Posted: October 20th, 2022

Accounts 50 Multiple Choice Questions

1. In 2013, Juan invested $20,000 in a cattle-feeding partnership that used nonrecourse notes to purchase $70,000 of feed, which was used to feed the cattle and expensed. If Juan’s share of the expense was $50,000, what is the most that Juan can deduct in 2013?a. $20,000b. $30,000c. $50,000d. $70,0002. Maidelin, a corporate executive, exercised an incentive stock option (“ISO”) granted by Maidelin’s employer to purchase 1,000 shares of the corporation’s stock at the option price of $1 per share (i.e., the exercise price was $1 per share). The stock is freely transferable. At the time the option was exercised, the stock was selling for $16 per share. What is the AMT adjustment that results from Maidelin exercising the ISO (assume that Maidelin will NOT dispose of any of the stock during the year)?a. $0b. $1,000c. $15,000d. $16,0003. Bettyna, a single parent, lives in an apartment with Bettyna’s TWO minor children each under age 10, whom Bettyna supports. For 2013, Bettyna will have AGI and earned income of $22,000. Calculate the amount, if any, of Bettyna’s earned income credit.a. $5,372b. $4,431c. $2,000d. $04. David and Paula are married and file a joint return. In 2013, Paula worked fulltime and earned $11,000, while David worked fulltime and earned $15,000. Assume their 2013 AGI equaled $26,000. Assume they incurred $7,000 of child care expenses during 2013 for their TWO dependent children, Pamela and Bethsie (who are 5 and 7 years old, respectively). What is their child and dependent care CREDIT amount?a. $1,740b. $2,000c. $6,000d. $7,0005. In 2007, Natalia received stock from Mariana worth $15,000 at the time of the GIFT. At the time of the gift, Mariana’s adjusted basis in the stock was $25,000. What is the gain or loss that Natalia should report for 2013 if she sold the stock to Sofia in 2013 for $5,000 (ignore any gift tax that may have been paid on the transfer from Mariana to Natalia)?a. There is no gain or lossb. $5,000 gainc. $20,000 lossd. $10,000 loss 6. Now, assume that in the previous question Natalia sold the stock to Sofia for $30,000 (instead of $5,000). What is the gain or loss that Natalia should report (again, ignore any gift tax that may have been paid on the transfer from Mariana to Natalia)?a. There is no gain or lossb. $5,000 gainc. $15,000 gaind. $30,000 gain7. Now, assume that in Question 5 Natalia sold the stock to Sofia for $20,000 (instead of $5,000). What is the gain or loss that Natalia realized on the sale to Sofia (again, ignore any gift tax that may have been paid on the transfer from Mariana to Natalia)?a. There is no gain or lossb. $5,000 lossc. $5,000 gaind. $20,000 gain8. Robert traded in office equipment with an adjusted basis of $40,000 (and value of $60,000) for other (like-kind) office equipment then valued at $50,000. Robert also received $10,000 in cash as part of the deal. What was Robert’s recognized gain on the exchange, if any? a. $0b. $10,000 c. $20,000d. $60,0009. Randolph traded in computer equipment with an adjusted basis of $30,000 (and a value of $30,000) for other (like-kind) computer equipment then valued at $25,000. Randolph also received $5,000 in cash as part of the deal. What was Randolph’s realized gain on the exchange, if any? a. $25,000b. $10,000c. $5,000d. $010. In 2013, Dawn and Billy sold a house to Oleksii for $1,500,000. Prior the 2013 sale, neither Dawn nor Billy had ever excluded a gain from the sale of a personal residence. Dawn and Billy had lived in the house for the last eight years and used it exclusively for personal purposes. Dawn and Billy had purchased the house for $700,000. Dawn and Billy started living in the house immediately after purchasing it and never made any capital improvements to the house or took any depreciation (or other deductions) against it. Assume there were no selling expenses. How much of a gain did Dawn and Billy realize on the sale to Oleksii (assume that Dawn and Billy are married and file a joint return)?a. $1,500,000b. $800,000c. $300,000 d. $011. Assume the facts stated in the previous question. How much of a gain must Dawn and Billy recognize on the sale to Oleksii?a. $1,500,000b. $800,000c. $300,000 d. $012. In 2013, Sascha will have taxable income of