ACCT 3250 - FINAL - 2018/2019 - Scharf
T/F Depreciable property placed in service nine months earlier is considered Sec. 1231 property.
False
T/F When a donee disposes of appreciated gift property, the recapture amount for the donee is computed by including the recapture amount attributable to the donor.
True
Scott provides accounting services worth $40,000 to the ABC Partnership in exchange for a 20% interest in the capital and profits of the partnership. The tax result to Scott is A. a partnership interest with a $40,000 basis and $40,000 ordinary income. B. a partnership interest with a zero basis and no gain or loss. C. a partnership interest with a $40,000 basis and $40,000 capital gain. D. a partnership interest with a zero basis and $40,000 of ordinary income.
A. a partnership interest with a $40,000 basis and $40,000 ordinary income.
Limited liability of partners or members is an advantage of all the following with the exception of A. general partnerships. B. limited partnerships. C. LLC. D. LLP.
A. general partnerships.
T/F Where non-like-kind property other than cash is received as boot, the amount of the boot is the property's fair market value.
True
All of the following are true except A.a nonsimultaneous exchange may never qualify as a like-kind exchange B.nonrecognition of gains and losses is mandatory if the exchange is a like-kind exchange C.the holding period of like-kind property received includes the holding period of the property exchanged D.a loss may be recognized on non-like-kind property (boot) if the taxpayer transfers the boot in an otherwise like-kind exchange
A.a nonsimultaneous exchange may never qualify as a like-kind exchange
T/F A citator enables tax researchers to locate authorities (e.g., cases and IRS pronouncements) that have cited a particular case.
True
All the following are types of pass-through entities except A. S corporations. B. C corporations. C. LLP. D. LLC.
B. C corporations.
Ben is a 30% partner in a partnership. The partnership guarantees Ben payments of $25,000 for the year. If the partnership has ordinary income of $15,000 before adjustment for the guaranteed payment, Ben must report A. ordinary income of $22,000. B. ordinary income of $25,000 and a partnership loss of $3,000. C. an ordinary loss of $3,000. D. ordinary income of $25,000 and a partnership income of $4,500.
B. ordinary income of $25,000 and a partnership loss of $3,000.
For purposes of the accumulated earnings tax, reasonable needs of the business include all of the following with the exception of A. providing working capital for the business. B. acquiring the assets or stock of another business. C. making loans to stockholders. D. reasonably anticipated expansion of the business and plant replacement.
C. making loans to stockholders.
Raina owns 100% of Tribo Inc., an S corporation. She started the business this year with a $100,000 capital contribution. In addition, the business borrowed $50,000 from the bank which she had to guarantee. Tribo incurred a first year operating loss of $170,000. Raina will deduct an ordinary loss this year of A. $170,000. B. $0. C. $100,000. D. $150,000.
C. $100,000.
On July 1, Alexandra contributes business equipment (which she had purchased two years ago) having a $45,000 FMV and a $40,000 adjusted basis to the AX Partnership in exchange for a 25% interest in the capital and profits. The basis of Alexandra's partnership interest is A. $5,000. B. $45,000. C. $40,000. D. None of the above.
C. $40,000.
T/F For corporations, both NLTCLs and NSTCLs are eligible for a 3-year carryback and a 5-year carryforward as an offset against capital gains for those years.
True
https://quizlet.com/98809575/chapter-c1-tax-research-note-flash-cards/
Extra Chapter 15 Quizlet
T/F Echo Corporation plans to sell a small building to Nate, its 65% shareholder. The building was placed in service five years ago. An independent appraisal will be obtained to set the selling price at an appropriate market price, and a $50,000 gain is expected to result. The only asset previously sold by Echo was a stock investment five years ago which resulted in a $40,000 loss. If the sale of the building closes before year-end, the gain on the building will allow recognition of the capital loss carryover before it expires.
False
T/F Gain due to depreciation recapture is included in the netting of Sec. 1231 gains and losses.
False
T/F If an employee has more than one employer during the year, all employers must withhold federal income taxes but only one employer must withhold FICA tax.
