Individual Tax Final Exam

All of the following qualify as a like-king exchange except

a printer used in trade or business for a computer used in trade or business

The installment method may be used for sales of all kinds of property with the exception of

marketable securities

All of the following are allowable under the alternative minimum tax except

state income taxes

When accounting for long-term contracts (other than those for services), all of the following accounting methods may be acceptable with the exception of

the installment sale method

For purposes of the accrual method of accounting, the economic performance test is met when

the property or services are actually provided

Landry exchanged land with an adjusted basis of $50,000 for another parcel of land worth $35,000 plus $10,000 of cash. Landry held the original land for investment purposes and will do the same with the new parcel. Due to the exchange, Landry will recognize

$0

The maximum amount of the American Opportunity Tax Credit for each qualified student is

$2,500

The earned income credit is available only to taxpayers with qualifying children

False

One-half of the self-employment tax imposed is allowed as a FOR AGI deduction

True

In the fall of 2020, James went back to school to earn a mater of accountancy degree. He incurred $7,000 of qualified educational expenses and his modified AGI for the year was $40,000. His Lifetime Learning Credit is

$1,400

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 recognized gain?

$10,000

Tanya has net earnings from self-employment of $240,000, resulting in self-employment tax of $24,035 and Additional Medicare Tax of $360. Due to these taxes, she will be allowed a deduction for AGI of

$12,018

The building used in Terry's business was condemned by the city of St. Louis. . Terry received a condemnation award of $125,000. He paid $1,200 in lawyer's fees and $8000 for an appraisal of the building. Terry's adjusted basis in the building was $60,000. Terry reinvests in similar property costing $110,000, and Terry makes the proper election regarding the property. What is the amount of Terry's recognized gain in the condemnation?

$13,000

Henri likes to invest in land. In a nontaxable exchange, Henri exchanges land having an adjusted basis of $8,00 and a FMV of $10,000, for another parcel of land having a FMQ of $15,000. In addition, Henri paid cash of $5,000. What is Henri's basis in the new land?

$13,500

Evan and Barbara incurred qualified adoption expenses on 2019 of $6,000, and then incurred $9,000 more in 2020 when the adoption of their child final. Their 2019 AGI was $110,000 and their 2020 AGI was $100,000. The allowable adoption credit is

$14,300 in 2020

Bob and Elizabeth Brown, a married couple, sell their personal residence to Tamel. Tamel pays $660,000 and assumes their $90,000 mortgage. To make the sale, the Browns pay $20,000 in commissions and $10,000 in legal costs. The couple has owned and lived in the house for seven years and their tax basis is $200,000. What is the amount of gain recognized on the sale?

$20,000

Steph's building, which was used in her business, was destroyed in a fire. Her adjusted basis in the building was $175,000 and its FMW was $210,000. She filed an insurance claim and was reimbursed $200,000. In that same year, she invested $180,000 of the insurance proceeds in another business building. If the proper election is made to defer gain, she will recognize gain of

$20,000

Risa exchanges an office building with a $600,000 adjusted basis for an apartment building with a $1,000,000 FMV and $200,000 of marketable securities. The other party indicates he had paid $175,000 for the securities a year earlier. What is Risa's basis for the securities?

$200,000

Pierce sold his home this year. He had owned and lived in the house for 10 years. He signed a contract on March 4 to sell his home. Sales Price: $600,000 Selling Price: 15,000 Replaced and paid for broken window on Mar. 2: 800 Basis of old home before repairs and improvements 310,000 Based on these facts, what is the amount of his recognized gain?

$25,000

In year 1, a contractor agrees to build a building for $2,500,000 by the end of year 2. The builder's cost is estimated to be $1,800,000. The actual costs in Year 1 are $900,000 and Year 2's actual costs are $1,300,000. Under the completed contact method, the gross profit for Year 1 is

$300,000

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?

$32,000

Dean exchanges a business storage facility with a $120,000 adjusted basis for $40,000 cash and a parking lot with a $140,000 FMV. What is the amount of gain which Dean recognizes on the exchange?

$40,000

Daniella exchanges business land with a $100,000 adjusted basis for $10,000 cash and business land with a $96,000 FMV. What is the amount of gain recognized on the exchange?

$6,000

Risa exchanges an office building with a $600,000 adjusted basis for an apartment building with a $1,000,000 FMV and $200,000 of marketable securities. What is Risa's basis for the apartment building?

$600,000

Generally, a full exclusion of gain under Sec. 21 upon the sale of a personal residence applies to only one sale or exchange every

2 years

If there is a like-kind exchange of property between related parties, how long do they have to wait to dispose of the property received in order to avoid having to recognize any gain on the exchange?

2 years

Which of the following businesses is most likely to benefit from the election to account for its inventory under LIFO?

A company producing parts for the auto industry- costs in this field tend to steadily climb.

Which of the following statements with respect to a like-kind exchange is false?

A sale of property and subsequent purchase of like-kind property will always qualify as a like-kind exchange

Alex owns an office building which the state condemns on Jan. 15, 2020. Alex receives the condemnation award on Apr. 1, 2020. In order to qualify for non recognition of gain on this involuntary conversion, what is the last date for Alex to acquire qualified replacement property?

December 31, 2023

A cash-basis lawyer purchases an office building to use in her legal practice. To acquire the mortgage, the taxpayer must pay $5,000 in points. The taxpayer will deduct the points in the year paid.

False

A cash-basis taxpayer pays a bill with a credit card. The underlying expenditure is not deductible until the credit card bill is paid

False

A taxpayer sells a parcel of land on the installment sale basis and will recognize the gain over the five-year installment schedule. Form 6252 must be included with his tax return only in the year of sale.

