TAX PC QUIZ

Tyler, age 20, earned $8,000 in wages and had taxable interest income of $3,000. He uses the standard deduction and is not allowable as a dependent on his parents' tax return. The amount of Tyler's income taxed at his parents' marginal tax rate is

0

Evan, age 18, has wages of $7,000, interest income of $6,000 and dividend income of $10,000. Evan uses the standard deduction and is allowable as a dependent on his parents' tax return. His parents have taxable income of $500,000. What is the MTR for the portion of the income taxed at Mike's rate?

10%

A single taxpayer has an MTR of 25%. Her dividend preference rate is

15%

Jaime is considering an investment in either a corporate bond with a pretax return of 4.5 percent or a municipal bond with a pretax return of 3.8 percent. Assume that the assets possess equal risk. Jaime has a marginal tax rate of 25 percent and an average tax rate of 17 percent. What is the implicit tax rate on the municipal bond and the asset that would give Jaime the greatest after-tax return?

15.6 %; muni bond

Erin, age 17, has wages of $3,000, interest from a savings account of $2,500, and municipal bond interest of $1,500. Erin uses the standard deduction and is allowable as a dependent on her parents' return. How much is Erin's taxable income?

2150

A taxpayer files as head of household with taxable income of $131,200 for 2017. What is the taxpayer's MTR for 2017?

28%

Taxpayer files as single. She has taxable income of $91,900 for 2017. The taxpayer's marginal tax rate is

28%

Madison, age 17, is allowable as a dependent on her parent's return. She has interest income of $10,000 and dividend income of $30,000. She paid state income taxes of $2,000 during the current year. Madison's allowable amounts for 2017 are

3050

For 2017, Rebecca, age 17, earned $3,000 working part-time. She also has $20,000 interest income. Rebecca is a dependent of her parents, who have taxable income of $550,000. How much is Rebecca's standard deduction for 2017?

3350

A taxpayer files as single for 2017 with the following information: Salary 60,000 Interest 2,000 Dividends 3,000 Dependents 0 Municipal bond interest 1,000 Itemized deductions 5,000 IRA Contribution 2,000 Tax withholding 4,000 The taxpayer's taxable income (TI) is

52600

The standard mileage rate per miles for 2017 is

53.5 cents

Roger receives a dividend of $10,000 from a family corporation. His accumulated share of corporate earnings (i.e., E&P) is $6,000 and his basis in his stock is $2,500. How is Roger's dividend treated?

6000 ordinary (qualified) dividend, 2500 nontaxable recovery of capital, and 1500 long term capital gain

For a single taxpayer to file as surviving spouse, he she must maintain a household for herself and

A dependent son or daughter

A taxpayer converts property from personal use to business use, creating a dual basis. If the loss basis is used, the holding period starts A. on the date the property was originally acquired. B. one the ate the property was transferred into the business. C. on the date the property is sold from the business.

A. on the date the property was originally acquired.

The phase out of the exemption amounts is justified by which concept?

Ability to pay

Alex owns a 25% interest in a partnership. She contributed $10,000 to create her interest. In the first year of operations, the partnership reports $100,000 as net income and makes a distribution to Alex of $15,000. How much gross income must Alex recognize from her investment in the partnership? A. 10000 B. 25000 C. 35000 D. 50000

B. 25000

Sally retires in 2016 at age 69 and begins receiving payments from an annuity purchased with the proceeds from her 401(k) account established through her employer. Over the years, Sally's employer contributed $300,000 to the account, while Sally contributed $100,000 after tax. Sally is to receive $3,000 per month for life. She received 12 payments in 2017. The amount to be included in Sally's gross income from the annuity in 2017 is A. 36000 B. 30288 C. 30048 D. 13143 E. 5952 F. 5712

B. 30288

Sarah drives her auto 24,000 miles for business and 6,000 miles for personal and commuting. Sarah pays $500 in personal property taxes on her auto. Her deduction for property taxes is A. 400 on S. C; no deduction on S. A B. 400 on S. C; 100 on S A C. 100 on S C; 400 S A D. 500 on S A E. Sarah cannot deduct the property taxes because shes uses the standard mileage rate

B. 400 on S C; 100 on S A

Melissa is single with interest of $10,000, dividends of $5,000, a taxable pension of $25,000, municipal interest of $2,000, and $8,000 of social security benefits. Melissa's provisional income is

B. 46000

Matt and Katie file a joint return and have provisional income of $47,000 and social security benefits of $10,000. How much of the social security benefits is taxable?

