the stock for $110/share. They filed MFS on the returns: A) Larry has a STL of $1,000 on his Y1 return B) Vickie has STG of $3,000 on her Y2 return C) Vickie will have STG of $3,000 on Y2 return, and Larry takes the STL of $1,000 on his Y1 return D) Vickie will have a LTG of $2,000 on her Y2 return and Larry will not have any capital loss on his Y1 return

D (Cannot deduct wash sales. Wash sales occur when you sell/trade stock at a loss within 30 days before or after the sale) ($11,000 selling price - ($8,000 purchase price + $1,000 Larrys unrecognized loss)

Mr. Brown died on 9-30-19. His gross estate was valued at $10,480,000. Unless an extension is granted, a Form 706 must be filed on or before: A) April 15, 2020 B) January 15, 2020 C) June 30, 2020 D) Not required to file a Form 706

D ( < $11,400,000)

A married couple has $150,000 of TI made up of $100,000 of ordinary income, a $200,000 LTL subject to the 15% rate, and $350,000 received in the sale of a residential building in 2019 hat they had purchased in 1985 for $300,000. The building had a basis of $100,000. Assume that depreciation recapture at ordinary income rates is $10,000. What are the amount and the character of their capital gain (loss) after netting the gains and losses? A) $0 B) $200,000 LTCG taxed at 15% C) $40,000 LTCG taxed at 15% D) $40,000 LTCG taxed at 25%

D ($200,000 LTCL subj to 15% tax rate, combined with $50,000 gain taxed at 15%, leaving a $150,000 loss in the 15% category, is the offset against the $190,000 gain in the 25% category. Leaving a $40,000 gain taxed at 25%.) ($300,000 pp - 100,000 basis = $200,000 - $10,000 recognized depreciation = $190,000 Sec. 1250 gain)

Karen bought stock for $475 on March 31, 2019. On November 15, 2019, Karen received a non-taxable distribution of $155 on the 50 shares of stock she owned. She sold the stock for $300 on December 22, 2019. What is her gain or loss on the sale? A) $175 gain B) $175 loss C) $20 gain D) $20 loss

D ($300 realized - $320 adj basis)

In 2019, Jims will established a trust for his son Kevin and his grandsons. In 2020, a taxable termination occurred when Kevin died, and trust assets were distrubuted to grandsons Mark and John. Jim's executor allocated $1,500,000 of his exemption to the trust, which had a value of $6,500,000 at that time. When the taxable termination occurred in 2020, trust assets had a value of $9,000,000. State death taxes attributable to trust property were $500,000. What is the generation-skipping transfer tax due on the taxable termination? A) $1,800,000 B) $1,950,000 C) $2,550,000 D) $2,700,000

D (9,000,000 * 40% * 3/4) 3/4 comes from (1 - 1,500,000) / (6,500,000 - 500,000)

Pete purchased his home on June 1, 2010. On June 1, 2015, Pete became physically incapable of self-care and entered a licensed care facility. Pete sold the residence on April 15, 2019. Pete was residing at the facility at the time of the sale. Pete had purchased the home for $150,000, and he sold the home for $300,000. What is Pete's recognized gain for 2019? A) $300,000 B) $250,000 C) $150,000 D) $0

D (Individual must have lived in the residence for at least 1 year during the 5 years preceding the sale. Gain is excluded)

During 2003, John purchased 50 shares of CS in Corp D for $4,500. In 2014, D declared a stock dividend of 20%. The new stock received by John in the stock dividend was identical to the old stock. In 2019., D's stock split 3-for-1 at a time when the FMV was $120 per share. What is John's basis in each of his shares of D's stock if both distributions were nontaxable? A) $120 per share B) $90 for 50 shares and $0 for all additional shares C) $75 for 60 shares and $142.50 for 120 shares D) $25 per share

D (Johns total number of shares is 180 (50 + 10) * 3)

When Amelia bought her first home in 2016, she paid $100,000 plus $1,000 closing costs. In 2017, she added a deck that cost $5,000. Then, in July of 2019, a real estate dealer accepted her house as a trade-in and allowed her $125,000 toward a new house priced at $200,000. How should Amelia report this transaction on her 2019 return? A) $19,000 LTCG B) No reporting because the trade is not a sale C) $0 taxable gain and reduce her basis in her new house by $19,000 D) No reporting required

