TAX4001 Final Exam

Ficia recognizes $34,500 ordinary income and a $40,000 capital loss. WHY?

Ficia recognizes only a $40,000 capital loss. Ficia recognizes only a $5,500 capital loss. Ficia recognizes $34,500 ordinary income and a $40,000 capital loss. None of these choices are correct

Fleet, Pete, and Bete are an affiliated group. WHY?

Fleet and Pete are an affiliated group. Fleet, Pete, and Bete are an affiliated group. Fleet, Zete, Pete, and Bete are an affiliated group. Fleet and Zete are an affiliated group.

Corporate tax, $0; individual tax, $37,000 WHY? S Corporations are not taxed at the corporate level

Corporate tax, $21,000; individual tax, $0 Corporate tax, $0; individual tax, $37,000 Corporate tax, $21,000; individual tax, $37,000 Corporate tax, $21,000; individual tax, $15,800

$35,000 WHY?

$0 $5,000 $65,000 $35,000

$6,190 tax savings WHY?

$0 $6,190 tax savings $7,695 tax cost $1,050 tax savings

$2,000 gain WHY?

$0 gain or loss $2,000 gain $3,000 loss $8,000 loss

$2,350 WHY?

$1,100 $2,350 $2,000 $0

$93,000 WHY?

$118,000 $50,000 $93,000 $85,000

$37,000 WHY? 12000+(.5*100000)+(.5*10000)-(.5*60000) = 37000

$13,000 $25,000 $37,000 $27,000

$159,000 ordinary abandonment loss. WHY?

$159,000 ordinary abandonment loss. Y&S has no tax consequences because it did not sell or exchange the patent. $159,000 Section 1231 loss. $159,000 capital loss.

$29,150. WHY? Addt'l $1,350 for 65+ and blind 1350*3 = 4050 25100+4050 = 29150

$21,050. $29,150. $25,100. $26,450.

$5,240 WHY? 500/2500 = .2 ((12000+4000+2500+2200)*.2)+1100 = 5240

$21,800 $4,260 $4,140 $5,240

$225,000 WHY?

$230,000 $320,000 $220,000 $225,000

$15,900 ordinary gain and $9,100 Section 1231 gain. WHY?

$25,000 Section 1231 gain. $25,000 ordinary gain. $15,900 ordinary gain and $9,100 Section 1231 gain. $19,700 ordinary gain and $5,300 Section 1231 gain.

$225,000 gain recognized; $593,000 basis in C&K property. WHY? Mortgage + cash paid = gain recognized

$25,000 gain recognized; $593,000 basis in C&K property. $25,000 gain recognized; $793,000 basis in C&K property. $225,000 gain recognized; $593,000 basis in C&K property. None of these choices are correct.

$12,000 ordinary gain and $38,000 Section 1231 gain. WHY?

$50,000 ordinary gain. $16,900 ordinary gain and $33,100 Section 1231 gain. $50,000 Section 1231 gain. $12,000 ordinary gain and $38,000 Section 1231 gain.

$1,100 WHY?

$510 $730 $860 $1,100

$569,000 WHY?

$569,000 $519,000 $589,000 $539,000

$37,500 WHY?

$60,000 $22,500 $125,000 $37,500

None of these choices are correct WHY?

$65,000 Section 1231 loss None of these choices are correct $3,400 Section 1231 loss $65,000 ordinary loss

No gain or loss WHY?

$700 loss None of these choices are correct $1,300 gain No gain or loss

$75,000 WHY?

$75,000 $65,000 $80,000 $57,000

$15,950 WHY? 1700*2 = 3400 3400+12550 = 15950

$8,850 $15,950 $12,550 $15,250

$1,200,000 WHY? 500000+700000 = 1200000

$850,000 $650,000 $1,200,000 $500,000 PreviousNext

$85,000 WHY? 20000+60000-(10000-15000) = 85000

$95,000 $65,000 $75,000 $85,000

$12,600 WHY? (.35*20000)+(.24*10000)+(.32*10000)= 12600

- $0 - $35,200 - $8,800 - $12,600

$748,200 ordinary loss WHY? It was uninsured.