False
T/F If the accumulated depreciation on business equipment held longer than one year exceeds realized gain on the sale of the equipment, all of the realized gain will be treated as Sec. 1231 gain.
False
T/F Tax planning is not an integral part of open-fact situations.
False
T/F The child and dependent care credit is partially refundable.
False
T/F The exchange of land held for investment purposes for stock in a real estate holding corporation held as an investment qualifies for like-kind treatment.
False
T/F The health insurance premium assistance credit is designed to help lower and middle income taxpayers who purchase their own health insurance directly from an insurance company or through a state or federal exchange.
False
T/F The holding period of like-kind property received in a nontaxable exchange begins on the day of the exchange.
False
T/F The income of a single member LLC is taxed to its owner under the sole proprietorship rules if no election to be taxed as a corporation is made.
True
T/F The sale of inventory results in ordinary gain or loss.
True
T/F New business owners expecting losses in the early years will generally prefer the partnership (or LLC) form of business over the C and S corporation forms.
True
T/F The Internal Revenue Code of 1986 contains the current version of the tax law.
True
T/F Under the "check-the-box" Treasury Regulations, an LLC with more than one member is treated as a partnership unless the LLC affirmatively elects to be classified as a corporation.
True
Extra Quizlet for Chapter 13
https://quizlet.com/290935331/chapter-13-practice-flash-cards/
Dixie Corporation distributes $31,000 to its sole shareholder, Sally. At the time of the distribution, Dixie's E&P is $25,000 and Sally's basis in her Dixie stock is $10,000. Sally's basis in her Dixie stock after the distribution is A. $25,000. B. $4,000. C. $10,000. D. $31,000.
B. $4,000.
Danielle transfers land with a $100,000 FMV (basis $95,000) and $85,000 of business-related liabilities to a corporation in exchange for 100% of the corporation's stock with a FMV of $15,000. The corporation qualifies as a 351 transfer. The corporation assumes the $85,000 mortgage. What is the adjusted basis of the property to the corporation? A. $15,000 B. $95,000 C. $100,000 D. $0
B. $95,000
Gena exchanges land held as an investment with a $60,000 basis for other land with a $80,000 FMV and a motorcycle with a $10,000 FMV. The acquired land is to be held for investment and the motorcycle is for personal use. What is the amount of recognized gain? A.$30,000 B.$10,000 C.$0 D.$20,000
B.$10,000
All of the following are separately stated items that pass through from the partnership to the partners except A. 1231 gains or losses. B. charitable contributions. C. capital gains and losses. D. 1245 and 1250 recapture.
D. 1245 and 1250 recapture.
S corporation shareholders who own more than 2% of the outstanding stock are eligible for which of the following tax-free benefits? A. exclusion for cafeteria plan benefits B. group term life insurance exclusion under Sec. 79 for premiums paid for up to $50,000 coverage C. exclusion from income for premiums paid for accident and health and medical reimbursement plans D. None of the above.
D. None of the above.
All of the following business forms offer limited liability except the A. limited liability company. B. corporation. C. S corporation. D. partnership.
D. partnership.
A liquidating corporation A. never recognizes gains and losses on the distribution of property. B. recognizes gains, but not losses, on the distribution of property. C. recognizes gains and losses only on the distribution of the specific property contributed in a Sec. 351 transaction. D. recognizes gains and losses on the distribution of property.
D. recognizes gains and losses on the distribution of property.
A corporation has the following capital gains and losses during the current year: LTCG: $25,000 LTCL: 15,000 STCG: 8,000 STCL: 4,000 The tax result to the corporation is A. $10,000 NLTCG is included in gross income and taxed at reduced rates; and $4,000 NSTCG included in gross income and taxed at the ordinary rate. B. $14,000 included in gross income and taxed at reduced rates. C. $10,000 NLTCG included in gross income and taxed at the ordinary rate; $4,000 NSTCG included in gross income and taxed at reduced rates. D. $14,000 included in gross income and taxed at the ordinary rate.