D (Page 318)

Paula received notice that her mutual fund had allocated a LTCG to her account in 2019 in the amount of $3,500 and had paid federal tax on her behalf in the amount of $1,225 on the gain. No amount was to be paid to Paula on the gain, but it would be credited to her account. All of the following statements are true EXCEPT: A) Paula is allowed a credit for the federal tax paid on her behalf of $1,225. B) Paula will report a LTCG of $3,500 C) Paula will increase her basis in the stock by $2,275 D) Paula will not report any gain because nothin was paid to her

D (Paula must report the full $3,500 as a LTCG)

John bought his principal residence for $250,000 on May 3, 2018. He sold it on May 3, 2019, for $400,000. What is the amount and character of his gain? A) Long-term, ordinary gain of $650,000 B) Long-term, capital gain of $150,000 C) Short-term, ordinary gain of $650,000 D) Short-term, capital gain of $150,000

D (Real property not used in trade or business is a capital asset)

Which of the following assets will NOT qualify for gain or loss treatment under Sec. 1231? A) Factory machine acquired March 1, 2018; sold August 1, 2019 B) Land used as a parking lot acquired August 1, 2018; sold September 1, 2019. C) Sculpture acquired August 1, 2018, by an investor for the purpose of making a profit on it; destroyed in a fire on September 1, 2019. D) Personal automobile acquired August 1, 2018; destroyed in a collision on September 1, 2019.

D (Sec 1231 property is depreciable or real property used in a trade or business and held for more than 1 year)

The Quick Torch Insurance Agency owns the land and building in which its offices are located. The agency also owns its office furniture, company cars, office equipment, and client files. Which of the following is NOT Sec. 1245 property? A) The office equipment B) The office furniture C) The company cars D) The client files

D (Sec 1245 property includes property depreciable under Sec. 167, which is either personal property or specified real property)

On January 3, 2019, Irene purchased 300 shares of CS in Corp Y for $120 per share. Four months later, she purchased 100 additional shares at $180 per share. On December 10, 2019, Irene received a 20% nontaxable stock dividend. The new and the old stock are identical. What is the amount of Irene's basis in each share of stock after the stock dividend? A) 480 shares at $112.50 B) 360 shares at $120 per share and 120 shares at $180 per share C) 360 shares at $120 per share and 120 shares at $150 per share D) 360 shares at $100 per share and 120 shares at $150 per share

D (The stock dividend is equal to 80 shares (400 * 20%). Thus, 360 shares (300 + .75(80) will have a basis equal to $100 per share ($36,000 / 360), and 120 shares ($100 + .25 (80) will have a basis equal to $150 per share)

Cheryl sold a boat, which had cost her $3,600, for $6,000. The boat was not used in a trade or business or held for rent. Cheryl accepted a $1,800 down payment and an installment obligation calling for 30 monthly payments of $140, plus interest. After receiving 8 months payments, Cheryl sold the installment obligation for $2,500. What was Cheryl's gain or loss on the disposition of the installment obligation? A) $820 B) $(420) C) $2,192 D) $652

D (amt real $2,500 - basis $1,848) Basis = $3,080 face amount * (100% - 40% gp %)

Matt owned an office building for investment purposes on the south side of Chicago. Matts adjusted basis in the building was $75,000 and the FMV was $90,000. He exchanged his investment for other real estate held for investment with a FMV of $80,000. What is Matt's basis in the new building? A) $80,000 B) $90,000 C) $95,000 D) $75,000

D (the basis in the new building is the adjusted basis the taxpayer had in the old building)

Mr. X inherited 2,000 shares of Corp Zero stock from his dad, who died on March 4, 2019. His father paid $10 per share for the stock on September 4, 1992. The FMV of the stock on the date of death was $50 per share. On Sep 4, 2019, the FMV of the stock was $60 per share. Mr. X sold the stock for $75 per share on July 3, 2019. The estate qualified for, and the executor elected, the alternate valuation date. An estate tax return was filed. What was Mr. X's basis in the stock on the date of the sale? A) $100,000 B) $120,000 C) $130,000 D) $150,000

