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266 Cards in this Set
- Front
- Back
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R1-3a. What are 2 Types of the Federal Income Tax? (R-A)
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-Regular Tax
-AMT |
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R1-3b. What are 4 Examples of Other Taxes to increase Federal Income Tax? (S-I-Q-H)
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-Self employed social security tax
-IRA Tax -Qualified plan tax (withdrawing amounts for penalties, etc) -Household employees tax |
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R1-3c. What are 4 Examples of Payments to reduce the Federal Income Tax? (P-E-O-S)
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-Paycheck Withholding
-Estimated Payments Made -Overpayment from Prior Year -Social Security excess taken out from (i.e. 2 jobs for the current year instead of 1) |
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R1-4a. In individual taxation, which schedule does Interest and Dividends appear on?
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-Schedule B
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R1-4b. TRUE or FALSE: In order to qualify for adjustments to AGI, you must meet certain income thresholds.
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-FALSE, Deductions to Arrive at AGI are open to anybody.
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R1-4c. TRUE or FALSE: When incurring an interest withdrawl penalty, it should be netted with interest income.
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-FALSE, an interest withdrawl penalty SHOULD NOT be netted with interest income.
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R1-4c. If you are claiming a standard deduction rather than itemizing, which schedule should you use?
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-1040EZ
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R1-4d. IRA deductions fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-A. Adjustments to AGI
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R1-4e. Moving Expenses fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-A. Adjustments to AGI
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R1-4f. Casualty/Theft Losses fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-B. Itemized Deductions
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R1-4g. Alimony Paid falls under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-A. Adjustments to AGI
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R1-4h. Interest Expense on a home or investment falls under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-B. Itemized Deductions
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R1-4i. Interest Withdrawal Penalties fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-A. Adjustments to AGI
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R1-4j. Medical Expenses fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-B. Itemized Deductions
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R1-4k. State and Local Taxes (i.e. sales tax, property tax) fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-B. Itemized Deductions
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R1-4l. Tuition and Fee Deductions fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-A. Adjustments to AGI
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R1-4m. Educator Expenses fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-A. Adjustments to AGI
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R1-4n. Expenses which pertain to a Health Savings Account fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-A. Adjustments to AGI
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R1-4o. Deductions for Charity fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-B. Itemized Deductions
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R1-4p. Student Loan Interest Expenses fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-A. Adjustments to AGI
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R1-4q. Self-Employed Health Insurance Expenses fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-A. Adjustments to AGI
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R1-4r. Other Miscellaneous Deductions which are NOT subject to a 2% threshold of AGI fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-B. Itemized Deductions
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R1-4s. One-Half Self-Employment FICA Taxes fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-A. Adjustments to AGI
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R1-4t. Self-Employed Retirement Expenses fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-A. Adjustments to AGI
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R1-4u. Miscellaneous Deductions which ARE subject to the 2% threshold of AGI fall under which of the following categories?
A. Adjustments to AGI B. Itemized Deductions |
-B. Itemized Deductions
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R1-7a. TRUE or FALSE: An individual DOES NOT have to file a tax return if his total exemptions, standard deduction, AND additional standard deduction (if applicable) DOES NOT equal to or exceed his/her total gross income.
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-TRUE, but there are a few exceptions to the General Rule.
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R1-7b. What are the 2 Requirements to qualify for an additional standard deduction? (O-B)
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-Old (65 years or older)
OR -Blind |
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R1-7. If an individuals total exemptions, standard deduction, AND additional standard deduction (if applicable) DOES NOT equal to or exceed his/her total gross income, BUT he/she earns $250 from self-employment, is he/she required to file?
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-NO, Individuals whose net earnings from self-employment must be $400 or more.
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R1-7d. If an individuals total exemptions, standard deduction, AND additional standard deduction (if applicable) DOES NOT equal to or exceed his/her total gross income, BUT he/she can be claimed as a dependent, has unearned income, AND has gross income of $950 or more, is he/she required to file?
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-YES
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R1-7e. If an individuals total exemptions, standard deduction, AND additional standard deduction (if applicable) DOES NOT equal to or exceed his/her total gross income, BUT he/she receives advanced payments of earned income credit, is he/she required to file?
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-YES
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R1-7f. TRUE or FALSE: The automatic six-month extension for individuals (Form 4868) is an extension for payment for taxpayers who cannot pay their taxes by April 15.
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-FALSE, 4868 is NOT an extension for payment of any taxes owed - it is merely an extension to file a 1040.
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R1-7g. If you are outside the country and cannot file on time, you are entitled to a 2 month automatic extension. Does this imply that you may also pay your taxes 2 months later?
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-NO, you must pay all taxes due by April 15, no matter if you are filing an extension or not.
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R1-8a. TRUE or FALSE: In order to qualify for the status of Surviving Spouse, the only requirement is that your spouse must have died in the prior two years.
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-FALSE, they must have a dependent child to qualify.
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R1-8b. TRUE or FALSE: In order to qualify for the status of Surviving Spouse, the three requirements are that your spouse must have died in the prior two years, you must have dependent child, and you must maintain a household which supports that child for at least half the year.
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-FALSE, you must maintain a household which supports that child for the WHOLE YEAR! ('W'idow = 'W'hole Year)
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R1-9a. To qualify for the Head of Household status, what are the three requirements that MUST be met that pertain to your RELATIONSHIP to your SPOUSE? (N-S-L)
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-Not Married
-Seperated Legally OR -Lived Apart from his/her spouse for the LAST 6 MONTHS of the year AS OF THE CLOSE of the taxable year |
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R1-9b. To qualify for the Head of Household status, what are the 3 types of dependents which you must to support? (C-P-R)
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-Child or Descendent
-Parents OR -Relatives |
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R1-9c. TRUE or FALSE: To qualify for the Head of Household status, if your qualifying dependent is a child or decendent, they must be your dependent but they do not neccessarily have to live with the taxpayer - as long as you maintain their home for more than half of the year.
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-FALSE, dependent children or descendents MUST live with the taxpayer. (think of a divorced mother who raises her children)
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R1-9d. TRUE or FALSE: To qualify for the Head of Household status, if your qualifying dependent is your PARENT who lives in a nursing home, they must be your dependent but they do not neccessarily have to live at home with the taxpayer - as long as you maintain more then 50% support of their residence AND maintain their home for more than half of the year.
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-TRUE
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R1-9e. TRUE or FALSE: To qualify for the Head of Household status, if your qualifying dependent is your relative (Parents, grandparents, brothers, sisters, aunts, uncles, nephews, nieces, stepparents, parents-in-law, etc), they must be your dependent AND they have to live with you for the entire year - as long as you maintain their home for more than half of the year.
