REG missed ?s
While preparing a partnership tax return, the accountant discovered that ABC Partnership distributed property to Anne, a partner, in a nonliquidating transfer. No money was distributed to Anne during the year, the property was in the partnership for over five years, and no debt was attached to the property. Anne had a basis in her partnership interest of $10,000. The partnership had an adjusted basis of $20,000 in the property distributed to Anne. Which of the following are the tax consequences to Anne?
$0 gain, basis in the partnership is reduced to $0, and basis in the property received is $10,000.
During 2020, Nale Corp. received dividends of $1,000 from a 10%-owned taxable domestic corporation. When Nale computes the maximum allowable deduction for charitable contributions in its 2020 return, the amount of dividends to be included in the computation of taxable income is
$1,000 When calculating taxable income for regular tax purposes, Nale Corp. may deduct 50% of the dividends received from the 10% owned domestic corporation. However, when computing taxable income for Nale Corp.'s charitable contributions, there is no deduction for dividends received.
Stone owns 100% of an S corporation and materially participates in its operations. The stock basis at the beginning of the year is $5,000. During the year, the corporation makes a distribution of $3,500 and passes through a loss from operations of $2,000 for the year. What loss can Stone deduct on Stone's personal tax return?
$1,500 5,000 - 3,500 = 1,500 (adj basis) Loss is limited to adj basis (1,500)
A married individual invested in Section 1244 small business stock in year 1. In year 7, the individual sold the stock at a loss of $157,000. There were no other stock transactions during year 7. If the taxpayer files a joint return, how much loss can the taxpayer deduct in year 7?
$103,000 The $100,000 ordinary loss is deductible and the remaining capital loss is limited to $3,000. A married taxpayer can deduct up to $100,000 of losses for Section 1244 stock. The other $57,000 loss is a long-term capital loss, of which $3,000 of the capital loss is deductible
The credit for prior year alternative minimum tax liability may be carried
Forward Indefinitely
Carr Corp. declares a 7% stock dividend on its common stock. The dividend Must be registered with the SEC pursuant to the Securities Act of 1933. Is includable in the gross income of the recipient taxpayers in the year of receipt. Has no effect on Carr's earnings and profits for federal income-tax purposes. Requires a vote of Carr's stockholders.
Has no effect on Carr's earnings and profits for federal income-tax purposes
To file for bankruptcy under Chapter 7 of the Federal Bankruptcy Code, an individual must Have debts of any amount. Be insolvent. Be indebted to more than three creditors. Have debts in excess of $5,000.
Have debts of any amount
Bass Corp., a calendar-year C corporation, made qualifying 2019 estimated tax deposits based on its actual 2018 tax liability. On March 15, 2020, Bass filed a timely automatic extension request for its 2019 corporate income tax return. Estimated tax deposits and the extension payment totaled $7,600. This amount was 95% of the total tax shown on Bass's final 2019 corporate income tax return. Bass paid $400 additional tax on the final 2019 corporate income tax return filed before the extended due date. For the 2019 calendar year, Bass was subject to pay I. Interest on the $400 tax payment made in 2020. II. A tax delinquency penalty.
I only This Answer is Correct Bass Corp. based its estimated payments on its 2018 tax liability, indicating that the corporation used the preceding-year method. This method requires that the estimated payments to be equal to the corporation's tax liability during the preceding year. However, interest is required to be paid on any portion of the corporation's tax liability exceeding the amount of the estimated payments. This response is, therefore, correct in stating that Bass Corp. would be required to pay interest on the $400 tax payment made in 2020. The tax delinquency penalty is imposed if the taxpayer fails to promptly file a tax return with a tax liability. As Bass Corp. filed an automatic extension on the original due date of its return, the corporation qualifies for a six-month extension and is not viewed as being filed late. Hence, this response is correct in implying that Bass Corp. would not be subject to the tax delinquency penalty.
When a corporation has an unused net capital loss that is carried back or carried forward to another tax year,
It is treated as a short-term capital loss, whether or not it was short term when sustained. Whether or not a net capital loss was short term when sustained, the carryover (five years) and carryback (three years) is treated as a short-term capital loss.
