Reference no: EM132727285
Questions -
QUESTION 1 - Roger is one of your young clients, but he is rather successful after graduating with his degree in Cyber Security and has a good job with a defense contractor. In addition, Roger inherited a rather large estate from his parents after they passed in a horrible accident. He received the estate 2 months ago, and his investment advisor wants to reallocate his holdings into riskier investments.
As a result, Roger has come to you asking you to calculate his capital gains and losses for this action. The following items will be sold for the following gains.
Asset
Date Bought and Price
Date Sold and Price
75 Shares of IBM Stock
04/23/2015 for $18,000
03/05/2020 for $7,000
200 Shares of Mitsui Bank
04/06/2020 for $15,000
07/06/2020 for $9,500
750 Newmont Mining
05/24/2016 for $10,000
07/09/2020 for $18,000
200 Shares of ExxonMobil
03/06/2020 for $16,000
09/20/2020 for $14,000
300 Shares of Bitcoin Dist.
03/16/2019 for $6,000
03/16/2020 for $25,000
Calculate the Capital Gains/Loss from above.
a. $16,000 Long Term, ($7,500) Short Term
b. $8,500 Long Term
c. $8,500 Short Term
d. ($3,000) Long Term, $11,500 Short Term
QUESTION 2 - Roger is one of your young clients, but he is rather successful after graduating with his degree in Cyber Security and has a good job with a defense contractor. In addition, Roger inherited a rather large estate from his parents after they passed in a horrible accident. He received the estate 2 months ago, and his investment advisor wants to reallocate his holdings into riskier investments.
As a result, Roger has come to you asking you to calculate his capital gains and losses for this action. The following items will be sold for the following gains.
Asset
Date Bought and Price
Date Sold and Price
75 Shares of IBM Stock
04/23/2015 for $18,000
03/05/2020 for $7,000
200 Shares of Mitsui Bank
04/06/2020 for $15,000
07/06/2020 for $9,500
750 Newmont Mining
05/24/2016 for $10,000
07/09/2020 for $18,000
200 Shares of ExxonMobil
03/06/2020 for $16,000
09/20/2020 for $14,000
300 Shares of Bitcoin Dist.
03/16/2019 for $6,000
03/16/2020 for $25,000
Assume that one of the assets inherited was a rare, original Walt Disney Cinderella castle, valued at over $37,000. Assuming the asset was held for 14 months, what would be the tax rate on the sale of this asset?
a. 20%
b. 0%
c. 15%
d. 28%
QUESTION 3 - Roger is one of your young clients, but he is rather successful after graduating with his degree in Cyber Security and has a good job with a defense contractor. In addition, Roger inherited a rather large estate from his parents after they passed in a horrible accident. He received the estate 2 months ago, and his investment advisor wants to reallocate his holdings into riskier investments.
As a result, Roger has come to you asking you to calculate his capital gains and losses for this action. The following items will be sold for the following gains.
Asset
Date Bought and Price
Date Sold and Price
75 Shares of IBM Stock
04/23/2015 for $18,000
03/05/2020 for $7,000
200 Shares of Mitsui Bank
04/06/2020 for $15,000
07/06/2020 for $9,500
750 Newmont Mining
05/24/2016 for $10,000
07/09/2020 for $18,000
200 Shares of ExxonMobil
03/06/2020 for $16,000
09/20/2020 for $14,000
300 Shares of Bitcoin Dist.
03/16/2019 for $6,000
03/16/2020 for $25,000
Would the artifact be subject to the Net Investment Income Tax, and if so, how much?
a. Yes, but at 3.8%
b. No, personal artifacts are not considered investments under the IRS laws.
c. Yes, at 15%
d. Yes, but at graduated rates of 0%, 15%, or 20%
QUESTION 4 - What is the limit on usage in order for a residential property to qualify as a personal use asset?
a. 5% of personal use
b. 14 days of personal use
c. 14 days of rental use
d. 95% of personal use
QUESTION 5 - If a taxpayer rents out a home during the year and there is a $30,000 loss at the end of the year, where does this loss get reported, and how is it treated? Assume the taxpayer makes $200,000 per year (AGI) and the property qualifies as a rental property.
a. Form 8621 and the loss is fully allowed
b. Schedule E and the loss is allowed up to $25,000
c. Form 8582 and the loss is carried over until either there is passive income, or the activity is disposed of.
d. Form 4797 and the loss is fully allowed as §1231 loss against ordinary income.
QUESTION 6 - What is the tax treatment for rents received for a home rented out for less than 14 days?
a. Taxed at ordinary rates
b. Tax Exempt
c. Taxed at Capital Gains Rates
d. Tax at the property tax rates for the locality.