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-TRUE
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R1-9f. TRUE or FALSE: To qualify for the Head of Household status, if your qualifying dependent is your cousin, foster parent, or unrelated friends, these all meet the requirements of a dependent relative.
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-FALSE, Cousins, foster parents, and unrelated dependents do not qualify.
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R1-9f. To qualify for the Head of Household status, your qualifying dependent cannot be your cousin, foster parent, or an unrelated friend. Can you still claim an exemption for each of them if they meet the CARES or SUPORTS requirements?
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-YES
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R1-10a. In being married and filing seperately, a husband may claim his spouses exemption if 2 requirements are met. What are they? (N-N)
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-His spouse has [No] gross income.
-His spouse was [Not] claimed as a dependent on somebody elses return. |
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R1-10b. TRUE or FALSE: If a person dies on January 2, Year 1, you may claim an extension for him/her; however, it must be prorated to a factor of 2/365 days which he was alive for the year.
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-FALSE, if a person is born or dies during the year, you may claim an extension for them; however, they ARE NOT prorated.
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R1-11a. In order to deduct an exemption for a Qualifying Child, what are the 5 requirements? (C-A-R-E-S)
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-Close Relative
-Age Limit -Residence and Filing Requirements (greater than half the year) -Eliminate Gross Income Test -Support Test Changes (your child did not provide over 50% of their support) |
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R1-12a. In order to deduct an exemption for a Qualifying Relative, what are the 6 requirements? (S-U-P-O-R-T)
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-Support (over 50%) test
-Under a specific amount of (taxable) gross income test -Precludes dependent filing a joint tax return test -Only citizens (residents of US/Canada or Mexico) test -Relative test OR -Taxpayer lives with the individual for the ENTIRE year. |
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R1-12b. TRUE or FALSE: Social Security and state welfare payments are included in the dependent's total support, but only to the extent that such amounts are ACTUALLY expended for support purposes.
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-TRUE
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R1-12c. In filing a multiple support agreement, what are the two requirements? (M-M)
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-A contributor must have contributed [M]ore than 10% of the persons support.
-The joint contributors are required to file a [M]ultiple support declaration Form 2120. |
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R1-12d. TRUE or FALSE: In filing a multiple support agreements, assuming that each supporter meets the two requirements, they may all claim the exemption.
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-FALSE, they may only agree among themselves which contributor may claim the dependency exemption.
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R1-13a. TRUE or FALSE: A taxpayer will lose the exemption for a married dependent who files a joint return, even if the joint return is solely for the purposes of obtaining a tax refund.
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-FALSE, If a married dependent is filing a joint return for the purpose of refund, you may still claim their exemption. (this is the only exception to claiming an exemption to one who files a joint return)
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R1-13b. Two divorced parents share custody of their child. If the Mother maintains custody for 7 months, and the Father maintains custody for 5 months, who can claim their exemption?
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-Mother, unless she waives her right to the exemption by filing Form 8322.
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R1-13c. Two divorced parents share custody of their child. If the Mother maintains custody for 6 months and has AGI of 90,000, and the Father maintains custody for 6 months and has AGI of 100,000, who can claim their exemption?
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-Father, unless he waives his right to the exemption by filing Form 8322.
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R1-15a. If you buy a stock for $100 and it appreciates in value to $150, what is the realized gain?
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-ZERO, a gain of $50 would only be REALIZED when you sell the stock for $150.
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R1-15b. If you buy a non-taxable security for $100 and it appreicates in value to $150, and you subsequently sell it for $150, what is your basis?
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-$100, the NBV of the security. The basis for gains which are not taxable is the NBV. (therefore, there is no recognized gain, but there is a realized gain of $50)
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R1-15c. If you buy a taxable security for $100 and it appreicates in value to $150, and you subsequently sell it for $150, what is your basis?
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-$150, the FMV of the security. The basis for gains which are taxable is the FMV. (therefore, there is a recognized gain of $50)
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R1-16a. Interest and dividends fall into which basket of income?
A. Ordinary Income B. Porfolio Income C. Passive Income D. Capital |
-B. Porfolio Income
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R1-16b. TRUE or FALSE: Gains and losses on Interest and Dividends are unrealized.
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-FALSE, they are realized.
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R1-16c. TRUE or FALSE: You may offset passive income with a loss from a rental activity.
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-TRUE, passive income may only be offset against passive loss, or vice versa.
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R1-16d. TRUE or FALSE: If you cannot find any passive income to offset a passive loss, you may deduct it on your tax return.
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-FALSE, it is suspended and carried forward until passive income exists to offset it, UNLESS an exception exists and the REQUIREMENT for passive treatment is REMOVED.
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R1-17a. TRUE or FALSE: You may offset a passive loss with a general activity gain that is listed on your form K-1.
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-FALSE, only LIMITED activity on a K-1 is deemed passive. GENERAL activity is not passive!
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R1-17b. TRUE or FALSE: Form K for a Partnership, LLC, Fiduciary, or S Corporation is the summation of all of the earnings and deductions for each entity that gets broken up on each investor's K-1.
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-TRUE
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R1-17c. What is the maximum deduction for a capital loss of an individual?
A. 2,500 B. 3,000 C. 3,500 D. 5,000 |
-B. 3,000
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R1-17d. TRUE or FALSE: Capital Gains/Losses are caused by appreciations or depreciations in the FMV of capital assets.
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-FALSE, Capital Gains/Losses are caused by the SALE of capital assets.
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R1-17e. TRUE or FALSE: All debts cancelled are included in gross income, even if they were cancelled through bankruptcy.
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-FALSE, all debts cancelled are included in gross income, UNLESS they are cancelled through bankruptcy.
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R1-17f. TRUE or FALSE: If an employer sells property to the employee for less than its fair market value, the difference is income to the employee.
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-TRUE
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R1-18a. TRUE or FALSE: Guarenteed payments to a partner, without regard to the partner's ratio of income, are subject to the self-employment tax.
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-TRUE
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R1-18b. TRUE or FALSE: The FMV of a fringe benefit, such as an employee's personal use of a company car is NOT included in the employee's income.
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-FALSE, it is included as wages in the employee's income, and it is also subject to employment taxes and withholding.
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R1-18c. TRUE or FALSE: Non-Discriminatory Plans [i.e. in a partially taxable fringe benefit such as a group-term life insurance policy that covers an employee only up to a specific threshold] are only for executives.
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-TRUE
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R1-18d. TRUE or FALSE: If the proceeds from a life insurance proceeds include interest, none of it is taxable.
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-FALSE, interest income on life insurance proceeds is fully taxable.
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R1-18e. TRUE or FALSE: Accelerated death benefits received by a terminally ill insured are not taxable, BUT ONLY IF the proceeds are used to pay for long-term care.