Yancie took her bike in to Pete's Bike Sales and Repair to have it repaired. Pete said he would need to have her leave it for two days. The next day, one of Pete's employees sold Yancie's bike to Jake. Jake paid for the bike with a credit card, unaware that Pete did not own the bike. Which of the following is correct?
Jake has title to the bike
A cash-basis taxpayer made a bona fide, nonbusiness loan to an acquaintance in year 1. At the end of year 2, it is determined that the taxpayer will likely be able to collect only 20% of the principal, and no interest has been or will be collected. How should the loss be treated for tax purposes in year 2?
None of the loss is deductible in year 2. Losses from nonbusiness bad debts cannot be deducted until the debt is completely worthless. This debt is only 80% worthless currently.
North, Inc. hires Sutter as a purchasing agent. North gives Sutter written authorization to purchase, without limit, electronic appliances. Later, Sutter is told not to purchase more than 300 of each appliance. Sutter contracts with Orr Corp. to purchase 500 tape recorders. Orr had been shown Sutter's written authorization. Which of the following statements is correct?
North will be liable to Orr, because of Sutter's actual and apparent authority.
The partnership of Martin & Clark sustained an ordinary loss of $84,000 in 2020. The partnership, as well as the two partners, are on a calendar-year basis. The partners share profits and losses equally. At December 31, 2020, Clark, who materially participates in the partnership's business, had an adjusted basis of $36,000 for his partnership interest, before consideration of the 2020 loss. On his individual income tax return for 2020, Clark should deduct a(n)
Ordinary loss of $36,000 remaining 6,000 loss will be carried forward
Hall, a divorced person and custodian of her 12-year-old child, filed her 2020 federal income tax return as head of a household. She submitted the following information to the CPA who prepared her 2020 return: During 2020, Hall spent a total of $1,000 for state lottery tickets. Her lottery winnings in 2020 totaled $200. Hall's lottery transactions should be reported as follows:
Other income on page 1: $200 Schedule A - Itemized Deductions: $200
Under the "Ultramares" rule, to which of the following parties will an accountant be liable for negligence?
Parties in privity: YES Foreseen parties: NO The "Ultramares" rule, established in a 1931 case of the same name, requires privity before an accountant is liable for negligence. Other rules, such as the Restatement rule, allow foreseeable users who rely on a negligently false statement to sue.
Which of the following transactions is subject to the gift tax before the gift tax annual exclusion is taken into account? Contribution of cash to a candidate for the U.S. Senate Transfer to a trust for the benefit of relatives where the donor determines the amount of distributions to be made Reimbursement to a grandchild for medical school tuition Naming of a new beneficiary on an insured's life insurance policy
Reimbursement to a grandchild for medical school tuition
McGraw purchased an antique rocking chair from Tillis by check. The check was dishonored by the bank due to insufficient funds. In the meantime, McGraw sold the rocking chair to Rio who had no knowledge that McGraw's check had been dishonored. Which of the following is correct?
Tillis may recover money damages from McGraw.
Which of the following credits may be offset against the gross estate tax to determine the net estate tax of a U.S. citizen?
Unified Credit: YES Credit for gift taxes paid on gifts made after 1976: NO
Don Wolf became a general partner in Gata Associates on January 1, 2020, with a 5% interest in Gata's profits, losses, and capital. Gata is a distributor of auto parts. Wolf does not materially participate in the partnership business. For the year ended December 31, 2020, Gata had an operating loss of $100,000. In addition, Gata earned interest of $20,000 on a temporary investment. Gata has kept the principal temporarily invested while awaiting delivery of equipment that is presently on order. The principal will be used to pay for this equipment. Wolf's passive loss for 2020 is
$5,000
Hook Corp., a calendar-year C corporation, reported the following year 2 financial information: Net income per books $210,000 Federal income taxes per books 114,000 Tax depreciation in excess of book depreciation 66,000 Charitable contributions per books 46,000 What is Hook's taxable income?
