Posted: October 20th, 2022

ACCT – MCQs

39. Bill owns 50% of the outstanding shares of stock of S corporation.
a. Bill may revoke the corporation’s S status.b. Bill may not revoke the S status of the corporation.( because IRs requires consent of over 50% of the company’s owner to terminate or revoke.)c. Bill may sell all of his shares to a third party thus causing the deemed dissolution of the S corporation and the deemed creation of a successor C corporation.d. Bill may sell all or any of his shares to Igor, a citizen of Transylvania residing in Stateboro,GA, thus causing the corporation to lose its S status.
40. S corporation borrows $5,000 from Bank @6% interest for one year.
a. If Bill, one of several shareholders of S corporation, signs an agreement with Bank guaranteeing repayment of the loan, he may add $5,000 to the basis of his S stock. b. If shareholder Bill signs a repayment guarantee he will be entitled to have his Schedule K-1 from S corporation list 100% of the loan interest paid as his deduction to the exclusion of the other shareholders.c. Even if shareholder Bill signs a repayment guarantee he will not be permitted to increase his S corporation stock basis by $5,000.d. Partnership and S corporation tax rules allowing partners/shareholders to increase the basis of partners/shareholders by the amount of partnership/corporation debt are identical.
41. Section 1014 of the Internal Revenue Code
a. requires adjustment to the basis of most items included in a decedent’s gross estate.b. permits the exclusion from a decedent’s gross estate of real property located in a foreign country.c. provides mortgage foreclosure relief for real property comprising part of a decedent’s gross estate.d. will be repealed effective January 1, 2015.
42. The maximum federal estate tax charitable deduction is
a. 50% of the adjusted gross estate.b. 100% of the fair market value of gross estate property contributed to charity.c. 35% of the adjusted gross estate.d. limited to the cash plus fair market value of securities included in the gross estate and contributed to charity.
43. The 2013 and 2014 annual gift tax exclusion per donee is
a. $14,000.b. $12,000.c. one-half of the fair market value of the gift to a maximum of $20,000.d. not available to reduce the value of present interest gifts.
44. The decedent died on March 12, 2013. The longest first income tax year the decedent’s executor can choose for the estate will end on
a. December 31, 2013.b. January 31,2014.c. February 28,2014.d. March 31,2014.
45. The trustee of a testamentary trust has distributable net income of $30,000 on December 31, 2013, the last day of the trust’s income tax year. On March 3, 2014 the trustee makes a distribution of all distributable net income on hand as of December 31,2013 to the trust beneficiaries . The trustee
a. may elect to have the distribution treated as though made on December 31,2013.b. cannot elect to have the distribution treated as though made on December 31,2013.c. is limited to the lesser of distributable net income or trust accounting income to be deemed as distributed on December 31, 2013. d. cannot elect to have the distribution treated as though made on the prior December 31 for the first income tax year of the trust.
46. All of the following are separately stated items on a partner’s Schedule K-1 except
a. short term capital gain.b. ordinary business income of the partnership.c. dividends.d. interest.
47. A partnership may deduct start-up expenses in the first year of operation to a maximum amount of
a. $5,000.b. $50,000. c. 25% of start-up expenses.d. 5% of first year’s gross income.
48. When a partner dies
a. the tax year closes for all the partners on date of death.b. the partnership tax year closes with respect to the deceased partner on date of death.c. the partnership tax year closes for all partners on the last day of the tax year as it normally would.d. the partnership may elect a fiscal tax year for all surviving partners beginning on the day after date of death.
49. A Family Partnership
a. is subject to income taxation as an entity, like a C corporation.b. must register as such with the state’s business regulation agency, much like a limited partnership.c. must report its annual income on Form 1065 FP and Schedule K-1/FP.d. is subject to having its annual reported income re-allocated among family member partners by the IRS.
50. A sale of a general partnership interest
a. automatically makes the purchaser a general partner.b. is only the sale of the selling partner’s economic interest in the partnership.c. is automatically subject to the right-of-first-refusal granted by the Uniform Partnership Code to the other partners.d. must first be approved by the other partners and approval may not be unreasonably withheld.
Extra Credit (Maximum of 10 points)
The following 10 questions are extra credit. Each correct answer is worth one point.
You will not lose credit on the regular portion of Test Two for wrong answers on the extra credit.