D. $14,000 included in gross income and taxed at the ordinary rate.
Corkie Corporation distributes $80,000 cash along with land having a $60,000 adjusted basis and a $40,000 FMV to its shareholder Josh. What are the tax consequences to Corkie Corporation? A. $20,000 gain realized but not recognized B. $20,000 gain realized and recognized C. $20,000 loss realized and recognized D. $20,000 loss realized but not recognized
D. $20,000 loss realized but not recognized
An S corporation distributes land with a basis of $60,000 and a FMV of $90,000 to its shareholder. The tax results of the distribution will be A. no gain recognized by the corporation but $30,000 of gain recognized by the shareholder. B. no gain to the corporation or to the shareholder. C. $30,000 of gain recognized by the S corporation and no pass-through to the shareholder. D. $30,000 of gain recognized by the S corporation which is passed through to the shareholder.
D. $30,000 of gain recognized by the S corporation which is passed through to the shareholder.
T/F Appeals from the U.S. Tax Court are to the Court of Appeals for the Federal Circuit.
False
Joe, who is single with modified AGI of $84,000, is sending his son to his first year of college. The total tuition and related payments during the year amounted to $18,000. Joe has not taken advantage of any other type of tax benefit related to educational expenses. His American Opportunity Tax Credit is A.$1,500 B.$2,500 C.$0 D.$1,000
A. $1,500.
Louisiana Land Corporation reported the following results for the current year: Taxable income before the dividends-received deduction and before the charitable contributions deduction 320,000 Charitable contributions 60,000 Dividends-received deduction 20,000 What is the amount of the taxable income for the current year? A. $268,000 B. $294,000 C. $240,000 D. $300,000
A. $268,000
Ella needs to move her business to a larger facility. She projects a large realized gain on the sale of the old building and prefers not to pay tax on the gain because the sales proceeds are needed to finance the purchase of the new building. In the circumstances, a direct two- or three-party like-kind exchange is not feasible. Ella's sale can still qualify for like-kind treatment if she arranges an appropriate nonsimultaneous exchange. Among other criteria, after the transfer of the old building, the replacement property must be A. identified within 45 days and received within 180 days B. identified within 45 days and received by year-end C. identified within 60 days and received within 180 days D. identified within 90 days and received by year-end
A. identified within 45 days and received within 180 days
Kai owns an apartment building held for investment purposes. The apartment building is worth $500,000, although it is subject to a mortgage of $100,000. Kai's basis in the apartment building is $380,000. Kai exchanges the apartment building for an office building. The office building has an FMV of $350,000. Kai receives $50,000 cash in addition to receiving the office building, and the other party assumes the apartment building mortgage. What is Kai's recognized gain on this exchange? A.$120,000 B.$0 C.$150,000 D.$50,000
A.$120,000
Rolf exchanges an office building worth $150,000 for investment land worth $175,000. He also provided stock worth $25,000. Rolf's adjusted basis in the building and stock is $130,000 and $11,000, respectively. How much gain will Rolf recognize on the exchange? A.$14,000 B.$20,000 C.$34,000 D.$0
A.$14,000
Cassie owns equipment ($45,000 basis and $30,000 FMV) and a building ($152,000 basis and $158,000 FMV), which are used in Cassie's business. Cassie has used straight-line depreciation for both assets, which were acquired two years ago. Both the equipment and the building are destroyed in a fire, and Cassie collects insurance proceeds equal to the assets' FMV. The tax result to Cassie for this transaction is a A.$15,000 ordinary loss and a $6,000 ordinary gain B.$15,000 Sec. 1231 loss and a $6,000 Sec. 1231 gain C.$15,000 Sec. 1231 loss and a $6,000 ordinary gain D.$15,000 ordinary loss and a $6,000 Sec. 1231 gain
