Reference no: EM132859752

Questions -

Q1) In December 20X3, Davis purchased a new residence for $200,000. During that same month he sold his former residence for $80,000 and paid the realtor a $5,000 commission. The former residence, his first home, had cost $65,000 in 20X0. Davis added a bathroom for $5,000 in 20X1. What amount of gain is recognized from the sale of the former residence on Davis' 20X3 tax return?

A. $15,000

B. $10,000

C. $5,000

D. $0

Q2) Norbert works in a beauty salon. He receives a 50% employee discount for salon services. In 20X4 he used his discount to pay $1,000 for services with a fair market value of $2,000. As a result of these bargain purchases, how much should Norbert include in 20X4 gross income?

A. $1,000

B. $600

C. $2,000

D. $0

Q3) An individual taxpayer purchased and placed into service five-year assets at a total cost of $2,800,000 when the Section 179 limit was $1,020,000 with a $2,550,000 phase-out threshold. If the taxpayer elects the Section 179 deduction but does not elect out of bonus depreciation, how much property-related expense can the taxpayer deduct for the current tax year?

A. $1,020,000

B. $1,400,000

C. $2,030,000

D. $2,800,000

Q4) A taxpayer inherited a partnership interest from a grandparent. The adjusted basis of the grandparent's partnership interest was $50,000, and its fair market value on the date of the grandparent's death (the estate valuation date) was $70,000. What was the taxpayer's original basis for the partnership interest?

A. $70,000

B. $50,000

C. $20,000

D. $0

Q5) A deceased parent left land to their adult child. The parent's adjusted basis for the land was $100,000, and its fair market value on the parent's date of death (the estate valuation date) was $250,000. What is the child's basis for the land?

A. $250,000

B. $150,000

C. $100,000

D. $0

Q6) A child, age five, is claimed as a dependent on the parents' tax return. The child has $3,000 of interest income, no earned income this year, and will file a tax return. Assuming the current applicable standard deduction is $1,100, how much of the child's income will be taxed at the parents' tax rates?

A. $800

B. $1,900

C. $2,200

D. $3,000

Q7) In Year 3, a taxpayer's parent sold 100 shares of Gym Co. stock to the taxpayer for $11,000. The parent paid $15,000 for the stock in Year 1. Subsequently in Year 3, the taxpayer sold the stock to an unrelated third party for $16,000. What amount of gain should the taxpayer report on the Year 3 income tax return?

A. $0

B. $1,000

C. $4,000

D. $5,000

Q8) A 2019 divorce decree provides that Alex pay alimony of $10,000 per year to Blair, to be reduced by 20% on their child's 18th birthday. During the tax year, Alex paid $7,000 directly to Blair and $3,000 for Blair's tuition to an accredited university. What amount, if any, of these payments should be reported as income in Blair's income tax return for the year?

A. $0

B. $7,000

C. $8,000

D. $10,000

Q9) A land developer would like to trade some business assets in a nontaxable exchange. Which of the following exchanges would qualify as nontaxable?

A. The company office building for a large truck to be used in the corporation.

B. Investment securities for antiques to be held as investments.

C. A road grader used in land development for another road grader.

D. A corporate office building for a vacant lot.

Q10) Roger Corporation purchased 4 pieces of similar office furniture for $18,000 in 20X1. Assuming Roger Corporation prepares audited financial statements and has a similar capitalization policy in place for financial reporting purposes, how much can Roger Corporation expense in the year of purchase under IRC 263, de minimus capitalization regulations?

A. $0, since the entire amount of $18,000 must be capitalized and subsequently depreciated.

B. $5,000

C. $9,000

D. $18,000

Q11) On November 1, year 3, Ruth gave Helen a gift of stock worth $15,000. Ruth had purchased the stock on February 1, year 3 for $17,000. Helen sold the stock to an unrelated party on November 1, year 4 for $17,700. What is the amount and character of Helen's gain or loss upon the sale?

A. $700 short-term capital gain

B. $2,700 short-term capital gain

C. $700 long-term capital gain

D. $2,700 long-term capital gain

Q12) Kathryn has lived in her house for one year. Her company recently relocated to a city 100 miles away, forcing her to move. She purchased her house a year ago for $400,000, and sold it for $525,000, its current fair market value. What amount of gain will Kathryn recognize for federal tax purposes?

A. $0

B. $62,500

C. $125,000

D. $250,000

Q13) Which of the following is deductible as a miscellaneous itemized deduction?

A. An individual's tax return preparation fee.

B. Gambling expenses to the extent of gambling winnings.

C. An individual's subscription to professional journals.

D. Custodial fees for a brokerage account.

Q14) An individual taxpayer reports the following items for the current year:

Ordinary income from partnership A. operating a movie

Theater in which the taxpayer materially participates $70,000

Net loss from Partnership B, operating an equipment rental business in which the taxpayer does not materially participates $(9,000)

Rental income from building rented to a third party $7,000

Short-term capital gain from sale of stock $4,000

What is the taxpayer's adjusted gross income (AGI) for the year?

A. $70,000

B. $72,000

C. $74,000

D. $77,000

Q15) On March 1, Year 3, a taxpayer was bequeathed 1,000 shares of Extra Corp. common stock under their parent's will. The parent had paid $5,000 for the stock in Year 0. The fair market value of the stock on March 1, Year 3, the date of the parent's death, was $8,000 and had increased to $11,000 six months later. The executor of the estate elected the alternate valuation date for estate tax purposes. The taxpayer sold the stock for $9,000 on May 1, Year 3, the date that the executor distributed the stock to the taxpayer. What was the taxpayer's recognized gain or loss on sale of the 1,000 shares in Year 3?

A. $2,000 loss

B. $0

C. $1,000 gain

D. $4,000 gain

Q16) The self-employment tax is

A. Fully deductible as an itemized deduction.

B. Fully deductible in determining net income from self-employment.

C. One-half deductible from gross income in arriving at adjusted gross income.

D. Not deductible.