False

A taxpayer who uses the LIFO method of inventory valuation may use the lower of cost or market method.

False

Assume a taxpayer projects that his total income tax for the year will $25,000. A taxpayer with savings should prefer to structure his tax prepayments so that he will receive a tax refund of $2,500 rather than a tax due of $2,500.

False

In 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

The earned income credit is refundable only if a tax has been withheld.

False

Do accounting rules determine the amount of income to be reported by a taxpayer?

In the long run, the amount of income reported by a taxpayer will generally be the same regardless of the accounting methods used by the taxpayer. In a given year the amount of income reported by a taxpayer can vary significantly depending on the accounting method used by the taxpayer.

Kuda owns a parcel of land she acquired on June 1, 2012 as an investment. She exchanges the land on July 5, 2020 for a storage building to be used in her business and marketable securities to be held as an investment. The marketable securities' holding period begins on

July 6, 2020

Kuda owns parcel of land she acquired on June 1, 2012 as an investment. She exchanges the land on July 5, 2020 for a storage building to be used in her business and marketable securities to be held as an investment. On what date does the storage building's holding period begin?

June 1, 2012

A wage cap does not exist for which of the following self-employment taxes?

Medicare

Mingming and Xavier, unrelated single taxpayers, have each incurred a $1,000 expenditure. Before considering this expenditure. Mingming has taxable income of $600,000 and Xavier has taxable income of $32,000. Assume the expenditure qualifies as either a tax deduction or a 25% credit. Which of the following statements is correct?

Mingming will prefer the deduction, bt Xavier will prefer the credit.

Self-employment taxes include components for

Social Security and Medicare hospital insurance

Which statement is correct?

Tax credits reduce tax liability on a dollar-for-dollar basis

How does a taxpayer's tax accounting method affect the amount of tax paid?

The accounting methods used by a taxpayer can accelerate or defer the recognition of income, and thereby, change when the tax must be paid. Also, because of the progressive tax rate structure, taxes can be saved by spreading income over several years, rather than having income bunched into one year, pushing the taxpayer into higher brackets.

Which of the following statements is false with regard to the ownership and uses tests under Sec. 121?

The taxpayer must be occupying the residence at the time of the sale in order for Sec. 121 to apply.

A subsidiary corporation filing a consolidation return with its parent corporation must change its accounting period to conform with its parent's tax year.

True

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

Jay and Cara's daughter is starting her freshman year of collage. Jay and Cara will be able to ??? the American Opportunity Tax Credit for a percentage of the cost of tuition, required fees and course materials, but the room and board charges will not qualify for the credit

True

Many taxpayers use the LIFO method of inventory valuation because during inflationary periods, LIFO normally results in the lowest valuation of ending inventory and, hence, the lowest taxable income

True

Points paid on a mortgage tp buy a personal residence are deductible in the year paid.

True

The installment method is not applicable to sales of inventory and marketable securities

True

The uniform capitalization rules (UNICAP) require the capitalization of some overhead costs that are expensed for financial according purposes

True

When a husband and wife file a joint return and both have self-employment income, the self-employment tax must be computed separately

True

Which of the following statements regarding UNICAP is correct?

UNICAP requires that advertising and selling costs be allocated between inventory and cost of sales

A new business is established. It is not a business. All of the following are acceptable accounting tax years with the exception of

a C corporation (not a personal service corporation) tax year ending on February

Which of the following partnerships can use the cash method of accounting?

a CPA firm with average revenues of $30 million

If an individual is liable for self-employment tax, a portion of the self-employment tax is

a for AGI deduction

Which of the following companies who business involves long-term contracts with eligible to use the completed contract method?

a home construction company averaging $30 million in gross revenues each year

All of the following are true except

a non-simultaneous exchange may never qualify as a like-kind exchange

Which of the following statements is false regarding involuntary conversions?

a taxpayer must replace the destroyed property within the same tax year in which the gain is realized

In computing AMTI, tax preference items are

added only

Harley's tentative minimum tax is computed by multiplying the AMT tax rates by her

alternative minimum tax base

An installment sale is best defined as

any disposition of property where at least one payment is received after the close of the taxable year in which disposition occurs

According to Sec. 121, individuals who sell or exchange their personal residence may exclude part or all of the gain if the house was owned and occupied as a principal residence for

as least two years of the five-year period before the sale date

Under the percentage of completion method, gross income is reported

based on the portion of work that has been completed

The look-back interest adjustment involves the

calculation of interest on additional tax that would have been due if actual cost rather than estimated cost had been used on the percentage of completion method

All of the following are self-employment income except

dividends received by a corporate shareholder

Which of the following is a refundable credit?

earned income credit

In computing AMTI, adjustments are

either added or subtracted

All of the following conditions would encourage a taxpayer to avoid like-kind exchange treatment on the disposition of an otherwise qualifying asset except

expected lower tax rates in the future

Under the cash method of accounting, all of the following are true with the exception of

fixed assets are always expensed as the taxpayer pays for the assets

The general business credit includes all of the following with the exception of

foreign tax credit

A business uses the same inventory method for both financial reporting and tax reporting. Because of the UNICAP requirement, ending inventory is likely to be

higher for tax reporting purposes than for financial reporting purposes

In computing AMTI, all of the following must be added back except

home mortgage interest (on mortgage in effect since home was purchased)

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 circumstance, a direct two - or three - party like- kind exchange is not feasible. Ella's sale can still qualify for like- kind of treatment if she arranges an appropriate non-simultaneous exchange. Among other criteria, after the transfer of the old building, the replacement property must be

identified within 45 days and received within 180 days