A.$15,000 ordinary loss and a $6,000 ordinary gain
Nana is a self-employed consultant. For the past five years, she has used an extra bedroom (15% of the house) in her home as a qualifying home office and deducted $9,000 of depreciation expense. This year she sells the house for $740,000. The house cost $500,000. Nana is single. She will recognize gain on the sale of the house of A.$9,000 B.$0 C.$45,000 D.$249,000
A.$9,000
Which of the following citations denotes a regular decision of the Tax Court? A.35 T.C. 1083 (2003) B.39 AFTR 2d 77minus640 C.41 TCM 1272 D.all of the above
A.35 T.C. 1083 (2003)
Which of the following statements is false regarding involuntary conversions? A.A taxpayer must replace the destroyed property within the same tax year in which the gain is realized B.If deferral of gain is elected, the holding period of the converted property carries over to the replacement property C.Gain may be deferred if the property is involuntarily converted into property that is similar or related in service or use to the converted property D.A taxpayer cannot elect to defer recognition of a loss resulting from an involuntary conversion
A.A taxpayer must replace the destroyed property within the same tax year in which the gain is realized
Pierce has a $16,000 Sec. 1231 loss, a $12,000 Sec. 1231 gain, and a salary of $50,000. What is the treatment of these items in Pierce's AGI? A.The 1231 gains and losses are treated as ordinary gains and losses making Pierce's AGI for the year $46,000 B.Pierce has a $3,000 LTCL which is deductible for AGI making AGI $47,000. He also has a $1,000 LTCL carryover C.Pierce has net LTCG of $9,000 and $37,000 of net ordinary income D.Pierce has a LTCG of $12,000 and a net ordinary income of $34,000.
A.The 1231 gains and losses are treated as ordinary gains and losses making Pierce's AGI for the year $46,000
Identify which of the following statements is true. A.The Statements on Standards for Tax Services recommend that only written tax advice be provided to the client in all situations B.The first step in conducting tax research is to clearly understand the issues involved C.Tax planning is an integral part of both closed-fact situations and open-fact situations D.All of the above are false
A.The Statements on Standards for Tax Services recommend that only written tax advice be provided to the client in all situations
You have the following citation: Joel Munro, 92 T.C. 71 (1989). Which of the following statements is true? A.The case appears on page 71 in Volume 92 of the official Tax Court of the United States Reports and the case was decided in 1989 B.This citation refers to a taxpayer conference between the IRS and the taxpayer C.The case was tried in 1989 and was appealed in 1992 D.The taxpayer, Joel Munro, won the case because there is no reference to the IRS
A.The case appears on page 71 in Volume 92 of the official Tax Court of the United States Reports and the case was decided in 1989
When a taxpayer contacts a tax advisor requesting advice as to the most advantageous way to dispose of a stock, the tax advisor is faced with A.an open-fact situation B.a closed-fact situation C.a restricted-fact situation D.a recognized-fact situation
A.an open-fact situation
Sec. 1231 property will generally have all the following characteristics except A.held for sale to customers B.used in trade or business C.held for more than one year D.real or depreciable property
A.held for sale to customers
Form 6251, Alternative Minimum Tax, must be filed in any of the following situations except A.the earned income tax credit exceeds the tentative minimum tax B.the taxpayer has general business tax credits that are limited by the tentative minimum tax C.the tentative minimum tax exceeds the regular tax D.the AMT base exceeds the exemption amounts and an individual has AMT adjustments or tax preference items
A.the earned income tax credit exceeds the tentative minimum tax
A taxpayer at risk for AMT should consider which of the following decisions? A.timing of state income tax estimated payments B.investing in corporate bonds C.choosing a depreciation method for a new business building D.All of the above.
