REG MCQ Gauntlet

On January 1, Year 1, JP purchased 30 shares of Micron Co. for $5 per share. On June 30, Year 2, JP sold all 30 shares of Micron Co. for $3 per share. On July 15, Year 2, JP purchased 20 shares of Micron Co. for $2 per share. On July 17, Year 2, JP sold 20 shares of Micron Co. for $2.50 per share. On August 22, Year 2, JP purchased 50 shares of Micron Co. for $3.75 per share. Calculate for June 30, July 17, and August 22: → basis → realized gain (loss) → recognized gain (loss)

1/1 - purchased 30 shares for $5/share 6/30 - sold 30 shares for $3/share → basis = 30 shares x $5 = *$150* → proceeds = 30 shares x $3 = $90 → original loss = $90 - $150 = *($60)* → realized loss → recognized loss = *($20)* → from bottom 7/15 - purchased 20 shares for $2/share → wash sale → original loss = $60 → disallowed loss = 2/3 x $60 = $40 → allowed loss = 1/3 x $60 = $20 → new basis = $40 (from purchase) + $40 (disallowed loss) = $80 7/17 - sold 20 shares for $2.50/share → proceeds = 20 shares x $2.50 = $50 → basis from 7/15 = *$80* → total loss = *($30)* → realized loss → recognized loss = *($30)* → since the next transaction was after 30 days → not a wash sale 8/22 - purchased 50 shares for $3.75/share → basis = 50 shares x $3.75 = *$188*

*Mary purchased an annuity that pays her $500 per month for the rest of her life. She paid $70,000 for the annuity. Based on IRS annuity tables, Mary's life expectancy is 16 years. A) How much of the 200th $500 monthly payment will Mary include in her gross income?* B) How much of the first $500 payment will Mary include in her gross income?

16 years x 12 months = 192 months return of capital every month = $70,000/192 = $364.58 → nontaxable → thus the excess = $500 - $364.58 = $135.42 is taxable A) $500 (since all capital has been retuned after 200 months) B) $135.42

*Which of the following increases the accumulated adjustments account of an S corporation?* A. Interest and dividends. B. Charitable contributions. C. Capital contributions by the shareholders. D. Distribution to shareholders.

A. Interest and dividends. not C → this affects basis, but not AAA

*On September 27, Summers sent Fox a letter offering to sell Fox a vacation home for $150,000. On October 2, Fox replied by mail agreeing to buy the home for $145,000. Summers did not reply to Fox. Do Fox and Summers have a binding contract?* A. No, because Fox's letter was a counteroffer. B. Yes, because Summers' silence is an implied acceptance of Fox's letter. C. Yes, because Summers' offer was validly accepted. D. No, because Fox failed to sign and return Summers' letter.

A. No, because Fox's letter was a counteroffer.

*Cookie Co. offered to sell Distrib Markets 20,000 pounds of cookies at $1.00 per pound, subject to certain specified terms for delivery. Distrib replied in writing as follows:* *"We accept your offer for 20,000 pounds of cookies at $1.00 per pound, weighing scale to have valid city certificate."* *Under the UCC:* A. No contract was formed because Distrib included the weighing scale requirement in its reply. B. A contract was formed between the parties. C. No contract was formed because Distrib's reply was a counteroffer. D. A contract will be formed only if Cookie agrees to the weighing scale requirement.

B. A contract was formed between the parties. under UCC rules → you can accept a contract with minor changes (no "mirror image" rule) → thus the minor change of "weighing scale certificate" doesn't change the fact that they accepted the offer and a contract was formed

*Wok Corp. has decided to expand the scope of its business. In this connection, it contemplates engaging several agents. Which of the following agency relationships is within the statute of frauds and thus should be evidenced by a signed writing?* A. An irrevocable agency. B. An agency for the forthcoming calendar year that is entered into in mid-December of the prior year. C. An agency which is of indefinite duration but which is terminable upon one month's notice. D. A sales agency where the agent normally will sell goods that have a value in excess of $500.

B. An agency for the forthcoming calendar year that is entered into in mid-December of the prior year. since it was entered into last year and will last for the "forthcoming calendar year" → it is impossible to complete within 1 year → must be in writing not D → contracts for sale of goods > $500 must be in writing, but this is an agency, not a contract

*Opal offered, in writing, to sell Larkin a parcel of land for $300,000. If Opal dies, the offer will:* A. Remain open for a reasonable period of time after Opal's death. B. Automatically terminate prior to Larkin's acceptance. C. Automatically terminate despite Larkin's prior acceptance. D. Terminate prior to Larkin's acceptance only if Larkin received notice of Opal's death.

B. Automatically terminate prior to Larkin's acceptance.

*During the current year, Freda was entirely supported by her three children, Michelle, Brian, and John, who provided support in the following percentages:* Michelle = 10% Brian = 48% John = 42% *Which of the children is entitled to claim their mother as a dependent, assuming a multiple support agreement exists?* A. Michelle or John. B. Brian or John. C. Michelle, Brian, or John. D. Michelle.

B. Brian or John. not Michelle → you have to provide MORE than 10% (bruh)

*Which of the following events will release a noncompensated surety from liability to the creditor?* A. The principal debtor was involuntarily petitioned into bankruptcy. B. The creditor failed to notify the surety of a partial surrender of the principal debtor's collateral. C. The creditor was adjudicated incompetent after the debt arose. D. The principal debtor exerted duress to obtain the surety agreement.

B. The creditor failed to notify the surety of a partial surrender of the principal debtor's collateral. this is a modification of the contract → thus the surety will be released not C → this doesn't matter not D → this only works in court if you can prove the credit knew about the duress when the creditor accepted the surety

*Under Chapter 7 of the federal Bankruptcy Code, what effect does a bankruptcy discharge have on a judgment creditor when there is no bankruptcy estate?* A. The judgment creditor's claim is nondischargeable. B. The debtor is relieved of any personal liability to the judgment creditor. C. The judgment creditor retains a statutory lien against the debtor. D. The debtor is required to pay a liquidated amount to vacate the judgment.

B. The debtor is relieved of any personal liability to the judgment creditor. Chapter 7 discharges MOST debts of a debtor, whether or not there is a bankruptcy estate from which to pay the debts.

*Which of the following events will always terminate an agent's apparent authority?* A. Both the principal and agent agree to terminate the relationship. B. The principal's death. C. The agent's renunciation of the relationship. D. The principal revoking the relationship.

B. The principal's death. BID LID → death of either party will terminate the agency the other answer choices → would need to notify the 3rd party to terminate apparent authority

*Lazur Corp. agreed to purchase 100 radios from Wizard Suppliers, Inc. Wizard is a wholesaler of small home appliances and Lazur is an appliance retailer. The contract required Wizard to ship the radios to Lazur by common carrier, "F.O.B. Wizard Suppliers, Inc. Loading Dock." Under the UCC Sales Article:* A. Lazur must inspect the radios at the time of delivery or waive any defects and the right to sue for breach of contract. B. Title to the radios passes to Lazur at the time they are delivered to the carrier, even if the goods are nonconforming. C. Wizard must pay the freight expense associated with the shipment of the radios to Lazur. D. Lazur would have the right to reject any shipment if Wizard fails to notify Lazur that the goods have been shipped.

B. Title to the radios passes to Lazur at the time they are delivered to the carrier, even if the goods are nonconforming. we're talking about title, not risk of loss → title will pass to the buyer once the goods are delivered to the carrier → but risk of loss stays with the seller since the goods are nonconforming (but the problem didn't ask about that!)