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-TRUE
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R1-18f. Premium payments on Accident, Medical, and Health Insurance are __________ from the employee's income when the employer paid the insurance premiums.
A. Includable B. Excludable |
-B. Excludable
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R1-18g. Amounts of Accident, Medical, and Health Insurance paid to the employee under the policy are includable in income UNLESS such amounts are:
I. Reimbursement for medical expenses which were actually incurred by the employee II. Compensation for the permanent loss or loss of use of a member or function of the body. A. Both I and II B. I or II C. I D. II |
-B. I or II
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R1-19a. TRUE or FALSE: De Minimis Fringe Benefits, such as an employee's personal use of a company computer, must be included in their gross income.
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-FALSE, De Minimis fringe benifits are so minimal that they may be excluded from income.
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R1-19b. TRUE or FALSE: To be non taxable, employee lodging must be required as a condition of employment.
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-TRUE
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R1-19c. TRUE or FALSE: If an employer is paying for an employee's educational expenses, up to $5,250 may be excluded from gross income but this DOES NOT APPLY to graduate school.
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-FALSE, the exclusion applies to BOTH undergraduate and graduate level education. (MBA is OK)
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R1-19d. TRUE or FALSE: Undergraduates may exclude tuition reduction from gross income.
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-TRUE
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R1-19e. TRUE or FALSE: Graduate students may exclude tuition reduction in the same manner as undergraduates.
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-FALSE, graduate students may exclude tuition reduction ONLY if they are engaged in teaching or research activities AND ONLY if the tuition reduction is IN ADDITION to the pay for the teaching or research.
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R1-19f. Qualified Employee Discounts: If an employee receives a merchandise discount, it is:
A. Limited to 20% of the FMV of the merchandise itself. B. Limited to 230 /month. C. Limited to the employer gross profit. D. Limited to 250 /month. |
-C. Limited to the employer gross profit.
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R1-19g. Qualified Employee Discounts: If an employee receives a service discount, it is:
A. Limited to 20% of the FMV of services B. Limited to 230 /month. C. Limited to the employer gross profit. D. Limited to 250 /month. |
-A. Limited to 20% of the FMV of services.
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R1-19h. Qualified Employee Discounts: If an employee is entitled to employer-provided parking, it is:
A. Limited to 20% of the FMV of the parking space. B. Limited to 230 /month. C. Limited to the employer gross profit. D. Limited to 250 /month. |
-B. Limited to 230 /month.
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R1-19i. Qualified Employee Discounts: If an employee receives transit passes, it is:
A. Limited to 20% of the FMV of the transit pass itself. B. Limited to 230 /month. C. Limited to the employer gross profit. D. Limited to 250 /month. |
-B. Limited to 230 /month.
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R1-19j. In a qualified pension, profit-sharing, or stock bonus plan, the original payments by an employer [which were paid into a trust account (i.e. 401k)] are:
A. Taxable B. Nontaxable C. It Depends |
-B. Non Taxable
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R1-20a. In a qualified pension, profit-sharing, or stock bonus plan, the benefits received from that trust account (i.e. 401k) in the future are:
A. Taxable B. Nontaxable C. It Depends |
-A. Taxable
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R1-20b. TRUE or FALSE: If you elect to have money withdrawn from your paycheck to be placed into a flexible spending account, that amount WILL NOT show up on your W-2.
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-TRUE
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R1-20c. TRUE or FALSE: If you elect to have money withdrawn from your paycheck to be placed into a healthcare flexible spending account, you may use that money to offset any medical expenses, even expenses that are covered by insurance.
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-FALSE, you may not use a flexible spending account (pre-tax dollars) to offset any expense which is covered by insurance.
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R1-20d. TRUE or FALSE: If you elect to have money withdrawn from your paycheck to be placed into a flexible spending account, you may accumulate the account and carry it forward indefinitelly.
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-FALSE, funds not used within 2.5 months after year-end or not claimed within a period of time (i.e. 6 months) are forfeited. If you don't USE it, you LOSE it!
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R1-20e. TRUE or FALSE: For 2010, economic recovery payments are not taxable.
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-TRUE
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R1-22a. TRUE or FALSE: All interest is taxable, unless specifically excluded.
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-TRUE
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R1-22b. TRUE or FALSE: Interest income from Federal Bonds, such as US Treasury Notes and Bills are NOT TAXABLE.
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-FALSE
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R1-22c. TRUE or FALSE: Interest income from industrial development bonds are NOT TAXABLE.
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-FALSE
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R1-22d. TRUE or FALSE: Interest income from corporate bonds are TAXABLE.
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-TRUE
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R1-22e. TRUE or FALSE: Premiums received for opening a savings account (i.e. prizes and awards) are TAXABLE, but ONLY at the Book Value at which the bank paid for it.
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-FALSE, they are TAXABLE, but at FMV, not BV.
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R1-22f. TRUE or FALSE: Part of the proceeds from an installment sale is NOT TAXABLE.
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-TRUE
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R1-22g. TRUE or FALSE: Interest paid by federal or state government for late payment of a tax refund is TAXABLE.
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-TRUE
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R1-22h. For certain taxpayers and certain bonds, the amortization of a bond PREMIUM is a __________ to the interest received and a __________ to the bond's basis.
A. Reduction; Reduction B. Reduction; Increase C. Increase; Reduction D. Increase; Increase |
-A. Reduction; Reduction
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R1-22i. For certain taxpayers and certain bonds, the amortization of a bond DISCOUNT is a __________ to the interest received and a __________ to the bond's basis.
A. Reduction; Reduction B. Reduction; Increase C. Increase; Reduction D. Increase; Increase |
-D. Increase; Increase
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R1-22j. If a taxpayer with a basis of $100 purchases bonds for $100 that pays $10 interest but has a $20 premium, what is his amount of taxable interest in year 1, assuming he opts to amortize the bond premium over a 4 year life-span?
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1) $20 premium / 4 years = $5 per year
2) $10 interest per year - $5 = $5 Taxable Interest in Year 1 |
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R1-22j. If a taxpayer with a basis of $100 purchases bonds for $100 that pays $10 interest but has a $20 premium, what is his adjusted basis at the end of year 2, assuming he opts to amortize the bond premium over a 4 year life-span?
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1) $20 premium / 4 years = $5 per year
2) $100 Basis - $5 year 1 reduction - $5 year 2 reduction = $90 Adjusted Basis |
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R1-22k. TRUE or FALSE: Interest paid by state and local governments on bonds/obligations is NOT TAXABLE.
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-TRUE
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R1-22l. TRUE or FALSE: Interest earned on a Series EE Savings Bond is tax exempt ONLY to the extent that the interest is used to pay higher education expenses of the taxpayer, spouse, or dependents.