- $1 million ordinary loss - $748,200 ordinary loss - None of these choices are correct - $748,200 Section 1231 loss

$1,384,900 WHY? 1349600+29200+(210000-14900) = 1384900

- $1,399,800 - $1,378,800 - $1,349,000 - $1,384,900

$1,645,000 WHY? 1200000+380000-10000+75000 income tax expense is not deductible for tax purposes, only half of business meals is deductible, and municipal bond income is not taxable

- $1,665,000 - $1,720,000 - $1,645,000 - $1,580,000

$13,300 WHY? 15400+2100+1600-5800 = 13300, can only take up to the partnership basis amount

- $10,200 - $14,000 - $11,700 - $13,300

$14,750 Section 1231 gain. WHY?

- $10,890 ordinary gain and $9,415 Section 1231 gain. - $14,750 Section 1231 gain. - None of these choices are correct. - $14,750 ordinary gain.

$107,600 ordinary gain and $530,400 Section 1231 gain WHY?

- $107,600 ordinary gain and $530,400 Section 1231 gain - $127,600 ordinary gain and $510,400 Section 1231 gain - Section 1231 gain - $538,000 ordinary gain and $100,000 Section 1231 gain

$25,443 WHY?

- $17,143 - None of these choices are correct - $23,700 - $25,443

None of these choices are correct WHY?

- $188,000 book and tax gain - None of these choices are correct - $61,000 book and tax gain - $188,000 book gain and $61,000 tax gain

$2,000 Section 1231 gain WHY?

- $2,000 Section 1231 gain - $2,000 ordinary gain - No gain or loss - None of these choices are correct

$1,100 WHY? "Standard deduction is limited to no more $1,100 or earned income plus $350 if the taxpayer is a dependent"

- $510 - $860 - $1,100 - $730

$128 WHY? 25,500-25,100 = 400 400*.32 = 128

- $528 - $0 - $128 - $400

$75,000 WHY? Can only take up to the basis in loss 45000+(.6*30000)+(.6*20000) = 75000

- $57,000 - $65,000 - $75,000 - $80,000

$57,400 WHY? 50000+(.1*100000)-(.1*5000)-(.1*1000)-2000 = 57400

- $57,500 - $57,400 - $59,200 - $142,000

$30,000 WHY? We can only deduct until the basis is $0

- $60,000 - $50,000 - $40,000 - $30,000

$855,900 WHY?

- $781,000 - $951,000 - $855,900 - $909,000

$125,000 WHY? 60000+(.5*200000)-(.5*20000)-25000

- $85,000 - $125,000 - $110,000 - $215,000

$22,800 WHY? 15000+16800-9000 = 22800

- $92,800 - $22,800 - $31,800 - $15,000

37% WHY? S Corporation is a flowthrough entity so the effective tax rate is her marginal tax rate

- 36.8% - 37% - 21% - 58%

The management of the business is centered in a Board of Directors elected by the shareholders. WHY?

- A shareholder is personally liable for the debts of the corporation. - The management of the business is centered in a Board of Directors elected by the shareholders. - The life of the corporation will terminate when a majority of the shareholders die or cease to exist. - A shareholder must seek permission to sell his stock.

All of the shareholders must consent to voluntarily terminating an S election. WHY?

- All of the shareholders must consent to voluntarily terminating an S election. - If a shareholder in an S corporation sells his shares of stock to a nonresident alien, the election will terminate. - All of the corporation's shareholders must consent to make an S election. - If an S corporation loses its election, the shareholders cannot make a new election for five years without IRS consent.

Book gain $301,000; tax gain $38,839 WHY?

- Book gain $301,000; tax gain $100,000 - Book gain $301,000; tax gain $38,839 - None of these choices are correct - Book and tax gain $38,839

None of these choices are correct WHY?

- Capital gain - None of these choices are correct - $167,200 ordinary gain and $162,000 Section 1231 gain - Section 1231 gain

If the sale price was $80,000, Adula recognized $4,200 ordinary loss. WHY?

- If the sale price was $80,000, Adula recognized $4,200 ordinary loss. - If the sale price was $90,000, Adula recognized $5,800 ordinary gain. - If the sale price was $80,000, Adula recognized $4,200 Section 1231 loss. - If the sale price was $120,000 Adula recognized $33,000 ordinary gain and $2,800 Section 1231 gain.