*Ames Construction Co. contracted to build a warehouse for White Corp. The construction specifications required Ames to use Ace lighting fixtures. Inadvertently, Ames installed Perfection lighting fixtures, which are of slightly lesser quality than Ace fixtures, but in all other respects meet White's needs. Which of the following statements is correct?* A. Ames did not breach the construction contract because the Perfection fixtures were substantially as good as the Ace fixtures. B. White's recovery will be limited to monetary damages because Ames' breach of the construction contract was not material. C. Ames must install Ace fixtures or White will not be obligated to accept the warehouse. D. White will not be able to recover any damages from Ames because the breach was inadvertent.

B. White's recovery will be limited to monetary damages because Ames' breach of the construction contract was not material. this is a minor (not material) breach → thus limited to monetary damages not C → since Ames substantially performed the services under the contract already → White IS obligated to accept the warehouse

*Castle borrowed $5,000 from Nelson and executed and delivered to Nelson a promissory note for $5,000 due on April 30. On April 1 Castle offered, and Nelson accepted, $4,000 in full satisfaction of the note. On May 15, Nelson demanded that Castle pay the $1,000 balance on the note. Castle refused. If Nelson sued for the $1,000 balance Castle would:* A. Lose, because the amount of the note was not in dispute. B. Win, because the acceptance by Nelson of the $4,000 constituted an accord and satisfaction. C. Lose, because no consideration was given to Nelson in exchange for accepting only $4,000. D. Win, because the debt was unliquidated.

B. Win, because the acceptance by Nelson of the $4,000 constituted an accord and satisfaction.

*During the current year, Tarbet's residence was destroyed by a hurricane and a federal disaster was declared for the area.Tarbet's basis in the property was $150,000. The fair market value determined by an appraiser shortly before the hurricane was $450,000. In November of the current year, Tarbet received $300,000 from the insurance company. Tarbet's adjusted gross income was $75,000 and she did not have any casualty gains during the year. What total amount can Tarbet deduct as a current year casualty loss itemized deduction, after the application of the threshold limitations?* A. $75,000 B. $450,000 C. $0 D. $142,400

C. $0 loss = LESSER of NBV or decrease in FMV • NBV = 150,000 • FMV = 450,000 loss = 150,000 → reimbursed for 300,000 → cannot take deduction

*An individual shareholder held 100 shares of a corporation's stock with a $4,000 total basis. During the year, the shareholder received a cash dividend of $300 and a stock dividend of 10%. What amount, rounded to the nearest dollar, is the shareholder's cost basis in each share of stock at the end of the year?* A. $39 B. $34 C. $36 D. $37

C. $36 cash dividends don't affect basis basis = $4,000 / (100 x 1.10) = 36.36

*If the executor of a decedent's estate elects the alternate valuation date and the property included in the gross estate is sold 3 months after the decedent's death, the estate assets must be valued as of how many months after the date of death?* A. 6 B. 9 C. 3 D. 12

C. 3 they said the elected the AVD → implied to be 6 months after the date of death → but property was distributed after only 3 months so use the earlier

*Filing a valid petition in bankruptcy acts as an automatic stay of actions to:* *Garnish the debtor's wages / Collect alimony from the debtor* A. Yes / Yes B. No / Yes C. Yes / No D. No / No

C. Yes / No

*A distinction between a surety and a co-surety is that only a co-surety is entitled to:* A. Reimbursement (Indemnification). B. Exoneration. C. Subrogation. D. Contribution.

D. Contribution

*Under the Sales Article of the UCC, which of the following events will release the buyer from all its obligations under a sales contract?* A. Impracticability of delivery under the terms of the contract. B. Destruction of the goods after risk of loss passed to the buyer. C. Anticipatory repudiation by the buyer that is retracted before the seller cancels the contract. D. Refusal of the seller to give written assurance of performance when reasonably demanded by the buyer.

D. Refusal of the seller to give written assurance of performance when reasonably demanded by the buyer.

*Leslie Ponzi has just received written tax advice from her attorney, Dewey H. Cheatem. Which of the following statements is not a requirement of written advice under Circular 230 of the Internal Revenue Service?* A. The practitioner must base written advice on reasonable factual and legal assumptions, including assumptions as to future events. B. The practitioner must not rely on representations, statements, findings, or agreements of the taxpayer if reliance on them would be unreasonable. C. The practitioner may not, in evaluating a federal tax matter, take into account the possibility that a tax return will not be audited. D. The practitioner may not provide written advice in the form of electronic communications.

D. The practitioner may not provide written advice in the form of electronic communications. why would this be disallowed?

*Sorus and Ace have agreed, in writing, to act as guarantors of collection on a debt owed by Pepper to Towns, Inc. The debt is evidenced by a promissory note. If Pepper defaults, Towns will be entitled to recover from Sorus and Ace unless:* A. Sorus and Ace are in the process of exercising their rights against Pepper. B. Sorus and Ace prove that Pepper was insolvent at the time the note was signed. C. Pepper dies before the note is due. D. Towns has not attempted to enforce the promissory note against Pepper.

D. Towns has not attempted to enforce the promissory note against Pepper. since they are guarantors → the creditor has to go through the debtor first before seeking to recover from the sureties

*Sands purchased 100 shares of Eastern Corp. stock for $18,000 on April 1 of the prior year. On February 1 of the current year, Sands sold 50 shares of Eastern for $7,000. Fifteen days later, Sands purchased 25 shares of Eastern for $3,750.* What is the amount of Sand's recognized gain or loss? What is the basis of the repurchased shares?

purchased 100 shares for $18k → $180/share sold 50 shares for $7,000 → $140/share "total loss" = 50 shares x ($140 - $180) = $2,000 → but they purchased 25 shares for $3,750 → $150/share this is a wash sale → disallowed loss = amount of loss they recovered → recovered on 25 shares out of total 50 they sold → thus 50% of the loss is disallowed → 50% is allowed → $2,000 x 50% = *$1,000* basis of repurchased shares = repurchase price + disallowed loss = 3,750 + 1,000 = 4,750 / 25 shares = *$190/share*

*Bob and Nancy are married and file a joint return for the current tax year. They are both under age 50 and employed with wages of $50,000 each. Their total AGI is $131,000. Bob is an active participant in a qualified retirement plan at work, but Nancy is not. What is the maximum traditional IRA deduction they can take for the current year?*

$7,000 for each spouse but for Bob (working spouse) → phase-out for MFJ is $123k-143k → his AGI of $131k is 8/20 → loses 40% of the deduction so Bob only gets 60% of the $7,000 deduction = 4,200 total IRA deduction = 7,000 + 4,200 = *$11,200*

*Melanie is the sole stockholder of Machine Inc., an S corporation. Her basis in the stock as of the end of Year 4 is $43,400. During Year 5, Machine reported a loss of $19,000. During Year 5, Melanie received a distribution of $38,000 from Machine and loaned $11,000 directly to Machine.* *What is Melanie's *total stock and debt basis* in Machine Inc. as of the end of Year 5?* *What amount of the loss is passed through to Melanie's individual income tax return for Year 5?*

A) $0 → basis before loss = 43,400 - 48,000 + 11,000 = 16,400 → loss of 19,000 is greater than basis so basis will drop to zero B) $16,400 (from above) → note: you can only deduct a loss from a flow-through entity to the extent of your basis

*Becki died on March 5, Year 5. Mark inherited publicly traded stock from Becki, which had an FMV of $3,400 on her date of death. The stock was distributed to him on July 10, Year 5, when the FMV was $4,500. The alternate valuation date (AVD) was not elected for the estate, and the stock had an FMV of $8,000 on that date. Becki originally purchased the stock in Year 1 for $1,200. If Mark sold the stock for $4,500 on the day he received it, how much is his gain or loss?* A. $1,100 gain B. $3,300 gain C. $0 D. $3,500 loss

A. $1,100 gain note: if they say that the AVD was not elected → you can literally just ignore all the sentences talking about the FMV about those dates if AVD is not elected → basis will = FMV on date of death