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-TRUE
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R1-22m. TRUE or FALSE: Interest earned on a Series EE Savings Bond is tax exempt when it is used for higher education expenses, but it will be reduced any tax-free scholarships.
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-TRUE
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R1-22n. TRUE or FALSE: Interest earned on a Series EE Savings Bond is tax exempt, and there is no phaseout.
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-FALSE, Phase-out starts when modified AGI exceeds an indexed amount.
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R1-22o. If a filthy rich guy shelters $5,000 under his qualifying child's social security number, how much is taxable at the parents rate?
A. $3,100 B. $950 C. $1,900 D. $0 |
-A. $3,100
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R1-23a. If you withdraw interest from a savings account (i.e. CD) prematurely and you have to pay penalties, these penalties are treated as an __________ gross income.
A. Adjustment to B. Deduction from |
-A. Adjustment to
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R1-23b. TRUE or FALSE: When you withdraw interest from a savings account prematurely and you have to pay penalties, these penalties are netted with interest income on the tax return.
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-FALSE, the amount of forfeited interest is reported SEPARATELY and NOT netted with interest income.
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R1-23c. If there are current earnings and profits at year end, the distribution should be treated as a __________.
A. Dividend B. Return of Capital C. Capital Gain Distribution |
-A. Dividend
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R1-23d. If there are accumulated earnings and profits at the distribution date, the distribution should be treated as a __________.
A. Dividend B. Return of Capital C. Capital Gain Distribution |
-A. Dividend
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R1-23e. If there are no earnings and profits, distributions should be treated as a __________.
A. Dividend B. Return of Capital C. Capital Gain Distribution |
-B. Return of Capital
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R1-23f. If there are no earnings and profits and all of the capital has already been distributed (i.e. there is no basis), distributions should be treated as a __________.
A. Dividend B. Return of Capital C. Capital Gain Distribution |
-C. Capital Gain Distribution
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R1-23g. TRUE or FALSE: In order to get the special (lower) tax rate on qualified dividends, the stock must be held for more than 60 days during the 120-day period which begins 60 days before the ex-dividend date.
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-TRUE
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R1-23h. TRUE or FALSE: The ex-dividend date is the date which a purchased share no longer is entitled to any recently declared dividends.
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-TRUE
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R1-24a. Disqualfied Dividends from the special (lower) tax rate include:
A. Regulated Investment Companies B. REIT (Real Estate Investment Trust) C. Employer stock held by an ESOP D. Accounts taken into account as investment income (for purposes of the limitation on investment expenses) E. Short sale positions F. Certain Foreign Corporations. G. All of the Above |
-G. All of the Above
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R1-24b. TRUE or FALSE: A return of capital must be included in gross income.
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-FALSE, it is tax exempt.
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R1-24c. TRUE or FALSE: A stock split is tax exempt.
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-TRUE
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R1-24d. TRUE or FALSE: A stock dividend is always tax exempt, even if the shareholder has the option to receive cash or other property.
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-FALSE, if the shareholder has an OPTION to receive cash or property, stock dividends are taxable at FMV.
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R1-24e. TRUE or FALSE: Life insurance dividends which are caused by ownership of insurance with a mutual company (premium return/refund) are tax exempt.
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-TRUE
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R1-24f. TRUE or FALSE: If a distribution by a corporation is not a dividend or a tax free distribution, it should be classified as a return of capital.
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-FALSE, it should be classified as a Capital Gain Distribution.
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R1-24g. TRUE or FALSE: Capital Gain Distributions by a corporaton that has no earnings and profits, and for which the shareholder has recovered his or her entire basis, are treated as taxable gross income.
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-TRUE
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R1-25a. State and Local Tax Refunds are taxable if you __________.
A. Itemized your deductions in the prior year. B. Took the standard deduction in the prior year. |
-A. Itemized your deductions in the prior year. (i.e. purposely overpaid to get a refund)
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R1-25b. State and Local Tax Refunds are non taxable if you __________.
A. Itemized your deductions in the prior year. B. Took the standard deduction in the prior year. |
-B. Took the standard deduction in the prior year. (note: interest is taxable on state refunds)
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R1-25c. Alimony payments made by the contributing spouse are a/an __________ to/from his/her AGI.
A. Adjustment B. Deduction |
-A. Adjustment
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R1-25d. TRUE or FALSE: Alimony payments may extend beyond the death of the payee-spouse - they can be made to their qualifying relatives/children or put away into a trust or estate only for qualifying beneficiaries.
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-FALSE, alimony payments cannot extend beyond the death of the payee-spouse.
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R1-25e. TRUE or FALSE: Alimony payments need not be made in cash; for example, you can make a gift to your ex-spouse.
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-FALSE, payments must be in cash (or its equivalent) [equivalent = pay credit card bills of your ex-spouse; pay her college fees]
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R1-25f. TRUE or FALSE: Alimony payments must be legally required pursuant to a written divorce (or separation) agreement.
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-TRUE
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R1-25g. TRUE or FALSE: Child Support payments are non-taxable to the receiving spouse.
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-TRUE
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R1-25h. A divorced father owes $1,500 in alimony and $900 in child support but he only pays $500. How much will be applied to alimony?
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-ZERO DOLLARS, the child support amount due must be completely paid before any amount may be applied to alimony.
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R1-25i. TRUE or FALSE: Property Settlements in a divorce settlement are taxable events. For example, if the divorce settlement provides that the wife receives the house and the husband incurs the mortgage, the exchange is taxable.
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-FALSE, Property settlements are not taxable.
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R1-26a. TRUE or FALSE: Net income from self-employment is computed on Schedule C. The net income from the sole proprietorship is then transferred to Form 1040 as one amount.
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-TRUE
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R1-27a. On Schedule C, the sole-proprietor must use the __________ method for inventory.
A. Cash B. Accrual |
-B. Accrual Method
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R1-28a. TRUE or FALSE: Cancellation of debt is included in gross income.
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-TRUE
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R1-28b. Under the accrual method for a sole proprietorship, inventory is expensed when __________.
A. Purchased B. Sold |
-B. Sold (the expense is your COGS)
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R1-28c. TRUE or FALSE: As a sole proprietor, you may expense the salary and commissions that you pay to yourself.
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-FALSE, only to others.
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R1-28d. Office Expenses such as supplies, equipment and rent are a __________ expense.
A. Deductible B. Nondeductible |
-A. Deductible
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R1-28e. If you use your automobile 100 miles for business and 50 miles for personal use, which portion is a deductible expense on Schedule C?
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-100 miles (based on a specific amount per mile provided by the federal government)
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R1-28f. Are business meals and entertainment expenses are 100% deductible?
