Tax Exam 2 (Ch. 8, 13, 14)
If the alternate valuation date is elected by the executor of the estate, the basis of all of the property included in the decedent's estate becomes the fair market value 6 months after the decedent's death.
False
If the buyer assumes the seller's liability on the property acquired, the seller's amount realized is decreased by the amount of the liability assumed.
False
If the cost of a building constructed and placed into service by an eligible small business in the current year includes the cost of a wheelchair ramp, the cost of the ramp qualifies for the disabled access credit.
False
If the fair market value of the property on the date of death is greater than on the alternate valuation date, the use of the alternate valuation amount is mandatory.
False
In computing the foreign tax credit, the greater of the foreign income taxes paid or the overall limitation is allowed.
False
Intangible drilling costs must be capitalized and recovered through depletion.
False
John owns and operates a real estate agency as a sole proprietor. On a full-time basis, he employs his 17-year old daughter as a receptionist and his 22-year old son as a bookkeeper. Both children are subject to FICA withholding.
False
Land improvements are generally not eligible for cost recovery.
False
MACRS depreciation is used to compute earnings and profits.
False
Monroe's delivery truck is damaged in an accident. Monroe's adjusted basis for the delivery truck prior to the accident is $20,000. If Monroe receives insurance proceeds of $21,000 and recognizes a casualty gain of $1,000, his adjusted basis for the delivery truck after the accident is $21,000.
False
Motel buildings have a cost recovery period of 27.5 years.
False
On October 2, Ross quits his job with Blue Corporation. If requested by Ross, Blue Corporation must furnish a Form W-2 to Ross within 45 days after the date of the request or the final wage payment, whichever is later.
False
Only married taxpayers with children are qualified to receive the earned income credit.
False
Only self-employed individuals are required to make estimated tax payments.
False
Parker bought a brand new Ferrari on January 1, 2016, for $125,000. Parker was fatally injured in an auto accident on June 23, 2016, when the fair market value of the car was $105,000. Parker was driving a loaner car from the Ferrari dealership while his car was being serviced. In his will, Parker left the Ferrari to his best friend, Ryan. Ryan's holding period for the Ferrari begins on January 1, 2016.
False
Qualified rehabilitation expenditures include the cost of acquiring the building, but not the cost of acquiring the land.
False
Reggie owns all the stock of Amethyst, Inc. (adjusted basis of $100,000). If he receives a distribution from Amethyst of $90,000 and corporate earnings and profits are $15,000, Reggie has a capital gain of $5,000 and an adjusted basis for his Amethyst stock of $0.
False
Residential rental real estate includes property where 80% or more of the net rental revenues are from nontransient dwelling units.
False
The "luxury auto" cost recovery limits change if mid-quarter cost recovery is used.
False
The amount received for a utility easement on land is included in the gross income of the taxpayer.
False
The basis for gain and loss of personal use property converted to business use is the lower of the adjusted basis or the fair market value on the date of conversion.
False
The cost of a covenant not to complete for 10 years incurred in connection with the acquisition of a business is amortized over 10 years.
False
The credit for child and dependent care expenses is an example of a refundable credit.
False
The disabled access credit is computed at the rate of 50% of all access expenditures incurred by the taxpayer during the year.
False
The earned income credit is available only if the taxpayer has at least one qualifying child in the household.
False
The education tax credits (i.e., the American Opportunity credit and the lifetime learning credit) are available to help defray the cost of higher education regardless of the income level of the taxpayer.
False
The factor for determining the cost recovery for eligible real estate under MACRS, in the year of disposition, is taken from the month of the disposition.
False
The holding period for nontaxable stock dividends that are the same type (i.e., common on common) includes the holding period of the original shares, but the holding period for nontaxable stock dividends that are not the same type (i.e., preferred on common) is new and begins on the date the dividend is received.
False
The holding period for property acquired by gift is automatically long term.
False
The low-income housing credit is available to low-income tenants who reside in qualifying low-income housing.
False
The luxury auto cost recovery limits applies to all automobiles.
False
The maximum child tax credit under current law is $1,500 per qualifying child.
False
The maximum cost recovery method for all personal property under MACRS is 150% declining balance.
False
The purpose of the tax credit for rehabilitation expenditures is to encourage the relocation of businesses from older, economically distressed areas (i.e., inner city) to newer locations.
False
The tax benefits resulting from tax credits and tax deductions are affected by the tax rate bracket of the taxpayer.
False
The work opportunity tax credit is available only for wages paid to qualifying individuals during their first year of employment.
False
The § 179 deduction can exceed $500,000 in 2016 if the taxpayer had a § 179 amount which exceeded the taxable income limitation in the prior year.
False
The § 179 limit for a sports utility vehicle with a GVW of 7,000 pounds will not apply if the sports utility vehicle is used as a taxi.
False
Under MACRS, if the mid-quarter convention is applicable, all property sold is treated as being sold at the mid-point of the quarter in which it is placed in service.
False
Under the MACRS straight-line election for personalty, only the half-year convention is applicable.
False
Under the alternative depreciation system (ADS), the half-year convention must be used for personalty.
False
Unless a taxpayer is disabled, the tax credit for the elderly or disabled is available only if the taxpayer is at least 59 1/2 years old.
False
Unused foreign tax credits can be carried back three years and forward fifteen years.
False
The taxpayer owns stock with an adjusted basis of $15,000 and a fair market value of $8,000. If the stock or cash is going to be given to her niece, it is preferable for the taxpayer to sell the stock and give the $8,000 of cash to her niece. The same preference would exist if the recipient were a qualified charitable organization.
True
The fair market value of property received in a sale or other disposition is 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
The inclusion amount for a leased automobile is adjusted by a business usage percentage.
True
The incremental research activities credit is 20% of the qualified research expenses that exceed the base amount.
True
The key date for calculating cost recovery is the date the asset is placed in service.
True
The maximum credit for child and dependent care expenses is $2,100 if only one spouse is employed and the other spouse is a full-time student.
True
The purpose of the work opportunity tax credit is to encourage employers to hire individuals from specified target groups traditionally subject to high rates of unemployment.
True
The tax benefit received from a tax credit is never affected by the tax rate of the taxpayer.
True
The tax credit for rehabilitation expenditures for certified historic structures differs from that for qualifying structures that are not certified historic structures.
True
Transactions between related parties that result in disallowed losses might later provide a tax benefit to the related party buyer.
True
If an employee holds two jobs during the year, an overwithholding of FICA tax will result.