*A taxpayer reported the following in a tax year:* *Salary = 122,000* *Capital gain dividends = 3,700* *Partnership short-term capital loss = (6,300)* *The taxpayer acquired the partnership interest during the year in exchange for a capital contribution of $2,750, and there were no additional items affecting the taxpayer's basis in the partnership. What is the taxpayer's adjusted gross income for the year?* A. $122,950 B. $122,700 C. $122,000 D. $119,400

A. $122,950 AGI = 122,000 + 3,700 - 2,750 (can only deduct partnership loss to the extent of your basis)

*Paula pays alimony to her former spouse. The divorce decree, which was finalized in 2010, requires Paula to make regular cash payments to her former spouse of $30,000 annually. The divorce decree also requires Paula to pay the $24,000 annual mortgage on her former spouse's home, which they used to share. Paula still has ownership interest in the home. During the current year, Paula pays $18,000 directly to her former spouse, $12,000 for some expenses of her former spouse, and $24,000 on the mortgage. How much of these payments are deductible alimony in the current year?* A. $30,000 B. $42,000 C. $54,000 D. $18,000

A. $30,000

*Carson agreed orally to repair Ives' rare book for $450. Before the work was started, Ives asked Carson to perform additional repairs to the book and agreed to increase the contract price to $650. After Carson completed the work, Ives refused to pay and Carson sued. Ives' defense was based on the Statute of Frauds. What total amount will Carson recover?* A. $650 B. $450 C. $200 D. $0

A. $650 this is NOT statute of frauds since it was a contract to repair the book, not sell a book → thus the contract is enforceable even tho there is no writing → seller will be able to recover the full $650 contract price

*David is a CPA and enjoys playing the lottery. This year, David won $10,000 in lottery scratch-off tickets. He spent $200 purchasing the tickets. Which statement is true regarding David's winnings?* A. David must include the $10,000 in gross income and can deduct $200 as an itemized deduction. B. David must include $10,000 in gross income and can deduct $200 as an adjustment to AGI. C. David's winnings are not taxable. D. David must include $9,800 in gross income.

A. David must include the $10,000 in gross income and can deduct $200 as an itemized deduction. cost to buy the tickets = technically a gambling loss → can only deduct as an itemized deduction

*Mary purchased an annuity that pays her $500 per month for the rest of her life. She paid $70,000 for the annuity. Based on IRS annuity tables, Mary's life expectancy is 16 years. If Mary dies after receiving 10 full years of the annuity payments, how is Mary's annuity treated on her final tax return?* A. Deduct $26,250 as an itemized deduction. B. Deduct $43,750 as an itemized deduction. C. No deduction for the annuity. D. Deduct $70,000 as an itemized deduction.

A. Deduct $26,250 as an itemized deduction. paid $70,000 to receive annuity payments for 16 x 12 = 192 months monthly return of capital = $70,000/192 = $364.58 after 10 years → 6 years of this return of capital is left → $364.58 x 12 x 6 = *$26,250* → can be taken as an itemized deduction in the year of death

*A CPA quickly prepares the financial statements for WSA Co. without noticing that an asset was inadvertently overstated on the balance sheet by 10 percent. An investor who had purchased stock in WSA based on the financial statements lost $10,000 as a result of the investment. The investor claims that WSA committed fraud. Which of the following is true concerning whether fraud was committed?* A. Fraud was not committed because the misstatement was due to negligence. B. Fraud was committed because the balance sheet is misstated. C. Fraud was not committed because the investor's damages are not material. D. Fraud was committed because the reliance was placed on the statements by the investor.

A. Fraud was not committed because the misstatement was due to negligence. nothing in the problem indicates that this was intentional → CPA was just being negligent

*On February 12, Harris sent Fresno a written offer to purchase Fresno's land. The offer included the following provision: "Acceptance of this offer must be by registered or certified mail, received by Harris no later than February 18 by 5:00 p.m. CST." On February 18, Fresno sent Harris a letter accepting the offer by private overnight delivery service. Harris received the letter on February 19. Which of the following statements is correct?* A. Fresno's letter constituted a counteroffer. B. A contract was formed on February 18 regardless of when Harris actually received Fresno's letter. C. Fresno's use of the overnight delivery service was an effective form of acceptance. D. A contract was formed on February 19.

A. Fresno's letter constituted a counteroffer. since the letter was RECEIVED (like they asked for) after the specified deadline, it is a counteroffer instead of an acceptance

*Wilson, CPA, uses a commercial tax software package to prepare clients' individual income tax returns. Upon reviewing a client's computer-generated year 1 itemized deductions, Wilson discovers that the schedule's deductible investment interest expense is less than the amount paid by the taxpayer and the amount that Wilson entered into the computer. After analyzing the entire tax return, Wilson determines that the computer-generated investment interest expense deduction is correct. Why is the computer-generated investment interest expense deduction correct?* *I. The client's investment interest expense exceeds net investment income.* *II. The client's qualified residence interest expense reduces the deductible amount of investment interest expense.* A. I only. B. II only. C. Neither I nor II. D. Both I and II.

A. I only. not II → qualified residence interest is not investment interest and would not affect investment interest income in any manner.

*Robbe, a cash-basis single taxpayer, reported $50,000 of adjusted gross income last year and claimed itemized deductions of $13,550, which included $5,500 of state income taxes paid last year. Robbe's itemized deduction amount exceeded the standard deduction available to single taxpayers for last year by $1,150. In the current year, Robbe received a $1,500 state tax refund relating to the prior year. What is the proper treatment of the state tax refund?* A. Include $1,150 in income in the current year. B. Amend the prior-year's return and reduce the claimed itemized deductions for that year. C. Include $1,500 in income in the current year. D. Include none of the refund in income in the current year.

A. Include $1,150 in income in the current year. standard deduction is included in taxable income if you itemized last year → but only taxable to the extent that itemized deductions exceeded the standard deduction last year refund for current year = $1,500 itemized exceeded standard deduction last year = $1,150 thus only $1,150 of the refund is taxable

*Brown cosigned Royal's $50,000 note to State Bank. If Royal is later adjudicated mentally incompetent, what would be Brown's liability on the note?* A. Liable to pay State on the due date of the note. B. Liable to pay State only if State first seeks payment from Royal. C. Not liable to pay State because Royal's incompetency discharges Royal as a surety. D. Not liable to pay State unless Brown was a compensated surety.

A. Liable to pay State on the due date of the note.

*Under the liquidation provisions of Chapter 7 of the federal Bankruptcy Code, certain property acquired by the debtor after the filing of the petition becomes part of the bankruptcy estate. An example of such property is:* A. Municipal bond interest received by the debtor within 180 days after the filing of the petition. B. Social Security payments received by the debtor within 180 days after the filing of the petition. C. Alimony received by the debtor within one year after the filing of the petition. D. Gifts received by the debtor within one year after the filing of the petition.

A. Municipal bond interest received by the debtor within 180 days after the filing of the petition.

*Which of the following types of mistakes made when entering into a contract generally allows for rescission of the contract?* A. Mutual mistakes of material fact B. Mutual mistakes of value of consideration C. Unilateral mistakes of value of consideration D. Unilateral mistakes of material fact

A. Mutual mistakes of material fact

*Under the Sales Article of the UCC, which of the following events will result in the risk of loss passing from a merchant seller to a buyer?* *Tender of the goods at the seller's place of business* *Use of the seller's truck to deliver the goods* A. No / No B. Yes / No C. No / Yes D. Yes / Yes

A. No / No merchant seller and using the seller's truck (not a carrier) to deliver goods → this is situation B from the table → risk of loss passes upon actual delivery of the goods to the buyer I → no since we need actual delivery, not just tender of goods II → no, putting the goods in the seller's truck does not transfer risk since it is not a common carrier and the goods have not actually been delivered to the buyer

*Under Chapter 11 of the federal Bankruptcy Code, which of the following actions is necessary before the court may confirm a reorganization plan?* A. Provision for full payment of administration expenses. B. Acceptance of the plan by all classes of claimants. C. Appointment of a trustee. D. Preparation of a contingent plan of liquidation.