B. 7550

Allison purchased a 20000 machine in 2015 for use in her business. The machine is being recovered under the half year convention, 179 expense was not elected and 50% bonus was used. Allison disposed on the machine on January 5, 2017. Allison MACRS deduction for 2017 is A. 0 B. 875 C. 1749 C. 3498

B. 875

For 2017, Mel drives his car, costing 25000, for business. His business miles are 15,000 and his total miles are 20000. He pays 1500 for gas and maintenance and 500 for insurance. His maximum deduction for the business use of his auto, assuming he bonus depreciation is A. 1500 B. 9870 C. 12660 D. 8025

B. 9870

On June 1, 2017, taxpayer receives a gift of land. The donor's basis in the land, acquired on November 1, 2002, is $60,000. The FMV of the land at the time of the gift is $50,000. On December 1, 2017, the taxpayer sells the land for $40,000. When does the holding period begin? A. November 1, 2002 B. June 1, 2017 C. Novemeber 1, 2017 D. Decemeber 1, 2017

B. June 1, 2017

Monica converts property from personal use to business use. At the time of the conversion, the property is worth $30,000. The property has an adjusted basis $40,000. Monica sells the property for $25,000. Her holding period starts A. When the property is contributed. B. Starts when the property was originally acquired. C. Cannot be determined.

B. Starts when the property was originally acquired

William and Mary are retired. During the current year, they receive $10,000 in Social Security benefits. They have $45,000 of other taxable gross income and receive $23,000 of municipal bond interest. The taxable portion of the $10,000 Social Security payment is: A. 0 B. 5000 C. 8500 D. 10000

C. 8500

Grandparent, parent, and child all live in the same household that is maintained by the grandparent. Parent is 25 and earns $15,000 through employment. Child receives all of her support from the grandparent and the parent . The child has no income. The grandparent's filing status is A. MFJ B. SS C. HoH D. Single E. Abandoned Spouse

C. HoH

Chad, Bailie, and Gretchen provide the majority of the support for their mother. Support is provided as follows: Chad 20% Bailie 25% Gretchen 7% Mother's social security benefits 48% Under the multiple support agreement rules, who is eligible to claim the dependency exemption?

Chad or Bailie

An achievement award made by the employer to an employee can be excluded from the gross income of the employee per section 74(b), provided that the employer transfers the award directly to a recognized charity. T/F

False

During 2017, taxpayer receives a Form 1099-G from the state indicating a state income tax refund of $200 for 2016. Taxpayer did not itemize deductions in 2016. The state income tax refund must be included in gross income in 2017.

False

For 2017, Jamie purchased a new car and uses it 75% for business. The car cost $33,000. Jamie elects to use bonus depreciation and actual expenses for the auto expense. Jamie's depreciation deduction for the car is $11,160. A. True B. False

False

In order to be a qualifying relative, the person must live with the taxpayer.

False

Kansas State University College of Business selects one of its professors for its annual teaching award. The professor directs the College to give the award directly to the K-State scholarship fund, making the award excludable form income under Section 74(b). T/F

False

Taxpayer has an annuity from an employer-sponsored retirement plan. The employer contributed $200,000 pretax and the taxpayer contributed $100,000 pretax. The account is worth $700,000 at retirement. The cost to be recovered using the simplified method is $100,000. T/F

False

The average rate will be lower than the effective rate when the taxpayer has income that is excluded.

False

The kiddie tax calculation may be used to reduce the amount of tax paid.