False
If insurance proceeds are received for property used in a trade or business, a casualty transaction can result in recognized gain, but cannot result in a recognized loss.
False
If losses are disallowed in a related party transaction, the holding period for the buyer includes the holding period of the seller.
False
If an automobile is placed in service in 2016, the limitation for cost recovery in 2018 will be based on the cost recovery limits for the year 2016.
True
Joyce's office building was destroyed in a fire (adjusted basis of $350,000; fair market value of $400,000). Of the insurance proceeds of $360,000 she receives, Joyce uses $310,000 to purchase additional inventory and invests the remaining $50,000 in short-term certificates of deposit. She received only $360,000 because of a co-insurance clause in her insurance policy. What is Joyce's recognized gain or loss?
$10,000 gain
Katie sells her personal use automobile for $12,000. She purchased the car three years ago for $25,000. What is Katie's recognized gain or loss?
$0
Noelle received dining room furniture as a gift from her friend, Jane. Jane's adjusted basis was $9,200 and the fair market value on the date of the gift was $7,000. Noelle decided she did not need the furniture and sold it to a neighbor six months later for $6,500. What is her recognized gain or loss?
$0
On June 1, 2016, Norm leases a taxi and places it in service. The lease payments are $1,000 per month. Assuming the dollar amount from the IRS table for such leases is $241, determine Norm's gross income inclusion amount.
$0
Karen owns City of Richmond bonds with a face value of $10,000. She purchased the bonds on January 1, 2016, for $11,000. The maturity date is December 31, 2025. The annual interest rate is 8%. What is the amount of taxable interest income that Karen should report for 2016, and the adjusted basis for the bonds at the end of 2016, assuming straight-line amortization is appropriate?
$0 and $10,900
Arthur owns a tract of undeveloped land (adjusted basis of $145,000) which he sells to his son, Ned, for its fair market value of $105,000. What is Arthur's recognized gain or loss and Ned's basis in the land?
$0 and $105,000.
Karen purchased 100 shares of Gold Corporation stock for $11,500 on January 1, 2013. In the current tax year (2016), she sells 25 shares of the 100 shares purchased on January 1, 2013, for $2,500. Twenty-five days earlier, she had purchased 30 shares for $3,000. What is Karen's recognized gain or loss on the sale of the stock, and what is her basis in the 30 shares purchased 25 days earlier?
$0 recognized loss, $3,375 basis in new stock.
Harry and Wilma are married and file a joint income tax return. On their tax return, they report $44,000 of adjusted gross income ($20,000 salary earned by Harry and $24,000 salary earned by Wilma) and claim two exemptions for their dependent children. During the year, they pay the following amounts to care for their 4-year old son and 6-year old daughter while they work. ABC Day Care Center $3,200 Blue Ridge Housekeeping Services 2,000 Mrs. Mason (Harry's mother) 1,000 Harry and Wilma may claim a credit for child and dependent care expenses of:
$1,200.
Over the past 20 years, Alfred has purchased 380 shares of Green, Inc., common stock. His first purchase was in 1994 when he acquired 30 shares for $20 a share. In 2000, Alfred bought 150 shares at $10 a share. In 2015, Alfred acquired 200 shares at $50 a share. Alfred intends to sell 125 shares at $60 per share in the current year (2016). If Alfred's objective is to minimize gain and assuming he can adequately identify the shares to be sold, what is his recognized gain?
$1,250
Carlton purchases land for $550,000. He incurs legal fees of $10,000 and broker's commission of $28,000 associated with the purchase. He subsequently incurs additional legal fees of $25,000 in having the land rezoned from agricultural to residential. He subdivides the land and installs streets and sewers at a cost of $800,000. What is Carlton's basis for the land and the improvements?
$1,413,000
George and Martha are married and file a joint tax return claiming their two children, ages 10 and 8 as dependents. Assuming their AGI is $119,650, George and Martha's child tax credit is:
$1,500.
Alice owns land with an adjusted basis of $610,000, subject to a mortgage of $350,000. Real estate taxes are $9,000 per calendar year and are payable on December 31. On April 1, Alice sells her land subject to the mortgage for $650,000 in cash, a note for $600,000, and property with a fair market value of $120,000. What is the amount realized?
$1,722,250
On June 1, 2016, James places in service a new automobile that cost $40,000. The car is used 60% for business and 40% for personal use. (Assume this percentage is maintained for the life of the car.) James does not take additional first-year depreciation (if available). Determine the cost recovery deduction for 2016.
$1,896
During the current year, Eleanor earns $120,000 in wages as an employee of an accounting firm. She also earns $13,000 in gross income from an outside consulting service she operates. Deductible expenses paid in connection with the consulting service amount to $3,000. Eleanor also incurs a recognized long-term capital gain of $1,000 from the sale of a stock investment. She must pay a self-employment tax on:
$10,000.
Pat generated self-employment income in 2016 of $76,000. The self-employment tax is:
$10,738.46.
Tara purchased a machine for $40,000 to be used in her business. The cost recovery allowed and allowable for the three years the machine was used are computed as follows. Cost Recovery Allowed Cost Recovery Allowable Year 1 $16,000 $ 8,000 Year 2 9,600 12,800 Year 3 5,760 7,680 If Tara sells the machine after three years for $15,000, how much gain should she recognize?
$11,480
On June 1, 2016, Red Corporation purchased an existing business. With respect to the acquired assets of the business, Red allocated $300,000 of the purchase price to a patent. The patent will expire in 20 years. Determine the total amount that Red may amortize for 2016 for the patent.
$11,667
Paul sells property with an adjusted basis of $45,000 to his daughter Dean, for $38,000. Dean subsequently sells the property to her brother, Preston, for $38,000. Three years later, Preston sells the property to Hun, an unrelated party, for $50,000. What is Preston's recognized gain or loss on the sale of the property to Hun?
$12,000
In 2012, Harold purchased a classic car that he planned to restore for $12,000. However, Harold is too busy to work on the car and he gives it to his daughter Julia in 2016. At this time, the fair market value of the car has declined to $10,000. Harold paid no gift tax on the transaction. Julia completes some of the restoration herself with out-of-pocket costs of $5,000. She later sells the car for $30,000. What is Julia's recognized gain or loss on the sale of the car?
