Question: Jacob purchased business equipment for $56,000

> Fox Corp. owned 2,000 shares of Duffy Corp. stock that it bought in year 0 for $9 per share. In year 8, when the fair market value of the Duffy stock was $20 per share, Fox distributed this stock to a non corporate shareholder. Fox's recognized gain on t

> On January 1, year 5, Olinto Corp., an accrual basis, calendar year C corporation, had $35,000 in accumulated earnings and profits. For year 5, Olinto had current earnings and profits of $15,000 and made two $40,000 cash distributions to its shareholders

> Hirsch, Incorporated, is a calendar year corporation that has had revenues of less than $500,000 since inception. In 2017, Hirsch had a net operating loss that \Vas able to be used in full via a carryback to 2016. For 2018, Hirsch expects to have taxable

> In the current year, Acorn, Inc., had the following items of income and expense: The dividends were received from a corporation of which Acorn owns 30%. In Acorn's current-year corporate income tax return, what amount should be reported as income befor

> Ron, David, and Mary formed Widget, Inc. Ron and David each received 40% of the stock, and Mary received the remaining 2001o. Ron contributed land with an FMV of $70,000 and an adjusted basis of $20,000. The corporation also assumed a $30,000 liability o

> Gearry and Olinto organized The Worthington Corp., which issued voting common stock with a fair market value of $240,000. They each transferred property in exchange for stock as follows: The building \Vas subject to a $20,000 mortgage that was assun1ed

> Gearry and Olinto organized The Worthington Corp., which issued voting common stock with a fair market value of $240,000. They each transferred property in exchange for stock as follows: The building was subject to a $20,000 mortgage that was assumed b

> Use the following data to calculate Chiara's AMT base in 2018. Chiara will itemize deductions and will file as a single taxpayer. Taxable income $248,000 Positive AMT adjustments 73,000 Negative AMT adjustments Preferences 25,000 30,000

> Jim spent four years earning his undergraduate degree at a local university. He began his first year of Jaw school in January of the current year. Assuming he is under the phase out limitation, what education tax credit is Jim eligible for in the current

> Which of the following credits is considered "refundable"? a. Child and dependent care credit b. Retirement plan contribution credit c. Child tax credit d. Credit for elderly

> In the current year, Wells paid the following expenses: 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

> Ryan Ross (111-11-1112), Oscar Omega (222-22-2222), Clark Carey (333-33-3333). and Kim Kardigan (444 44 4444) are equal active members in ROCK the Ages 11.C. ROCK serves as agent and manager for prominent musicians in the Los Angeles area. 1he LLC's Fede

> On November 1, 2008, Janet Morton and Kim Wong formed Pet Kingdom, Inc., to sell pets and pet supplies. Pertinent information regarding Pet Kingdom i5 summarized as follows. • Pet Kingdom's business address is 1010 Northwest Parkway, Da

> Paul and Donna Decker are married taxpayers, ages 44 and 42, respectively, who file a joint return for 2018. The Deckers live at 1121 College Avenue, Carmel, IN 46032. Paul is an assistant manager at Carmel Motor Inn, and Donna is a teacher at Carmel Ele

> John Parsons (123-45-6781) and George Smith (123-45-6782) are 70%, and 30%, owners, respectively, of Premium, Inc. (11-1111111), a candy company located at 1005 16th Street, Cut and Shoot, TX 77303. Premium's S election was made on January 15, 2010, its

> Bob and Nancy are married and file a joint return. They are both under age 50 and employed, with wages of $50,000 each. Their total AGI is $110,000. Neither of them is an active participant in a qualified plan. What is the maximun1 traditional IRA deduct

> Linda is an employee of JRH Corporation. Which of the following is included in Linda's gross income? a. Premiums paid by JRH Corporation for a group term life insurance policy for $50,000 of coverage for Linda. b. $l ,000 of tuition paid by JRH Corporat

> Kim was seriously injured at her job. As a result of her injury, she received the following payments. • $5,000 reimbursement from employer-provided health insurance for medical expenses paid by Kim. The premiums this year paid by Kim's employer totaled $

> For many years, Sophie has owned and operated several apartn1ent buildings. In 2012, upon the advice of her attorney, Sophie transferred the apartment buildings to a newly created corporation. Her main reason for incorporating the business was to achieve