A. Provision for full payment of administration expenses. not B → All unimpaired classes do not need to accept the plan if: (i) at least one impaired class has accepted the plan and (ii) the plan does not discriminate unfairly and is fair and equitable to all impaired classes.

*Riley purchased Series EE U.S. Savings Bonds in 1998. Redemption proceeds will be used for payment of the college tuition for Riley's dependent child. One of the conditions that must be met for the tax exemption of accumulated interest on these bonds is that the:* A. Purchaser of the bonds must be the sole owner of the bonds (or the joint owner with his or her spouse). B. Bonds must be transferred to the college for redemption by the college rather than the owner of the bonds. C. Bonds must be purchased by the parent (or both parents) and put in the name of the dependent child. D. Bonds must be purchased by the owner of the bonds before the owner reaches the age of 24.

A. Purchaser of the bonds must be the sole owner of the bonds (or the joint owner with his or her spouse). not C → cannot be in the name of the child → child can't be the owner

*An S corporation pays one of its individual shareholders for services rendered to the S corporation, and a general partnership pays one of its partners for services rendered to the partnership. Which of the following statements is accurate regarding these payments?* A. The S corporation should classify the payments as deductible wages reportable on Form W-2. B. The partnership should classify the payments as deductible wages reportable on Form W-2. C. The S corporation should classify the payments as nondeductible dividends reportable on Form 1099-DIV. D. The partnership should classify the payments as nondeductible partnership distributions reportable on Schedule K-1.

A. The S corporation should classify the payments as deductible wages reportable on Form W-2. not D → partnership would classify this as a guaranteed payment, not a distribution

*Cox engaged Datz as her agent. It was mutually agreed that Datz would not disclose that he was acting as Cox's agent. Instead he was to deal with prospective customers as if he were a principal acting on his own behalf. This he did, and he made several contracts for Cox. Assuming Cox, Datz, or the customer seeks to avoid liability on one of the contracts involved, which of the following statements is correct?* A. The third party may choose to hold either Datz or Cox liable. B. The third party can avoid liability because he believed he was dealing with Datz as the principal. C. Datz has no liability once he discloses that Cox was the real principal. D. Cox must ratify the Datz contracts in order to be held liable.

A. The third party may choose to hold either Datz or Cox liable. agent is liable → since the principal was undisclosed principal is liable → since the agent has actual authority

*Which of the following statements is not true?* A. There is no income limitation on the dividends-received deduction. B. Affiliated corporations that file consolidated returns can take a 100% dividends-received deduction. C. The dividends-received deduction for a large investment in a corporation is 65%. D. The dividends-received deduction for a small investment in an unrelated corporation is 50%.

A. There is no income limitation on the dividends-received deduction.

*Which of the following prejudgment remedies would be available to a creditor when a debtor owns no real property?* *Writ of attachment / Garnishment* A. Yes / Yes B. Yes / No C. No / Yes D. No / No

A. Yes / Yes A writ of attachment is an order by the court to a sheriff to seize a person's property. The writ can apply to personal property and to real property, and so the writ can be used even when a person owns no real property. Garnishment is an order to a third person who holds property of the debtor to turn the property over to a creditor. The property involved usually are wages and/or other property owed by the third person to the debtor. *There is no requirement that the property be the debtor's real property.*

*Albert and Carol Dutton finalized their divorce in January 2017. In accordance with the divorce decree, Albert transferred title in their home to Carol during the year. The home, which had a fair market value of $450,000, was subject to a mortgage of $300,000 that had more than 25 years remaining on the amortization schedule. Monthly mortgage payments amount to $2,200. Under the terms of the settlement, Albert is obligated to make the mortgage payments on the home for the full remaining 25-year term of the indebtedness, regardless of how long Carol lives. Albert made 12 mortgage payments during the current year. What amount is taxable as alimony on Carols' current year tax return?* A. $150,000 B. $0 C. $26,400 D. $13,200

B. $0 this is property settlement, not alimony → nontaxable to the receiver

*Ryan is 39 years old and works as a real estate agent. Ryan's marginal tax rate is 25%. Ryan has a traditional (deductible) IRA with a current balance of $80,000. The IRA consists of $60,000 of contributions that Ryan made and deducted on his tax return and $20,000 of account earnings. In the current year, Ryan receives a distribution of the entire $80,000. He contributes $60,000 of the distribution to a Roth IRA 45 days after the withdrawal and keeps the remaining $20,000. What is Ryan's total income tax and penalty on the transactions?* A. $20,000 income tax, $8,000 penalty B. $20,000 income tax, $2,000 penalty C. $5,000 income tax, $2,000 penalty D. $0 income tax, $0 penalty

B. $20,000 income tax, $2,000 penalty since he took a deduction for the contributions → distribution of both principal and earnings are taxable but he contributed $60,000 to a Roth IRA within 45 days → meets the 60 day window → no penalty tax and no distribution tax on this but he kept $20,000 → this is subject to income tax (since it was a distribution from a Traditional IRA) and the 10% penalty since he was 39 years old when he withdrew it and it wasn't rolled over to a Roth IRA

*Mane Bank lent Eller $120,000 and received securities valued at $30,000 as collateral. At Mane's request, Salem and Rey agreed to act as uncompensated co-sureties on the loan. The agreement provided that Salem's and Rey's maximum liability would be $120,000 each. Mane released Rey without Salem's consent. Eller later defaulted when the collateral held by Mane was worthless and the loan balance was $90,000. Salem's maximum liability is:* A. $30,000 B. $45,000 C. $60,000 D. $90,000

B. $45,000 A release of a co-surety without the other co-surety's consent and without "reservation of rights" against the other co-surety results in the remaining co-surety's losing the right of contribution against the released co-surety. Thus, the remaining surety is discharged to the extent that the remaining surety could have recovered from the released surety. Here the sureties were liable for the debt equally. Thus, Salem is now liable for only $45,000, which is half of the $90,000 debt.

*Spencer, who itemizes deductions, had adjusted gross income of $60,000 for the current year. The following additional information is available for the year:* • Cash contribution to church = 4,000 • Purchase of art object at church bazaar (with a fair market value of $800 on the date of purchase) = 1,200 • Donation of used clothing to Salvation Army (fair value evidenced by receipt received) = 600 *What is the maximum amount Spencer can claim as an itemized deduction for charitable contributions in the current year?* A. $4,400 B. $5,000 C. $5,200 D. $5,400

B. $5,000 read it carefully → 2nd bullet point → they purchased something from the charity, not donated something → contribution = cost paid - FMV = 400 total contribution = 4,000 + 400 = 600 = 5,000

*Upon the recommendation of a physician, Mark, age 40, has an air filtration system installed in his personal residence. He suffers from severe allergy problems. In connection with this matter, Mark incurs and pays the following amounts during the current year:* Filtration system and cost of installation = 7,000 Increase in utility bills due to the system. = 700 Cost of certified appraisal = 350 *The system has an estimated useful life of five years. The appraisal was to determine the value of Mark's residence with and without the system. The appraisal states that the system increased the value of Mark's residence by $1,000. Expenses qualifying for the medical deduction in the current year total:* A. $7,700 B. $6,700 C. $7,350 D. $8,050

B. $6,700 qualifying expenses = 7,000 + 700 = 7,700 have to subtract $1,000 increase in value of property tho → 7,700 - 1,000 = *6,700*

*Xylo, a calendar year C corporation, acquired the assets of Yerkes, also a calendar year C corporation, on March 1 of the current year. One of the assets acquired was a trademark to which Xylo properly allocated $1,200,000 of the purchase price. What is Xylo's amortization deduction for the current year?* A. $120,000 B. $66,667 C. $30,000 D. $80,000

B. $66,667 = 1,200,000/15 x 10/12

*Kram sent Fargo, a real estate broker, a signed offer to sell a specified parcel of land to Fargo for $250,000. Kram, an engineer, had inherited the land. On the same day that Kram's letter was received, Fargo telephoned Kram and accepted the offer. Which of the following statements is correct under the common law statute of frauds?* A. A contract was formed and would be enforceable against both Kram and Fargo. B. A contract was formed but would be enforceable only against Kram. C. No contract could be formed because Kram's letter was signed only by Kram. D. No contract could be formed because Fargo's acceptance was oral.