$13,000
Molly has generated general business credits over the years that have not been utilized. The amounts generated and not utilized follow: 2012 $2,500 2013 7,500 2014 5,000 2015 4,000 In the current year, 2016, her business generates an additional $15,000 general business credit. In 2016, based on her tax liability before credits, she can utilize a general business credit of up to $20,000. After utilizing the carryforwards and the current year credits, how much of the general business credit generated in 2016 is available for future years?
$14,000.
In 2015, Gail had a § 179 deduction carryover of $30,000. In 2016, she elected § 179 for an asset acquired at a cost of $115,000. Gail's § 179 business income limitation for 2016 is $140,000. Determine Gail's § 179 deduction for 2016.
$140,000
During 2016, Barry (who is single and has no children) earned a salary of $13,000. He is age 30. His earned income credit for the year is:
$144.
The disabled access credit was enacted to encourage small businesses to make their businesses more accessible to disabled individuals.
True
During the year, Purple Corporation (a U.S. Corporation) has U.S.-source income of $1,800,000 and foreign income of $600,000. The foreign-source income generates foreign income taxes of $150,000. The U.S. income tax before the foreign tax credit is $816,000. Purple Corporation's foreign tax credit is:
$150,000.
Black Company paid wages of $180,000, of which $40,000 was qualified wages for the work opportunity tax credit under the general rules. Black Company's deduction for wages for the year is:
$164,000.
During the year, Green Corporation (a U.S. corporation) has U.S.-source income of $750,000 and foreign income of $500,000. The foreign-source income generates foreign income taxes of $240,000. The U.S. income tax before the foreign tax credit is $425,000. Green Corporation's foreign tax credit is:
$170,000.
On January 15, 2016, Vern purchased the rights to a mineral interest for $3,500,000. At that time it was estimated that the recoverable units would be 500,000. During the year, 40,000 units were mined and 25,000 units were sold for $800,000. Vern incurred expenses during 2016 of $500,000. The percentage depletion rate is 22%. Determine Vern's depletion deduction for 2016.
$175,000
Diane purchased a factory building on April 15, 1993, for $5,000,000. She sells the factory building on February 2, 2016. Determine the cost recovery deduction for the year of the sale.
$19,838
Ralph gives his daughter, Angela, stock (basis of $8,000; fair market value of $6,000). No gift tax results. If Angela subsequently sells the stock for $10,000, what is her recognized gain or loss?
$2,000
Realizing that providing for a comfortable retirement is up to them, Jim and Julie commit to making regular contributions to their IRAs, beginning this year. Consequently, they each make a $2,000 contribution to their traditional IRA. If their AGI is $35,000 on their joint return, what is the amount of their credit for certain retirement plan contributions?
$2,000
Roger is considering making a $6,000 investment in a venture that its promoter promises will generate immediate tax benefits for him. Roger, who does not anticipate itemizing his deductions, is in the 30% marginal income tax bracket. If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure, by how much will Roger's tax liability decline because of the investment?
$2,400
The only asset Bill purchased during 2016 was a new seven-year class asset. The asset, which was listed property, was acquired on June 17 at a cost of $50,000. The asset was used 40% for business, 30% for the production of income, and the rest of the time for personal use. Bill always elects to expense the maximum amount under § 179 whenever it is applicable. The net income from the business before the § 179 deduction is $100,000. Determine Bill's maximum deduction with respect to the property for 2016.
$2,499
Doug purchased a new factory building on January 15, 1990, for $400,000. On March 1, 2016, the building was sold. Determine the cost recovery deduction for the year of the sale; Doug did not use the MACRS straight-line method.
$2,645
Ahmad is considering making a $10,000 investment in a venture which its promoter promises will generate immediate tax benefits for him. Ahmad, who normally itemizes his deductions, is in the 28% marginal tax bracket. If the investment is of a type where the taxpayer may claim either a tax credit of 25% of the amount of the expenditure or an itemized deduction for the amount of the investment, what treatment normally would be most beneficial to Ahmad and by how much will Ahmad's tax liability decline because of the investment?
$2,800, take the itemized deduction.
On May 30, 2015, Jane purchased a factory building to use for her business. In August 2016, Jane paid $300,000 for improvements to the building. Determine Jane's total deduction with respect to the building improvements for 2016.
$2,889
Several years ago, Sarah purchased a structure for $150,000 that was placed in service in 1929. In the current year, she incurred qualifying rehabilitation expenditures of $200,000. The amount of the tax credit for rehabilitation expenditures, and the amount by which the building's basis for cost recovery would increase as a result of the rehabilitation expenditures are the following amounts.
$20,000 credit, $180,000 basis.
Pedro borrowed $250,000 to purchase a machine costing $300,000. He later borrowed an additional $25,000 using the machine as collateral. Both notes are nonrecourse. Eight years later, the machine has an adjusted basis of zero and two outstanding note balances of $145,000 and $18,000. Pedro sells the machine subject to the two liabilities for $45,000. What is his realized gain or loss?
$208,000
Hazel purchased a new business asset (five-year asset) on September 30, 2016, at a cost of $100,000. On October 4, 2016, Hazel placed the asset in service. This was the only asset Hazel placed in service in 2016. Hazel did not elect § 179 or additional first-year depreciation if available. On August 20, 2017, Hazel sold the asset. Determine the cost recovery for 2017 for the asset.
$23,750
Several years ago, Tom purchased a structure for $300,000 that was placed in service in 1929. Three and one-half years ago he incurred qualifying rehabilitation expenditures of $600,000. In the current year, Tom sold the property in a taxable transaction. Calculate the amount of the recapture of the tax credit for rehabilitation expenditures.
$24,000
Barry purchased a used business asset (seven-year property) on September 30, 2016, at a cost of $200,000. This is the only asset he purchased during the year. Barry did not elect to expense any of the asset under § 179, did not take additional first-year depreciation (if available), and did not elect straight-line cost recovery. Barry sold the asset on July 17, 2017. Determine the cost recovery deduction for 2017.
$24,490
Tan Company acquires a new machine (ten-year property) on January 15, 2016, at a cost of $200,000. Tan also acquires another new machine (seven-year property) on November 5, 2016, at a cost of $40,000. No election is made to use the straight-line method. The company does not make the § 179 election and elects to not take additional first-year depreciation if available. Determine the total deductions in calculating taxable income related to the machines for 2016.
$25,716
James purchased a new business asset (three-year personalty) on July 23, 2016, at a cost of $40,000. James takes additional first-year depreciation but does not elect Section 179 expense on the asset. Determine the cost recovery deduction for 2016.