The answer sheet for the extra credit is the second page of the answer sheet for Test Two.If you choose to do the extra credit question, your answers are due by 11 p.m. on March 15.
1. Assume for 2013 that Don made one transfer involving his granddaughter as follows: Don opened a joint checking account with his granddaughter, with right of survivorship, for her college expenses. Don made an initial deposit of $100,000. During 2013, granddaughter wrote checks on the account to the school for tuition of $15,000 and living expenses of $20,000. What is the amount of the taxable gift for federal gift tax purposes?
a. 0.( Assumed that the granddaughter has not attained 21 years of age)b. $6,000. c. $21,000. d. $35,000.
2. Oliver gave his wife $5,250,000 worth of publicly traded stock in August 2013, outright. Oliver’s basis in the stock was $50,000. What is the amount of the taxable gift for federal gift tax purposes? (Oliver made no other gifts to anyone in 2013).
a. 0.b. $87,000.c. $100,000. d. $5,087,000.( Gift to spouse will be included in the taxable amount, but no tax will be paid on this)
3. For 2013, what is the amount of the maximum gift tax annual exclusion per donor from the value of a gift of a future interest made to any one donee?
a. 0.b. $14,000.c. $28,000.d. $5,250,000.
Facts for Questions 4 and 5. Mr. Grey died on January 1, 2013. Mr. Grey made no gifts during his life. Under his will, Mr. Grey devised all of his probate assets to his wife. Mr. Grey owned the following assets, probate and nonprobate, at the date of his death:
Asset 1. Home in Mr. Grey’s and Mrs. Grey’s (his surviving spouse) names as tenants by the entireties that was purchased in 2006. The home was had a fair market value of $2,000,000 both at the date of Mr. Grey’s death and six months after the Mr. Grey’s death.
Asset 2. Publicly traded stocks and bonds solely in , Mr. Grey’s name that had a fair market value of $3,000,000 on the date of Mr. Grey’s death and a fair market value of $2,000,000 six months after Mr. Grey’s death.
Asset 3. Undeveloped real estate in Mr. Grey’s name and the name of his daughter, Sue Smith, jointly with right of survivorship that Mr. Grey purchased in 2006 for $100,000. The property had a fair market value of $2,500,000 at the date of Mr. Grey’s death and a fair market value of $1,000,000 six months after the date of Mr. Grey’s death.
Asset 4. A condominium in the decedent’s name alone purchased in 2002 and used as a vacation home that had a fair market value of $500,000 on the date of Mr. Grey’s death. The condominium was sold by the personal representative of the decedent’s estate for $250,000 four months after Mr. Grey’s death.
Based on the facts for questions 4 and 5, which of the following options are available to Mr. Grey’s estate for valuation of the assets includible in the gross estate?
a. The estate may use date of death values or it may elect alternate valuation. b. The estate must use date of death values.c. The estate must elect alternate valuation.d. Valuation is not required as no Federal Estate Tax Return is required to be filed.
5. Facts for Questions 4 and 5. Mr. Grey died on January 1, 2013. Mr. Grey made no gifts during his life. Under his will, Mr. Grey devised all of his probate assets to his wife. Mr. Grey owned the following assets, probate and nonprobate, at the date of his death:
Asset 1. Home in Mr. Grey’s and Mrs. Grey’s (his surviving spouse) names as tenants by the entireties that was purchased in 2006. The home was had a fair market value of $2,000,000 both at the date of Mr. Grey’s death and six months after the Mr. Grey’s death.
Asset 2. Publicly traded stocks and bonds solely in , Mr. Grey’s name that had a fair market value of $3,000,000 on the date of Mr. Grey’s death and a fair market value of $2,000,000 six months after Mr. Grey’s death.
Asset 3. Undeveloped real estate in Mr. Grey’s name and the name of his daughter, Sue Smith, jointly with right of survivorship that Mr. Grey purchased in 2006 for $100,000. The property had a fair market value of $2,500,000 at the date of Mr. Grey’s death and a fair market value of $1,000,000 six months after the date of Mr. Grey’s death.
Asset 4. A condominium in the decedent’s name alone purchased in 2002 and used as a vacation home that had a fair market value of $500,000 on the date of Mr. Grey’s death. The condominium was sold by the personal representative of the decedent’s estate for $250,000 four months after Mr. Grey’s death.
