Question 1 (2 points)

 

In computing MACRS depreciation, salvage value is considered

 

True

 

False

 

 

 

Question 2 (3 points)

 

To be deductible for tax purposes, a trade or business expenditure must be for a cash basis taxpayer:

 

a.       Ordinary, Necessary, Reasonable

 

b.      Ordinary, Necessary, Reasonable, Justified

 

c.       Ordinary, Necessary, Reasonable, Paid

 

d.      Ordinary or necessary

 

 

 

Question 3 (2 points)

 

Job-seeking expenses are deductible if incurred by an individual who is presently employed and looking for work in the same trade or business

 

 

 

a.       Only if the individual actually finds a new job

 

b.      Regardless of whether the individual finds a new job

 

c.       If the expenses relate to the individual’s first job

 

d.      Both (a) and (b)

 

e.       None of the answers provided are correct

 

 

 

Question 4 (2 points)

 

Which of the following types of taxes is/are not deductible?

 

a.       State property taxes

 

b.      State income taxes.

 

c.       Cigarette taxes

 

d.      None of the answers are correct

 

e.       At least 3 answers are correct 

 

 

 

Question 5 (2 points)

 

         During the holiday season, a taxpayer gives business gifts to 25 customers. The gifts have the following fair market values: 7 gifts of property valued at $10 each 5 gifts of property valued at $20 each 13 gifts of property valued at $50 each How much can the taxpayer deduct for business gifts?

 

a.       $312.50

 

b.      $495.00

 

c.       $625.00

 

d.      $247.00

 

e.       No answer is correct

 

 

 

 

 

Question 6 (2 points)

 

A calendar-year corporation incurs $4,000 of start-up costs. If the corporation began business on August 1 of the current year, what is the maximum amount of the start-up costs that it can deduct against business income in the current year? (round your answer to the nearest dollar)

 

a.       $3,417

 

b.      $5,000

 

c.       $2,000

 

d.      $6,333

 

e.       $4,000

 

 

 

 

 

Question 7 (3 points)

 

Five-year property costing $50,000 was placed in service on June 11 (along with other assets placed in service throughout the year) of the current year. The property is depreciated using MACRS. Assuming the company elects not to take advantage of either bonus depreciation or the Code Sec. 179 deduction and the mid-quarter convention applies. What will be depreciation expense with regard to the 5 year property for the current year

 

a.       $625

 

b.      $5,000

 

c.       $4,375

 

d.      $3,045

 

e.       $12,500

 

f.       None of the provided answers are correct

 

 

 

Question 8 (3 points)

 

         During 2013, Klecker, Inc. placed in service $2,700,000 of Code Sec. 179 property. How much can Klecker elect to immediately expense in 2013 related to 179?

 

a.       $2,100,000

 

b.      $0

 

c.       $400,000

 

d.      $500,000

 

e.       None of the answers provided are correct

 

f.       $100,000

 

 

 

 

 

Question 9 (3 points)

 

Hobby revenue $60,000.  Hobby expenses are $80,000.   AGI is $500,000.  The amount of hobby expense that would be deductible on Schedule A is (ignoring phase-outs but not floor)

 

a.       $0

 

b.      $60,000

 

c.       $40,000

 

d.      $50,000

 

e.       none of the provided answers are correct

 

 

 

 

 

Question 10 (3 points)

 

Janet owns a 100 shares of stock which was purchased on January 4, 2013 for $84/share.  On December 31, 2013 the stock was selling for $52/ share.  The loss recognized for tax purposes is

 

a.      $0

 

b.      $32/share

 

c.       $84/share

 

d.      no provided answer is correct

 

 

 

 

Question 11 (3 points)

 

Stock owned by a brother is sold to his sister.  The brother’s adjusted basis of the stock is $22,000.  He sells the stock for $19,000.  The sister sells the stock to an unrelated party for $17,000.  What is the gain recognized by the sister

 

a.       Her basis is $17,000.  The price she paid for it.  She sold it for $19,000.  She recognizes a gain of $2,000.

 

b.      Because of the situation, she only has a $1,000 recognized loss.

 

c.       She takes the brother’s basis in the stock and recognizes the $1,000 gain

 

d.      None of the answers provided are correct

 

 

 

 

Question 12 (3 points)

 

Ann Jones uses a dry cleaning machine in her business, and it was completely destroyed by fire. At the time of the fire, the adjusted basis was $30,000 and its fair market value was $18,000. How much is Ann’s loss?