Limited partnership WHY? In a limited partnership, there still has to be one general partner who is liable.

- Limited partnership - LLC - S corporation - C corporation

MW's basis in its newly acquired asset is $35,600. WHY? 28100 adjusted basis on the old asset + 7500 boot = 35600

- MW's realized gain is $59,400 and recognized gain is $7,500. - Teco's realized gain is $26,100 and recognized gain is -0-. - Teco's basis in its newly acquired asset is $61,400. - MW's basis in its newly acquired asset is $35,600.

Single WHY?

- Married filing separately - None of these choices are correct - Head of household - Single

Married filing jointly with the second Mrs. Jones WHY? Marriage counts up until the last day of the tax year

- Married filing separately (can't file jointly with either spouse) - Married filing jointly with the second Mrs. Jones - Married filing jointly with the first Mrs. Jones - None of the above

$2,040 recognized loss; $16,000 basis in the furniture WHY? It paid 16,000 to replace the furniture, and then 17040 - 15000 = 2040

- No recognized gain or loss; $13,960 basis in the furniture - No recognized gain or loss; $18,040 basis in the furniture - $2,040 recognized loss; $16,000 basis in the furniture - None of these choices are correct

$102,700 capital gain WHY?

- None of these choices are correct - $102,700 capital gain - $612,300 ordinary loss - $102,700 capital gain and $25,000 ordinary loss

None of these choices are correct WHY?

- None of these choices are correct - -0- - $20,000 - $15,800

Single $39,175; head of household $37,725 WHY? Single: ((182340-164925)*.32)+33603 = 39175 HoH: ((182340-164900)*.32)+32145 = 37725

- None of these choices are correct - Single $39,175; head of household $37,725 - Single $38,221; head of household $43,762 - Single $43,764; head of household $36,400

If the sale price was $42,500, Izard recognized $12,900 Section 1231 gain. WHY?

- None of these choices are false. - If the sale price was $50,000, Izard recognized $18,900 ordinary gain and $1,500 Section 1231 gain. - If the sale price was $25,000, Izard recognized $4,600 Section 1231 loss. - If the sale price was $42,500, Izard recognized $12,900 Section 1231 gain.

None of these choices arefalse. WHY?

- None of these choices arefalse. - If the Lansings' AGI is $417,300, their child tax credit is $7,100. - If the Lansings' AGI is $596,000, their child tax credit is zero. - If the Lansings' AGI is $77,900, their child tax credit is $8,000.

Ordinary income, $120,000; interest income and long-term capital gain are separately stated. WHY?

- Ordinary income, $136,000; nothing is separately stated. - Ordinary income, $120,000; interest income and long-term capital gain are separately stated. - Ordinary income, $126,000; long-term capital gain is separately stated. - Ordinary income, $195,000; interest income, long-term capital gain, and salary costs are separately stated.

Partners can increase tax basis in their partnership interest only by making additional capital contributions. WHY?

- Partners can increase tax basis in their partnership interest only by making additional capital contributions. - If a partner's share of partnership losses exceeds the partner's tax basis in the partnership interest, the excess is not deductible in the current year. - If a partnership becomes profitable in the future, the partner's share of such future income will create basis against which loss carryforwards can be deducted. - Partnership losses that are not deductible due to the basis limitation can be carried forward indefinitely.

Partnership tax basis is reduced by the partner's share of nondeductible partnership expenses. WHY? "These items decrease basis: - Distributions to the partner - Ordinary partnership losses, separately stated partnership losses, and nondeductible expenses - Decreases in partnership liabilities for which a partner could be held liable (all general partnership debts)"

- Partnership tax basis is increased annually by cash distributions from the partnership. - Partnership tax basis is reduced by the partner's share of nontaxable partnership income. - Partnership tax basis is reduced by the partner's share of nondeductible partnership expenses. - Partnership tax basis becomes negative if allocable losses exceed basis.

Schedule C, Statement of Profit or Loss from Business WHY?