273,600 Book income$210,000\ + Federal income taxes114,000 + Charitable contribution46,000 - Excess tax depreciation (66,000) Taxable income before contribution$304,000 Less charitable contribution for tax(30,400)(limited to 10% of taxable income) Taxable income$273,600
The standard deduction for a trust or an estate in the fiduciary income tax return is
$0
In the current year, a taxpayer reports the following items: Salary$50,000 Income from partnership A, in which taxpayer materially participates20,000 Passive activity loss from partnership B(40,000) During the year, the taxpayer disposed of the interest in partnership B, which had a suspended loss carryover of $10,000 from prior years. What is the taxpayer's adjusted gross income for the current year?
$20,000 In the year that a passive activity is sold the suspended passive losses are released and can offset all types of income. Therefore, the $40,000 current loss and $10,000 suspended loss from partnership B can both be used to offset the other income ($50,000 + $20,000 − $40,000 − $10,000 = $20,000).
Curry's adjusted basis in Vantage Partnership was $5,000 at the time he received a nonliquidating distribution of land. The land had an adjusted basis of $6,000, and a fair market value of $9,000 to Vantage. What was the amount of Curry's basis in the land?
$5,000 A partner's basis in property received in a nonliquidating distribution is the same as the partnership's basis in the property immediately before the distribution. However, the partner's basis in the property may not exceed his/her basis in the partnership less any cash received in the distribution. The partnership's basis in the land is $6,000. Curry would assume the partnership's basis in the land. However, Curry's basis in the partnership is less than the partnership's basis in the land so Curry's basis in the land would be limited to his/her basis in the partnership. Thus, Curry's basis in the land would equal his/her partnership basis of $5,000.
In the current year, Fitz, a single taxpayer, sustained a $48,000 loss on Code Sec. 1244 stock in JJJ Corp., a qualifying small business corporation, and a $20,000 loss on Code Sec. 1244 stock in MMM Corp., another qualifying small business corporation. What is the maximum amount of loss that Fitz can deduct for the current year?
$50,000 ordinary loss and $18,000 capital loss If Section 1244 stock is sold at a loss the loss is treated as an ordinary loss up to the applicable limit. The limit applies per calendar year and is $50,000 for single taxpayers and $100,000 for those filing as married-joint. Fitz's total Section 1244 losses are $68,000 but only $50,000 of the loss is characterized as ordinary. The remaining $18,000 is treated as a capital loss since investments are a capital asset.
David Autrey was covered by an $80,000 group-term life insurance policy of which his wife was the beneficiary. Autrey's employer paid the entire cost of the policy, for which the uniform annual premium was $8 per $1,000 of coverage. Autrey died during 2020, and his wife was paid the $80,000 proceeds of the insurance policy. What amount of group-term life insurance proceeds must be included in gross income by Autrey's widow?
0 Life insurance proceeds paid by reason of death are generally excluded from gross income. Note that although only the cost of the first $50,000 of group-term insurance coverage can be excluded from gross income during the employee's life, the entire amount of insurance proceeds paid by reason of death will be excluded from the beneficiary's income.
On January 1, Smith sold land to Baker for $100,000 cash plus a note for $200,000 plus adequate interest with a $30,000 principal payment due in the second year. Smith's basis in the property was $100,000. What is the amount of the gain recognized in the second year under the installment method?
20,000 The formula for the gain recognized in any year under the installment method: (Gross Profit/ Total Contract Price) × Amount Received($200,000/$300,000) × $30,000 = $20,000Total Contract Price: cash ($100,000) + note ($200,000) = $300,000Gross Profit: Total Contract Price ($300,000) - Basis ($100,000) = $200,000Amount Received: Principal Payment ($30,000)
On June 30, 2020, Berk retired from his partnership. At that time, his capital account was $50,000 and his share of the partnership's liabilities was $30,000. Berk's retirement payments consisted of being relieved of his share of the partnership liabilities and receipt of cash payments of $5,000 per month for 18 months, commencing July 1, 2020. Assuming Berk makes no election with regard to the recognition of gain from the retirement payments, he should report income therefrom of
2020: $0 2021: $40,000
Johnson borrowed $45,000 secured by land with a basis of $20,000. Johnson could not pay the principal, so the bank foreclosed and sold the land for $35,000 as full settlement of the debt. What income should Johnson recognize?