$26,666
On May 2, 2016, Karen placed in service a new sports utility vehicle that cost $60,000 and has a gross vehicle weight of 6,300 lbs. The vehicle is used 60% for business and 40% for personal use. Determine the cost recovery for 2016. Karen wants to maximize her deductions.
$27,200
The bank forecloses on Lisa's apartment complex. The property had been pledged as security on a nonrecourse mortgage, whose principal amount at the date of foreclosure is $750,000. The adjusted basis of the property is $480,000, and the fair market value is $750,000. What is Lisa's recognized gain or loss?
$270,000
Abby sells real property for $300,000. The buyer pays $5,000 in property taxes that had accrued during the year while the property was still legally owned by Abby. In addition, Abby pays $15,000 in commissions and $3,000 in legal fees in connection with the sale. How much does Abby realize (the amount realized) from the sale of her property?
$287,000
Howard's business is raising and harvesting peaches. On March 10, 2016, Howard purchased 10,000 new peach trees at a cost of $60,000. Howard does not make an election to expense assets under § 179 and does not take additional first-year depreciation (if available). Determine the cost recovery deduction for 2016.
$3,000
Mary sells her personal use automobile for $20,000. She purchased the car two years ago for $17,000. What is Mary's recognized gain or loss? It increased in value due to its excellent mileage, yet safe design.
$3,000
Cheryl is single, has one child (age 6), and files as head of household during 2016. Her salary for the year is $19,500. She qualifies for an earned income credit of the following amount.
$3,164.
Orange Corporation begins business on April 2, 2016. The corporation reports startup expenditures of $64,000 all incurred last year. Determine the total amount that Orange can elect to deduct in 2016
$3,200
On June 1, 2016, Irene places in service a new automobile that cost $21,000. The car is used 70% for business and 30% for personal use. (Assume this percentage is maintained for the life of the car.) She does not take additional first-year depreciation (if available). Determine the cost recovery deduction for 2017.
$3,570
Alice purchased office furniture on September 20, 2015, for $100,000. On October 10, 2015, she purchased business computers for $80,000. Alice placed all of the assets in service on January 15, 2016. Alice did not elect to expense any of the assets under § 179, did not elect straight-line cost recovery, and did not take additional first-year depreciation (if available). Determine the cost recovery deduction for the business assets for 2016.
$30,290
Tobin inherited 100 acres of land on the death of his father in 2016. A Federal estate tax return was filed and the land was valued at $300,000 (its fair market value at the date of the death). The father had originally acquired the land in 1973 for $19,000 and prior to his death had made permanent improvements of $6,000. What is Tobin's basis in the land?
$300,000
On July 10, 2016, Ariff places in service a new sports utility vehicle that cost $70,000 and weighed 6,300 pounds. The SUV is used 100% for business. Determine Ariff's maximum deduction for 2016, assuming Ariff's § 179 business income is $110,000. Ariff does not take additional first-year depreciation (if available).
$34,000
On March 1, 2016, Lana leases and places in service a passenger automobile. The lease will run for five years and the payments are $500 per month. During 2016, she uses her car 60% for business and 40% for personal activities. Assuming the dollar amount from the IRS table for auto leases is $70, determine Lana's gross income attributable to the lease.
$35
Jamie bought her house in 2008 for $395,000. Since then, she has deducted $70,000 in depreciation associated with her home office and has spent $45,000 replacing all the old pipes and plumbing. She sells the house on July 1, 2016. Her realtor charged $34,700 in commissions. Prior to listing the house with the realtor, she spent $300 advertising in the local newspaper. Sammy buys the house for $500,000 in cash, assumes her mortgage of $194,000, and pays property taxes of $4,200 for the entire year on December 1, 2016. What is Jamie's adjusted basis at the date of the sale and the amount realized?
$370,000 adjusted basis; $661,100 amount realized.
Robert and Diane, husband and wife, live in Pennsylvania, a common law state. They purchased land as joint tenants in 2012 for $300,000. In 2016, Diane dies and bequeaths her share of the land to Robert. The land has a fair market value of $450,000. What is Robert's adjusted basis for the land?
$375,000
On February 1, Karin purchases real estate for $375,000. The annual property taxes of $5,000 are payable on December 31. Realizing that she will pay the property taxes for the entire year, Karin remits $374,575 to the seller at closing. Karin's adjusted basis for the real estate is:
$375,000.
Yolanda buys a house in the mountains for $450,000 which she uses as her personal vacation home. She builds an additional room on the house for $40,000. She sells the property for $560,000 and pays $28,000 in commissions and $4,000 in legal fees in connection with the sale. What is the recognized gain or loss on the sale of the house?
$38,000
Green Company, in the renovation of its building, incurs $9,000 of expenditures that qualify for the disabled access credit. The disabled access credit is:
$4,375.
Cardinal Corporation hires two persons certified to be eligible employees for the work opportunity tax credit under the general rules (e.g., food stamp recipients), each of whom is paid $9,000 during the year. As a result of this event, Cardinal Corporation may claim a work opportunity credit of:
$4,800.
George and Jill are husband and wife, ages 67 and 65 respectively. During the year, they receive Social Security benefits of $4,000 and have adjusted gross income of $11,000. Assuming they file a joint return, their tax credit for the elderly, before considering any possible limitation due to their tax liability, is:
$450.
Neal and his wife Faye reside in Texas, a community property state. Their community property consists of real estate (adjusted basis of $800,000; fair market value of $6 million) and personal property (adjusted basis of $390,000; fair market value of $295,000). Neal dies first and leaves his estate to Faye. What is Faye's basis in the property after Neal's death?
$6,000,000 real estate and $295,000 personal property.
Alvin is employed by an automobile dealership as its manager. As such, he purchased an SUV for $32,000 (fair market value is $48,000). No other employees are permitted a discount. What is Alvin's basis in the SUV?
$48,000.
Steve purchased his home for $500,000. As a sole proprietor, he operates a certified public accounting practice in his home. For this business, he uses one room exclusively and regularly as a home office. In Year 1, $3,042 of depreciation expense on the home office was deducted on his income tax return. In Year 2, Steve sustained losses in his business; therefore, no depreciation was taken on the home office. Had he been allowed to deduct depreciation expense, his depreciation expense would have been $3,175. What is the adjusted basis in the home?
$493,783
Amber is in the process this year of renovating the office building (placed in service in 1976) used by her business. Because of current Federal Regulations that require the structure to be accessible to handicapped individuals, she incurs an additional $11,000 for various features, such as ramps and widened doorways, to make her office building more accessible. The $11,000 incurred will produce a disabled access credit of what amount?