approximately $40,000. In 2013, Sascha will also have a long-term capital loss of $12,000. Sascha has no other capital gains or losses (in 2013 or prior years). For 2013, what is the maximum capital loss amount that Sascha may use to offset her other income?a. $0b. $3,000c. $9,000d. $12,00013. Assume the facts stated in the prior question. Assume further that for 2013 Sascha offset her wages (with her capital loss) to the maximum extent permitted by law. What is the amount of Sascha’s capital loss carryover to 2014?a. $0b. $3,000c. $9,000d. $12,00014. Nicole is a single taxpayer in the 35% tax bracket. Nicole wants to minimize her 2013 tax liability. Which of the following provides the LARGEST tax benefit to Nicole (assume that she may legally take advantage of each item in its entirety for 2013)?a. A $1,010 exclusion from gross income.b. A $1,010 deduction from gross income.c. A $500 tax credit.d. Options “a” and “b” would provide the largest tax benefits.15. What was the MAXIMUM EARNED INCOME CREDIT amount that John and Jenny could possibly take for 2013? Assume they are U.S. taxpayers filing a joint return with THREE qualifying children.a. $0b. $3,000c. $6,000d. $6,04416. Which item MOST resembles an interest free loan from the U.S. government?a. The American Opportunity tax creditb. First-time homebuyer credit for a closing that occurred in June of 2008c. The earned income credit d. The child tax credit17. In early 2013, Anne-Emilie sold her personal residence to Julio for $500,000. At the time of the sale, Anne-Emilie’s adjusted basis was $400,000. Within three months of the sale, Anne-Emilie moved into a new residence she purchased for $350,000. What is Anne-Emilie’s basis in her new residence?a. $100,000b. $250,000c. $350,000d. $450,00018. Which of the following is TRUE?a. When compared to exclusions, deferrals are more temporary in natureb. When compared to deferrals, exclusions are more temporary in naturec. Section 1031 provides for an elective deferral upon certain exchangesd. All of the above19. Dinorah’s business property (located in Talhatown USA) was condemned by the proper local authorities. Immediately before the condemnation, the property had a fair market value of $400,000 and Dinorah’s adjusted basis in the property was $200,000. The local authorities replaced Dinorah’s condemned property with similar Talhatown property having a fair market value of $300,000. What is Dinorah’s realized gain or loss relating to these matters?a. $0b. Gain of $100,000c. Gain of $300,000d. Loss of $100,00020. Assume the facts stated in the prior question. What is Dinorah’s recognized gain or loss relating to such matters?a. $0b. Gain of $100,000c. Gain of $300,000d. Loss of $100,00021. Assume the facts stated in the prior two questions. What is Dinorah’s basis in the Talhatown property she received as a result of the condemnation (i.e., what is Dinorah’s basis in the newly acquired property)?a. $0b. $100,000c. $200,000d. $300,00022. In 2013, Maria and Marcus sold a house to Magda for $700,000. Maria and Marcus had purchased the house for $800,000 in 2005 (during the real estate boom). Maria and Marcus started living in the house immediately after purchasing it and never made any capital improvements to it or took any depreciation (or other deductions) against it. Assume there were no selling expenses. How much of a LOSS may Maria and Marcus recognize on the sale to Magda (assume that Maria and Marcus are married and file a joint return and itemize deductions)?a. $100,000 b. $100,000 less 10% of their AGIc. $99,900 less 10% of their AGId. $023. Zoff purchased land for $200,000 in 1990. The land was valued at $800,000 on July 1, 2013, when Zoff died. Zoff’s son Manuel inherited the land. What basis would Manuel have in the land as a result of the inheritance?a. $0b. $200,000c. $800,000d. Zoff’s adjusted basis on July 1, 2013 (if different than $200,000)24. Assume the same facts stated in the previous question. Which of the following is most likely TRUE, if Manuel sold the land in September 2013 for $900,000?a. Manuel’s 2013 gain is long-termb. In 2013, Manuel should “recapture” any depreciation previously taken by Zoff on the land c. In 2013, Manuel will be taxed on the appreciation that occurred while Zoff held the land (provided that