A.timing of state income tax estimated payments
Juan's business delivery truck is destroyed in an accident. He paid $40,000 for the truck, and $30,000 of depreciation has been deducted during its period of use. The insurance company pays Juan $32,000 due to the accident. What is the minimum amount that Juan must spend on a new truck to avoid any gain recognition? A.$40,000 B.$32,000 C.$10,000 D.$22,000
B.$32,000
In 1980, Artima Corporation purchased an office building for $400,000 for use in its business. The building is sold during the current year for $550,000. Total depreciation allowed for the building was $390,000; straight-line would have been $360,000. As result of the sale, how much Sec. 1231 gain will Artima Corporation report? A.$150,000 B.$398,000 C.$510,000 D.$540,000
B.$398,000
Dean exchanges business equipment with a $120,000 adjusted basis for $40,000 cash and business equipment with a $140,000 FMV. What is the amount of gain which Dean recognizes on the exchange? A.$60,000 B.$40,000 C.$20,000 D.$0
B.$40,000
Daniella exchanges business equipment with a $100,000 adjusted basis for $10,000 cash and business equipment with a $96,000 FMV. What is the amount of gain recognized on the exchange? A.$10,000 B.$6,000 C.$4,000 D.$0
B.$6,000
With regard to noncorporate taxpayers, all of the following statements are true regarding Sec. 1250 recapture except A.Sec. 1250 ordinary income does not exist if the straight-line method of depreciation is used B.Sec. 1250 applies to assets sold or exchanged at either a gain or a loss C.Sec. 1250 ordinary income is never more than the additional depreciation allowed D.Sec. 1250 affects the character of the gain, not the amount of the gain
B.Sec. 1250 applies to assets sold or exchanged at either a gain or a loss
During the course of an audit, a CPA discovers an error in a prior return. According to the Statements on Standards for Tax Services, the CPA should A.correct the error in the current year's tax return. B.ask the client for permission to disclose the error to the IRS C.withdraw from the engagement D.inform the IRS of the error, regardless of whether the client grants permission
B.ask the client for permission to disclose the error to the IRS
With respect to estimated tax payments for a taxpayer with AGI of $150,000 or lower in the prior year, all of the following are generally true with the exception of A.no penalty is imposed if the estimated tax is less than $1,000 B.no underpayment penalty is imposed if the estimated payments total at least 90% of the actual tax liability for the prior year C.no underpayment penalty is imposed if the estimated payments total at least 90% of the tax due for the current year D.no penalty is imposed if the individual has no tax liability for the prior year
B.no underpayment penalty is imposed if the estimated payments total at least 90% of the actual tax liability for the prior year
Tanya has earnings from self-employment of $240,000, resulting in self-employment tax of $22,350 and Additional Medicare Tax of $360. Due to these taxes, Tanya will be allowed a deduction for AGI of A.$11,355 B.$22,350 C.$11,175 D.$22,710
C.$11,175
Terry has sold equipment used in her business. She acquired the equipment three years ago for $50,000 and has recognized $30,000 of depreciation across the years in use. In order to recognize any Sec. 1231 gain, she must sell the equipment for more than A.$20,000 B.$30,000 C.$50,000 D.$0
C.$50,000
Carlotta has $50,000 foreign-source income and $150,000 worldwide income. Her U.S. tax on her worldwide income is $30,290, and she paid foreign taxes of $9,000. What is the Carlotta's foreign tax credit? A.$30,290 B.$3,000 C.$9,000 D.$10,097
C.$9,000
When the Tax Court follows the opinion of the circuit court of appeals to which the case is appealable, the court is following the A.Forum shopping rule B.Acquiescence rule C.Golsen rule D.Conformity rule
C.Golsen rule
Which of the following statements is false with regard to the ownership and use tests under Sec. 121? A.For purposes of the two-year ownership rule, a taxpayer's period of ownership includes the period during which the taxpayer's deceased spouse owned the residence B.When a taxpayer receives a residence from a spouse or an ex-spouse incident to a divorce, the taxpayer's period of owning the property includes the time the residence was owned by the spouse or ex-spouse C.The taxpayer must be occupying the residence at the time of the sale in order for Sec. 121 to apply D.If a principal residence is sold before satisfying the ownership and use tests, part of the gain may be excluded if the sale is due to a change in employment, health, or unforeseen circumstances
C.The taxpayer must be occupying the residence at the time of the sale in order for Sec. 121 to apply
Blair, whose tax rate is 24%, sells one tract of land at a gain of $29,000 and another tract of land at a gain of $11,000. Both tracts of land are Sec. 1231 property. She has never had any other Sec. 1231 transactions. How are the gains taxed? A.a net capital gain of $40,000 which is not taxed B.ordinary income of $40,000 taxed at 25% C.a net capital gain of $40,000 taxed at 15% D.ordinary income of $40,000 taxed at 28%
C.a net capital gain of $40,000 taxed at 15%
Which of the following steps, related to a tax bill, occurs first? A.signature or veto by the President of the United States B.consideration by the entire Senate C.consideration by the House Ways and Means Committee D.consideration by the Senate Finance Committee
C.consideration by the House Ways and Means Committee
All of the following are allowable deductions under the alternative minimum tax except A.medical expenses B.charitable contributions C.state income taxes D.qualified housing interest
C.state income taxes
Statements on Standards for Tax Services are issued by A.the SEC B.the IRS C.the AICPA D.the FASB
C.the AICPA
Martha transferred property with a FMV of $60,000 (adjusted basis $30,000), which is subject to a $40,000 mortgage in exchange for a oneminusthird interest in a partnership. The partnership has no other liabilities. The partners of MNO own the partnership equally. The partnership's basis in the property contributed is A. $40,000. B. $0. C. $60,000. D. $30,000.