25,000 Correct! Forgiveness of debt is included in income. Johnson owed $45,000, but his land was sold for $35,000 in satisfaction of his debt. Therefore, he has $10,000 of debt relief, and this $10,000 is included in his income. His basis of $20,000 reduces the amount realized for the land of $35,000, resulting in recognized income of $15,000. $10,000 + $15,000 = $25,000.
Ola Associates is a limited partnership engaged in real estate development. Hoff, a civil engineer, billed Ola $40,000 in 2020 for consulting services rendered. In full settlement of this invoice, Hoff accepted a $15,000 cash payment plus the following: Fair market value; Carrying amount on Ola's books 3% limited partnership interest in Ola $10,000; N/A Surveying equipment 7,000; $3,000 What amount should Hoff, a cash-basis taxpayer, report in his 2020 return as income for the services rendered to Ola?
32,000 The amount of income realized by a taxpayer from services rendered equals the sum of the amount of cash received and the fair market value of any property received. Thus, Hoff would report the sum of the amount of cash received and the fair market value of any property received from Ola Associates. Hoff received $15,000 of cash, a 3% limited partnership interest in Ola Associates with a fair market value of $10,000 and surveying equipment with a fair market value of $7,000. Hence, Hoff would report $32,000 on his return as income for the services rendered to Ola Associates.
Tapper Corp., an accrual basis calendar-year corporation, was organized on January 2, 2020. During 2020, revenue was exclusively from sales proceeds and interest income. The following information pertains to Tapper: Taxable income before charitable contributions for the year ended December 31, 2020 $500,000 Tapper's matching contribution to employee-designated qualified universities made during 2020 $10,000 Board of Directors' authorized contribution to a qualified charity (authorized December 1, 2020, made February 1, 2021) $30,000 What is the maximum allowable deduction that Tapper may take as a charitable contribution on its tax return for the year ended December 31, 2020?
40,000 50,000 is the limit but both contributions are below limit and so 40,000 can be deducted
The following information is available for Ann Drury for the current year. Salary$36,000 Premiums per IRS table on group-term life insurance in excess of $50,000 500 Proceeds from state lottery5,000 How much should Drury report as gross income on her current-year tax return?
41,500
At the beginning of the year, West Wind, a C corporation, had a deficit of $45,000 in accumulated earnings and profits. For the current year, West Wind reported earnings and profits of $15,000. West Wind distributed $12,000 during the year. What was the amount of West Wind's accumulated earnings and profits at year-end?
42,000 deficit (45,000) is E&P at beginning of the year, plus 15,000 earnings, less 12,000 distribution = ($42,000). Note that this distribution of $12,000 does not increase the deficit in E&P since there was $15,000 of earnings for the current year.
Fred Zorn died on January 5, 2020, bequeathing his entire $2,000,000 estate to his sister, Ida. The alternate valuation date was validly elected by the executor of Fred's estate. Fred's estate included 2,000 shares of listed stock for which Fred's basis was $380,000. This stock was distributed to Ida nine months after Fred's death. Fair market values of this stock were: At the date of Fred's death$400,000 Six months after Fred's death450,000 Nine months after Fred's death480,000 Ida's basis for the stock is
450,000 When the alternate valuation date is elected, the basis of the property becomes its fair market value on the date that is six months after the date of death.
Mr. and Mrs. Sloan incurred the following expenses during the current year, when they adopted a child: Child's medical expenses $5,000 Legal expenses 9,000 Agency fee 4,000 Before consideration of any "floor" or other limitation on deductibility, what amount of the above expenses may the Sloans deduct on their current-year joint income tax return?
5,000
In the current year Tatum exchanged farmland for an office building. The farmland had a basis of $250,000, a fair market value (FMV) of $400,000, and was encumbered by a $120,000 mortgage. The office building had an FMV of $350,000 and was encumbered by a $70,000 mortgage. Each party assumed the other's mortgage. What is the amount of Tatum's recognized gain?