$5,000
Jermaine and Kesha are married, file a joint tax return, have AGI of $82,500, and have two children. Devona is beginning her freshman year at State University during Fall 2016, and Arethia is beginning her senior year at Northeast University during Fall 2016 after having completed her junior year during the spring of that year. Both Devona and Arethia are claimed as dependents on their parents' tax return. Devona's qualifying tuition expenses and fees total $4,000 for the fall semester, while Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2016. Full payment is made for the tuition and related expenses for both children during each semester. The American Opportunity credit available to Jermaine and Kesha for 2016 is:
$5,000.
Rex and Dena are married and have two children, Michelle (age 7) and Nancy (age 5). During 2016, Rex earned a salary of $24,500, received interest income of $300, and filed a joint income tax return with Dena. Dena had $0 gross income. Their earned income credit for the year is:
$5,412.
The earned income credit, a form of a negative income tax, is a refundable credit.
True
Bob and Sally are married, file a joint tax return, report AGI of $115,000, and have two children. Del is beginning her freshman year at State College during Fall 2016, and Owen is beginning his senior year at Southwest University during Fall 2016. Owen completed his junior year during the Spring semester of 2015 (i.e., he took a "leave of absence" during the 2015-2016 school year). Both Del and Owen are claimed as dependents on their parents' tax return. Del's qualifying tuition expenses and fees total $5,000 for the Fall semester, while Owen's qualifying tuition expenses were $6,100 for the Fall 2016 semester. Del's room and board costs were $3,200 for the Fall semester. Owen did not incur room and board costs, as he lived with his aunt and uncle during the year. Full payment is made for the tuition and related expenses for both children at the beginning of each semester. In addition to the children's college expenses, Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist. Bob attended the seminars during July and August 2016. Compute the available education tax credits for Bob and Sally for 2016.
$5,480
Kevin purchased 5,000 shares of Purple Corporation stock at $10 per share. Two years later, he receives a 5% common stock dividend. At that time, the common stock of Purple Corporation had a fair market value of $12.50 per share. What is the basis of the Purple Corporation stock, the per share basis, and gain recognized upon receipt of the common stock dividend?
$50,000 basis in stock, $9.52 basis per share, $0 recognized gain.
Mary purchased a new five-year class asset on March 7, 2016. The asset was listed property (not an automobile). It was used 60% for business and the rest of the time for personal use. The asset cost $900,000. Mary made the § 179 election. The income from the business before the § 179 deduction was $600,000. Mary also takes additional first-year depreciation (if available). Determine the total deductions with respect to the asset for 2016.
$524,000
On July 17, 2016, Kevin places in service a used automobile that cost $25,000. The car is used 80% for business and 20% for personal use. In 2017, he used the automobile 40% for business and 60% for personal use. Determine the cost recovery recapture for 2017.
$528
Pat purchased a used five-year class asset on March 15, 2016, for $60,000. He did not elect § 179 expensing. Determine the cost recovery deduction for 2016 for earnings and profits purposes.
$6,000
Lynn purchases a house for $52,000. She converts the property to rental property when the fair market value is $115,000. After deducting depreciation (cost recovery) expense of $1,130, she sells the house for $120,000. What is her recognized gain or loss?
$69,130
Kevin and Sue have two children, ages 8 and 14. They spend $6,200 per year on eligible employment related expenses for the care of their children after school. Kevin earned a salary of $20,000 and Sue earned a salary of $18,000. What is the amount of the credit for child and dependent care expenses?
$690
Sandra's automobile, which is used exclusively in her trade or business, was damaged in an accident. The adjusted basis prior to the accident was $11,000. The fair market value before the accident was $10,000 and the fair market value after the accident is $6,000. Insurance proceeds of $3,200 are received. What is Sandra's adjusted basis for the automobile after the casualty?
$7,000
Jason owns Blue Corporation bonds (face value of $10,000), purchased on January 1, 2016, for $11,000. The bonds have an annual interest rate of 8% and a maturity date of December 31, 2025. If Jason elects to amortize the bond premium, what is his taxable interest income for 2016 and the adjusted basis for the bonds at the end of 2016 (assuming straight-line amortization is appropriate)?
$700 and $10,900
Cora purchased a hotel building on May 17, 2016, for $3,000,000. Determine the cost recovery deduction for 2017.
$76,920
During the year, Green, Inc., incurs the following research expenditures: In-house wages, supplies, computer time $60,000 Paid to Blue Foundation for research 30,000 Green's qualifying research expenditures for the year are:
$79,500.
In March 2016, Gray Corporation hired two individuals, both of whom were certified as long-term recipients of family assistance benefits. Each employee was paid $11,000 during 2016. Only one of the individuals continued to work for Gray Corporation in 2017, earning $9,000 during the year. No additional workers were hired in 2017. Gray Corporation's work opportunity tax credit amounts for 2016 and 2017 are:
$8,000 in 2016, $4,500 in 2017.
In addition to other gifts, Megan made a gift of stock to Jeri in 1976. Megan had purchased the stock in 1974 for $7,500. At the time of the gift, the stock was worth $20,000. If Megan paid $850 of gift tax on the transaction in 1976, what is Jeri's gain basis for the stock?
$8,350
Bhaskar purchased a new factory building and land on September 10, 2016, for $3,700,000. ($500,000 of the purchase price was allocated to the land.) He elected the alternative depreciation system (ADS). Determine the cost recovery deduction for 2017.
$80,000
Nancy gives her niece a crane to use in her business with a fair market value of $61,000 and a basis in Nancy's hands of $80,000. No gift tax was paid. What is the niece's basis for depreciation (cost recovery)?
$80,000
On June 1 of the current year, Tab converted a machine from personal use to rental property. At the time of the conversion, the machine was worth $90,000. Five years ago Tab purchased the machine for $120,000. The machine is still encumbered by a $50,000 mortgage. What is the basis of the machine for cost recovery?
$90,000
Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4, 2016, the date of the decedent's death. The executor distributes the land to Kelly on November 12, 2016, at which time the fair market value is $49,000. The fair market value on February 4, 2017, is $45,000. In filing the estate tax return, the executor elects the alternate valuation date. Kelly sells the land on June 10, 2017, for $48,000. What is her recognized gain or loss?
($1,000)
Shontelle received a gift of income-producing property with an adjusted basis of $49,000 to the donor and fair market value of $35,000 on the date of gift. No gift tax was paid by the donor. Shontelle subsequently sold the property for $31,000. What is the recognized gain or loss?