D. $30,000.
According to the Statements on Standards for Tax Services , if a CPA believes that a client's prior-year tax return contains false information, the CPA should report this to the A. IRS B. SEC C. AICPA D. None of the above. The CPA does not report the false information to any external agencies, unless required by law
D. None of the above. The CPA does not report the false information to any external agencies, unless required by law
Pamela owns land for investment purposes. The land is worth $300,000 (basis of $260,000 to Pamela). Pamela exchanges the land, plus $20,000 cash, for a warehouse to be used in her business. The FMV of the warehouse is $400,000, but the warehouse is subject to a mortgage of $80,000, which is assumed by Pamela. Pamela must recognize a gain of A.$120,000 B.$40,000 C.$140,000 D.$0
D.$0
Which of the following statements is not correct regarding the compliance requirements of an involuntary conversion? A.A taxpayer properly elected to defer the full realized gain in year one and provides appropriate information on the replacement property. The taxpayer cannot later revoke the election and designate a different property as the replacement property B.A taxpayer who recognized the full gain and paid the taxes can later file a refund claim to elect the deferral if qualified property is acquired before the expiration of the replacement period C.The taxpayer elects the deferral by not reporting the gain as income for the first year in which the gain is realized although all relevant information regarding the event will be reported D.A taxpayer elects to defer the full gain in the year the gain is realized (year one), and no gain is reported on that year's tax return. Qualified replacement property is acquired in the following year (year two), but the full insurance proceeds are not spent so some gain must be recognized. The partial gain recognition will be reported on the tax return for year two
D.A taxpayer elects to defer the full gain in the year the gain is realized (year one), and no gain is reported on that year's tax return. Qualified replacement property is acquired in the following year (year two), but the full insurance proceeds are not spent so some gain must be recognized. The partial gain recognition will be reported on the tax return for year two
Which tax service is usually deemed to be the most authoritative? A.Standard Federal Tax Reporter B.United States Tax Reporter C.Federal Tax Coordinator 2d D.All are equally authoritative.
D.All are equally authoritative
Internet versions of topical tax services include A.Revenue rulings, letter rulings, and revenue procedures. B.Court cases involving tax issues C.Code and Regulations D.All of the above
D.All of the above
Ralph's business records were lost as a result of Hurricane Katrina. CPA Jane prepares Ralph's return using estimates. What do the Statements on Standards for Tax Services state about the use of estimates? A.Estimates may be used without disclosing their use to the IRS B.The Statements on Standards for Tax Services do not address the use of estimates C.Estimates may not be used D.Estimates may be used, but Jane should disclose their use to the IRS
D.Estimates may be used, but Jane should disclose their use to the IRS
During the current year, Hugo sells equipment for $150,000. The equipment cost $175,000 when placed in service two years ago, and $55,000 of depreciation deductions were allowed. The results of the sale are A.LTCG of $30,000 B.Sec. 1250 ordinary income of $30,000 C.Sec. 1231 gain of $30,000 D.Sec. 1245 ordinary income $30,000
D.Sec. 1245 ordinary income $30,000
Self-employment taxes include components for A.Medicare hospital insurance and SUTA B.FICA and FUTA C.Social Security and FUTA D.Social Security and Medicare hospital insurance
D.Social Security and Medicare hospital insurance.