> Stephen is a graduate student at West University. He works part time at the campus coffee shop earning $5,000 this year. Stephen also receives a $25,000 scholarship that pays for his tuition, fees, and books. What amount does Stephen include in his gross

> Section 1250 recapture applies to which of the following? a. Section 1231 real property sold at a gain with accumulated depreciation in excess of straight line. b. Section 1231 personal property sold at a gain with accumulated depreciation. c. Section 12

> Section 1245 recapture applies to which of the following? a. Section 1231 real property sold at a gain with accumulated depreciation in excess of straight line. b. Section 1231 personal property sold at a gain with accumulated depreciation. c. Section 12

> Net Section 1231 losses are: a. Deducted as a capital loss against other capital gains and nothing against ordinary income. b. Deducted as a capital loss against other capital gains and up to $3,000 against ordinary income. c. Not allowed as a deduction

> Wally, Inc., sold the following three personal property asset5 in year 6: What is Wally's net Section 1231 gain or loss in year 6? a. $500 loss b. $300 gain c. $800 gain d. $1,600 gain Asset Purchase Date Cost Accumulated Depreciation Selling Price

> A piece of depreciable machinery is sold. It has been held for three years and qualifies as Section 1231 property. The selling price is greater than the adjusted basis but less than the original purchase price. Which statement below is correct? a. All o

> In the current tax year, Blake Smith provided more than half of the support for his cousin, niece, and a close family friend. Blake lives alone and sends a monthly support check to each person. None of the individuals whom Blake supports has any income o

> Jane is 20 years old and is a sophomore at Lake University. She is a full-time student and does not have any gross income. Jane spends the holidays and summers at home with her parents. Her total support for the current tax year is $30,000, including a s

> Bob provides more than half of his mother's support. His mother earns $6,000 per year as a hairdresser. She lives in an apartment across town. Bob is unmarried and has no children. What is Bob's most advantageous filing status? a. Single b. Head of hous

> Brad and Angie are married and file a joint return. For year 14, they had income from wages in die amount of $100,000 and had the following capital transactions to report on their income tax return: What is the amount of capital loss carryover to year

> Herbert was employed for the first six months of 2018 and earned $90,000 in salary. During the next six months, he collected $8,800 of unemployn1ent compensation, borrowed $12,000 (using his personal residence as collateral), and withdrew $2,000 fron1 hi

> Conner purchased 300 shares of Zinco stock for $30,000 in year 1. On May 23, year 6, Conner sold all the stock to his daughter Alice for $20,000, its tl1en fair market value. Conner realized no other gain or loss during year 6. On July 26, year 6, Alice

> A gain on the sale of which of the following assets will not result in a capital gain? a. Stock in a public company b. A home used as a personal residence c. Goodwill of a corporation d. Inventory of a corporation

> Marsha exchanged land in Florida with an FMV of $72,700 and an adjusted basis of $40,000 for land in lowa with an FMV of $57,700. Marsha also assumed a $5,000 liability on the land received in the transaction and was relieved of a $20,000 liability on th

> Marsha exchanged land in Florida with an FMV of $72,700 and an adjusted basis of $40,000 for land in Iowa with an FMV of $57,700. Marsha also paid $5,000 cash in the transaction and received an automobile worth $20,000. What is Marsha's recognized gain o

> Chad owned an office building that was destroyed in a tornado. The adjusted basis of the building at the time was $890,000. After the deductible, Chad received an insurance check for S950,000. He used S900,000 of the insurance proceeds to purchase a new

> Chad owned an office building that was destroyed in a tornado. The adjusted basis of the building at the time was $890,000. After the deductible, Chad received an insurance check for $850,000. He used the $850,000 to purchase a new building that same yea

> Agnes sold 50 shares of ABC stock to her son, Steve, in year 4 for $42,000. She bought the stock eight years ago for $50,000. Steve sold the stock to an unrelated parry in year 6 for $60,000. How much gain will Steve recognize from the sale in year 6? a.