 

a.       $18,000

 

b.      $2,000

 

c.       $30,000

 

d.      None of the answers provided are correct

 

 

 

 

Question 13 (3 points)

 

During 2013, Hugh Hughes reported the following income and loss:

 

Activity X

 

($40,000)

 

 

 

Activity Y

 

$20,000

 

 

 

Both Activity X and Activity Y are passive to Mr. Hughes. How much is the loss that Mr. Hughes may deduct in 2013?

 

a.       $50,000

 

b.      $30,000

 

c.       $3,000

 

d.      $0

 

e.       No correct answer has been provided

 

 

 

 

Question 14 (3 points)

 

 Billy Ray owns several parcels of rental real estate (a passive activity), and he actively participates in managing the properties. His total loss from these activities in 2013 is $20,000. Assuming that his AGI for 2013 is $40,000, what is the allowable deduction from these properties in 2013?

 

a.       $0

 

b.      $25,000

 

c.       $20,000

 

d.      No correct answer has been provided

 

 

 

 

 

Question 15 (3 points)

 

 When a taxpayer incurs a business NOL in 2013 the taxpayer may:

 

a.       Has to carry the NOL forward instead of back

 

b.      Must either to elect to carry it back 2 years or carry the NOL forward 20 years

 

c.       Carry the NOL back five years

 

d.      All of the above

 

 

 

Question 16 (3 points)

 

Net operating losses can be increased by which of the following?

 

a.       standard deductions

 

b.      medical deductions

 

c.       personal property tax paid

 

d.      None of the above

 

 

 

Question 17 (3 points)

 

Mark Miller, 72, paid the following medical expenses during the year (all in excess of reimbursement):

 

Hospital and doctor bills for liposuction(for self and wife, 50)$1840

 

Over the counter Medicine and drugs (for self and wife) $1730

 

Hospitalization for hair replacement $16,200

 

Over the counter Medicine and drugs (for dependent mother, age 91) $1,060

 

 

 

Assuming the Millers’ adjusted gross income was $100,000, how much of a medical expense deduction may the Millers claim on their joint return?

 

a.       $1,770

 

b.      $2,830

 

c.       $4,330

 

d.      $8,830

 

e.       None of the above

 

 

 

Question 18 (2 points)

 

 

 

Cosmetic surgery costs directed solely at improving the patient’s physical deformity are generally:

 

a.       Qualify as a medical expense deduction if performed by a licensed doctor

 

b.      Are listed as standard deductions

 

c.       Will not qualify for a medical expense deduction

 

d.      Are limited to a maximum lifetime deduction of $10,000

 

 

 

Question 19 (3 points)

 

Karen Baker, a cash basis calendar year taxpayer, paid the following during the year:

 

Social security tax (withheld from wages)$6,120

 

Personal property taxes (ad valorem) 520

 

State income tax 5,000

 

State sales tax 3,800

 

Cigarette taxes 500

 

Fine for speeding 250

 

 

 

The amount deductible on Schedule A

 

a.      $5,520

 

b.      $9,820

 

c.       $15,420

 

d.      $16,190

 

e.       None of the above

 

 

 

 

 

Question 20 (3 points)

 

Miscellaneous Itemized deductions subject to the 2% floor include

 

a.       Hobby losses, gambling losses, job seeking expenses, work clothes and uniforms, and unreimbursed employee expenses

 

b.      Hobby losses, gambling losses, job seeking expenses, work clothes and uniforms, but not unreimbursed employee expenses

 

c.       Hobby losses, job seeking expenses,and unreimbursed employee expenses

 

d.      Only hobby losses

 

 

 

Question 21 (2 points)

 

 

 

Nonrefundable credits

 

a.      Will, generally, only bring tax liability to zero

 

b.      May bring the tax liability to zero and provide the taxpayer with a form of non-taxable income from the governmental

 

c.       May bring the tax liability to zero and provide the taxpayer with a form of taxable income from the governmental

 

d.      are prohibited

 

 

 

Question 22 (5 points)

 

In August 2011, a company bought $200K office equipment.  They did not elect bonus or code section 179. At the end of 2012, what is the ending adjusted basis of the property (for tax purposes?) 

 

Answer should be formatted exactly as 80,125

 

no decimals, no dollar sign.  rounded to the nearest dollar, only a comma, and numbers.

 

ex. 2:  75,125