False

Rachel does work for Jenna. Jenna pays Rachel $5,000 in December 2017. Dissatisfied with the work, Jenna sues Rachel. Rachel, under court order, pays $1,000 back to Jenna during 2018. The tax concepts to be used to determine the appropriate treatment of the transactions first for Jenna and then for Rachel is

Tax benefit rule; claim of right

Which dependent(s) will not qualify a single taxpayer for the head of household filing status? (Check all that apply)

Taxpayer's mother who resides in a nursing home paid for by the taxpayer and her siblings through a multiple support agreement. - The taxpayer's friend who lives with the taxpayer all year.

Which person does not have to be claimed as a dependent to qualify the taxpayer to be head of household?

Taxpayer's nephew who meets the requirements to be a qualifying child

Jill owns a 20% interest in the ABC partnership. Her initial basis (contribution) in the partnership is 20,000. For 2017, the partnership had $400,000 of income. Jill also received a distribution of $15,000 from the partnership. Jill's taxable income and the treatment of the distribution, respectively is

80000 income and a nontaxable distribution

A taxpayer sells nonresidential MACRS property. To the extent of depreciation taken, the gain on the property will be unrecaptured 1250 gain. A. True B. False

A. True

Sally retires in 2016 at age 69 and begins receiving payments from an annuity purchased with the proceeds from her 401(k) account established through her employer. Over the years, Sally's employer contributed $300,000 to the account, while Sally contributed $100,000 before tax. Sally is to receive $3,000 per month for life. She received 12 payments in 2017. The amount to be included in Sally's gross income from the annuity in 2017 is A. 36000 B. 30288 C. 30048 D. 13143 E. 5952 F. 5712

A. 36000

Taxpayer converts property from personal use to business use. The property originally cost $100,000. At the time of the conversion, the property is valued at $80,000. The depreciation basis for the asset is A. 800000 B. 100000

A. 80000

On June 1, 2017, taxpayer receives a gift of land. The donor's basis in the land, acquired on November 1, 2002, is $60,000. The FMV of the land at the time of the gift is $50,000. On December 1, 2017, the taxpayer sells the land for $70,000. When does the holding period begin? A. Novermber 1, 2002 B. June 1. 2017 C. November 1, 2017 D. December 1, 2017

A. November 1, 2002

Aubrey receives an award for 20 years of service. She receives a plaque and and a gift card for $200. The prize is A. Taxable B. Excluded if the awarded is part of a qualified plan C. Excluded if the award is part of a nonqualified plan D. Both B and C are correct

A. Taxable

In the kiddie tax calculation, section 1(g) allows the gross unearned income to be reduced by the allowable amounts of $2,100. Which concept justifies using the $2,100 amount?

Administrative Convenience

Which of the following is (are) not an itemized deduction(s)? (Check all that apply)

Alimony paid, student loan interest

Loss deductions from related party transactions are disallowed because they violate which concept?

Arms length transaction

Doug owns a shopping center. The lease agreements require that the payments be made to a partnership in which Doug's two children are the partners. Which concept applies to the treatment of the rental income?

Assignment of income

Ryan purchased an apartment building on November 1, 2012. He sells the building on April 30, 2017. The MACRS rate used for building for 2017 is A. 3.636% B. 1.061% C. 3.175% D. 0.748% E. 2.564%

B. 1.061%

Melissa receives a gift of investment property. At the time of the gift, the property is worth $300,000. The donor has an adjusted basis in the property of $400,000. Gift tax of $6,000 is paid on the transfer. Melissa sells the property for $410,000. Her gain on the disposal is A. 0. B. $10,000 gain. C. $4,000 gain. D. $104,000 gain. E. $110,000 gain.

B. 10,000 gain.

Melissa receives a gift of investment property. At the time of the gift, the property is worth $300,000. The donor has an adjusted basis in the property of $400,000. Gift tax of $6,000 is paid on the transfer. Melissa sells the property for $290,000. Her loss on the disposal is A. 0. B. $10,000 loss. C. $16,000 loss. D. $110,000 loss. E. $116,000 loss.