($4,000)
In 2015, Juan and Juanita incur $9,800 in legal and adoption fees directly related to the adoption of an infant son born in a nearby state. Over the next year, they incur another $4,500 of adoption expenses. The adoption becomes final in 2016. Which of the following choices properly reflects the amounts and years in which the adoption expenses credit is available.
2015: None 2016: $13,460
Nontaxable stock dividends result in:
A lower cost per share for all shares than before the stock dividend.
Which of the following statements is false?
A realized gain that is never recognized results in the temporary recovery of more than the taxpayer's cost or other basis for tax purposes.
If the alternate valuation date is elected by the executor in 2016, the total basis of inherited property will be more than what it would have been if the primary valuation date and amount had been used.
False
The components of the general business credit include all of the following except:
All of the above are components of the general business credit
Capital recoveries include:
Amortization of bond premium.
If a husband inherits his deceased wife's share of jointly owned property in a common law state, both the husband's original share and the share inherited from the deceased wife are stepped-up or down to the fair market value at the date of the wife's death.
False
If a seller assumes the buyer's liability on the property acquired, the buyer's adjusted basis for the property is increased by the amount of the liability assumed.
False
If a taxpayer chooses to claim a foreign tax credit, those foreign income taxes paid can also be claimed as a deduction.
False
Elvis owns all of the stock of White Corporation. The accumulated earnings and profits of White Corporation at the beginning of the year are a deficit of $20,000. The current earnings and profits are $30,000. Elvis' basis for his stock is $250,000. He receives a distribution of $300,000 on the last day of the tax year. How much dividend income and/or capital gain should Elvis report?
Dividend income of $30,000 and capital gain of $20,000.
Which of the following issues does not need resolution in an employer's effort to comply with employment tax payment requirements?
Each of the above issues needs to be resolved.
Refundable tax credits include the:
Earned income credit.
The holding period of property acquired by gift may begin on:
Either the date the property was acquired by the donor or the date of gift.
A LIFO method is applied to general business credit carryovers, carrybacks, and utilization of credits earned during a particular year.
False
A realized loss whose recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis.
False
A small employer incurs $1,500 for consulting fees related to establishing a qualified retirement plan for its 75 employees. As a result, the employer may claim the credit for small employer pension plan startup costs for $750.
False
A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is under age 17.
False
A taxpayer who meets the age requirement and receives no Social Security benefits will be entitled to the full tax credit for the elderly.
False
A taxpayer who qualifies for the low-income housing credit claims the credit over a 20-year period.
False
All foreign taxes qualify for the foreign tax credit.
False
All personal property placed in service in 2016 and used in a trade or business qualifies for additional first-year depreciation.
False
All taxpayers are eligible to take the basic research credit.
False
An election to use straight-line under ADS is made on an asset-by-asset basis for property other than eligible real estate.
False
An expatriate who works in a country with an income tax rate higher than the U.S. rate probably will find the foreign earned income exclusion preferable to the foreign tax credit.
False
An individual generally may claim a credit for adoption expenses in the year in which the expenses are paid.
False
Antiques may be eligible for cost recovery if they are used in a trade or business.
False
Any unused general business credit must be carried back 3 years and then forward for 20 years.
False
Ben sells stock (adjusted basis of $25,000) to his son, Ray, for its fair market value of $15,000. Ray gives the stock to his daughter, Trish, who subsequently sells it for $26,000. Ben's recognized loss is $0 and Trish's recognized gain is $1,000 ($26,000 - $15,000 - $10,000).
False
BlueCo incurs $900,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours. The credit for employer-provided child care available to BlueCo this year is $225,000.
False
Both education tax credits are available for qualified tuition expenses, and in certain instances, also may be available for room and board.
False
Cardinal Company incurs $800,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours. Assuming Cardinal claims the credit for employer-provided child care this year, its basis in the newly constructed facility is $640,000.
False
Certain high-income individuals are subject to three additional Medicare taxes—on wages, unearned income, and tax credits claimed.
False
Expenses that are reimbursed by a taxpayer's employer under a dependent care assistance program can also qualify for the credit for child and dependent care expenses.
False
For a new car that is used predominantly in business, the "luxury auto" limit depends on whether the taxpayer takes MACRS or straight-line depreciation.
False
Gene purchased an SUV for $45,000 which he uses 100% for personal purposes. When the SUV is worth $30,000, he contributes it to his business. The gain basis is $45,000, the loss basis is $30,000, and the basis for cost recovery is $45,000.
False
Goodwill associated with the acquisition of a business cannot be amortized.
False
Helen purchases a $10,000 corporate bond at a premium of $1,000 and elects to amortize the premium. On the later sale of the bond for $10,800, she has amortized $300 of the premium. Helen has a recognized gain of $800 ($10,800 amount realized - $10,000 adjusted basis).
False
If Wal-Mart stock increases in value during the tax year by $6,000, the amount realized is a positive $6,000.
False
If a taxpayer is required to recapture any tax credit for rehabilitation expenditures, the recapture amount need not be added to the adjusted basis of the rehabilitation expenditures.
False
Wade is a salesman for a real estate development company. Because he is the "salesperson of the year," he is permitted to purchase a lot from the developer for $90,000. The fair market value of the lot is $150,000 and the developer's adjusted basis is $100,000. Wade must recognize a gain of $10,000 ($100,000 developer's adjusted basis - $90,000 cost to Wade), and his adjusted basis for the lot is $100,000 ($90,000 cost + $10,000 recognized gain).
False
When a taxpayer has purchased several lots of stock on different dates at different purchase prices and cannot identify the lot of stock that is being sold, he should use either a weighted average approach or a LIFO approach.
False
An employer calculates the amount of income tax withheld from salary or wages based on the information an employee provides on the following form:
Form W-4.
Gift property (disregarding any adjustment for gift tax paid by the donor):
Has the same basis to the donee as the donor's adjusted basis if the donee disposes of the property at a gain.
Which of the following statements concerning the credit for child and dependent care expenses is not correct?
If a taxpayer's adjusted gross income exceeds $15,000 but is not over $17,000, the rate for the credit for child and dependent care expenses is 35%.
Identify the statement below that is false.
If an employer is not required to withhold income taxes from an employee's wages, the wages are not taxable to the employee.