D (2,000 shares * $75) (If the executor elects the alternate valuation date for the estate tr, the basis of the assets is their FMV 6 months after death or date of sale or distribution if earlier)

Which of the following is NOT a test to determine if a child is a qualifying child for the Earned Income Credit? A) Relationship B) Age C) Residency D) Support

D (#1, child must be related by birth or adoption or be an eligible foster child or step child, #2, principal residence must be with taxpayer, #3, child must be under the age of 19 at the close of the tax year)

Janice volunteers at her local art museum where she teaches art education classes. She is required to wear a blazer that the museum provides, but she paid the dry cleaning costs of $200 for the year. Her travel to and from the museum was 1,000 miles for the year. She estimates the value of her time she contributed at $2,000 ($20/hour * 100 hours). Her Schedule A deduction for charitable cont. is what? A) $2,340 B) $2,140 C) $140 D) $340

D ($200 dry cleaning + (1000 miles * 14 cents)

Charles gave his daughter, Jane, a residential house. He had purchased the house for $250,000 in 2004. The FMV on the date of the gift was $300,000. Charles had added a $25,000 roof the year before he gave it to Jane. Jane converts the house to a residential rental property within 1 year of the gift when the FMV was $320,000. Jane's basis in the property is: A) $300,000 B) $250,000 C) $225,000 D) $275,000

D (250,000 + 25,000)

Chris flew to Chicago for surgery. He incurred the following costs in connection with the trip: Round trip airfare $350 Hotels ($100/night x 2 nights) $200 Meals $80 Hospital. $5,000 What is Chris' medical expense? A) $5,490 B) $5,630 C) $5,000 D) $5,450

D (350 + (50 hotel limit per night * 2) + 5,000) (Meals not deductible

Mr. H has an AGI of $50,000. In 2019, he donated capital gain property valued at $25,000 to his church and did not choose to reduce the FMV of the property by the amount that would have been LTCG if he had sold it. His basis in the property was $20,000. In addition, he made the following contributions: - $500 to upgrade the city public park - $1,000 to Chamber of Commerce - $5,000 to an organization in Germany How much can Mr. H deduct for contributions? A) $25,000 B) $31,500 C) $16,500 D) $15,500

D (50,000 * 30% rule = $15,000) ($15,000 + $500)

Mr. Ng sole proprietor of Wu Co. purchased a machine for use in his business. Mr. Ng's costs in connection with its purchase were as follows: - Cash paid to seller $4,000 - Note to sell $48,000 - State sales tax $2,600 - Machine repairs $800 - Wage expense to install machine $3,200 What is the amount of Mr. Ng's basis in the machine? A) $54,600 B) $55,200 C) $58,600 D) $57,800

D (52,000 + 2,600 + 3,200)

Which of the following statements is NOT true regarding tax benefits for education? A) The AOC may be claimed for tuition expenses incurred in their first 4 years of post-secondary education B) The dollar limitations for the AOC are calculated on a per-student basis C) The Lifetime Learning Credit is allowed for tuition paid for graduate program studies D) Room and board are qualifying expenses for the AOC

D (Books and required course materials are allowed for the AOC, the credits may not be used for room and board, activity fees, athletic fees, insurance exp, or transportation)

Smith paid $6,000 to the tax collector of Big City for realty taxes on a two-family house owned by Smith's mother. Of this amount $2,800 covered back taxes for the previous year, and $3,200 covered the current year taxes. Smith resides on the second floor of the house, and his mother resides on the first floor. In Smith's itemized deductions on his current year return, what amount was Smith entitled to claim for realty taxes? A) $6,000 B) $3,200 C) $3,000 D) $0

D (Property taxes may be deducted only by the person on whom they are legally levied)

Which of the following would be considered passive activity income? A) Alaska Permanent Funds dividends B) State, local, and foreign income tax refunds C) Personal service income D) None of the above

D (Two types of passive (1) taxpayer does not materially participate and (2) rental activities, unless the taxpayer is a real estate pro)