A. Yes B. No C. It Depends |
-C. It Depends. 50% of business meals and expenses are deductible; however, if all proceeds go to benefit a charity, 100% may be deductible as an itemized deduction for charitable contributions.
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R1-28g. Depreciation of business assets are a __________ expense.
A. Deductible B. Nondeductible |
-A. Deductible
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R1-28h. TRUE or FALSE: Interest expense on business loans paid in advance by a cash basis tax payer may be deducted right away.
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-FALSE, it cannot be deducted until the tax year/period to which the interest relates.
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R1-28i. Employee benefits are a __________ expense.
A. Deductible B. Nondeductuble |
-A. Deductible
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R1-28j. Legal and professional services are a __________ expense.
A. Deductible B. Nondeductible |
-A. Deductible
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R1-28k. TRUE or FALSE: Bad debts actually written off for a cash basis taxpayer may deduct the expense using the direct write off method.
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-FALSE, only accrual method taxpayers may use the direct write off method.
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R1-28l. Bad debts actually written off for an accrual basis taxpayer may deduct the expense using the __________ method.
A. Direct Write off Method B. Allowance Method |
-A. Direct Write off Method (You can deduct ONLY to the extent of what you wrote off)
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R1-29a. TRUE or FALSE: Health insurance expense of a sole proprietor is reported on Schedule C.
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-FALSE, it is reported as an adjustment to arrive at AGI.
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R1-29b. TRUE or FALSE: Itemized Deductions may be business expenses.
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-FALSE, itemized deductions are always reported on Schedule A, not Schedule C.
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R1-29c. What are the two types of taxes on Net Business Income? (I-F)
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-Income Tax
-Federal self-employment tax (social security tax) |
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R1-29d. TRUE or FALSE: When an employer pays a self-employment/social security tax, they are responsible for only 50% of tax - whereby the employee is responsible for paying the other 50%.
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-FALSE, the employer is responsible for 100% of the self-employment/social security tax.
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R1-29e. TRUE or FALSE: Ordinary Income from an S-Corporation is not subject to self-employment tax.
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-TRUE
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R1-29f. A business with a loss may deduct the loss against other sources of income for a period of __________ years back and __________ years forward.
A. 2-years back, 30-years forward B. 20-years back, 2-years forward C. 30-years back, 2-years forward D. 2-years back, 20-years forward |
-D. 2-years back, 20-years forward
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R1-31a. Under the Uniform Capitalization Rules, Direct Materials Expenses will be __________.
A. Capitalized as Inventory. B. Expensed in the Period which it is incurred. |
-A. Capitalized as Inventory
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R1-31b. Under the Uniform Capitalization Rules, General Expenses will be __________.
A. Capitalized as Inventory. B. Expensed in the Period which it is incurred. |
-B. Expensed in the Period which it is incurred
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R1-31c. Under the Uniform Capitalization Rules, Factory Overhead Expense will be __________.
A. Capitalized as Inventory. B. Expensed in the Period which it is incurred. |
-A. Capitalized as Inventory
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R1-31d. Under the Uniform Capitalization Rules, Administrative Expenses will be __________.
A. Capitalized as Inventory. B. Expensed in the Period which it is incurred. |
-B. Expensed in the Period which it is incurred
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R1-31e. Under the Uniform Capitalization Rules, Selling Expenses will be __________.
A. Capitalized as Inventory. B. Expensed in the Period which it is incurred. |
-B. Expensed in the Period which it is incurred
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R1-31f. Under the Uniform Capitalization Rules, Direct Labor Expenses will be __________.
A. Capitalized as Inventory. B. Expensed in the Period which it is incurred. |
-A. Capitalized as Inventory
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R1-31g. Under the Uniform Capitalization Rules, Research & Development Expenses will be __________.
A. Capitalized as Inventory. B. Expensed in the Period which it is incurred. |
-B. Expensed in the Period which it is incurred
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R1-35a. TRUE or FALSE: Self-Employment Tax (Schedule SE) is computed by taking a percentage of your Gross Earnings from self-employment.
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-FALSE, it is derived from your NET Earnings from self-employment.
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R1-39a. How do you compute the gain or loss realized on the disposition of property?
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-Amount Realized - (Adjusted Basis of Assets Sold) = Gain or Loss Realized
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R1-39b. TRUE or FALSE: IRA Income (withdrawing funds from your Individual Retirement Account when you reach the age of 59.5) is taxable when withdrawn.
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-TRUE
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R1-39c. TRUE or FALSE: IRA Income that is from a traditional deductible IRA distribution is taxed as a special type of retirement income.
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-FALSE, it is taxed as Ordinary Income.
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R1-39d. TRUE or FALSE: Roth IRA's are taxed when the money is withdrawn.
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-FALSE
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R1-39e. TRUE or FALSE: In a traditional non-deductible IRA, the principle is non taxable when withdrawn but the accumulated earnings are taxable.
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-TRUE
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R1-40a. What are 6 exceptions to the 10% penalty for withdrawings funds prematurely from an IRA? (H-I-M-D-E-a-D)
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-Home buyer (first time)
-Insurance (medical) -Medical Expenses -Disability -Education Expenses -and -Death |
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R1-40b. If the investment in an annuity contract is $60,000 and the annuitant is 64 years old (actuary factor is 260 months [life expectancy]) at the start of the payout period, what amount is excludable from each of the first 260 payments?
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-$60,000 / 260 = $230.77 excludable
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R1-40c. TRUE or FALSE: If an annuitant lives longer than his actuariarily determined life expectancy, then further payments are partially taxable.
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-FALSE, they are fully taxable.
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R1-40d. TRUE or FALSE: If an annuant dies before the actuarial determined payments are collected, the unrecovered portion is a miscellaneous itemized deduction on the annuitant's final income tax return which is subject to the 2% floor of his/her AGI.
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-FALSE, it is a miscellaneous itemized deduction on their final income tax return; however, it is NOT subject to the 2% floor.
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R1-41a. __________ is used to compute supplemental income and loss from Rental Activities.
A. Schedule A B. Schedule C C. Schedule E D. Schedule D |
-C. Schedule C (all information listed on this form comes from K-1's.
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R1-43a. State the basic for the determination of net rental income or loss.
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Gross Rental Income + Prepaid Rental Income + Rent Cancellation Payment + Improvement In-Lieu-of Rent - Rental Expenses = Net Rental Income or Net Rental Loss
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R1-43b. TRUE or FALSE: Prepaid Rental Income can only be non refundable deposits and it is taxable income to the landlord RIGHT NOW.
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-TRUE
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R1-43c. TRUE or FALSE: Improvement In-Lieu-of Rent, such as a home improvement, must be recorded at book value.