QUESTION 7 - Assume you have a taxpayer, who wants to sell their home and they have heard they don't have to pay any tax on the sale. You tell her there are conditions to gain exclusion. Which of the following are requirements for the §121 gain exclusion? (Choose only one, best answer)
a. An ownership test of 5 out of the last 8 years and use test of 2 of the last 5 years.
b. An ownership and use test of 5 out of the last 8 years.
c. A use test of 5 out of the last 8 years and ownership test of 2 of the last 5 years.
d. An ownership and use test of 2 out of the last 5 years.
QUESTION 8 - Assume your client Peace and Love, Inc. has purchased the following assets listed below, when they moved into their new office space in 2020. The office building was purchased in 2017 and placed into service on Dec 31, 2017. Also assume they have taxable income of $350,000 for the year and charitable deductions of $50,000 (This client files a 1040 Tax Return).
Asset
Purchase Date
Cost
Furniture - 7 Year
Nov 20 $180,000
Office Equipment - 7 Year
Apr 1 30,000
Construction Truck - 5 Year
May 30 80,000
Office Leasehold Improvements - 39 Year
Jan 15 500,000
Total $790,000
Assume the income listed above and deductions are all from the taxpayers only business activity. What is the maximum §179 Deduction allowed by the client in 2020?
a. 210,000
b. 790,000
c. 290,000
d. 300,000
QUESTION 9 - Assume your client Peace and Love, Inc. has purchased the following assets listed below, when they moved into their new office space in 2020. The office building was purchased in 2017 and placed into service on Dec 31, 2017. Also assume they have taxable income of $350,000 for the year and charitable deductions of $50,000 (This client files a 1040 Tax Return).
Asset
Purchase Date
Cost
Furniture - 7 Year
Nov 20 $180,000
Office Equipment - 7 Year
Apr 1 30,000
Construction Truck - 5 Year
May 30 80,000
Office Leasehold Improvements - 39 Year
Jan 15 500,000
Total $790,000
What convention will be used for the property placed into service in 2020?
a. MQ
b. MM
c. HY
d. MY
QUESTION 10 - Assume your client Peace and Love, Inc. has purchased the following assets listed below, when they moved into their new office space in 2020. The office building was purchased in 2017 and placed into service on Dec 31, 2017. Also assume they have taxable income of $350,000 for the year and charitable deductions of $50,000 (This client files a 1040 Tax Return).
Asset
Purchase Date
Cost
Furniture - 7 Year
Nov 20 $180,000
Office Equipment - 7 Year
Apr 1 30,000
Construction Truck - 5 Year
May 30 80,000
Office Leasehold Improvements - 39 Year
Jan 15 500,000
Total $790,000
Assuming the maximum §179 deduction you could take was $125,000 due to income limits and it was applied all to the Furniture, what is the total depreciation and expensing allowed for 2020 for all property (Rounded to the nearest 1000s)?
a. 161,000
b. 184,000
c. 177,000
d. 169,000
QUESTION 11 - Assume your client Peace and Love, Inc. has purchased the following assets listed below, when they moved into their new office space in 2020. The office building was purchased in 2017 and placed into service on Dec 31, 2017. Also assume they have taxable income of $350,000 for the year and charitable deductions of $50,000 (This client files a 1040 Tax Return).
Asset
Purchase Date
Cost
Furniture - 7 Year
Nov 20 $180,000
Office Equipment - 7 Year
Apr 1 30,000
Construction Truck - 5 Year
May 30 80,000
Office Leasehold Improvements - 39 Year
Jan 15 500,000
Total $790,000
Assuming no bonus depreciation is taken, nor any §179 expense is taken, what is the first year's depreciation for all tangible personal property, using either the MY or HY convention?
a. 12,305
b. 790,000
c. 46,009
d. 58,314
5 points
QUESTION 12 - Assume your client Peace and Love, Inc. has purchased the following assets listed below, when they moved into their new office space in 2020. The office building was purchased in 2017 and placed into service on Dec 31, 2017. Also assume they have taxable income of $350,000 for the year and charitable deductions of $50,000 (This client files a 1040 Tax Return).
Asset
Purchase Date
Cost
Furniture - 7 Year
Nov 20 $180,000
Office Equipment - 7 Year
Apr 1 30,000
Construction Truck - 5 Year
May 30 80,000
Office Leasehold Improvements - 39 Year
Jan 15 500,000
Total $790,000
If you were to fill out the Form 4562, which property above would be considered listed property?
a. Office Equipment
b. Construction Truck
c. Furniture
d. Office Leasehold Improvements
QUESTION 13 - A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.
Cost of the house (in 1950) $35,000
Value of the house at date of death (1995): $250,000
Value at time placed into service as rental property (2005): $400,000
Depreciation taken on the house: $140,000
Sales price of the house: $800,000
Expenses of selling the home: $50,000
What is the basis of the home, based on when it was placed into service?
a. 35,000
b. 250,000
c. 400,000
d. 260,000
5 points
QUESTION 14 - A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.
