Accounting 371 - Tax

If loss occurs on an involuntary conversion, it is postponed and not recognized.

False

In a like-kind exchange, if the taxpayers give or receive any additional property that is not like-kind property, the transaction will not qualify as a like-kind exchange.

False

Only sales of property are considered dispositions for tax purposes.

False

Alimony paid and certain itemized deductions, such as charitable contributions and gambling losses, are not allowed for AMT purposes.

False

Capital additions decrease and recoveries of capital increase the original basis so that on the date of disposition, the adjusted basis reflects the unrecovered cost or other basis of the property.

False

For AMT purposes mining exploration and development costs must be capitalized and amortized ratably over a 5-year period.

False

For a long-term contract, taxpayers are required to use the completed contract method for AMT purposes.

False

For regular income tax purposes, a taxpayer may elect to amortize the cost of certified facilities over 60 months. For AMT purposes, such amortization is also allowed.

False

Taxpayers should generally make gifts of depreciated property (property that if sold would produce a realized loss) because the donor receives an income tax deduction for the unrealized loss element.

False

The holding period for property acquired by gift begins on the date the donor acquired the property is the loss basis rule applies

False

The nonrecognition provisions for nontaxable exchanges apply to realized losses from the sale or exchange of personal use assets.

False

A ___________ loss on the other hand, is the amount of a ___________ loss that is deductible for tax purposes.

Recognized; realized

________ gain is the amount of ________ gain that is included in the taxpayer's gross income

Recognized;realized

A taxpayer may elect to use the AMT depreciation method for personal property for regular income tax purposes. If this election is made, no AMT adjustment is required because the depreciation deduction is the same for regular income tax and for the AMT.

True

A taxpayer should generally make bequests of appreciated property in his/her will, so that both the decedent and the heir can avoid income tax on the unrealized gain.

True

For AMT purposes, circulation expenditures must be capitalized and amortized ratably over the three-year period beginning in the year the expenditures were made.

True

If gift taxes are paid by the donor, the portion of the gift tax paid that is related to any appreciation is taken into account in determining the donee's gain basis.

True

In a nontaxable exchange, the recognition of gain or loss is postponed (deferred until the property received in the nontaxable exchange is subsequently disposed of in a taxable transaction.

True

In a tax-free transaction, the nonrecognition is permanent.

True

In some cases, the income or expense amount is considered in both the regular income tax and AMT computations, but the amount differs.

True

In some nontaxable exchanges, only part of the property involved in the transaction qualifies for nonrecognition treatment.

True

Postponement of realized gain is permitted to the extent that the taxpayer reinvests the amount realized from the conversion in replacement property.

True

Rather than having taxpayers recalculate the components of the individual income tax formula using a different set of rules, the calculation of AMTI begins with regular taxable income.

True

Regarding like-kind exchanges, the transaction must involve a direct exchange of property to qualify as a like-kind exchange.

True

Regardling like-kind exchanges, Delayed (non-simultaneous) exchanges are allowed, but there are time limits on its completion.

True

The amount realized also includes any liability on the property disposed of, such as a mortgage debt, if the buyer assumes the mortgage or the property is sold subject to the mortgage.

True

The amount realized from a sale or other disposition of property is the sum of any money received plus the fair market value of other property received.

True

The amount realized from an involuntary conversion is normally any insurance proceeds received.

True

The basis for depreciation on depreciable gift property is the donee's gain basis.

True

The donor, who makes gifts of appreciated property, avoids income tax on the unrealized gain that would have occurred had the donor sold the property.

True

When multiple assets are acquired in a single transaction, the contract price must be allocated. The seller prefers a high allocation for nondepreciable assets.

True

The fair market value of property received in a sale or other disposition has been defined by the courts as the price at which property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy

True.

In 2018, Brennen sold a machine used in his business for $180,000. The machine was purchased eight years ago for $340,000. Depreciation up to the date of the sale for regular income tax purposes was $210,000 and $190,000 for AMT purposes. For AMT purposes, Brennen has a___________adjustment of __________ related to the sale.

negative; $20,000

The direction of an adjustment attributable to a revenue (or income) item can be determined as follows: if regular tax income is greater than AMT income the result is a ______________ AMT adjustment and if regular tax income is less than AMT income the result is a ______________ AMT adjustment.

negative;positive

If the regular tax deduction is greater than the AMT deduction the result is a __________ AMT adjustment and if the regular tax deduction is less than the AMT deduction the result is a __________ AMT adjustment.

positive;negative