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-FALSE, it must be recorded at FMV
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R1-44a. TRUE or FALSE: If passive losses are unused and you dispose of (sell) the property for which it pertains to, you may deduct the passive losses in full during that year.
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-TRUE
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R1-44b. Passive activity losses may be carried forward for how many years?
A. 3 years B. 5 years C. 7.5 years D. Indefinitally |
-D. Indefinitally
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R1-44c. TRUE or FALSE: Taxpayers with passive activity losses may deduct up to $25,000 per year, even if they don't actively participate in the maintainance.
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-FALSE, they must be actively participating in the property in order to qualify for the allowance.
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R1-44d. TRUE or FALSE: For every $2.00 of income over $100,000, your $25,000 allowance of passive activity losses is reduced by $1.00.
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-TRUE, the allowace is eliminated completely when AGI exceeds $150,000.
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R1-45a. TRUE or FALSE: Real Estate Agents may deduct passive activity losses in full every year if they are a fulltime real estate agent.
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-TRUE
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R1-45b. TRUE or FALSE: Unemployment compensation is tax free but workers' compensation is taxable.
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-FALSE, VICE VERSA
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R1-45c. Social Security Income is taxed at the following rates: Lower income at _________; Middle income at __________; and Upper Income at __________.
A. 0%; 50%; 80% B. 0%; 55%; 80% C. 0%; 50%; 85% D. 20%; 50%; 85% |
-C. 0%; 50%; 85%
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R1-46a. TRUE or FALSE: The FMV of prizes and awards is taxable income.
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-TRUE
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R1-46b. TRUE or FALSE: Gambling Winnings are not taxable events.
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-FALSE
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R1-46c. TRUE or FALSE: Gambling Losses may be deducted with no limitations.
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-FALSE, they are only deductible to the extent of gambling winnings, and they are not subject to the 2% floor.
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R1-46d. TRUE or FALSE: You must net gambling losses and gambling winnings together.
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-FALSE, you DO NOT net them together. Gambling losses are taken as itemized deductions on Schedule A.
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R1-46e. If you receive a damage award for business lost profits, the amount is __________.
A. Taxable B. Non Taxable |
-A. Taxable
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R1-46f. TRUE or FALSE: Punitive damages are fully taxable as ordinary income if received in a business context or for loss of personal reputation.
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-TRUE
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R1-46g. TRUE or FALSE: Scholarships and fellowship grants are excludible only up to amounts actually spent on tuition, fees, books, supplies, and room and board, provided that the grant is made to a degree seeking student, even if the grant is contingent on a service in which the student must perform.
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-FALSE, room and board is not included and no services are to be performed as a condition to receiving the grant.
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R1-46h. TRUE or FALSE: Tuition reductions for graduate teaching assistants and research assistants are taxed at the reduction if it is their only compensation.
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-TRUE
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R1-47a. TRUE or FALSE: Interest income on life insurance proceeds is fully taxable.
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-TRUE
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R1-47b. TRUE or FALSE: Medicare Benefits are fully taxable.
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-FALSE
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R1-47c. TRUE or FALSE: Accident Insurance proceeds, even if you did not pay the original premiums, is tax free.
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-FALSE, it is only tax free if the insured paid the premiums for the policy.
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R1-48a. Land is __________ property.
A. Real B. Persona |
-A. Real
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R1-48b. Machinery is __________ property.
A. Real B. Personal |
-B. Personal
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R1-48c. Equipment is __________ property.
A. Real B. Personal |
-B. Personal
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R1-48d. Buildings are __________ property.
A. Real B. Personal |
-A. Real
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R1-48e. Machnery and Equipment; Land and Building are examples of __________ property.
A. Section 1231 B. Section 1245 C. Section 1250 |
-A. Section 1231
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R1-48f. Copyrights, literary, musical, or artistic compositions which have been purchased from an original artist are examples of __________.
A. Capital Assets B. Non-capital Assets |
-A. Capital Assets
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R1-48g. TRUE or FALSE: Section 1231 assets are forms of capital assets.
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-FALSE
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R1-51a. A taxpayer conveys commercial property in which he has a basis of $70,000 and which is subject to morgage of $45,000 to X for $60,000 in cash. In computing the formula for capital gains and losses, what is his amount realized?
A. $70.000 B. $115,000 C. $105,000 D. $60,000 |
-C. $105,000
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R1-51b. A taxpayer conveys commercial property in which he has a basis of $70,000 and which is subject to morgage of $45,000 to X for $60,000 in cash. In computing the formula for capital gains and losses, what is his amount of realized gain?
A. $45,000 B. $105,000 C. $60,000 D. $35,000 |
-D. $35,000
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R1-51c. TRUE or FALSE: In computing the formula for capital gains and losses, if you have a gain from an excess amount caused by a cancellation of debt (boot), it is taxable.
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-TRUE
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R1-51d. TRUE or FALSE: In computing the formula for capital gains and losses, a gain resultign from cash received is taxable.
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-TRUE
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R1-51e. What are the 3 ways that you can acquire something? (P-G-I)
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-purchase
-gift -inheritance |
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R1-52a. If grandma bought a car for $20,000 and gifted it to you when the FMV is only $5,000, what is your basis in the car?
A. $20,000 B. $5,000 C. $15,000 D. $0, there is a time limitation exception |
-A. $20,000
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R1-52b. If grandma bought a car for $20,000 and gifted it to you when the FMV is only $5,000, and you subsequently sell it for $3,000, what is your basis in the car?
A. $20,000 B. $5,000 C. $15,000 D. $0, there is a time limitation exception |
-B. $5,000
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R1-52c. If grandma bought a car for $20,000 and gifted it to you when the FMV is only $5,000, and you subsequently sell it for $25,000, what is your basis in the car?
A. $20,000 B. $5,000 C. $15,000 D. $0, there is a time limitation exception |
-A. $20,000
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R1-52d. If grandma bought a car for $20,000 and gifted it to you when the FMV is only $5,000, and you subsequently sell it for $17,000, what is your realized gain/loss?
A. $20,000 B. $5,000 C. $(2,000) D. $0 |
-D. $0
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R1-52e. If grandma bought a car for $20,000 and gifted it to you when the FMV is only $5,000, and you subsequently sell it for $3,000, what is your realized gain/loss?
A. $(20,000) B. $5,000 C. $(2,000) D. $0 |
-C. $(2,000)
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R1-52f. If grandma bought a car for $20,000 and gifted it to you when the FMV is only $5,000, and you subsequently sell it for $25,000, what is your realized gain/loss?
A. $20,000 B. $5,000 C. $2,000 D. $0 |
-B. $5,000
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R1-53a. TRUE or FALSE: When somebody receives a gift, the holding period starts at 0 years
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-FALSE, the recipient of the gift normally assumes the donor's holding period.