Cost of the house (in 1950) $35,000
Value of the house at date of death (1995): $250,000
Value at time placed into service as rental property (2005): $400,000
Depreciation taken on the house: $140,000
Sales price of the house: $800,000
Expenses of selling the home: $50,000
What is the realized gain on the sale of the home?
a. 640,000
b. 750,000
c. 800,000
d. 210,000
QUESTION 15 - A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.
Cost of the house (in 1950) $35,000
Value of the house at date of death (1995): $250,000
Value at time placed into service as rental property (2005): $400,000
Depreciation taken on the house: $140,000
Sales price of the house: $800,000
Expenses of selling the home: $50,000
If your friend wants to take the home, sell it and purchase a new office building using all of the proceeds, can this be done in a tax efficient way? If so, how?
a. No, the law does not allow exchanges of rental property to commercial property.
b. Yes, this will qualify for §1031 gain exclusion treatment.
c. Yes, this will qualify for §1031 gain deferment treatment.
d. No, the new tax law does not allow exchanges on this kind of property.
QUESTION 16 - A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.
Cost of the house (in 1950) $35,000
Value of the house at date of death (1995): $250,000
Value at time placed into service as rental property (2005): $400,000
Depreciation taken on the house: $140,000
Sales price of the house: $800,000
Expenses of selling the home: $50,000
Say your friend has a buyer interested (who is a friend of your friend), but the buyer does not have good credit, so your friend (the client) wants to sell it to them on an installment basis. Assume that you have calculated the gain at $325,000 and the sales price is 610,000. What is the gross profit percentage for use on the installment sale?
a. 34.76%
b. Insufficient information to calculate the gross profit percentage.
c. 46.72%
d. 53.28%
QUESTION 17 - A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.
Cost of the house (in 1950) $35,000
Value of the house at date of death (1995): $250,000
Value at time placed into service as rental property (2005): $400,000
Depreciation taken on the house: $140,000
Sales price of the house: $800,000
Expenses of selling the home: $50,000
What is the character of the gain?
a. §1245 gain on 140,000 and §1231 gain on the rest, taxed at ordinary rates
b. §1250 gain on 140,000 and §1231 gain on the rest, taxed at ordinary rates
c. §1245 gain on 140,000 and §1231 gain on the rest, taxed at capital gain rates
d. §1250 gain on 140,000 and §1231 gain on the rest, taxed at capital gain rates
QUESTION 18 - A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.
Cost of the house (in 1950) $35,000
Value of the house at date of death (1995): $250,000
Value at time placed into service as rental property (2005): $400,000
Depreciation taken on the house: $140,000
Sales price of the house: $800,000
Expenses of selling the home: $50,000
Assuming there is §1250 gain, what is the maximum tax rate on the gain?
a. 15%
b. Ordinary rates for the taxpayer
c. 3.8%
d. 25%
QUESTION 19 - A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.
Cost of the house (in 1950) $35,000
Value of the house at date of death (1995): $250,000
Value at time placed into service as rental property (2005): $400,000
Depreciation taken on the house: $140,000
Sales price of the house: $800,000
Expenses of selling the home: $50,000
What is the AR when the house is sold?
a. 800,000
b. 660,000
c. 610,000
d. 750,000
QUESTION 20 - A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.
Cost of the house (in 1950) $35,000
Value of the house at date of death (1995): $250,000
Value at time placed into service as rental property (2005): $400,000
Depreciation taken on the house: $140,000
Sales price of the house: $800,000
Expenses of selling the home: $50,000
In the third year, your friend, who is now your client, was informed by his buyer he is unemployed and wants some leeway on the payments. Your client (without consulting you) defers all payments in year 4 for the client, so he can get back on his feet. Assume the payments were once per year for $25,000 and the gross profit percentage is 40%. What is the gain your client must realize in year 4, even though they receive no cash?
a. $25,000
b. $0
c. $15,000
d. $10,000
QUESTION 21 - A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.
Cost of the house (in 1950) $35,000
Value of the house at date of death (1995): $250,000
Value at time placed into service as rental property (2005): $400,000
Depreciation taken on the house: $140,000
Sales price of the house: $800,000
Expenses of selling the home: $50,000
What is the AB of the home at time of sale?
a. 0
b. 150,000
c. 260,000
d. 110,000
QUESTION 22 - A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.
Cost of the house (in 1950) $35,000
Value of the house at date of death (1995): $250,000
Value at time placed into service as rental property (2005): $400,000
Depreciation taken on the house: $140,000
Sales price of the house: $800,000
Expenses of selling the home: $50,000
Assuming there is §1245 gain, what is the tax rate on the gain?
a. 3.8%
b. 15%
c. Ordinary rates for the taxpayer
d. 25%