Reference no: EM131731594

Q1. A taxpayer purchased and placed in service during the year a $100,000 piece of equipment. The equipment is 7-year property. The first-year depreciation for 7-year property is 14.29%. There is an allowable Section 179 limit in the current year of $25,000. What amount is the maximum allowable depreciation?

Q2. Rock Crab, Inc. purchases the following assets during the year:

Computer    $3,000     Computer desk    $1,000     Office furniture     $4,000      Delivery van    $25,000

What should be reported as the cost basis for MACRS five-year property?

Q3. Anscomb is an employee who also solely owns and actively participates in a rental activity which produced a $20,000 loss in the current year. Anscomb's W2 income in the current year is $115,000. Considering only the foregoing facts, what should Anscomb's adjusted gross income be for the current year?

Q4. Freddy, a sole proprietor, is one of several retail business owners competing to rent space in a desirable location that rents at a rate of $2,000 per month. Freddy pays the landlord 12 months' rent up front, even though only two months' advance rent is required. The lease term begins October 1, 2015. In addition, Freddy gives the landlord a $2,500 cash gift in order to sweeten the deal. Considering only these facts, what amount is deductible on Schedule C of Freddy's 2015 tax return?

Q5. In 20X5, James Bolton, an individual taxpayer, incurred net capital losses that amounted to $25,000. During the period from 20X1 through 20X4, Bolton had net capital gains of $2,000 each year. How much capital loss may Bolton carry forward to 20X6?

Q6. The following facts pertain to Catchall Consulting, a sole proprietorship owned by Peabody:

20X09 net profit or (loss): ($  5,000)    20X10 net profit or (loss):  $ 250    20X11 net profit or (loss):  $ 500 20X12 net profit or (loss): ($  1,200)   20X13 net profit or (loss): $ 800

 In 20X14 Peabody gave out 50 promotional clipboards to prospective clients, at a cost of $3 per clipboard. What amount of business expense can Peabody include, as a result of the clipboards, on Peabody's 20X14 Schedule C?

Q7. A taxpayer purchased and placed into service a $690,000 piece of equipment in a year with a maximum allowable section 179 amount of $500,000 and a ceiling of $2,000,000 of qualifying property. The equipment is 7-year property. The first-year depreciation for 7-year property is 14.29%. Before considering any depreciation deduction, the taxpayer had $700,000 of taxable incoe. The taxpayer elected out of any bonus depreciation. What amount is the maximum allowable depreciation deduction?

Q8. Which of the following is correct regarding self-employment taxes?

I. For purposes of the portion of self-employment tax that is equivalent to Social Security tax, taxable self-employment income is limited to a prescribed maximum amount reduced by other wages earned by the taxpayer that are subject to FICA and Medicare taxes.

II. For purposes of the portion of self-employment tax that is equivalent to the Medicare tax, taxable self-employment income is limited to a prescribed maximum amount reduced by other wages earned by the taxpayer that are subject to FICA and Medicare taxes.