- Schedule E, Statement of Rent and Royalty Income - A separate tax return prepared for the business operation - The first page of Form 1040 as other income - Schedule C, Statement of Profit or Loss from Business

Head of household WHY?

- Single - Married filing separately - None of these choices are correct - Head of household

The personal holding company tax is assessed on a qualifying corporation's undistributed personal holding company income.

- The personal holding company tax is calculated by a qualifying corporation and paid on its annual corporate income tax return. - The personal holding company tax was originally enacted to discourage individuals from incorporating their investment portfolios. - The personal holding company tax is imposed in addition to the regular corporate income tax. - The personal holding company tax is assessed on a qualifying corporation's undistributed personal holding company income.

The payment of boot triggers recognition of realized gain to the payer. WHY?

- The receipt of boot does not trigger recognition of realized loss to the recipient. - The receipt of boot triggers recognition of realized gain to the recipient. - The payment of boot triggers recognition of realized gain to the payer. - The purpose of boot is to equalize the values of the exchanged properties.

A partner is taxed annually on only that portion of a partnership's taxable income that is actually distributed. WHY?

A general partner's basis in a partnership includes his share of partnership debt. Limited partnerships must have at least one general partner. A properly-drafted partnership agreement is crucial. A partner is taxed annually on only that portion of a partnership's taxable income that is actually distributed.

AGI $118,000; taxable income $99,200 WHY?

AGI $118,000; taxable income $90,900 AGI $107,000; taxable income $88,550 AGI $118,000; taxable income $99,200 AGI $118,000; taxable income $92,300

AGI $50,200; taxable income $25,100. WHY?

AGI $50,200; taxable income $25,100. AGI $50,200; taxable income $8,850. AGI $52,000; taxable income $26,900. AGI $52,000; taxable income $33,950.

The standard deduction is a function of filing status. WHY?

An individual who is both blind and age 65 by the last day of the taxable year is entitled to one additional standard deduction amount. The standard deduction is a function of filing status. An individual who is considered a dependent of another person for tax purposes is not allowed a standard deduction. The standard deduction for a head of household is twice the standard deduction for a single individual.

Both Blitza has no legal obligation to settle the $34,500 unpaid balance of the mortgage and Blitza recognizes a $5,500 Section 1231 loss is true. WHY?

Blitza recognizes a $40,000 Section 1231 loss. Blitza has no legal obligation to settle the $34,500 unpaid balance of the mortgage. Both Blitza has no legal obligation to settle the $34,500 unpaid balance of the mortgage and Blitza recognizes a $5,500 Section 1231 loss is true. Blitza recognizes a $5,500 Section 1231 loss.

Dana is neither a qualifying child nor a qualifying relative of the Andersons.Dana is neither a qualifying child nor a qualifying relative of the Andersons. WHY?

Both Dana and John are qualifying children of the Andersons. Neither Dana nor John is a qualifying child of the Andersons. Dana is a qualifying relative and John is a qualifying child of the Andersons. Dana is neither a qualifying child nor a qualifying relative of the Andersons.

If Asset A and Asset Z are like-kind property, Nixon recognizes a $15,750 gain and takes a $400,000 basis in Asset Z. WHY?

If Asset A and Asset Z are like-kind property, Nixon recognizes a $15,750 gain and takes a $415,750 basis in Asset Z.If Asset A and Asset Z are like-kind property, Nixon recognizes no gain and takes a $400,000 basis in Asset Z. If Asset A and Asset Z are like-kind property, Nixon recognizes a $15,750 gain and takes a $400,000 basis in Asset Z. If Asset A and Asset Z are not like-kind property, Nixon recognizes a $110,000 gain and takes a $510,000 basis in Asset Z. If Asset A and Asset Z are like-kind property, Nixon recognizes a $15,750 gain and takes a $415,750 basis in Asset Z.

David is neither a qualifying child nor a qualifying relative of the Jelks. WHY?

If David earns less than $4,300 gross income this year, he is a qualifying child of the Jelks. If David earns less than $4,300 gross income this year, he is a qualifying relative of the Jelks. David is a qualifying child of the Jelks. David is neither a qualifying child nor a qualifying relative of the Jelks.