B. A contract was formed but would be enforceable only against Kram. sale of land → MY LEGS but the buyer did not accept it in writing → doesn't mean a contract doesn't exist tho → just means that it is not legally enforceable thus → contract is still formed, but only enforceable against the seller since he is the one who signed it

*In which of the following situations does the first promise serve as valid consideration for the second promise?* A. A builder's promise to complete a contract for a purchaser's promise to extend the time for completion. B. A debtor's promise to pay $500 for a creditor's promise to forgive the balance of a $600 disputed debt. C. A debtor's promise to pay $500 for a creditor's promise to forgive the balance of a $600 liquidated debt. D. A police officer's promise to catch a thief for a victim's promise to pay a reward.

B. A debtor's promise to pay $500 for a creditor's promise to forgive the balance of a $600 disputed debt. disputed debt → counts as "honest dispute" → thus counts as valid consideration

*Which of the following statements is false?* A. The Internal Revenue Service may waive the penalty for underpayment of taxes if the failure to pay was due to casualty, disaster, illness, or death of the taxpayer. B. If an individual files a tax return with a zero tax liability in the prior year, the individual must pay in at least 90 percent of the current year's tax to avoid underpayment penalties, as the ability to use the 100 percent of prior year tax is lost. C. If an individual fails to pay estimated taxes for a year, there is no underpayment penalty due under any circumstances if the balance of tax due at filing is less than $1,000. D. If tax payments are withheld from payroll checks, regardless of the dollar amounts withheld at any particular time throughout the year, the payments are deemed to have been paid evenly throughout the year.

B. If an individual files a tax return with a zero tax liability in the prior year, the individual must pay in at least 90 percent of the current year's tax to avoid underpayment penalties, as the ability to use the 100 percent of prior year tax is lost.

*Webstar Corp. orally agreed to sell Northco Inc. a computer for $20,000. Northco sent a signed purchase order to Webstar confirming the agreement. Webstar received the purchase order and did not respond. Webstar refused to deliver the computer to Northco, claiming that the purchase order did not satisfy the UCC Statute of Frauds because it was not signed by Webstar. Northco sells computers to the general public and Webstar is a computer wholesaler. Under the UCC Sales Article, Webstar's position is:* A. Correct because it was the party against whom enforcement of the contract is being sought. B. Incorrect because it failed to object to Northco's purchaser order. C. Correct because the purchase price of the computer exceeded $500. D. Incorrect because only the buyer in a sale-of-goods transaction must sign the contr

B. Incorrect because it failed to object to Northco's purchaser order. since they are both merchants → the seller did not reject the buyer's purchase oder within reasonable time → thus contract is legally enforceable even tho the seller didn't sign the contract this is the W in the SWAP exceptions

*Rail, who was 16 years old, purchased an $800 computer from Elco Electronics. Rail and Elco are located in a state where the age of majority is 18. On several occasions Rail returned the computer to Elco for repairs. Rail was very unhappy with the computer. Two days after reaching the age of 18, Rail was still frustrated with the computer's reliability, and returned it to Elco, demanding an $800 refund. Elco refused, claiming that Rail no longer had a right to disaffirm the contract. Elco's refusal is:* A. Correct, because Rail's multiple requests for service acted as a ratification of the contract. B. Incorrect, because Rail disaffirmed the contract within a reasonable period of time after reaching the age of 18. C. Incorrect, because Rail could disaffirm the contract at any time. D. Correct, because Rail could have transferred good title to a good faith purchaser for value.

B. Incorrect, because Rail disaffirmed the contract within a reasonable period of time after reaching the age of 18. minors can disaffirm (cancel) a contract and make it void... → anytime while a minor → even within a reasonable time after turning 18

*Thorp was a purchasing agent for Ogden, a sole proprietor, and had the express authority to place purchase orders with Ogden's suppliers. Thorp placed an order with Datz, Inc. on Ogden's behalf after Ogden was declared incompetent in a judicial proceeding. Thorp was aware of Ogden's incapacity. Which of the following statements is correct concerning Ogden's liability to Datz?* A. Ogden will be liable because Thorp acted with express authority. B. Ogden will not be liable because Thorp's agency ended when Ogden was declared incompetent. C. Ogden will not be liable because Ogden was a nondisclosed principal. D. Ogden will be liable because Datz was not informed of Ogden's incapacity.

B. Ogden will not be liable because Thorp's agency ended when Ogden was declared incompetent. An agency is terminated by operation of law upon the incapacity of the principal; no notice is needed.

*An S corporation has two shareholders who are also employees of the corporation. Shareholder A owns 20 shares and shareholder B owns 90 shares. The total number of shares issued and outstanding is 2,000. The corporation pays the health insurance premiums for all its employees and families. The cost of family coverage is $5,300. The corporation pays for family coverage for both shareholders. Because the company paid for health insurance, which of the following amounts would be reported to Shareholder A as his income?* A. $2,650 B. $4,240 C. $0 D. $5,300

C. $0 since shareholder A owns 20/2,000 = 1% < 2% → this is deductible to the employer and nontaxable to the employee

*The question below includes actual dates that must be used to determine the appropriate tax treatment of the transaction. Jake and his wife divorced in 2018. Jake pays the following amounts to his former spouse during the current year: • Regular alimony payments = $30,000 • Residence as part of a property settlement = $250,000 *Jake and his former spouse have a 10-year-old child. When the child reaches the age of 18, the regular alimony payments are reduced by $10,000. What amount can Jake deduct as alimony for the current year?* A. $0 B. $10,000 C. $20,000 D. $280,000

C. $20,000 read it carefully → once the child turns 18, the alimony payments are reduced BY $10,000 → alimony = 30,000 - 10,000 = 20,000 f u cpa

*Which of the following statements is true regarding the taxation of Social Security benefits?* A. If a taxpayer's only source of income is $10,000 of Social Security benefits, then 50% of the benefits are taxable. B. If a taxpayer's only source of income is $10,000 of Social Security benefits, then 85% of the benefits are taxable. C. 85% is the maximum amount of taxable Social Security benefits. D. 50% is the maximum amount of taxable Social Security benefits.

C. 85% is the maximum amount of taxable Social Security benefits.

*Which of the following promises is supported by legally sufficient consideration and will be enforceable?* A. A parent's promise to pay one child $500 because that child is not as wealthy as the child's sibling. B. A promise to pay the police $250 to catch a thief. C. A promise to pay a minor $500 to paint a garage. D. A person's promise to pay a real estate agent $1,000 in return for the real estate agent's earlier act of not charging commission for selling the person's house.

C. A promise to pay a minor $500 to paint a garage. not D → this is a past act and isn't bargained for, so it doesn't count as consideration same thing as → someone saves your life at the beach and you promise to pay them $1,000 → not confirmation because it's a past act and was not bargained for

*A debtor owes a total of $40,000 to three secured creditors and a total of $100,000 to 15 unsecured creditors. The debtor has not been paying debts as they become due. Which of the following requirements must be met for the debtor's creditors to file an involuntary bankruptcy petition under Chapter 7 of the federal Bankruptcy Code?* A. At least three unsecured creditors and one fully secured creditor must join in the petition. B. At least 12 unsecured creditors must join in the petition. C. At least three unsecured creditors must join in the petition. D. All three fully secured creditors must join in the petition.