Which of the following statements is incorrect regarding qualifying criteria for the health insurance premium tax credit? A.Household income must be below designated levels. B.The taxpayer cannot have access to affordable essential coverage through an employer. C.The individual may not be eligible as a dependent of another taxpayer. D.The insurance policy must be purchased directly from an insurance company.
D.The insurance policy must be purchased directly from an insurance company.
The committee that is responsible for holding hearings on tax legislation for the House of Representatives is the A.Conference Committee B.Joint Committee on Taxation C.Finance Committee D.Ways and Means Committee
D.Ways and Means Committee
In computing AMTI, tax preference items are A.either added or subtracted B.subtracted only C.excluded D.added only
D.added only
A citator is used to find A.whether a case has been overturned. B.the judicial history of a case. C.the cases that have cited a case subsequent to the issuance of the opinion. D.all of the above
D.all of the above
The term "tax law" includes A.judicial decisions B.legislation C.treasury regulations D.all of the above
D.all of the above
Title 26 of the U.S. Code includes A.income tax legislation only. B.gift tax and estate tax legislation only. C.alcohol and tobacco tax legislation only. D.all of the above
D.all of the above
T/F Realized gain or loss must be recognized unless a specific Code section provides for nonrecognition treatment.
True
Douglas bought office furniture two years and four months ago for $25,000 to use in his business and elected to expense all of it under Sec. 179. Depreciation of $3,500 would have been taken under the MACRS rules. If Douglas converts the furniture to nonbusiness use today, Douglas must A.amend the prior two years tax returns B.include $3,500 in gross income in year of conversion C.include $25,000 in gross income in year of conversion D.include $21,500 in gross income in year of conversion
D.include $21,500 in gross income in year of conversion
Harry owns equipment ($50,000 basis and $38,000 FMV) and a building ($140,000 basis and $156,000 FMV), which are used in his business. Harry uses straight-line depreciation for both assets, which were acquired several years ago. Both the equipment and the building are destroyed in a fire, and Harry collects insurance proceeds equal to the assets' FMV. The tax result to Harry for this transaction is A.the loss on involuntary conversion is treated as a Sec. 1231 loss while the gain is treated as an ordinary gain B.the involuntary conversions are treated as ordinary gains and losses C.the loss on involuntary conversion is treated as an ordinary loss while the gain is treated as a Sec. 1231 gain D.the involuntary conversions are treated as Sec. 1231 gains and losses
D.the involuntary conversions are treated as Sec. 1231 gains and losses
Lana owned a house used as a rental property for three years. During this rental period, she took $60,000 of depreciation deductions. Lana moved into the house and has used it as her principal residence for the past two years. Lana has just sold the house and realized a $200,000 gain. She will recognize gain of A.$200,000 B.$60,000 C.$0 D.$144,000
D.$144,000
T/F The amount recaptured as ordinary income under either Sec. 1245 or Sec. 1250 can never exceed the realized gain.
True
T/F A shareholder receives a distribution from a corporation in complete liquidation. The distribution will be taxed as a dividend to the extent of current or accumulated E&P.
False
T/F A corporation's E&P is equal to its taxable income for the year.
False
T/F A loss on the sale of a taxpayer's personal residence is deductible if the taxpayer owned and lived in the home for two of five years.
False
T/F A taxpayer sells her principal residence of five years and qualifies to exclude her full $100,000 gain. The taxpayer must report this excluded gain on her tax return for the year of sale.
False
T/F A self-employed individual has earnings from his business of $300,000 in 2018. For the earnings in excess of $128,400, he will only have to pay the 2.9% Medicare Tax.
False
T/F One-half of the self-employment tax imposed is allowed as a for AGI deduction.