> Rick purchased 100 shares of XYZ stock on April 4, year 4, for $8,600. He sold 50 shares on Febn1ary 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? a. $0 b. $1,30

> Jerry inherits an asset from his uncle, who purchased the asset five days before he died. Which of the following statements is correct? a. If Jerry sells the asset a few days after receiving it, any gain or loss on the sale will be short term. b. Jerry's

> Alice gifted stock to her son, Bob, in year 5. Alice bought the stock in year 1 for The value of the stock on the date of gift was $6,400. Bob sold the stock in year 7 for $ 15,800. What is Bob's recognized gain or Joss on the sale in year 7? a. $0 b. $7

> Emmy contributes $40,000 to MeldCo in exchange for a 30% ownership interest. During the first year of operations, MeldCo earns a profit of $200,000. At the end of that year, MeldCo holds liabilities of $75,000. Calculate Emmy's basis for her ownership in

> Danny received the following interest and dividend payments this year. What amount should Danny include in his gross incon1e? Source Amount $1,200 City of Atlanta bond interest U.S. Treasury bond interest State of Georgia bond interest Ellis Compan

> Which statement below is correct? a. Real property is depreciated using the half-year convention. b. Residential real estate is depreciated over a 39-year life. c. One-half month of depreciation is taken for the month that real property is disposed of. d

> Data, Inc., purchased and placed in service $5,000 of office furniture on August 24, year 3. This is the only asset purchase during the year. Section 179 expensing was not elected. Using the excerpt of the MACRS half-year convention table below, what is

> Data, Inc., purchased and placed in service a $5,000 computer on August 24, year 3. This is the only asset purchase during the year. Section 179 expensing was not elected. The computer was sold during year 5. Using the excerpt of the MACRS half-year conv

> Sam rents his second home. During the current year, he reported a $40,000 net loss from the rental. Assume Sam actively participates in the rental activity and no phase out lin1itations apply. What is the greatest amount of the rental loss that Sam can d

> What is the correct order of applying the loss limitation rules? a. Passive loss limits, tax basis, at-risk amount b. Tax basis, at-risk amount, passive loss limits c. At-risk an1ount, tax basis, passive loss limits d. Passive loss limits, at-risk amount

> An apartment building was acquired in 2009 by an individual taxpayer. The depreciation taken on the building was $123,000, and the building was sold for a $34,000 gain. What is the maximum amount of 25%gain?

> Sissie owns two items of business equipment. Both were purchased in 2014 for $100,000, both have a 7-year MACRS recovery period, and both have an adjusted basis of $37,490. Sissie is considering selling these asset5 in 2018. One of them is worth $60,000,

> Renata Corporation purchased equipment in 2016 for $180,000 and has taken $83,000 of regular MACRS depreciation. Renata Corporation sells the equipment in 2018 for $110,000. What is the amount and character of Renata's gain or loss?

> Amy, Becky, and Chau form a business entity with each contributing the following. Their ownership percentages will be as follows. Becky's land has a $20,000 mortgage that is assumed by the entity. Chau is an attorney who receives her ownership intere

> Elliott has the following capital gain and loss transactions for 2018. After the capital gain and loss netting process, what is the amount and character of Elliott's gain or loss? $ 1,500 Short-term capital gain Short-term capital loss (3,600) Long

> Celine has the following capital gain and loss transactions for 2018. After the capital gain and loss netting process, what is the amount and character of Celine's gain or loss? $ 5,000 Short-term capital gain Short-term capital loss (2,100) Long-t

> Michael owns a rental house that generated a $10,000 Joss this year. Michael manages the rental property, but does not meet the standards for n1aterial participation. Michael is a college professor and has wages of $60,000 and $5,000 in dividend income.

> Which of the following statements regarding passive activity losses is true? a. A net passive activity loss may be deducted against wages. b. Losses on rental property are always considered passive. c. A passive activity is one in which the taxpayer doe

> Data, Inc., purchased and placed in service a $5,000 computer on August 24, year 3. This is the only asset purchase during the year. Section 179 expensing was not elected. Using the excerpt of the MACRS half-year convention table below, What is the MACRS

> Stem Corp. bought a machine in February of year 7 for $20,000. Then Stem bought furniture in November of year 7 for $30,000. Both machines were placed in service for business purposes in1mediately after purchase. No other assets were purchased during yea

> Cox Construction, a con1pany in its 10th year of business, purchased a piece of equipment on April I, year 9, for $20,000. Cox has used it for business purposes since the initial purchase date. The con1pany depreciated the equipment using the MACRS half-

> Michael Sima, a sole proprietor craftsman, purchased an amount of equipn1ent in the current year that exceeded the maximum allowable § 179 depreciation election limit by $20,000. Sima's total purchases of property placed in service in the current year di