Both if Firm F is a corporation, it recognizes $55,000 ordinary income and $255,000 Section 1231 gain and if Firm F is a noncorporate taxpayer, it recognizes $310,000 Section 1231 gain are true. WHY?

If Firm F is a corporation, it recognizes $62,000 ordinary income and $248,000 Section 1231 gain. If Firm F is a noncorporate taxpayer, it recognizes $310,000 Section 1231 gain. If Firm F is a corporation, it recognizes $55,000 ordinary income and $255,000 Section 1231 gain. Both if Firm F is a corporation, it recognizes $55,000 ordinary income and $255,000 Section 1231 gain and if Firm F is a noncorporate taxpayer, it recognizes $310,000 Section 1231 gain are true.

If both properties in the exchange are subject to debt, both parties will be treated as receiving boot. WHY?

If both properties in the exchange are subject to debt, both parties will be treated as receiving boot. The party assuming debt treats the assumption as boot paid. The party relieved of debt treats the relief as boot received. None of these choices are false.

If the business is a partnership the owners can allocate income and losses in any reasonable manner. WHY?

If the business is an S corporation, the owners can allocate income and losses in any reasonable manner. Regardless of whether the business is a partnership or an S corporation, the owners will include the bank debt in the tax basis of their ownership interests. From a liability standpoint, the owners should be indifferent as to whether they are a general partnership or an S corporation. If the business is a partnership the owners can allocate income and losses in any reasonable manner.

The old asset's FMV is $150,000. WHY?

If the exchange is nontaxable, G&G's recognized gain is -0-. The old asset's FMV is $150,000. If the exchange is nontaxable, G&G's tax basis in the new asset is $130,300. None of these statements are false.

Margie will owe the regular 1.45 percent Medicare tax on her entire wage income and the additional .9 percent Medicare tax only on her wage income in excess of $200,000. WHY? She is a single taxpayer, so her limited for the .9% extra medicare tax is 200,000. Anything above that gets taxed extra.

Margie will owe the regular 1.45 percent Medicare tax on her entire wage income and the additional .9 percent Medicare tax only on her wage income in excess of $200,000. Margie will owe the regular 1.45 percent Medicare tax on her entire wage income and the additional .9 percent Medicare tax only on her wage income in excess of $250,000. Margie's employer is required to withhold both the regular Medicare tax but does not withhold the additional .9 percent Medicare tax. Margie will owe both the regular 1.45 percent Medicare tax and the additional .9 percent Medicare tax on her entire wage income.

None of these choices are false. WHY?

Mr. Albert's tax basis in his 820 shares is $50,000. Triple Incorporated's tax basis in the assets transferred by Mrs. Billig is $9,000. None of these choices are false. Mrs. Crisp's tax basis in her 32 shares is $4,000.

Mr. Weller received $193,000 boot; Olson paid $193,000 boot. WHY?

Mr. Weller received $193,000 boot; Olson paid $193,000 boot. Mr. Weller received $428,000 boot; Olson received $235,000 boot. Mr. Weller paid $428,000 boot; Olson paid $235,000 boot. Mr. Weller paid $193,000 boot; Olson received $193,000 boot.

Mr. and Mrs. West were legally divorced on December 21, 2021. Mrs. West has not remarried and maintains a home for three dependent children. WHY? They divorced before the last day of the tax year

Mrs. Holden died on January 15, 2020. Mr. Holden has not remarried and maintains a home for two dependent children. Mr. and Mrs. West were legally divorced on December 21, 2021. Mrs. West has not remarried and maintains a home for three dependent children. All of the above taxpayers qualify for married filing jointly filing status. Mr. Lane died on August 10, 2021. Mrs. Lane has not remarried and has no dependent children.

No gain recognized; $111,700 tax basis in property WHY?

No gain recognized; $340,200 tax basis in property $111,700 gain recognized; $111,700 tax basis in property No gain recognized; $111,700 tax basis in property $340,200 gain recognized; $111,700 tax basis in property

$36,400 loss recognized; $136,200 basis WHY?

No loss recognized; $136,200 basis No loss recognized; $76,200 basis $36,400 loss recognized; $125,000 basis $36,400 loss recognized; $136,200 basis

Nondeductible capital losses are carried forward for deduction against future capital gains. WHY?