such appreciation was previously not taxed)d. Manuel’s 2013 gain is short-term25. Which of the following statements is most likely TRUE for Nicholas (a typical individual taxpayer in the 35% tax bracket)?a. Nicholas usually prefers ordinary income to long-term capital gains b. Nicholas usually prefers ordinary losses to capital lossesc. Nicholas usually prefers a $1,000 deduction to a $800 creditd. Both “a” and “b” are correct26. Mazihel, who owns and operates an ICE CREAM SHOP as a sole proprietor, has the following property:• STOCKS held for Mazihel’s investment• Elaborate ice cream making EQUIPMENT that was inherited from Danita (Mazihel’s grandmother) (it is used exclusively in the ICE CREAM SHOP)• CHAIRS that are used exclusively Mazihel’s home• a COMPUTER used exclusively in the ICE CREAM SHOPConsidering the above items, which option below lists the capital asset(s) under Section 1221?a. Only the STOCKS b. Only the STOCKS & CHAIRSc. Only the EQUIPMENT, CHAIRS & COMPUTERd. Each of the above assets is a capital asset under Section 122127. Iris recently purchased a piece of land, a building and a truck for a lump sum of $500,000. The fair market value of the land was $200,000, the fair market value of the building was $350,000, and the fair market value of the truck was $50,000. What is Iris’s basis in the BUILDING?a. $0b. $291,667c. $300,000d. $350,00028. On September 1, 2001, Alexander paid $550 for 100 shares of TXX-5761 Inc. common stock. On August 13, 2013, Alexander received a nontaxable 10% common stock dividend (i.e., 10 additional shares of identical common stock). On August 13, 2013, TXX-5761 Inc. the common stock was trading on the market for $100 a share. On November 15, 2013, Alexander sold the 10 shares he received on August 13, 2013 to Ari. What is the basis of the 10 shares Alexander sold to Ari?a. $0b. $50c. $55d. $1,00029. Refer to the facts stated in the prior question. The gain or loss resulting from the November 15, 2013 sale to Ari will most likely be:a. Short-termb. Long-termc. Both short-term and long-termd. Neither short-term nor long-term 30. In 2013, Freda sold a piece of equipment from Freda’s business for $800,000. The equipment was purchased in 2009 for $480,000. Assume total of $336,000 depreciation was taken (prior to the sale). What is Freda’s recognized gain on the sale?a. $800,000b. $656,000c. $336,000d. $320,00031. Refer to the facts stated in the prior question. What amount of the gain (at least) will be recaptured at Irma’s ordinary income rate?a. $800,000b. $656,000c. $336,000d. $320,00032. Refer to the facts stated in the prior two questions. What amount of the gain will be treated as Section 1231 gain and (possibly) taxed at the long-term capital gain rate?a. $800,000b. $656,000c. $336,000d. $320,00033. Which of the following is most likely Section 1245 property (assume that each item has been held long-term and is used in a trade or business)?a. Business Equipmentb. Inventorya. Office Buildingc. Land34. Which of the following is most likely Section 1231 property (assume that each item has been held long-term and is used in a trade or business)?a. Section 1250 propertyb. Section 1245 propertyc. Landd. Each of the above items is Section 1231 property35. Which of the following would MOST LIKELY require an adjustment for the alternative minimum tax?a. A gambling lossb. A charitable contribution deductionc. A deduction for property taxesd. Each of the above items requires an adjustment for the alternative minimum tax36. Brian was at risk for $25,000 in Partnership X and $30,000 in Partnership Z on January 1, 2013. Both partnerships are passive activities to Brian (these are Brian’s only passive activities). Brian’s share of net income from Partnership X during 2013 is $10,000. Brian’s share of losses from Partnership Z during 2013 is $55,000. How much is Brian at risk for Partnership X on January 1, 2014?a. $35,000b. $25,000c. $10,000d. $037. Refer to the facts in the previous question. How much is Brian at risk for Partnership Z on January 1, 2014a. $85,000b. $55,000c. $30,000 d. $038. Refer to the facts in the previous questions. What is Brian’s carryover under the at-risk rules for Partnership Z in 2013?a. $55,000b. $30,000c. $25,000 d. $039. Refer to the facts in the previous question. What