> Two independent situations are described below. Each situation has future deductible amounts and/or future taxable amount5 produced by temporary differences. The enacted tax rate is 25% for both situations. Determine the income tax expense for the year

> Cavan Company prepared the following reconciliation between book income and taxable income for the current year ended Decen1ber 31, year 1. Cavan's effective Federal and state income tax rate for year 1 is 30%. The depreciation difference will reverse

> Continue with the facts presented in Problem 12. At the end of the first year, SD distributes $100,000 cash to Sam. No distribution is made to Drew. a. How does Sam treat the payment? b. How much income or gain would Sam recognize as a result of the dis

> At the end of year 6, the tax effects of temporary differences reported in Tortoise Company's year-end financial statements were as follows. A valuation allowance was not considered necessary. Tortoise anticipates that $40,000 of the deferred tax liabi

> Two independent situations are described below. Each involves future deductible amounts and/ or future taxable amounts produced by temporary differences. The enacted tax rate is 25% for both situations. Determine the change in the deferred tax asset ba

> Hart's adjusted basis of his interest in a partnership was $30,000. He received a non liquidating distribution of $24,000 cash plus a parcel of land with a fair market value and partnership basis of $9,000. Hart's basis for the land is: a. $9,000 b. $6,0

> After a corporation's status as an S corporation is revoked or tern1inated, how many years is the corporation required to wait before making a new S election, in the absence of IRS consent to an earlier election? a. 1 b. 3 c. 5 d. 10

> The Manhew Corporation, an S corporation, is equally owned by three shareholders Emily, Alejandra, and Kristina. TI1e corporation is on the calendar year basis for tax and financial purposes. On April 1 of the current year, Emily sold her one-third inter

> Zinco Corp. was a calendar year S corporation. Zinco's S status terminated on April 1, year 6, when Case Corp. became a shareholder. During year 6 (365-day calendar year), Zinco had non separately con1puted income of $310,250. If no election was made by

> Which of the following statements is most correct? a. Tax preference items for the alternative minimum tax are always added back to regular taxable income. b. Itemized deductions that are added back to regular taxable income for the alternative minimum

> Carol reports taxable income of $48,000. Included in that calculation are the following items. Carol also had excluded municipal bond interest income of $8,000, $3,000 of which was deen1ed to be private activity bond interest. What are Carol's total al

> How is the alternative minimum tax credit applied in the calculation of the tentative minin1um tax (TMT)? a. It is carried forward indefinitely and applied to regular tax only. b. It is carried back five years and applied to regular tax only. c. It is c

> Anthony entered into a long-tern1 construction contract in year 3. The total profit of the contract is $80,000 and does not change over the life of the contract. The contract will be completed in year 5. The contract is 20%. and 70% complete at the end

> Using the legend provided, indicate which form of business entity each of the following characteristics describes. Some of the characteristics may apply to more than one form of business entity. a. Basis for an ownership interest is increased by an inv

> In 2014, Jed James began planting a vineyard. The costs of the land preparation, labor, rootstock, and planting were capitalized. The land preparation costs do not include any non depreciable land costs. In 2018, when the plants became viable, Jed placed

> For many years, Saul's sole proprietorship and his related Form 1040 have had a number of AMT tax preferences and AMT adjustments. He has made the AMT calculation each year, but the calculated amount always has been SO. Saul's regular taxable income and

> Cooper Partnership, a calendar year partnership, made qualifying rehabilitation expenditures to a building that it has used in its business for eight years. These improvements were placed in service on January 5, 2017. The amount of the rehabilitation ex

> Balm, Inc., has a general business credit for 2018 of $90,000. Balm's regular income tax liability before credits is $140,000, and its tentative AMT is $132,000. Calculate the amount of general business credit Balm can use in 2018, and calculate its gene

> To what extent are the personal assets of a general partner, limited partner, or member of an LLC subject to (a) contractual liability claims, such as trade account5 payable, and (b) malpractice claims against the entity? Answer the question for partne

> Jim Dunn, Amy Lauersen, and Tony Packard have agreed to form a partnership. In return for a 30%. capital interest, Dunn transferred machinery (basis $268,000, fair market value $400,000) subject to a liability of $100,000. The liability was assumed by th

> What type of information-sharing agreements does the IRS have with the revenue agency of the Bahamas? Canada? Germany? Israel? Argentina?