True
T/F Bob's income can vary widely from year-to-year because much of his compensation comes from sales commissions and bonuses. It generally is in the $200,000 to $300,000 range. To minimize the risk of underpayment penalties for estimated tax, he should pay in, through payroll withholding and estimated tax payments, 100% of the prior year tax liability.
False
T/F According to the Statements on Standards for Tax Services, CPAs must verify all tax return information submitted by reviewing client documentation.
False
T/F Assuming extensions are not filed, tax returns for calendar-year S corporations and partnerships are both due on April 15.
False
T/F Because a partnership is a pass-through entity rather than a taxable entity, partnerships need not file tax returns.
False
T/F Dividends paid from E&P are taxable to shareholders and are, therefore, deductible by the corporation.
False
T/F Peter transfers an office building into a new corporation in exchange for 100 percent of the stock. In addition, the corporation assumes the mortgage on the building. Peter will treat the debt relief as boot and have to recognize gain.
False
T/F Taxpayers must pay the disputed tax prior to filing a case with the Tax Court.
False
T/F The basis of a partnership interest is equal to the sum of money contributed plus the FMV of the property transferred to the partnership.
False
T/F A shareholder's basis for the S corporation stock is adjusted for ordinary income or loss and separately stated items that flow through to the shareholders as well as for additional capital contributions by shareholders and distributions to shareholders.
True
T/F Gain is recognized by an S corporation when it distributes appreciated property to its shareholders.
True
T/F If a corporation distributes appreciated property to its shareholders, the corporation will recognize any realized gain.
True
T/F A taxpayer exchanges an office building held as an investment asset for an office building to be used in her business. The exchange will qualify as like-kind.
True
T/F A taxpayer who paid AMT in prior years, but is not subject to the AMT in the current year, may be entitled to an AMT credit against his regular tax liability in the current year.
True
T/F For noncorporate taxpayers, depreciation recapture is not required on real property placed in service after 1986.
True
T/F If a principal residence is sold before satisfying the ownership and use tests, part of the gain may be excluded if the sale is due to a change in employment, health, or unforeseen circumstances.
True
T/F If a taxpayer has gains on Sec. 1231 assets, Secs. 1245 and 1250 must be applied first to determine any amounts recaptured as ordinary income, and any excess gain may then be netted with Sec. 1231 losses for possible long-term capital gain treatment.
True
T/F If an individual is classified as an employee, the employer is required to withhold the employee's share of the FICA tax and to provide a matching amount.
True
T/F If estimated tax payments equal or exceed 100% of the actual tax liability for the prior year, there is generally (assuming AGI less than or equal to $150,000) no penalty for underpayment of estimated taxes.
True
T/F In an involuntary conversion, the basis of replacement property is its cost reduced by the gain deferred.
True
T/F In 2018, Thomas, a single taxpayer who has a marginal tax rate of 10%, sells land that is Sec. 1231 property at a gain of $4,000. If he has no other 1231 transactions or capital asset transactions and has no nonrecaptured 1231 gain, Thomas will pay no tax on the $4,000 gain.
True
T/F Mortgage interest paid on a mortgage obtained to buy a principal residence, deductible for regular income tax purposes, is also an allowable deduction for AMT.
True
T/F A nonliquidating distribution of cash or property from the partnership to a partner is generally treated as a tax-free return of capital to the extent of a partner's basis.
True
T/F Appeals from the Court of Appeals go to the Supreme Court under a writ of certiorari. The Supreme Court decides whether or not they will hear the case.
True
T/F Corporations may be taxed on less than 100% of dividends received due to the dividends-received deduction, while individuals are taxed on all of their dividend income.
True
T/F For purposes of the accumulated earnings tax, reasonable needs of the business include providing working capital for the business.
True
T/F Income of a C corporation is subject to an initial tax at the corporate level and the shareholders are subject to a second tax if the corporation pays dividends from its earnings and profits.
True
T/F When property is contributed to a partnership, the partnership's basis in the property is the same as that of the transfer or partner even if gain is recognized on the transfer.
True
Extra Quizlet for Chapter 13
https://quizlet.com/290939386/chap-13-tax-flash-cards/