Nondeductible capital losses are carried forward for deduction against future capital gains. Short-term capital gains are taxed as ordinary income. Gain on sale of Section 1231 depreciable real property is taxed at a 25% maximum rate. Capital losses are deductible only against capital gains.

No effect WHY? We have to find the net capital, and losses are not deductible 8100+13500-27600 = (6000) so not effect

None of these choices are correct $12,900 increase $21,600 increase No effect

$175,000 gain recognized; $768,000 basis in OMG property. WHY?

None of these choices are correct. No gain recognized; $768,000 basis in OMG property. $175,000 gain recognized; $943,000 basis in OMG property. $175,000 gain recognized; $768,000 basis in OMG property.

TRU can deduct its $14,500 net Section 1231 loss from ordinary income. WHY?

None of these statements are true. TRU must treat its $14,500 net Section 1231 loss as a capital loss. TRU can deduct its $14,500 net Section 1231 loss from ordinary income. TRU can deduct its $34,100 net Section 1231 loss from ordinary income and can treat its $19,600 Section 1231 gain as a capital gain.

Ordinary income, $20,000; Guaranteed payment, $30,000. WHY? ((90000-30000)*1/3) = 20000

Ordinary income, $30,000; Guaranteed payment, $10,000. Ordinary income, $20,000; Guaranteed payment, $10,000. Ordinary income, $20,000; Guaranteed payment, $30,000. Ordinary income, $30,000; Guaranteed payment, $30,000. PreviousNext

None of these choices are correct. WHY?

Single $70,190; surviving spouse $39,642 Single $75,990; surviving spouse $55,222 Single $51,206; surviving spouse $52,460 None of these choices are correct.

Generally, the transfer of property by a controlling shareholder to a newly-formed S corporation in exchange for stock is a nontaxable event. WHY?

Some states treat S corporations as taxable corporations for purposes of corporate franchise taxes. If an S corporation's election terminates, the corporation is forced to liquidate. Generally, the transfer of property to a new partnership in exchange for a partnership interest is a taxable event. The owners of a new business should be indifferent between operating as an S corporation and a partnership.

Space-Y cannot recognize its $183,000 realized loss on sale on its current year tax return. WHY? Related party

Space-Y does not report the $183,000 realized loss on its current year financial statements. Space-Y cannot recognize its $183,000 realized loss on sale on its current year tax return. Both Space-Y cannot recognize its $183,000 realized loss on sale on its current year tax return and the $183,000 loss is an unfavorable temporary difference between Space-Y's book and tax income is true. The $183,000 loss is an unfavorable temporary difference between Space-Y's book and tax income.

Taxpayers are allowed to deduct the greater of itemized deductions or above-the-line deductions in calculating taxable income. WHY?

Taxpayers are allowed to deduct the greater of itemized deductions or above-the-line deductions in calculating taxable income. The first step in the calculation of taxable income is determining the taxpayer's total income. Adjusted gross income can be reduced by the greater of the standard deduction or itemized deductions. Adjusted gross income is equal to total income less above-the-line deductions.

The method does not apply to the sale of 12-acre tract of land held as inventory by a real estate developer or to the sale of U.S. Treasury notes. WHY?

The method does not apply to the sale of 12-acre tract of land held as inventory by a real estate developer or to the sale of U.S. Treasury notes. Sale of business equipment Sale of U.S. Treasury notes Sale of 12-acre tract of land held as inventory by a real estate developer

The purpose of including boot in a nontaxable exchange is to equalize the adjusted tax bases of the properties exchanged. WHY?

The purpose of including boot in a nontaxable exchange is to equalize the adjusted tax bases of the properties exchanged. The party paying the boot includes the FMV of the boot in the tax basis of the property received. The receipt of boot can trigger gain recognition but not loss recognition. None of these choices are false.

The interest paid by the corporation on the reclassified amount is treated as a dividend. WHY?

The taxable income of the corporation should stay the same. Mr. Eddy's taxable income will increase by the amount of the reclassified debt. None of these statements are true. The interest paid by the corporation on the reclassified amount is treated as a dividend.