50,000 Realized gain does = 150,000 But you choose lesser of Boot or Realized Gain Boot = 50,000 Note that debt relief ($120,000) is considered boot for a like-kind exchange, but the debt relief can be reduced (but not below zero) by any debt assumed ($70,000) in the exchange.
Smith, a single individual, made the following charitable contributions during the current year. Smith's adjusted gross income is $60,000. Donation to Smith's church$5,000 Artwork donated to the local art museum Smith purchased it for $2,000 4 months ago. A local art dealer appraised it for.3,000 Contribution to a needy family.1,000 What amount should Smith deduct as a charitable contribution?
7,000
Lee inherits a partnership interest from Dale. The adjusted basis of Dale's partnership interest is $50,000, and its fair market value on the date of Dale's death (the estate valuation date) is $70,000. What was Lee's original basis for the partnership interest?
70,000 For property received from a decedent through inheritance, a taxpayer generally assumes a basis equal to the fair market value of the property at the date of the decedent's death. Therefore, Lee's original basis in the partnership was $70,000 − the fair market value of Dale's partnership interest at the date of his death.
The minimum total voting power that a parent corporation must have in a subsidiary's stock in order to be eligible for the filing of a consolidated return is
80% To be permitted to file a consolidated return, the parent and its subsidiaries must be members of an affiliated group. Corporations qualify as members of an affiliated group by having a common parent that directly owns at least 80% of the total voting stock and at least 80% of the total value of the stock in at least one other includible corporation. In addition, a minimum of one of the other includible corporations must own at least 80% in each of the remaining includible corporations.
Jones, Smith, and Bay want to form a company called JSB Co., but are unsure about which type of entity would be most beneficial, based on their concerns. They all desire the opportunity to make tax-free contributions and distributions where appropriate. They want earnings to accumulate tax-free. They do not want to be subject to personal holding tax and do not want double taxation of income. Bay is going to be the only individual giving management advice to the company and wants to be a member of JSB through his current company, Channel, Inc. Which of the following would be the most appropriate business structure to meet all of their concerns?
A LLP
In year 1, a domestic LLC with two members elected classification as a corporation. In year 2, one of the members withdrew from the LLC. What is the LLC's tax classification for year 2 immediately after the member withdrew?
A corporation
Anne and Bart formed AB, LLC, a limited liability company, and elected to treat it as a partnership for tax purposes. Anne contributed $10,000 cash, and Bart contributed $5,000 cash, but Bart had a special skill that the partnership needed to be successful. The partnership agreement stated that Anne and Bart would both have a 50% interest in the LLC and that all profits and losses would be divided evenly between them. The LLC paid Bart $5,000 in year 1 for Bart's services to the partnership. The $5,000 would generally be reported to Bart as which of the following?
A guaranteed payment Guaranteed payments are those made to partners without regard to partnership income. Partners are not employees of the partnership but might receive guaranteed payments in return for services or capital investment. The $5,000 is the payment from the partnership for putting Bart's special skill to service. This payment is ordinary income to Bart at the partnership year-end.
Capital assets include
A manufacturing company's investment in U.S. Treasury bonds.
Which of the following parties generally has the most management rights? A minority shareholder in a corporation listed on a national stock exchange. A limited partner in a general partnership. A member of a limited-liability company. A limited partner in a limited partnership.
A member of a LLC
Under agency law, which of the following statements best describes ratification?
A principal's affirmation of an agent's unauthorized act
Hall, a divorced person and custodian of her 12-year-old child, filed her 2020 federal income tax return as head of a household. She submitted the following information to the CPA who prepared her 2020 return: Hall earned a salary of $25,000 in 2020. Hall was not covered by any type of retirement plan but contributed $2,000 to an IRA in 2020. Hall's $2,000 contribution to an IRA should be treated as
An adjustment to income in arriving at adjusted gross income. Individual taxpayers not active in certain employer-sponsored retirement plans may deduct cash contributions to individual retirement accounts to the extent of the lesser of $6,000 or 100% of the taxpayer's gross income in 2020. Those taxpayers covered by employer-sponsored retirement plans may still take individual retirement account deductions subject to a phase-out based on their adjusted gross income. No taxes are paid on the interest income earned on individual retirement accounts until the retirement savings are distributed. The individual retirement account deduction is an adjustment to income in arriving at adjusted gross income.