Mona purchased a business from Judah for $1,000,000. Judah's records and an appraiser provided her with the following information regarding the assets purchased: Adjusted Basis FMV Land $195,000 $270,000 Building 310,000 450,000 Equipment 95,000 180,000 What is Mona's adjusted basis for the land, building, and equipment?
Land $270,000, building $450,000, equipment $180,000.
In terms of the withholding procedures, which statement does not reflect current rules?
In preparing the income tax return for the year, the employee is bound by the number of exemptions claimed for withholding purposes.
Grape Corporation purchased a machine in December of the current year. This was the only asset purchased during the current year. The machine was placed in service in January of the following year. No assets were purchased in the following year. Grape Corporation's cost recovery would begin:
In the following year using a half-year convention.
Which of the following assets would be subject to cost recovery?
Landscaping around the doctor's office.
Which, if any, of the following correctly describes the earned income credit?
Is a refundable credit.
A strip along the boundary of Joy's land is condemned for a utility easement. She receives a payment of $7,500 from the utility company. Her basis in the land is $80,000. Which of the following is correct?
Joy must reduce the basis of the land by $7,500.
Andrew acquires 2,000 shares of Eagle Corporation stock for $100,000 on March 31, 2012. On January 1, 2016, he sells 125 shares for $5,000. On January 22, 2016, he purchases 135 shares of Eagle Corporation stock for $6,075. When does Andrew's holding period begin for the 135 shares?
March 31, 2012, for 125 shares and January 22, 2016, for 10 shares.
Which of the following correctly describes the tax credit for rehabilitation expenditures?
No credit is allowed for the rehabilitation of personal use property.
Which of the following correctly reflects current rules regarding estimated tax payments for individuals?
No quarterly payments are required if the taxpayer's estimated tax is under $1,000.
Albert purchased a tract of land for $140,000 in 2013 when he heard that a new highway was going to be constructed through the property and that the land would soon be worth $200,000. Highway engineers surveyed the property and indicated that he would probably get $180,000. The highway project was abandoned in 2016 and the value of the land fell to $100,000. What is the amount of loss Albert can claim in 2016?
None of the above
Augie purchased one new asset during the year (five-year property) on November 10, 2016, at a cost of $650,000. She would like to use the § 179 election and will also take additional first-year depreciation, if available. The income from the business before the cost recovery deduction and the § 179 deduction was $600,000. Determine the total cost recovery deduction with respect to the asset for 2016.
None of the above
Bonnie purchased a new business asset (five-year property) on March 10, 2016, at a cost of $30,000. She also purchased a new business asset (seven-year property) on November 20, 2016, at a cost of $13,000. Bonnie did not elect to expense either of the assets under § 179, nor did she elect straight-line cost recovery. Bonnie takes additional first-year depreciation. Determine the cost recovery deduction for 2016 for these assets.
None of the above
Carlos purchased an apartment building on November 16, 2016, for $3,000,000. Determine the cost recovery for 2016.
None of the above
During the past two years, through extensive advertising and improved customer relations, Orange Corporation estimated that it had developed customer goodwill worth $500,000. For the current year, determine the amount of goodwill Orange Corporation may amortize.
None of the above
George purchases used seven-year class property at a cost of $200,000 on April 20, 2016. Determine George's cost recovery deduction for 2016 for alternative minimum tax purposes, assuming George does not elect § 179 and does not take additional first-year depreciation, if available.
None of the above
Hans purchased a new passenger automobile on August 17, 2016, for $30,000. During the year the car was used 40% for business and 60% for personal use. Determine his cost recovery deduction for the car for 2016.
None of the above
White Company acquires a new machine (seven-year property) on January 10, 2016, at a cost of $600,000. White makes the election to expense the maximum amount under § 179. No election is made to use the straight-line method. White does take additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machine for 2016 assuming White has taxable income of $800,000.
None of the above
Milton owns a bond (face value of $25,000) for which he paid $28,000. Which of the following statements is correct?
None of the above is correct.
Which of the following statements is true regarding the education tax credits?
None of the above statements is true.
The basis of personal use property converted to business use is:
None of the above.
Which of the following is correct?
None of the above.
Nat is a salesman for a real estate developer. His employer permits him to purchase a lot for $75,000. The employer's adjusted basis for the lot is $45,000, and its normal selling price is $90,000.
Recognized gain: $15,000 Basis: $ 90,000
The ceiling amounts and percentages for 2016 for the two portions of the self-employment tax are:
Social Security portion Medicare portion a. $118,500; 12.4% Unlimited; 2.9%
Which of the following statements regarding the adoption expenses credit is not true?
The adoption expenses credit is limited to no more than $14,000 per eligible child in 2016.
In describing FICA taxes, which (if any) of the following statements is incorrect?
The base amounts for the Social Security and Medicare portions are the same.
If more than 40% of the value of property, other than real property, is placed in service during the last quarter, all of the property placed in service in the second quarter will be allowed 7.5 months of cost recovery.
True
If property that has been converted from personal use to business use has appreciated in value, its basis for gain will be the same as the basis for loss.
True
If startup expenses total $53,000, $51,000 of those costs are amortized over 180 months.
True
If the amount of a corporate distribution is less than the amount of the corporate earnings and profits, the return of capital concept does not apply and the shareholders' adjusted basis for the stock remains unchanged.
True
The carryover basis to a donee for property received by gift can be an amount greater than the donor's adjusted basis
True
The child tax credit is based on the number of the taxpayer's qualifying children under age 17.
True
For nontaxable stock rights where the fair market value of the rights is 15% or more of the fair market value of the stock, the taxpayer is required to allocate a portion of the stock basis to the stock rights.
True
For personal property placed in service in 2016, the § 179 maximum deduction is limited to $500,000.
True
Which, if any, of the following correctly describes the research activities credit?
The credit is not available for research conducted outside the United States.
For purposes of computing the credit for child and dependent care expenses, the qualifying employment-related expenses are limited to an individual's actual or deemed earned income.
True
For real property, the ADS convention is the mid-month convention.
True
The cost recovery basis for property converted from personal use to business use may be the fair market value of the property at the time of the conversion.
True
For the loss disallowance provision under § 267, related parties include certain family members, a shareholder and his or her controlled corporation (i.e., greater than 50% in value of the corporation's outstanding stock), and a partner and his or her controlled partnership (i.e., greater than 50% of the capital interests or profits interest in the partnership).
True
Fraction depletion enables the taxpayer to recover more than the cost of an asset in the form of tax deductions.
True
A purchased trademark is a § 197 intangible.