B. 10,000 loss.

On June 1, taxpayer receives a gift of land. The donor's basis in the land is $60,000. The FMV of the land at the time of the gift is $50,000. The donor paid gift tax of $6,000 on the transfer. On December 1, the taxpayer sells the land for $40,000. What is the taxpayer's gain or loss on the sale of the land? A. 20000 loss B. 10000 loss C. 4000 loss D. 14000 loss E. No gain or loss

B. 10000 loss

Taxpayer file as MFJ for 2017. They have taxable income before long-term capital gains of $75900 and a long term capital gain of 10000. The preference rate for the long term capital gain is A. 0. B. 15% C. 20% D. 25% E. 28%

B. 15%

Taxpayer starts a new business. She transfers her personal-use computer to the business. Taxpayer paid $2,000 for the computer. At the time of the transfer, the computer is valued at $600. After two months, the taxpayer sells the computer for $400. What is the taxpayer's gain or loss on the disposal of the computer A. No gain or loss B. 200 loss C. 1600 loss D. 2000 loss

B. 200 loss

Carol has the following gains and losses: STCG $3,000 LTCL $5,000 1231 Loss $8,000 1231 Gain $5,000 What is Carol's net capital gain or loss position for the year? A. $2,000 net short-term capital gain B. $2,000 net long-term capital loss. C. $5,000 net long-term capital loss. D. $3,000 net long-term capital gain.

B. 2000 net long term capital loss

On June 20, Julie buys land from Keith subject to a $120,000 liability. In return for the land, Julie pays $10,000 cash and provides a machine with an adjusted basis of $8,000 and FMV of $15,000. Real estate taxes are $6,000 for the calendar year. Keith reimburses Julie for his share of the property taxes. What is Julie's deduction for property taxes for the year? A. 0 B. 2795 C. 3205 D. 6000

C. 3205

Jesse and Abby file a joint return for 2017. During 2017, Abby drives her car 10000 miles for business and 5000 miles for personal. Property taxes on her car are 490, including a registration fee of 40. Jesse uses his care entirely for personal use. The property taxes on his car are 300, including a registration fee of 40. The couples itemized deduction on Schedule A for the property taxes on their cars is A. 260 B. 300 C. 410 D. 560

C. 410

Ozzie and Harriet file a joint return for 2017. Ozzie has W-2 income of 62000. Harriet has net income on Schedule C of 15000 afte depreciation. During 2017, Harriet purchased equipment costing 100000. What is the allowable section 179 deduction for 2017? A. 15000 B. 62000 C. 77000 D. 100000 E. 500000

C. 77000

Ken receives a watch valued at $500 from his employer as an award for 25 years of service to the company. The company has a written plan for employee achievement awards. What amount must Ken include in his gross income from the award? A. 500 B. 400 C. 100 D. 0

D. 0

Bruce wins $100,000 in the Kansas Lottery. He keeps $75,000 and gives $25,000 to a charity. How much GI does he have from the award? A. 0 B. 25000 C. 75000 D. 100000

D. 100000

Kim has $8,000 in state income tax withholding on her W-2 for 2017. In addition, she made estimated tax payments to the state of Kansas during 2017 of $2,000. Kim also paid $500 when she filed her 2016 Kansas income tax return on 4/12/2017. Kim's potential itemized deduction for state income taxes paid for 2017 is A. 0 B. 8000 C. 10000 D. 10500

D. 10500

On April 1, 2017, taxpayer receives land from an estate. The decedent had a basis in the land of $60,000. The FMV of the land at the time at the time of decedent's death, July 1, 2016, is $120,000. On January 1, 2017, the land is valued at $105,000. When the land is distributed in April 2017, it is deemed to be worth $100,000 What is the taxpayer's basis in the land if the executor makes no elections? A. 60000 B. 100000 C. 105000 D. 120000