Which of the following statements is correct regarding the unrelated business income of exempt organizations? If an exempt organization has any unrelated business income, it may result in the loss of the organization's exempt status. Unrelated business income relates to the performance of services, but not to the sale of goods. An unrelated business does not include any activity where all the work is performed for the organization by unpaid volunteers. Unrelated business income tax will not be imposed if profits from the unrelated business are used to support the exempt organization's charitable activities.
An unrelated business does not include any activity where all work is performed for the organization by unpaid volunteers
Becca has obtained a loan of $270,000 from Federal Credit Union. Becca pledged her three vehicles, valued at $90,000, as collateral for the loan. Archie and Bain have agreed to act as sureties for the loan in the amount of $90,000 each. Becca repaid $45,000 of the loan, and Federal released two of the vehicles, valued at $45,000, back to Becca. Federal then released Bain as a surety. Becca then defaults on the loan. Federal has demanded payment from Archie. Which of the following statements is correct? Archie will still be required to pay $90,000. Becca must agree to the release of a surety for it to be valid. Archie's obligation to pay is reduced by 50% because of the release of Bain. Because the release affects Archie materially, Bain cannot be discharged.
Archie's obligation to pay is reduced by 50% because of the release of Bain.
This year ABC Corporation, a calendar-year, accrual-basis corporation, made a nonliquidating cash distribution to its shareholders of $1,000,000 with respect to its stock. At that time ABC's current and accumulated E&P totaled $750,000 and its total paid-in capital for tax purposes was $10,000,000. Since ABC had no corporate shareholders, the distribution: -was taxable as $750,000 in dividend income to its shareholders. -reduces its shareholders' adjusted basis in the ABC stock by $250,000. -Both of the above are correct. -None of the above are correct.
Both of the above are correct
Which of the following conditions, if any, must a debtor meet to file a voluntary bankruptcy petition under Chapter 7 of the Federal Bankruptcy Code?
Insolvent: NO Three or more creditors: NO
John Budd is the sole stockholder of Ral Corp., an accrual basis taxpayer engaged in wholesaling operations. Ral's retained earnings at January 1, 2020, amounted to $1,000,000. For the year ended December 31, 2020, Ral's book income, before federal income tax, was $300,000. Included in the computation of this $300,000 were the following: Contribution to a recognized, qualified charity (this contribution was authorized by Ral's board of directors in December 2020, to be paid on January 31, 2021) 75,000 With regard to Ral's contribution to the recognized, qualified charity, Ral
Can elect to deduct in its 2020 return any portion of the $75,000 that does not exceed the deduction ceiling for 2020.
Vee Corp. retained Water, CPA, to prepare its 2019 income tax return. During the engagement, Water discovered that Vee had failed to file its 2016 income tax return. Water should:
Consider withdrawing from preparation of Vee's 2019 income tax return until the error is corrected.
To which of the following transactions does the common law Statute of Frauds not apply? Contracts for the sale of real estate. Agreements made in consideration of marriage. Promises to pay the debt of another. Contracts that can be performed within one year.
Contracts that can be performed within one year.
A taxpayer contemplates entering into a complex transaction. The taxpayer wants assurance that there will be no adverse tax effects from the transaction. The taxpayer should apply for which of the following? Technical advice memorandum (TAM) General counsel memorandum (GCM) Revenue ruling Private letter ruling (PLR)
D
Toggle owns a controlling interest in the LMN Partnership. The partnership agreement allows sale of all, or substantially all, of the partnership's assets upon majority vote. Toggle votes his controlling interest in favor of selling an important LMN asset to a corporation that he controls at a price to be set by an independent third-party appraiser. There is notice to all partners of the proposed transaction and a partnership vote. Toggle votes using his controlling interest, in favor of the sale. Minority partners sue, alleging that Toggle has violated his obligation of good faith and fair dealing. Which of the following is true? Toggle has violated his obligation of good faith and fair dealing. Toggle has also violated his duty to avoid conflicts of interest. A and B. None of the above.