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P1-53b. If grandma bought a car for $20,000 and gifted it to you when the FMV is $50,000, what is your basis in the car?
A. $20,000 B. $40,000 C. $30,000 D. $0 |
-A. $20,000
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R1-53c. If grandma bought a car for $20,000 and gifted it to you when the FMV is $50,000, and you subsequently sell it for $30,000, what is your basis in the car?
A. $20,000 B. $40,000 C. $10,000 D. $0 |
-A. $20,000
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R1-53d. If grandma bought a car for $20,000 and gifted it to you when the FMV is $50,000, and you subsequently sell it for $30,000, what is your realized gain/loss?
A. $(20,000) B. $10,000 C. $20,000 D. $0 |
-B. $10,000
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R1-54a. If grandma bought a car for $20,000, died, and you inherited it when FMV is only $5,000, what is your basis in the car?
A. $5,000 B. $20,000 C. $15,000 D. $0 |
-A. $5,000
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R1-54b. If grandma bought a car for $20,000, died, and you inherited it when FMV is $35,000, what is your basis in the car?
A. $35,000 B. $20,000 C. $15,000 D. $0 |
-A. $35,000
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R1-54c. If grandma bought a car for $20,000, died, and you inherited it when FMV is $35,000 and sold it 2 months later for $30,000, what is your realized gain/loss?
A. $15,000 B. $(5,000) C. $10,000 D. $0 |
-B. $(5,000)
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R1-54d. If grandma bought a car for $20,000, died, you inherited it when FMV is $35,000, it depreciated in value by $10,000 over the next six months, and sold it 1 year later for $30,000, what is your realized gain/loss, assuming the alternate valuation date was not elected?
A. $5,000 B. $10,000 C. $(5,000) D. $0 |
-C. $(5,000)
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R1-54e. If grandma bought a car for $20,000, died, you inherited it when FMV is $35,000, it depreciated in value by $10,000 over the next six months, and sold it 1 year later for $30,000, what is your realized gain/loss, assuming the alternate valuation date was elected?
A. $5,000 B. $10,000 C. $(5,000) D. $0 |
-C. $5,000
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R1-54f. TRUE or FALSE: Property acquired from a decedent is automatically considered to be long-term property regardless of how long it actually has been held.
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-TRUE
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R1-55a. What are 6 types of capital gains that you do not have to pay taxes on, at least not at the moment? (H-I-D-E-I-T)
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-Homeowners Exclusion
-Involuntary Conversion -Divorce Property ettlements -Exchange of Like Kind (Busines) -Installment Sale -Treasury Capital & Stock |
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R1-55b. What are 3 types of capital losses that ARE NOT ALLOWED? (W-R-a-P)
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-Wash Sale Losses
-Related Party Losses and -Personal Losses |
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R1-56a. On a sale of a residence, the homeowner's exclusion available to married couples filing a joint return is __________.
A. 300,000 B. 350,000 C. 250,000 D. 500,000 |
-D. 500,000
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R1-56b. On a sale of a residence, the homeowner's exclusion available to individuals who are single, married filing separately, and head of household status is __________.
A. 200,000 B. 250,000 C. 300,000 D. 350,000 |
-B. 250,000
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R1-56c. To qualify for the full homeowner's exclusion on the sale of a residence, the taxpayer must have owned and used the property as a principle residence for __________ years or more during the __________ year period ending on the date of the sale or exchange.
A. 2.5; 5 B. 2; 5 C. 2; 5.5 D. 2; 6 |
-B. 2; 5
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R1-56d. TRUE or FALSE: In order to qualify for the full homeowner's exclusion on the sale of a residence, both spouses on a joint return must meet the ownership requirement of 2 years for the 5 year period.
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-FALSE, either spouse for a joint return must meet the ownership requirement, but both spouses must meet the use requirement with respect to the property.
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R1-56e. Assuming that a married couple who files a joint return meets the ownership and use requirement to qualify for the homeowners exclusion, and they sell their house for a realized gain of $600,000, what amount is taxable?
A. $600,000 B. $500,000 C. $0 D. $100,000 |
-D. $100,000
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R1-56f. TRUE or FALSE: Taxpayers may be eligible for a partial (on a prorated basis) homeowner's exclusion if the sale is due to a change in place of employment, health, or unforeseen circumstances, and the exclusion has been claimed within the previous two years or the taxpayer FAILS to meet the ownership and use requirements.
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-TRUE
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R1-56e. TRUE or FALSE: The homeowner's exclusion may only be used once.
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-FALSE, it is renewable, but the exclusion may not be used mroe than once every two years.
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R1-56f. TRUE or FALSE: There is an age limit of 18 to qualify for the homeowner's exclusion.
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-FALSE, there is no age limit.
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R1-56g. TRUE or FALSE: In order to qualify for the homeowner's exclusion, no rollover to another house is required.
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-TRUE
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R1-57a. If my wife loses her diamond ring that originally costed $5,000 and my insurance company pays us $20,000, what is my realized gain, assuming that I invest invest the insurance proceeds in another similar item within 2 years?
A. $0 B. $15,000 C. $5,000 D. $20,000 |
-A. $0, involuntary conversion of personal property must be reinvested within 2 years from year end (12/31) to get nonrecognition treatment.
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R1-57b. If a painting in my office at work was stolen that originally costed $5,000 and my insurance company pays me $20,000, what is my realized gain, assuming that I invest invest the insurance proceeds in another similar item 5 years later?
A. $0 B. $15,000 C. $5,000 D. $20,000 |
-B. 15,000, involuntary conversion of business property must be reinvested within 3 years from year end (12/31) to get nonrecognition treatment.
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R1-57e. Crudd owned a building with an adjusted basis of $400,000. The state condemned it and awarded him $450,000. Crudd bought a new building for $440,000. What is his recognized gain/loss?
A. $50,000 B. $10,000 C. $(400,000) D. $40,000 |
-B. $10,000, this amount represents the boot that was not used.
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R1-58a. Rigoli had a factory with a cost basis of $340,000 that was destroyed by a fire. His insurance company paid him $330,000. Rigoli used the proceeds to buy a new plant for $500,000. What is his recognized gain/loss?
A. $0 B. $(10,000) C. $330,000 D. $10,000 |
-B. $(10,000), Involuntary conversion rules apply to gains only.
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R1-58b. TRUE or FALSE: In a divorce property settlement, the property is taxable to the party receiving it.
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-FALSE, divorced property settlements are not taxable.
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R1-58c. TRUE or FALSE: Nonrecognition treatment applies to like-kind exchange of property used in trade or business or held in investment including the trading of stock, securities, partnership interests, and real property in different countries.
|
-FALSE, like-kind exchange of property used in trade or business or held in investment DOES NOT INCLUDE trading of stock, securities, partnership interests, and real property in different countries.