D. 120000

On June 20, Julie buys land from Keith subject to a $120,000 liability. In return for the land, Julie pays $10,000 cash and provides a machine with an adjusted basis of $8,000 and FMV of $15,000. Real estate taxes are $6,000 for the calendar year. Keith reimburses Julie for his share of the property taxes. What is Julie's basis in the land? A. 18000 B. 25000 C. 140795 D. 145000 E. 147795 F. 148205

D. 145000

Kaden received interest from the following sources during 2017. Interest from Treasury Bonds $3,000 Interest from City of Manhattan Bonds $500 Interest from a Kansas state income tax refund dispute $70 Interest from a savings account at Kansas State Bank $300 How much gross income does Kaden have from the interest payments in 2017? A. 3870 B. 3800 C. 4450 D. 3370 E. 570 F. 370

D. 3370

Betty uses the $100,000 she inherited to purchase a life annuity. The annuity will pay Betty $500 per month for life. Betty is age 66 when the annuity begins making monthly payments in January 2017. How much gross income does Betty have for 2017?

D. 792

As a result of their divorce in 2017, Frank is required by the divorce decree to pay Margaret a $60,000 cash payment. Frank intends the payment to be for equity in the house, but this intention is not stated in the divorce decree. How is the $60,000 payment treated by Frank? A. Deducted from AGI as a property settlement. B. Nondeductible property settlement. C. Nondeductible alimony payment. D. Deducted for AGI as alimony. E. Nondeductible child support.

D. Deducted for AGI as alimony

Property is sold on November 22. Property taxes for the year are $3,000. The buyer's deduction for property taxes is A. 3000 B. 2671 C. 2589 D. 2500 E. 329 F. 250

E. 329

Which tax concept justifies the existence of the standard mileage rate for auto expense deductions? A. Claim or right B. Tax benefit rule C. Constructive receipt D. Assignment of income E. Adminstrtative convenience

E. Administrative convenience

On June 1, taxpayer receives a gift of land. The donor's basis in the land is $60,000. The FMV of the land at the time of the gift is $50,000. The donor paid gift tax of $6,000 on the transfer. On December 1, the taxpayer sells the land for $52,000. What is the taxpayer's gain or loss on the sale of the land? A. 2000 gain B. 4000 loss C. 8000 loss D. 14000 loss E. No gain or loss

E. No gain or loss

Which of the following statements regarding head of household is false: You Answered A. A qualifying child who is not claimed as a dependent can still qualify the taxpayer to file as head of household. B. The only dependents who can qualify the taxpayer without living with the taxpayer are the taxpayer's mother and father. C. A dependent who is a qualifying relative but not related (i.e., lives with the taxpayer for the entire year) will not qualify the taxpayer for head of household. D. A dependent who is a qualifying relative because of a multiple support agreement will not qualify the taxpayer for head of household. E. All of the above statements are true.

E. all of the above statements are true

Taxpayer receives land from an estate on December 1, 2017. The decedent died on January 20, 2017. The property is valued in the estate tax return at $100,000, the FMV on the date of death. The decedent originally paid $40,000 for the land on November 1, 2006. Taxpayer sells the land on December 20, 2017. The holding period for the land A. Starts on november 1, 2006 B. Starts on Jan 20, 2017 C. Starts on Dec 1, 2017 D. Is automatically short term E. is automatically long term

E. is automatically long term

Melissa receives a gift of investment property. At the time of the gift, the property is worth $400,000. The donor has an adjusted basis in the property of $300,000. Gift tax of $6,000 is paid on the transfer. Melissa sells the property for $310,000. Her gain or loss on the disposal is A. 0. B. $90,000 loss. C. $96,000 loss. D. $91,500 loss. E. $10,000 gain. F. $4,000 gain. G. $8,500 gain.

G. 8500 gain

Zach and Anne divorced in 2016. Their daughter, Rachel, lives with Anne during all of 2017. Zach pays 60% of the support for Rachel in the form of child support payments, while Anne pays the other 40% in child support payments. Rachel is 17 and makes $6,000 working part-time. Anne provides Zach with a signed Form 8332 for the residence test. What is Anne's filing status for 2017?

Head of Household

The implicit tax rate

Is the measure of how much lower the rate of return is for an asset that receives a tax preference.