D
Which of the following statements is correct regarding a tax return preparer's penalty for aiding and abetting the understatement of a tax liability? The penalty applies to a person who provides only clerical assistance. The penalty does not apply if another penalty is assessed with respect to the same action. The taxpayer must have knowledge of the action causing the penalty for the penalty to apply. The penalty applies to a return preparer who knows about and does not prevent the actions of a subordinate who understates the tax liability.
D
Blink Corp., an accrual-basis calendar-year corporation, had a net operating loss for the tax year ended December 31, 2018. Blink's gross revenues have been under $500,000 since inception. Blink expects to have profits for the tax year ending December 31, 2019. Which method(s) of estimated tax payment can Blink use for its quarterly payments during the 2019 tax year to avoid underpayment of federal estimated taxes? I. 100% of the preceding tax year method II. Annualized income method
II only This Answer is Correct Corporations owing $500 or more in income tax for the tax year are required to make estimated tax payments or be subject to an interest penalty. The payments must be equal to the lesser of 100% of the tax liability for the current year (i.e., the annualized income method) or the preceding year (i.e., the preceding-year method). The payments cannot be based on the preceding year if: (1) the corporation did not file a return showing a tax liability for that year (e.g., the corporation experienced a net operating loss); (2) the preceding year was less than 12 months; or (3) the corporation had taxable income of over $1,000,000. Hence, Blink Corp. could not use the preceding-year method for calculating its estimated tax payments because it sustained a net operating loss for that year. Blink Corp. must use the annualized income method. This response correctly states that Blink Corp. could use only the annualized method.
In what order are the following obligations paid after a secured creditor rightfully sells the debtor's collateral after repossession? I. Debt owed to any junior security holder. II. Secured party's reasonable sale expenses. III. Debt owed to the secured party.
II, III, I
Income in respect of a cash-basis decedent
Includes a bonus earned before the taxpayer's death but not collected until after death.
Hall, a divorced person and custodian of her 12-year-old child, files her 2020 federal income tax return as head of a household. She submits the following information to the CPA, who prepares her 2020 return: In 2020, Hall sells an antique that she bought in 1998 to display in her home. Hall pays $800 for the antique and sells it for $1,400, using the proceeds to pay a court-ordered judgmen The $600 gain that Hall realizes on the sale of the antique should be treated as
Long-term Capital Gain Property held for personal use is a capital asset and any gain from the sale or exchange of such an asset is reported as a capital gain. Capital gains must be classified as long- or short-term, depending on the holding period. A gain is classified as short-term if the property sold or exchanged is held for one year or less and as long-term if the property sold or exchanged is held for more than one year
Medical Specialists, a supplier of various types of diagnostic equipment, sent a June 1 letter to three hospitals with the following language: "Now through June 30, all of our diagnostic machines are 15% off with free delivery and installation. Call us with any questions." The letter was signed by Medical Specialist's president, Gavin McMurray. On June 15, McMurray sent a fax to the three hospitals with this statement: "Due to price increases on our diagnostic equipment, the sale information that we sent on June 1 is no longer valid. We look forward to sending other promotional materials in the near future." On June 20, Grady Memorial Hospital, one of the three hospitals that had received McMurray's June 1 letter, sent a fax ordering three sonogram machines "of the same model that we purchased from you last year." McMurray called Grady Memorial and said that the pricing no longer applied because he had withdrawn the promotion. Which of the following statements is correct?
McMurray will have to sell the three sonogram machines to Grady on the June 1 terms.
Which of the following requirements must be met in order for a single individual to qualify for the additional standard deduction?
