Purchase Solved ACCT 553 Week 8 Final Exam Version 1
Multiple Choice Questions
- (TCO E) For federal tax purposes, income attributable to the direct efforts of the taxpayer, such as salary, is classified as:
- (TCO D) Which of the following is an example of a nontaxable like-kind exchange?
- (TCO H) Alex and Amy filed a joint return for the 2012 tax year. Their adjusted gross income is $90,000. They had a net investment income of $8,000. In 2012, they had the following interest expenses:
• Personal credit card interest: $5,000
• Home mortgage interest: $10,000
• Interest paid on qualified education loans: $2,000
• Investment interest (on loans used to buy stocks): $10,000
What is the interest deduction for Alex and Amy for the 2012 tax year?
- (TCO B) Unreimbursed expenses of employees are considered to be deductions:
- (TCO A) Which of the following expenditures is always an itemized deduction for individual taxpayers?
- (TCO E) Adam sold a piece of business equipment that had an adjusted basis to him of $50,000. In return for the equipment, Adam received $80,000 cash and a painting with a fair market value of $20,000 from the buyer. The buyer also assumed Adam’s $25,000 loan on the equipment. Adam paid $5,000 in selling expenses. What is the amount of Adam’s gain on the sale?
- (TCO I) Gary and Gerdy Gray purchased a home for $125,000 on September 15, 2010. On October 7, 2011, they were divorced, and as part of the divorce agreement, the home was transferred to Gerda, who sold the home on October 18, 2012, for $350,000. How much can Gerda exclude?
- (TCO I) Under the accrual method of accounting, expenses are generally accrued when:
- (TCO D) Sean, a calendar year taxpayer, purchased stock on June 18, 2011, for $8,000. The stock became worthless on June 4, 2012. What is Sean’s loss in 2012?
$8,000 short-term capital loss
- (TCO A) Which of the following is a primary source of a tax authority?
- (TCO F) A nonbusiness bad debt is deductible for tax purposes as a(n):
- (TCO A) The art of using existing tax laws to pay the least amount of tax legally possible is known as:
- (TCO C) Which of the following items is not taxable?
- (TCO B) Under the terms of their divorce agreement executed in October 2011, Keith transferred Corporation M stock to his former wife, Karen, as a property settlement. At the time of the transfer, the stock had a basis to Keith of $20,000 and a fair market value of $50,000. What is the tax consequence of this transaction to Keith, and what is Karen’s basis in the Corporation M stock?
- (TCO G) During 2012, Edward East had wages of $10,000 and received unemployment compensation of $6,200 from the state. Edward is single and 45 years old. What is the amount of unemployment compensation to be included in his gross income? (Points: 5)
- (TCO F) Hobby expenditures are deductible to the extent of:
Essay Type Questions
- (TCO E) In 2012, Uriah Stone received the following payments:………………..What amount, if any, should Mr. Stone report as interest income on his 2012 tax return?
- (TCO G) Would any of the following items be deductible on an individual’s income tax return? If so, would the item be deductible for or from AGI? Explain each item.
- (TCO F) Michael and Mary Mason sold for $380,000 in November of 2012 their residence that they had purchased in 2002 for $75,000. They made major capital improvements during their 10-year ownership totaling $25,000.
- (TCO G) John Baron, a professional baseball player, raises Black Angus cattle under circumstances that would indicate that the activity is a hobby. His adjusted gross income for the year is $50,000, and he has $500 of other miscellaneous itemized deductions, all of which are subject to the two-percent floor. During the taxable year, the feed for the cattle costs $1,500. The income from the sale of cattle was $1,400.
- (TCO I) Rick, a single individual with a salary of $45,000, incurred and paid the following expenses during the year:
- (TCO I) Kim had the following transactions for 2012:
- (TCO F) Sara owns a sole proprietorship, and Phil is the sole shareholder of a C (regular) corporation. Each business sustained a $9,000 operating loss and a $2,000 capital loss for the year. Evaluate how these losses will affect the taxable income of the two owners. (Points: 17)
- (TCO B) Dave forms a corporation and transfers property having a basis to him of $22,000 and a fair market value of $29,000 to the corporation for 1,000 shares of $11 par stock. One year later, Hank transfers property having a basis to him of $3,500 and a fair market value of $4,500 for 100 shares of the stock. Hank is not related to Dave. The corporation issued no other stock.
(a) How much gain does Dave recognize on his exchange? What is the basis for Dave of his 1,000 shares?
(b) What gain or loss is recognized by the corporation when it issues its shares to Dave? What is the basis of the corporation of the property it received from Dave?
(c) What is the gain or loss that Hank recognizes on this transaction, and what is his basis in his 100 shares?
- (TCO F) In 2012, OK Company had a net loss of $82,000 from operations. Jane owns OK Company and works 20 hours a week in the business. She has a large amount of income from other sources and is in the 35% marginal tax bracket. Would Jane’s tax situation be better if OK Company were a proprietorship or a C corporation? Explain why.
- (TCO H) On May 18, 2012, Sara purchased 30 shares of ABC stock for $210, and on October 29, 2012, she purchased 90 additional shares for $900. On November 28, 2012, she sold 48 shares, which could not be specifically identified, for $576, and on December 8, 2012, she sold another 25 shares for $150. What is her recognized gain or loss?
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