Reference no: EM132456535

Question 1 - A business machine valued at $800 was contributed to a charitable organization during the year. The machine cost $1,000 but was depreciated down to $600 before the donation was made. Indicate the correct income tax treatment with respect to the donation.

Contribution of $600 (no income recognized)

Contribution of $1,000 (income of $200 recognized)

Contribution of $800 (income of $200 recognized)

Contribution of $800 (no income recognized)

Question 2 - Bob sold a piece of business equipment that had an adjusted basis to him of $50,000. In return for the equipment, Josh received $80,000 cash and a painting with a fair-market value of $20,000 from the buyer. The buyer also assumed Josh's $25,000 loan on the equipment. Josh paid $5,000 in selling expenses. What is the amount of Josh's gain on the sale?

$90,000

$125,000

$80,000

$70,000

Question 3 - Which of the following statements concerning property qualifying for like-kind exchange treatment is incorrect?

The property must be held for productive use in a trade or business or for investment.

The transfer of partnership interests qualify for like-kind exchange treatment.

The exchange of inventory for a business automobile does not qualify for like-kind exchange treatment.

The exchange of unimproved property for improved property qualifies for like-kind exchange treatment.

Question 4 - Which of the following is not a mathematical error as defined in IRC § 6213?

An error in addition, subtraction, multiplication, or division shown on any return

An incorrect use of any IRS table if such incorrect use is apparent from other information on the return

An omission of income that should be included on the return

Inconsistent entries on the return

Question 5 - Which of the following items is not subject to federal income tax?

The interest on California State bonds

Gambling winnings

A $5,000 birthday gift from a family member

Both the interest on California State bonds and the $5,000 birthday gift from a family member

Question 6 - In return for $1,000, Bobby cancels Sam's debt of $5,000. The cancellation is not a gift, and Sam is neither insolvent nor bankrupt. Which of the following statements is correct?

Bobby has $1,000 taxable income.

Sam has $4,000 of taxable income.

Sam has $5,000 of taxable income.

Neither Bobby nor Sam has any taxable income from this transaction.

Question 7 - All of the following income items are includible in an employee's gross income except _____.

Severance pay for the cancellation of employment

The amount received for personal injuries

An accrued vacation

Moving expense reimbursement