C. At least three unsecured creditors must join in the petition. not B → problem already states that 15 unsecured creditors are owed a total of $100,000 → thus at least 3 of them need to file if they are owed at least $18,600 together

*Axis Corp. is an accrual basis calendar year corporation. On December 13, Year 1, the board of directors declared a 2 percent of profits bonus to all employees for services rendered during Year 1 and notified them in writing. None of the employees own stock in Axis. The amount represents reasonable compensation for services rendered and was paid on March 13, Year 2. Axis' bonus expense may:* A. Not be deducted on Axis' tax return because payment is a disguised dividend. B. Not be deducted on Axis' Year 1 tax return because the per-share employee amount cannot be determined with reasonable accuracy at the time of the declaration of the bonus. C. Be deducted on Axis' Year 1 tax return. D. Be deducted on Axis' Year 2 tax return.

C. Be deducted on Axis' Year 1 tax return. not A → not a dividend since the employees don't own any shares not D → since the bonus was paid on March 13, Year 2 → within the 2.5 months from year-end

*Tax return preparers can be subject to penalties under the Internal Revenue Code for failure to do any of the following, except:* A. Provide a client with a copy of the tax return. B. Sign a tax return as a preparer. C. Disclose a conflict of interest. D. Keep a record of returns prepared.

C. Disclose a conflict of interest. theres is no penalty for this in the IRC

*Which of the following statements concerning an accountant's disclosure of confidential client data is generally correct?* A. Disclosure may be made to comply with an SEC audit request. B. Disclosure may be made to comply with Generally Accepted Accounting Principles. C. Disclosure may be made to any party on consent of the client. D. Disclosure may be made to any state agency without subpoena.

C. Disclosure may be made to any party on consent of the client. not B → compliance with GAAP does not require disclosure of client confidences

*Greed Co. telephoned Stieb Co. and ordered 30 tables at $100 each. Greed agreed to pay 15% immediately and the balance within thirty days after receipt of the entire shipment. Greed forwarded a check for $450 and Stieb shipped 15 tables the next day, intending to ship the balance by the end of the week. Greed decided that the contract was a bad bargain and repudiated it, asserting the statute of frauds. Stieb sued Greed. Which of the following will allow Stieb to enforce the contract in its entirety despite the statute of frauds?* A. Stieb shipped 15 tables. B. Greed paid 15% down. C. Greed admitted in court that it made the contract in question. D. The contract is not within the requirement of the statute of frauds.

C. Greed admitted in court that it made the contract in question. this is the "A" in "SWAP" → exceptions for when contract for sales of goods > $500 do not have to be in writing to be enforceable

*Which of the following is not considered a primary authoritative source when conducting tax research?* A. Internal Revenue Code. B. Tax Court cases. C. IRS publications. D. Treasury regulations.

C. IRS publications.

*On May 25, Fresno sold Bronson, a minor, a used computer. On June 1, Bronson reached the age of majority. On June 10, Fresno wanted to rescind the sale. Fresno offered to return Bronson's money and demanded that Bronson return the computer. Bronson refused, claiming that a binding contract existed. Bronson's refusal is:* A. Not justified, because Fresno is not bound by the contract unless Bronson specifically ratifies the contract after reaching the age of majority. B. Justified, because Bronson and Fresno are bound by the contract as of the date Bronson reached the age of majority. C. Justified, because Fresno must perform under the contract regardless of Bronson's minority. D. Not justified, because Fresno does not have to perform under the contract if Bronson has a right to disaffirm the contract.

C. Justified, because Fresno must perform under the contract regardless of Bronson's minority. not A → seller is bound to the contact on the date of the sale regardless of when the minor turns 18 or ratifies the contract not B → seller is bound to the contract on the date of the sale, not the date the minor turns 18 not D → seller IS bound to the contract, even though the buyer is a minor and has the right to disaffirm the contract

*If an employee has, within the scope of the agency relationship, committed both negligent and intentional acts resulting in injury to third parties, the principal* A. May effectively limit its liability to those third parties if the agent has signed a disclaimer absolving the principal from liability. B. Will be liable under the doctrine of respondeat superior only for intentional acts. C. May be liable even if the employee's acts were unauthorized. D. Will never be criminally liable unless it actively participated in the acts.

C. May be liable even if the employee's acts were unauthorized. not D → if the principal ordered an agent to commit a criminal act, both the principal and the agent would be criminally liable. An employer can also be liable for an employee's strict liability crimes (e.g., selling liquor to a minor).

*Strong Corp. filed a voluntary petition in bankruptcy under the reorganization provisions of Chapter 11 of the federal Bankruptcy Code. A reorganization plan was filed and agreed to by all necessary parties. The court confirmed the plan and a final decree was entered. Which of the following parties ordinarily must confirm the plan?* * 1/2 of the secured creditors* *2/3 of theshareholders* A. Yes / Yes B. Yes / No C. No / No D. No / Yes

C. No / No technically, only the court can confirm a plan gift bruh

*With respect to the penalties for failure to file information returns of tax preparers, which of the following provisions is correct for any person who employed a tax return preparer during the return period?* A. The fine for failure to file such information returns is a penalty of $100 for each failure, with a maximum of $50,000 for each return period. B. The fine for failure to file such information returns is a penalty of $50 for each failure, with no maximum for each return period. C. The penalty for failure to file information returns does not apply to the extent that the failure is due to reasonable cause and not due to willful neglect. D. Each such person must send to the IRS an information return containing the name, address, and social security number of each tax return preparer employed for at least 3 months during the year.

C. The penalty for failure to file information returns does not apply to the extent that the failure is due to reasonable cause and not due to willful neglect.

*Which of the following would preclude a taxpayer from deducting student loan interest expense?* A. The total amount paid is $1,000. B. The taxpayer claims a dependent on his or her income tax return. C. The taxpayer is single with AGI of $110,000. D. The taxpayer is married filing jointly with AGI of $135,000.

C. The taxpayer is single with AGI of $110,000. not B → the taxpayer cannot be a dependent themselves, but they are allowed to have their own dependents

*Parc, on behalf of Global Motor House, a chain motel, contracted with Furn Brothers Corp. to buy hotel furniture and fixtures. Global had instructed Parc to use Parc's own name and not to disclose to Furn that Parc was acting on Global's behalf. Who is liable to Furn on this contract?* *Parc / Global* A. No / Yes B. No / No C. Yes / Yes D. Yes / No

C. Yes / Yes agent obviously is liable principal is also liable (even tho they're undisclosed) since the agent had ACTUAL authority

*Patch, a frequent shopper at Soon-Shop Stores, received a rain check for an advertised sale item after Soon-Shop's supply of the product ran out. The rain check was in writing and stated that the item would be offered to the customer at the advertised sale price for an unspecified period of time. A Soon-Shop employee signed the rain check. When Patch returned to the store one month later to purchase the item, the store refused to honor the rain check. Will Patch win a suit to enforce the rain check?* A. No, because the rain check did not state the effective time period necessary to keep the offer open. B. No, because one month is too long a period of time for a rain check to be effective C. Yes, because the rain check met the requirements of a merchant's firm offer even though no effective time period was stated.