> In a two-page paper, separately evaluate each of the following alternative pro- Digging Deeper posals for taxing the income from property. a. All assets would be valued at the end of the year, any increase in value that occurred during the year would be

> What is the function of a partner's capital account under the rules of generally accepted accounting principles (GAAP)' What is the partner's initial balance in the capital account? How and when does the capital account increase and decrease? What is the

> Identify whether the taxpayer's economic position has changed in the following exchanges such that they are subject to current taxation. That is, identify whether the following qualify as like-kind exchanges under § 1031. a. Improved for unimproved real

> On your review of the books and records of Ridge Corporation, you note the following information pertaining to its tax provision: a. Calculate Ridge's taxable income and Federal income tax liability for the year. b. Calculate Ridge's deferred income ta

> Owl is a closely held corporation owned by eight shareholders (each has 12.5% of the stock). Its taxable income for the most recent year was $6,250,000. Owl's financial records also provides the following information. a. Calculate Owl's Federal income

> Charles is planning to invest $10,000 in a venture whose management is undecided as to whether it should be structured as a regular corporation or as a partnership. Charles will hold a l()OA. interest in the entity. Determine the treatment to Charles if

> Carlson's general business credit for the current year is $84,000. His net income tax is $190,000, tentative minimum tax is $175,000, and net regular tax liability is $185,000. He has no other tax credits. Determine the amount of Carlson's general busine

> In 2018, Robert entertains four key clients and their spouses at a nightclub. Business discussions occurred over dinner and prior to the entertainment beginning. Expenses were $200 (limo charge), $120 (cover charge), $700 (drinks and dinner), and $140 (t

> Vogel Corporation owns two subsidiaries. Song, located in State A, generated $500,000 taxable income this year. Bird, located in State B, generated a $100,000 loss for the period. a. Determine Song's taxable income in States A and B, assuming that the su

> Brenda, who is self employed, travels from Chicago to Barcelona (Spain) on business. She is gone for 10 days (including 2 days of travel), during which time she spends 5 days conducting business and 3 days sightseeing. Her expenses are $1,500 (airfare),

> Filion operates n1anufacturing facilities in States A and B. Filion has neil."us with both states; apportionment factors are .70 for A and .30 for B. Taxable income for the year totaled $150,000, with a $200,000 A profit and a S50,000 Bloss. Calculate ta

> In 2018, Meghann Carlson, a single taxpayer, has QB! of $110,000 and modified taxable income of $78,000 (this is also her taxable income before the QB! deduction). Given this information, what is Meghann's QB! deduction?

> Mio was transferred from New York to Germany. He lived and worked in Germany for 340 days in 2018. Mio's salary for 2018 is $190,000. What is Mio's foreign earned income exclusion? (In your computation, round any division to four decimal places before co

> Cordero, Inc., is a calendar year taxpayer and a CFC for the entire tax year. Yancy Company, a U.S. corporation, owns 75% of Cordero's one class of stock for the entire year. Cordero's Subpart F income for the year is $450,000, and no distributions were

> Franco owns a 600Ai interest in the Dulera LLC. On Decen1ber 31 of the current tax year, his basis in the LLC interest is S 128,000. The fair market value of the interest is $140,000. Dulera then distributes to Franco $30,000 cash and equipment with an a

> J\1abel and Alan, who are in the 32% tax bracket, recently acquired a fast food franchise. Both of them will work in the business and receive a salary of $175,000. They anticipate that the annual profits of the business, after deducting salaries, will be

> Fred, who is self employed, travels from Denver to Miami primarily on business. He spends five days conducting business and two days sightseeing. His expenses are $400 (airfare), $150 per day (meals), and $300 per night (lodging). What are Fred's deducti

> Dion, an S shareholder, owned 20%. of Meadow Brook's stock for 292 days and 25% for the remaining 73 days in the year. Using the per-day allocation method, compute Dion's share of the following S corporation items. Schedule K Totals Dion's Schedule

> Valentino is a patient in a nursing home for 45 days in 2018. While in the nursing home, he incurs total costs of S 13,500. Medicare pays $8,000 of the cost5. Valentino receives $15,000 from his long-term care insurance policy, which pays while he is in

> Samantha recently was employed by an accounting firm. During the year, she spends $2,500 for a CPA exam review course and begins working on a law degree in night school. Her law school expenses were $4,200 for tuition and $450 for books (which are not a