Based upon the facts presented in the fact pattern for questions 4 and 5, what is the amount of Mr. Grey’s gross estate for federal estate tax purposes?
a. 0.b. $2,500,000. c. $3,500,000.d. $4,250,000.e. $7,000,000.
6. Louise, who died in January 2013, was survived by her husband, Larry. Louise’s gross estate was equal to $6,000,000 on the date of death. When Louise died, Louise and Larry owned an undeveloped parcel of real estate in Ocala. The fair market value of the land on the date of Louise’s death was $750,000. Larry provided all of the consideration for the purchase of the land, paying $200,000 for it in 2010. Alternate valuation is not available to Louise’s estate as all assets owned by Louise will pass, either under Louise’s last will and testament or by operation of law, to Larry and hence, no estate tax will be due because of the marital deduction. What is the amount, if any, includible in Louise’s gross estate for federal estate tax purposes with respect to the land?
a. 0.b. $200,000. c. $375,000.d. $750,000.
7. Under Carl’s will, Carl created a testamentary trust to be funded with $700,000 worth of assets. All of the income of the trust is payable to Carl’s child, Jane, for her life, and thereafter, the remaining assets of the trust will pass to The Public Charity. Jane is serving as the trustee. In addition, the trustee has the discretion to distribute all or such portion of the principal as the trustee shall determine for Jane’s heath, support, and maintenance. Jane’s father, Carl, died during the current taxable year with a gross estate of $5,350,000. Carl’s spouse died in 1985 and no estate tax return was due at her death. Which of the following statements is accurate with respect to the federal estate tax?
a The estate tax charitable deduction is available to Carl’s estate for the assets passing to The Public Charity.b. Jane powers with respect to the assets of the trust constitute a general power of appointment.c. Carl’s estate is not required to file Form 706, the Federal Estate and Generation-Skipping Tax Return.d. When Jane dies, her right to trust income for life will not cause inclusion of the assets in her gross estate.
8. At the time of his death, Nick owned the following property:
Land held by Nick and his sister Ellen, as joint tenants with right of survivorship. The fair market value of the land on the date of Nick’s death was $600,000, and the land was purchased by Nick for himself and his sister 20 years before his death for $150,000.
Land held by Nick and Amy as tenants by the entirety. The fair market value of the land on the date of Nick’s death was $800,000, and the land was purchased by Amy for Nick and Amy five years before Nick’s death for $450,000.
A one-half undivided interest in land held with Lance as tenant in common. The fair market value of the land on the date of Nick’s death was $400,000, and the land was purchased by Lance for Nick and Lance four years before Nick’s death for $300,000.
City of Dayton bonds worth $500,000 purchased by Nick five years before his death, and titled in Nick’s sole name.
What amount is includible in Nick’s gross estate assuming alternate valuation is not available to Nick’s estate?
a. $800,000.b. $1,100,000.c. $1,200,000.d. $1,700,000.
9. If an election is available and is made to use alternate valuation for federal estate tax purposes, then if property X is sold within six months after the decedent’s death, property X is valued for federal estate tax purposes as of which date?
a. The date of the decedent’s death.b. The date that is six months after the decedent’s of death.c. The date of sale of the property.d. The date the property is distributed to the beneficiaries.
10. Leslie died on October 31, 2013. Prior to 2012, Leslie had never made any gifts, but in 2012 she made some transfers. Specifically, on January 10, 2012, Leslie gave her vacation beach house to her five children outright, as tenants in common. The fair market value of the vacation beach house on the date of the transfer was $50,000. The fair market value of the vacation beach house at the date of Leslie’s death was $100,000. When Leslie died on October 31, 2013, she owned a vacant lot jointly with her sister, Melissa, as joint tenants with right of survivorship. Leslie and her sister each contributed $10,000 toward the $20,000 purchase price. The basis of the property did not change subsequent to the purchase, and at Leslie’s death, the fair market value of the property was $60,000. There is $90,000 of life insurance on the life of Leslie, and her estate is named as the beneficiary. (Assume all assets have the same value on the alternate valuation date as on the date of death). What is the amount of Leslie’s gross estate for federal estate tax purposes?
a. $120,000b. $170,000. c. $220,000.d. $250,000.

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