C. Yes, because the rain check met the requirements of a merchant's firm offer even though no effective time period was stated. doesn't have to state a specific period of time → if no time is stated → then the offer is automatically irrevocable for a reasonable period of time (not to exceed 3 months)

*Becki died on March 5, Year 5. Mark inherited publicly traded stock from Becki, which had an FMV of $3,400 on her date of death. The stock was distributed to him on July 10, Year 5, when the FMV was $4,500. The alternate valuation date (AVD) was elected for the estate, and the stock had an FMV of $8,000 on that date. Becki originally purchased the stock in Year 1 for $1,200. If Mark sold the stock for $4,500 on the day he received it, how much is his gain or loss?* A. $1,100 gain B. $3,300 gain C. $3,500 loss D. $0

D. $0 they said the elected the AVD → implied to be 6 months after the date of death → but the property was distributed in July already → so use the FMV on that date for the basis which was $4,500 gain/loss = $4,500 - $4,500 = $0

*Wells paid the following expenses during the year:* • Premiums on an insurance policy against loss of earnings due to sickness or accident = 3,000 • Physical therapy after spinal surgery = 2,000 • Premium on an insurance policy that covers reimbursement for the cost of prescription drugs = 500 *In the current year, Wells recovered $1,500 of the $2,000 that she paid for physical therapy through insurance reimbursement from a group medical policy paid for by her employer. Disregarding the adjusted gross income percentage threshold, what amount could be claimed on Wells' current year income tax return for medical expenses before the adjusted gross income limitation?* A. $3,500 B. $4,000 C. $500 D. $1,000

D. $1,000 premiums on insurance policy *against loss of earnings* → not a qualifying expense physical therapy = 2,000 - 1,500 reimbursement = 500 premiums on insurance policy for cost of prescription drugs → qualifying expense = 500 total qualifying expenses = 500 + 500 = 1,000

*The question below includes actual dates that must be used to determine the appropriate tax treatment of the transaction. Fred and Wilma were divorced in 2017. Fred is required to pay Wilma $12,000 of alimony each year until their child turns 18. At that time, the payment will be reduced to $10,000 per year. In the current year, in accordance with the divorce agreement, Fred paid $6,000 directly to Wilma and $6,000 directly to the law school Wilma is attending. What amount of the payments received in the current year is income to Wilma?* A. $0 B. $12,000 C. $6,000 D. $10,000

D. $10,000 divorced in 2017 → taxable to receiver pay $12,000 until child turns 18, then pay $10,000 → $2,000 is child support → *$10,000 is alimony* *disregard the fact that Fred paid to the law school*

*Radon Corporation contributed $120,000 to a qualified charitable organization. Radon had taxable income before any charitable contribution deduction of $1,400,000 for the year. Also, a dividends-received deduction of $100,000 was reflected in the total amount of taxable income. Radon had carryover contributions of $25,000 from the prior year. For the current year, what is the maximum amount Radon may deduct as charitable contributions?* A. $120,000 B. $140,000 C. $150,000 D. $145,000

D. $145,000 subtotal A = 1,400,000 + 100,000 (since dividends-received deduction was included → have to add it back) = $1,500,000 cap on charitable contribution deduction = 1,500,000 x 10% = 150,000 charitable contributions = 120,000 carryforward from prior year = 25,000 total = *145,000* → okay since it doesn't exceed the 150,000 limit

*Jermaine and Keesha are married, file a joint tax return, have modified AGI of $50,000, and have two children, Devona and Arethia. Devona is beginning her first year at State University this fall and she will be enrolled on a full-time basis. Arethia is beginning her senior year at Northeast University this fall, but will not be enrolled at least half-time in any academic period. Both Devona and Arethia qualify as dependents on their parents' tax return. Devona's qualifying expenses total $3,600 for the fall semester, while Arethia's qualifying expenses total $4,250 for the fall semester. Full payment is made for the tuition and related expenses for both children during the fall semester. The American opportunity credit and lifetime learning credit, respectively, available to Jermaine and Keesha for the year are:* A. $2,400 / $1,000 B. $2,500 / $2,000 C. $2,500 / $4,250 D. $2,400 / $850

D. $2,400 / $850 American Opportunity Credit → for Devona • cannot use for Arethia since she wasn't in school for at least half-time • credit = 100% of first $2,000 + 25% of excess (up to $2,000) • cedit = $2,000 + $1,600 x 25% = *$2,400* Lifetime Learning Credit → for Arethia • credit = 20% up to $10,000 of expenses • credit = 20% x $4,250 = *$850*

*Stein, an unmarried taxpayer, had adjusted gross income of $80,000 for the year, and qualified to itemize deductions. Stein had no charitable contribution carryovers and only made one contribution during the year. Stein donated stock, purchased seven years earlier for $17,000, to a tax-exempt educational organization. The stock was valued at $25,000 when it was contributed. What is the amount of charitable contributions deductible on Stein's current year income tax return?* A. $25,000 B. $17,000 C. $21,000 D. $24,000

D. $24,000 since the stock was held for over 1 year → charitable contribution deduction is limited to $80,000 x 30% = $24,000

*In a 2017 divorce settlement, the ex-husband was required by court order to pay his ex-wife $36,000 in alimony. She received $25,000 in cash, a painting valued at $10,000, and the use of his beach house, valued at $3,000. What amount of gross income should she report as alimony?* A. $38,000 B. $36,000 C. $35,000 D. $25,000

D. $25,000 alimony can only be cash or cash equivalents (ex: paying bills on behalf of spouse)

*Jay received a court award for damages to his personal reputation by the National Gossip. He also received punitive damages. Which of the following statements is true?* A. None of the damages are taxable. B. The compensatory damages are not taxable, but the punitive damages are taxable. C. Only the compensatory damages are taxable. D. All of the damages are taxable.

D. All of the damages are taxable only nontaxable damages are → personal injury damages → medical expenses paid for in lawsuit everything else is taxable

*Gold contracted in writing to sell Hatch a used computer for $150. Hatch went to Gold's home with the money but Gold refused to deliver the computer. What would be the nature of Hatch's remedy against Gold?* A. Specific performance and consequential damages only. B. Specific performance only. C. Punitive damages and compensatory damages only. D. Compensatory damages only.

D. Compensatory damages only. used computer is not "unique" → no specific performance no fraud → no punitive damages

*Harp entered into a contract with Rex on behalf of Gold. By doing so, Harp acted outside the scope of his authority as Gold's agent. Gold may be held liable on the contract if:* A. Gold ratifies the entire contract after Rex withdraws from the contract. B. Rex was aware of the limitation on Harp's authority. C. Rex elects to hold Gold liable on the contract. D. Gold retains the benefits of the contract, knowing all material facts of the transaction.

D. Gold retains the benefits of the contract, knowing all material facts of the transaction. principal can ratify implicitly (not expressly) by retaining the benefits of the contract after learning all material facts not A → principal cannot ratify after the 3rd party withdraws from the contract

*Eagle Corporation solicited bids for various parts it uses in the manufacture of jet engines. Eagle received six offers and selected the offer of Sky Corporation. The written contract specified a price for 100,000 units, delivery on June 1 at Sky's plant, with payment on July 1. On June 1, Sky had completed a run. When Eagle's truck arrived to pick up the parts on June 1, Sky refused to deliver claiming the contract price was too low. Eagle was unable to cover in a reasonable time. Its production lines were in danger of shutdown because the parts were not delivered. Eagle would probably:* A. Have the right of replevin only if Eagle tendered the purchase price on June 1. B. Have as its only remedy the right of replevin. C. Have as its only remedy the right to recover dollar damages. D. Have the right to obtain specific performance.

D. Have the right to obtain specific performance. there is nothing in the problem that indicates that the goods were identified by the seller → thus the buyer cannot use the remedy of replevin also → cannot sue for money damages since the goods are very unique

*Kent Construction Company contracted to construct four garages for Magnum, Inc., according to specifications provided by Magnum. Kent deliberately substituted 2x4s for the more expensive 2x6s called for in the contract in all places where the 2x4s would not be readily detected. Magnum's inspection revealed the variance and Magnum is now withholding the final payment on the contract. The contract was for $300,000 and the final payment would be $100,000. Damages were estimated at $55,000. In a lawsuit for the balance due, Kent will:* A. Prevail on the contract, less damages of $55,000, because it has substantially performed. B. Prevail because the damages in question were not substantial in relation to the contract amount. C. Lose because the law requires a perfect tender of performance. D. Lose because its breach was intentional.