A person may meet the tests to be both a qualifying child and a qualifying relative. When this is the case, which one takes priority?

Qualifying child

Which source of income is not subject to FICA or self-employment tax?

Rental income from property that the taxpayer does not materially participate (i.e. passive)

Which test does not apply to a qualifying relative?

Residence test

Which income source is not subject to the Net Investment Income Tax (NIIT)

Salary

Mackenzie uses the $500,000 proceeds from an employer-sponsored retirement plan to purchase an annuity that will pay him $2,000 per month for life. All of her contributions to the retirement account were made pretax. Mackenzie is age 66 when the annuity begins making monthly payments in January 2017. Which method will Mackenzie use to determine the potential capital recovery from the annuity payments?

Simplified Method

Which of the following is (are) a conduit entity? (Check all that apply)

Sole Proprietorship. Partnership. S Corporation.

Barney operates a sole proprietorship. He paid a supplier $10,000 in 2016 for an amount that he deducted as a supplies expense. In January 2017, the supplier determines that Barney was due a 2% discount for paying early and remits $200 to Barney. Which concept is used to determine the appropriate tax treatment?

Tax benefit rule

For 2018, the net unearned income in the kiddie tax calculation will be taxed using

The tax rate schedule and the preference rates for trusts.

Alex is 22 and a full-time college student during 2016. How much gross income may Alex earn without failing to qualify as a dependent?

There is no gross income limit

Kristy uses the $300,000 proceeds from inheritance to purchase an annuity that will pay her $1,500 per month for life. Kristy is age 67 when the annuity begins making monthly payments in January 2016. Which method will Kristy use to determine the potential recovery of capital from the annuity payments?

Traditional Method

A deduction for AGI will produce a tax benefit that is greater than the stated tax rate (i.e. rate from the tax rate schedule) in cases where the taxpayer's deductions from AGI and tax credits are subject to phase out limitations.

True

A retired taxpayer will generally have less of her social security benefits included in gross income if she invests in muni bonds. If her MTR is low (e.g., 15%), this strategy will most likely result in less after-tax income because of the high implicit tax on the muni bonds. T/F

True

A taxpayer may recover capital before income results. Capital may be recovered through immediate deduction, over time via depreciation deductions, and using adjusted basis to determine gain or loss at disposal.

True

Bill sells property to Ike. Bill does not reimburse Ike for his share of the property taxes. As a result, Bill's share of the property taxes is added to Ike's basis in the property and to Bill's amount realized from the disposal of the property. t/f

True

Bob operates his business as a sole proprietorship. During 2017, he pays $7,000 is estimated state income taxes to Kansas. The payment is deductible as a state income taxes paid on Schedule A. True False

True

For 2018, an owner of a conduit business entity will be able to deduct up to 20% of qualified business income. T/F

True

For 2018, the dependency exemption deduction is being replaced by credits. The child credit will apply to a qualifying child that has not turned 17 prior to the end of the year.

True

Grant wins the Nobel prize. He elects to have the prize transferred by the payor to a recognized charity. The award meets the requirements for exclusion from gross income outlined in 74(b). T/F

True

Land used in a business would be a Section 1231 asset. Land held for investment would be a capital asset.

True

The early withdrawal penalty reported a Form 1099-INT creates a deduction for AGI.

True

The existence of a mass tax allows the tax code to be used by Congress as a tool for carrying out social and economic policy using tax expenditures. Tax expenditures take the form of exclusions, deductions, and credits.

True

The phase out of the exemption amounts is eliminated in 2018 and will be replaced by a phase out for the child and other dependent credits.

True

The taxpayer's mother or father is the only qualifying relative dependent who may qualify a taxpayer to be head of household while not living with the taxpayer for more than half the year.

True

Which concept justifies the phase-out of the child credit?

ability to pay

In order for a married taxpayer to qualify to file as head of household using the abandoned spouse provision, she must maintain a household for herself and a

dependent son or daughter

Which tax rate is used for decision making?

marginal rate