is Brian’s deductible loss for Partnership Z in 2013?a. $55,000b. $30,000c. $10,000d. $040. Refer to the facts in the previous question. What is Brian’s suspended loss under the passive loss rules for Partnership Z in 2013?a. $55,000b. $20,000c. $10,000 d. $041. In 2013, Satsuki invested in the MERCEDES Limited Partnership (“MERCEDES L.P.”) by paying $100,000 cash and contributing additional assets worth $40,000 (and having a basis equal to $30,000 on the date of the contribution). What amount did Satsuki have at risk in MERCEDES L.P. as of January 1, 2014, if MERCEDES L.P. broke even in 2013 (i.e., if MERCEDES L.P. had no income or loss in 2013)?a. $30,000b. $100,000c. $130,000d. $140,00042. Refer to the facts stated in the prior question. But, for this question, assume that MERCEDES L.P. allocated to Satsuki net income of $5,000 from operations in 2013. What amount does Satsuki have at risk in MERCEDES L.P. as of January 1, 2014?a. $35,000b. $105,000c. $130,000d. $135,00043. In 2013, Suzy and Satsuki (who file a joint return) had an interest expense of $6,000 on a loan that was used to purchase a variety of stock and bonds (all producing taxable income). Assume further that, in 2013, Suzy and Satsuki had net investment income of $4,000. Assume they itemize deductions, what is their maximum interest expense deduction in 2013?a. $10,000b. $6,000c. $4,000d. $044. Assume that Jose and Suma file a joint return and have the following items for 2013:Taxable income: $75,000Positive adjustments: $37,500Preferences: $37,500Regular tax ability: $10,608What was their 2013 AMT?a. $17,992b. $10,608c. $7,384d. $045. Assume that a couple that filed a joint return had 2013 AMTI of $375,000. What was the amount of their actual 2013 exemption for the AMT?a. $0b. $7,800 (i.e., $3,900 x 2)c. $25,525d. $80,80046. Gabriel is negotiating to buy land from Rachelle. What will Gabriel’s basis be in the land, if Gabriel gives Rachelle $50,000 and Gabriel assumes Rachelle’s mortgage on the land of $40,000?a. $90,000b. $50,000c. $40,000d. $10,00047. Which of the following is LEAST likely to qualify as a like-kind exchange under Section 1031 (assume all of the assets are used for business)?a. Unimproved real estate for office equipment b. Improved real estate for unimproved real estatec. Office building for a warehouse d. Office furniture for office equipment48. Manju exchanges undeveloped real estate for developed real estate on October 30, 2013. On October 30, 2013, the fair market value of each property is $500,000. Manju had purchased the undeveloped real estate on February 14, 2004, for $400,000. Both properties are considered investment property for Manju. Which of the following is FALSE?a. Manju’s basis in the developed real estate is $400,000 b. If Manju sells the developed real estate in June of 2014 for a gain, the gain will most likely be treated as a long-term gainc. Manju will realize a gain of $100,000 from the October 30, 2013 transaction d. Manju will recognize a gain of $100,000 from the October 30, 2013 transaction49. In October 2011, Polina purchased a playground set at a garage sale for $100. Polina is not in the business of buying and selling anything. Polina researched the playground set online and discovered it was worth $5,000. In December 2013, Polina sold the playground set through an auction website for that amount (i.e., $5,000). Which of the following is TRUE considering these transactions? a. Polina has a $4,900 long-term capital gainb. Polina has a $4,900 short-term capital gainc. Polina does not have any income d. Had Polina sold the playground set for $50, Polina could have deducted a $50 ordinary loss50. Oleksii had the following net Section 1231 results for each of the years shown below.Tax Year Net Section 1231 LOSS Net Section 1231 GAIN2008 $0 $02009 $0 $02010 $0 $02011 $7,000 2012 $5,000 2013 $20,000 Which of the following is TRUE regarding the net Section 1231 gain in 2013?a. All $20,000 will all be taxed at Oleksii’s ordinary income rate b. All $20,000 will all be taxed at Oleksii’s long-term capital gain ratec. Only $12,000 of the $20,000 will be taxed at Oleksii’s ordinary income rated. Only $5,000 of the $20,000 will be taxed at Oleksii’s ordinary income rate

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