Must be age 65 or older or blind: YES Must support dependent child or aged parent: NO
On August 1, 2004, Hall files a voluntary petition under Chapter 7 of the Federal Bankruptcy Code. Hall's assets are sufficient to pay general creditors 40% of their claims. The following transactions occurred before the filing: - On May 15, 2004, Hall gave a mortgage on Hall's home to National Bank to secure payment of a loan National had given Hall two years earlier. When the loan was made, Hall's twin was a National employee. - On June 1, 2004, Hall purchased a boat from Olsen for $10,000 cash. - On July 1, 2004, Hall paid off an outstanding credit card balance of $500. The original debt had been $2,500. The payment to Olsen was Preferential, because the payment was made within 90 days of the filing of the petition. Preferential, because the payment enabled Olsen to receive more than the other general creditors. Not preferential, because Hall is presumed insolvent when the payment was made. Not preferential, because the payment was a contemporaneous exchange for new value.
Not preferential, because the payment was a contemporaneous exchange for new value.
Rogers and Lennon entered into a written computer consulting agreement that required Lennon to provide certain weekly reports to Rogers. The agreement also stated that Lennon would provide the computer equipment necessary to perform the services and that Rogers' computer would not be used. As the parties were executing the agreement, they orally agreed that Lennon could use Rogers' computer. After executing the agreement, Rogers and Lennon orally agreed that Lennon would report on a monthly, rather than weekly, basis. The parties now disagree on Lennon's right to use Rogers' computer and how often Lennon must report to Rogers. In the event of a lawsuit between the parties, the parol evidence rule will
Not prevent the admission into evidence of testimony regarding Lennon's right to report on a monthly basis.
A stockholder's right to inspect books and records of a corporation will be properly denied if the purpose of the inspection is to Commence with a stockholder's derivative suit. Obtain stockholder names for a retail mailing list. Solicit stockholders to vote for a change in the Board of Directors. Investigate possible management misconduct.
Obtain stockholder names for a retail mailing list
Which of the following will make a contract voidable? There is only a unilateral promise. The subject matter is illegal. One of the parties lacks capacity. The contract was required to be in writing and is oral.
One of the parties lacks capacity
The charitable contribution deduction on an estate's fiduciary income tax return is allowable
Only if the decedent's will specifically provides for the contribution.
Capital gains and losses are required to be classified as short term (that is, those on assets held for one year or less) and long term (that is, those on assets held for more than one year).
Short-term capital gains are netted against short-term capital losses, with the result a net short-term capital gain or loss. Similarly, long-term capital gains are netted against long-term capital losses to get the net long-term capital gain or loss. The net short-term capital gain or loss and the net long-term capital gain or loss are netted with the resulting capital gain net income, taxable income to the corporation. Capital losses in excess of gains may not be used to reduce the taxable income of the corporation. However, the unused capital losses may be carried back for three years and carried forward five years. Since Ral Corp. only has a capital loss of $5,000 and no capital gain with which to offset the loss, the corporation may not deduct any of the loss. The $5,000 capital loss may be carried back for three years and carried forward five years.
Kaitlin owns an automobile that she uses for business, investment, and personal use, as follows: Personal use 25% Investment use 30% Business use 45% Will Kaitlin's use qualify her to use accelerated or straight-line depreciation, and what percentage of the asset's basis qualifies to be depreciated?
Straight-line, 75%. An automobile qualifies as listed property, and MACRS accelerated depreciation can be claimed for listed property only if the business use of the asset exceeds 50% of the total use. Since Kaitlin's business use is 45%, she does not meet the 50% test and must use straight-line (ADS) depreciation. However, she can depreciate both the business and investment use of the asset, so 75% of the asset's basis qualifies to be depreciated.
Under the Sales Article of the UCC, which of the following events will result in the risk of loss passing from a merchant seller to a buyer?
Tender of the goods at the seller's place of business: NO Use of the seller's truck to deliver the goods: NO
Lilac Corp., a C corporation with earnings and profits, redeemed shares of stock from an individual shareholder. The distribution in redemption of stock will likely result in dividend income treatment to the redeeming shareholder if
The redemption is proportionate with respect to the shareholder.
Which of the following facts will result in an offering of securities being exempt from registration under the Securities Act of 1933?
The sale or offer to sell the securities is made by a person other than an issuer, underwriter, or dealer.