True
A realized gain on the sale or exchange of a personal use asset is recognized, but a realized loss on the sale, exchange, or condemnation of a personal use asset is not recognized.
True
A realized gain whose recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis.
True
A taxpayer may elect to use the alternative depreciation system (ADS) to compute depreciation for earnings and profits.
True
A taxpayer's earned income credit is dependent on the number of his or her qualifying children.
True
A used $35,000 automobile that is used 100% for business is placed in service in 2016. If the automobile fails the 50% business usage test in the second year, no cost recovery will be recaptured.
True
All listed property is subject to the substantiation requirements of § 274.
True
An employee with outside income may be able to avoid the penalty for underpayment of estimated tax by having his employer increase income tax withholdings.
True
An employer's tax deduction for wages is affected by the work opportunity tax credit.
True
Any § 179 expense amount that is carried forward is subject to the business income limitation in the carryforward year.
True
Because current U.S. corporate income tax rates are higher than many foreign corporate income tax rates only infrequently will the credit's, the overall limitation yield a lower foreign tax credit than the amount of foreign taxes actually paid.
True
Broker's commissions, legal fees, and points paid by the seller reduce the seller's amount realized.
True
Child and dependent care expenses include amounts paid for general household services.
True
Child care payments to a relative are not eligible for the credit for child and dependent care expenses if the relative is a child (under age 19) of the taxpayer.
True
Cost depletion is determined by multiplying the depletion cost per unit by the number of units sold.
True
Employers are encouraged by the work opportunity tax credit to hire individuals who have been long-term recipients of family assistance welfare benefits.
True
Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property's adjusted basis whereas capital expenditures are added to the original basis.
True
The cost recovery period for 3-year class property is 4 years.
True
In 1973, Fran received a birthday gift of stock worth $75,000 from her aunt. The aunt had owned the stock (adjusted basis $50,000) for 10 years and paid gift tax of $27,000 on the transfer. Fran's basis in the stock is $75,000—the lesser of $77,000 ($50,000 + $27,000) or $75,000.
True
In a casualty or theft, the basis of property involved is reduced by the amount of insurance proceeds received and by any resulting recognized loss.
True
In computing the amount realized when the fair market value of the property received cannot be determined, the fair market value of the property surrendered may be used.
True
In the event that overwithholding of FICA tax occurs because the taxpayer has more than one employer, the excess amount should be claimed as a credit on the Federal income tax return of the employee.
True
Juan refuses to give the bank where he maintains a savings account his Social Security number. Juan is subject to backup withholding for the interest earned on the savings account.
True
Lump-sum purchases of land and a building are allocated on the basis of the relative fair market values of the individual assets acquired.
True
Milton purchases land and a factory building for his business for $300,000 with $100,000 being allocated to the land. During the first year, Milton deducts cost recovery of $4,922. Milton's adjusted basis for the building at the end of the first year is $195,078 ($200,000 - $4,922).
True
Nonrefundable credits are those that reduce the taxpayer's tax liability but are not paid when the amount of the credit (or credits) exceeds the taxpayer's tax liability.
True
Once the more-than-50% business usage test is passed for listed property, it still matters if the business usage for the property drops to 50% or less during the recovery period.
True
Property used for the production of income is not eligible for § 179 expensing.
True
Property which is classified as personalty may be depreciated.
True
Purchased goodwill is assigned a basis equal to cost, which is calculated using the residual method associated with the purchase of a business.
True
Qualified research and experimentation expenditures are not only eligible for the 20% tax credit, but also can be expensed in the year incurred.
True
Qualifying tuition expenses paid from the proceeds of a tax-exempt scholarship do not give rise to an education tax credit.
True
Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property's adjusted basis at the date of disposition.
True
Realized losses from the sale or exchange of stock are disallowed if within 30 days before or 30 days after the sale or exchange, the taxpayer acquires substantially identical stock.
True
Since wash sales do not apply to gains, it may be desirable to engage in this type of transaction before the end of the tax year.
True
Some (or all) of the tax credit for rehabilitation expenditures will have to be recaptured if the rehabilitated property is disposed of prematurely or if it ceases to be qualifying property.
True
Stuart owns land with an adjusted basis of $190,000 and a fair market value of $500,000. If the property is going to be given to Stuart's nephew, Alex, it is preferable for the transfer to be by inheritance rather than by gift.
True
Taxable income for purposes of § 179 limited expensing is computed by including the MACRS deduction.
True
Taxpayers may elect to use the straight-line method under MACRS for personalty.
True
The additional Medicare taxes assessed on high-income individuals carry differing tax rates depending on the tax base.
True
The adjusted basis for a taxable bond purchased at a premium is reduced if the amortization election is made. The amount of the amortized premium is treated as an interest deduction.
True
The amortization period for $58,000 of startup expenses is 180 months.
True
The amount of a corporate distribution qualifying for capital recovery treatment which exceeds the shareholder-recipient's basis in the stock investment is treated as a capital gain.
True
The amount of the loss basis of a gift will differ from the amount of the gain basis only if at the date of the gift the adjusted basis of the property exceeds the property's fair market value.
True
The base amount for the Social Security portion (old age, survivors, and disability insurance) is different from that for the Medicare portion of FICA.
True
The basis for depreciation on depreciable gift property received is the donor's adjusted basis of the property at the date of the gift (assuming no gift taxes are paid). The rule applies regardless of whether the fair market value at the date of the gift is greater than or less than the donor's adjusted basis.
True
The basis of an asset on which $20,000 has been expensed under § 179 will be reduced by $20,000, even if $20,000 cannot be expensed in the current year because of the taxable income limitation.
True
The basis of cost recovery property must be reduced by at least the cost recovery allowable.
True
The basis of inherited property usually is its fair market value on the date of the decedent's death.
True
The basis of property acquired in a wash sale is its cost plus the loss not recognized on the wash sale.
True
Which of the following best describes the treatment applicable to unused business credits?
Unused amounts are first carried back one year and then forward for 20 years.
Taylor inherited 100 acres of land on the death of his father in 2016. A Federal estate tax return was filed and this land was valued therein at $650,000, its fair market value at the date of the father's death. The father had originally acquired the land in 1970 for $112,000 and prior to his death he had expended $20,000 on permanent improvements. Determine Taylor's holding period for the land.
Will automatically be long-term.
Noelle owns an automobile which she uses for personal use. Her adjusted basis is $45,000 (i.e., the original cost). The car is worth $22,000. Which of the following statements is correct?
a., b., and c. are correct.