D. Lose because its breach was intentional. any material breaches of contract will automatically release the non-breaching party not A → contract was not substantially performed not B → breach was not minor not C → CL doesn't require perfect tender of performance, since this isn't a sale of goods

*The Griffins own a mountain cabin that is used for both personal and rental purposes. In the current year, the Griffins rented the cabin out for 150 days and used it personally for 50 days. Assume that the Griffins itemize their deductions. Which of the following statements regarding the treatment of the mountain cabin on the Griffin's tax return is true?* A. Depreciation is deductible under all rental circumstances. B. 100% of the utilities for the mountain cabin for the entire year are deductible. C. The rental income received is not included in gross income. D. Real estate taxes are deductible under all rental circumstances.

D. Real estate taxes are deductible under all rental circumstances. not A → depreciation wouldn't be deductible if rented < 15 days not B → can't deduct 100% of utilities → can only deduct the rental portion (since you normally couldn't deduct utilities on personal tax return) not C → since they rented ≥ 15 days → rental income IS taxable

*Under the UCC Secured Transaction Article, what is the effect of perfecting a security interest by filing a financing statement?* A. The secured party has permanent priority in the collateral even if the collateral is removed to another state. B. The secured party can enforce its security interest against the debtor. C. The debtor is protected against all other parties who acquire an interest in the collateral after the filing. D. The secured party has priority in the collateral over most creditors who acquire a security interest in the same collateral after the filing.

D. The secured party has priority in the collateral over most creditors who acquire a security interest in the same collateral after the filing. if PMSI occurs after the filing date, but before the date of attachment → that other creditor will win

*Under the Sales Article of the UCC, which of the following statements is correct regarding the warranty of merchantability arising when there has been a sale of goods by a merchant seller?* A. The warranty arises when the buyer relies on the seller's skill in selecting the goods purchased. B. The warranty must be in writing. C. The warranty cannot be disclaimed. D. The warranty arises as a matter of law when the seller ordinarily sells the goods purchased.

D. The warranty arises as a matter of law when the seller ordinarily sells the goods purchased. not A → that's talking about warranty of fitness for a particular purpose

*A taxpayer wants to deduct the cost of a seven-year asset placed in service this year. The cost qualifies for the Section 179 election to expense assets. Which of the following statements is most accurate regarding the immediate expensing of this asset versus the depreciation of this asset over seven years?* A. Section 179 provides a greater deduction over the life of the asset because, subject to limitations, the cost of the asset is deductible in full. B. Depreciation provides a greater deduction over the life of the asset. C. The cost of the asset may be deducted under both Section 179 and as depreciation. D. There is no difference in the total amount that is deductible over the life of the asset.

D. There is no difference in the total amount that is deductible over the life of the asset. not C → if you immediately expensed an asset under Section 179 → there is nothing left to deduct bruh

*Bond and Spear orally agreed that Bond would buy a car from Spear for $475. Bond paid Spear a $100 deposit. The next day, Spear received an offer of $575, the car's fair market value. Spear immediately notified Bond that Spear would not sell the car to Bond and returned Bond's $100. If Bond sues Spear and Spear defends on the basis of statute of frauds, Bond will probably:* A. Lose, because the agreement was not in writing and signed by Spear. B. Lose, because the agreement was for less than the fair market value of the car. C. Win, because Bond paid a deposit. D. Win, because the agreement was for less than $500.

D. Win, because the agreement was for less than $500. this is NOT one of the MY LEGS scenarios since the contract price is for $475 → thus it doesn't have to be in writing to be legally enforceable since Spear didn't perform under the contract (even tho it wasn't written) → Bond will win

what is the key to solving wash sales???

calculate the total "loss" then look at how many shares they repurchased → % of shares that they recovered → that % is the disallowed loss

Calculate the gain or loss Sold 1,225 shares of ABC Corp. stock at $9 per share. Green purchased 600 shares several years ago at $30 per share. Three years ago, when the stock price was $21, there was a 2-for-1 stock split and two years ago, when the stock price was $25, there was a 3-for-2 stock split. No other shares were sold by Green prior to Year 2.

original basis = $30/share 2 for 1 split → basis = 30/2 = $15/share 3 for 2 split → basis = 15/(1.5) = $10/share loss = 1225 shares x ($9-$10) = *($1,225)*

Sold 500 shares of XYZ Corp. stock at $20 per share. Green purchased these shares two years prior at $22 per share. Three weeks prior to the sale, Green purchased 100 shares of XYZ stock at $18 per share. Calculate the gain or loss

purchased 500 shares at $22/share purchased 100 shares at $18/share sold 500 shares at $20/share "total loss" = 500 shares x ($22 - 20) = $1,000 but from the wash sale → recovered on 100 shares → disallowed on 1/5 → allowed on 4/5 of the loss = $1,000 x 4/5 = *$800*

*The following Year 1 annual report was received by Clark from the qualified defined contribution plan provided by Clark's employer:* Beginning balance = 12,700 Employer contribution = 600 Plan earnings = 250 Ending balance = 13,550 *What income must be included in Clark's gross income for Year 1?*

qualified defined contribution plan → employer's contributions AND earnings are only taxable when it's actually distributed since it hasn't been distributed yet → include $0 in taxable income for this year

*Rick purchased 100 shares of XYZ stock on April 4, Year 4, for $8,600. He sold 50 shares on February 8, Year 5, for $3,000. He then bought another 50 shares of XYZ on March 1, Year 5, for $3,200. How much loss will Rick realize in Year 5?*

read it carefully → not a wash sale sold 50 shares for $3,000 → originally purchased for $8,600/2 = $4,300 loss = *$1,300*

**Parent Corp. owns 40% of Sub Corp. Parent has gross income of $43,000 and allowable deductions of $45,000 before considering any dividends-received deduction (DRD). Included in the $43,000 gross income is $8,000 in dividends from Sub What is the maximum DRD available to Parent?* Parent Corp. owns 40% of Sub Corp. Parent has gross income of $43,000 and allowable deductions of $39,000 before considering any dividends-received deduction (DRD). Included in the $43,000 gross income is $8,000 of dividends from Sub. What is the maximum DRD available to Parent?

since we have a net loss = 43,000 - 45,000 = (2,000) → DRD = dividends received x % excluded DRD = 8,000 x 65% excluded = *5,200* now we have net income = 43,000 - 39,000 = 4,000 subtotal B x % = 4,000 x 65% = 2,600 dividends received x % = 8,000 x 65% = 5,200 we would normally take the lesser, but there is a rule that we must take the greater if it would create a loss → here it would → so DRD = *5,200*

*Rick purchased 100 shares of XYZ stock on April 4, Year 4, for $8,600. He sold 50 shares on February 8, Year 5, for $3,000. He then bought another 50 shares of XYZ on March 1, Year 5, for $3,200.* What is the amount of deductible loss from the sale? What is Rick's basis of the 50 shares purchased on March 1, Year 5?

• purchased 100 shares for $8,600 → $86/share • sold 50 shares for $3,000 → $60/share • purchased 50 shares for $3,200 → $64/share "total loss" = 50 shares x ($86-64) = $1,100 this is a wash sale → disallowed loss = amount of loss they recovered → recovered on 50 shares out of total 50 they sold → thus 100% of the loss is disallowed → deductible loss = *$0* basis of repurchased shoes = repurchase price + disallowed loss = 3,200 + 1,300 = *4,500*