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R1-58d. Nonrecognition on the exchange of like-kind business/investment assets would most likely be associated with __________ or __________. (B-S)
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-Business Trade-in
-Swapping real estate |
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R1-58e. A taxpayer owns investment realty worth $40,000 with an adjusted basis of $25,000. If the taxpayer exchanges this property for other realty worth $35,000 and $5,000 in cash, what is his recognized gain/loss?
A. $(5,000) B. $5,000 C. $0 D. $35,000 |
-B. $5,000, the cash is boot because it doesn't qualify as property of like-kind exchange.
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R1-58f. A taxpayer owns investment realty worth $40,000 with an adjusted basis of $25,000. If the taxpayer exchanges this property for other realty worth $35,000 and $5,000 in cash, what is his new basis?
A. $35,000 B. $40,000 C. $20,000 D. $25,000 |
-D. $25,000, Carryover basis of $25,000 LESS the boot received of $5,000 + gain recognized of $5,000.
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R1-59a. A taxpayer trades in an automobile used solely for business purposes for another automobile to be used in his business. His automobile originally cost $35,000 and is currently worth $20,000. Assume that the automobile that the taxpayer wants in exchange is worth $20,000 and the taxpayer has taken $18,000 of depreciation on his old automobile. What is the gain or loss realized by the taxpayer on this like-kind exchange?
A. $3,000 B. $(15,000) C. $(2,000) D. $0 |
-A. $3,000
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R1-59b. A taxpayer trades in an automobile used solely for business purposes for another automobile to be used in his business. His automobile originally cost $35,000 and is currently worth $20,000. Assume that the automobile that the taxpayer wants in exchange is worth $20,000 and the taxpayer has taken $18,000 of depreciation on his old automobile. What is the gain or loss recognized by the taxpayer on this like-kind exchange?
A. $3,000 B. $(15,000) C. $(2,000) D. $0 |
-D. $0, the lesser of the gain realized or the boot received of $0.
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R1-59c. A taxpayer trades in an automobile used solely for business purposes for another automobile to be used in his business. His automobile originally cost $35,000 and is currently worth $20,000. Assume that the automobile that the taxpayer wants in exchange is worth $20,000 and the taxpayer has taken $18,000 of depreciation on his old automobile. What taxpayer's basis in the new property received on this like-kind exchange?
A. $20,000 B. $17,000 C. $35,000 D. $0 |
-B. $17,000
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R1-59d. A taxpayer trades in an old automobile used solely for business for another autommobile to be used for business. His automobile originally cost $35,000 and is currently worth $20,000. Assume that the automobile that the taxpayer wants in exchange is worth $20,000 and the taxpayer has taken $12,000 of depreciation on his old automobile. What is the gain or loss realized by the taxpayer on this like-kind exchange?
A. $(3,000) B. $3,000 C. $20,000 D. $0 |
-A. $(3,000)
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R1-59e. A taxpayer trades in an old automobile used solely for business for another autommobile to be used for business. His automobile originally cost $35,000 and is currently worth $20,000. Assume that the automobile that the taxpayer wants in exchange is worth $20,000 and the taxpayer has taken $12,000 of depreciation on his old automobile. What is the gain or loss recognized by the taxpayer on this like-kind exchange?
A. $(3,000) B. $3,000 C. $20,000 D. $0 |
-D. $0, realized loss is NEVER recognized in like-kind exchange.
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R1-59f. A taxpayer trades in an old automobile used solely for business for another autommobile to be used for business. His automobile originally cost $35,000 and is currently worth $20,000. Assume that the automobile that the taxpayer wants in exchange is worth $20,000 and the taxpayer has taken $12,000 of depreciation on his old automobile. What is the taxpayer's basis in the new property received on this like-kind exchange?
A. $20,000 B. $0 C. $23,000 D. $35,000 |
-C. $23,000
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R1-60a. A taxpayer trades in an old automobile used solely for business for another automobile to be used for business. The automobile originally cost $35,000 and the taxpayer has taken $18,000 in depreciation. The old automobile is currently worth $20,000. Assume that the new automobile the taxpayer wants in exchange is only worth $16,500, so the other party agrees to give the taxpayer a trailer worth $3,500 in addition to the new automobile. What is the gain or loss realized by the taxpaper on this like-kind exchange?
A. $3,500 B. $3,000 C. $(3,500) D. $20,000 |
-B. $3,000
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R1-60b. A taxpayer trades in an old automobile used solely for business for another automobile to be used for business. The automobile originally cost $35,000 and the taxpayer has taken $18,000 in depreciation. The old automobile is currently worth $20,000. Assume that the new automobile the taxpayer wants in exchange is only worth $16,500, so the other party agrees to give the taxpayer a trailer worth $3,500 in addition to the new automobile. What is the gain or loss recognized by the taxpaper on this like-kind exchange?
A. $3,500 B. $3,000 C. $(3,500) D. $20,000 |
-B. $3,000, the lesser of the realized gain of $3,000 or boot received of $3,500
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R1-60c. A taxpayer trades in an old automobile used solely for business for another automobile to be used for business. The automobile originally cost $35,000 and the taxpayer has taken $18,000 in depreciation. The old automobile is currently worth $20,000. Assume that the new automobile the taxpayer wants in exchange is only worth $16,500, so the other party agrees to give the taxpayer a trailer worth $3,500 in addition to the new automobile. What is the taxpayer's basis in the new property received on this like-kind exchange?
A. $20,000 B. $17,000 C. $0 D. $16,500 |
-D. $16,500
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R1-60d. A taxpayer trades in an old automobile used solely for business for another automobile to be used for business. The automobile originally cost $35,000 and the taxpayer has taken $18,000 in depreciation. The old automobile is currently worth $20,000. Assume that the new automobile the taxpayer wants in exchange is only worth $17,500, so the other party agrees to give the taxpayer cash of $2,500 in addition to the new automobile. What is the gain or loss realized by the taxpaper on this like-kind exchange?
A. $2,500 B. $3,000 C. $(2,500) D. $20,000 |
-B. $3,000
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R1-60e. A taxpayer trades in an old automobile used solely for business for another automobile to be used for business. The automobile originally cost $35,000 and the taxpayer has taken $18,000 in depreciation. The old automobile is currently worth $20,000. Assume that the new automobile the taxpayer wants in exchange is only worth $17,500, so the other party agrees to give the taxpayer cash of $2,500 in addition to the new automobile. What is the gain or loss recognized by the taxpaper on this like-kind exchange?
A. $2,500 B. $3,000 C. $(2,500) D. $0 |
-A. $2,500
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R1-60f. A taxpayer trades in an old automobile used solely for business for another automobile to be used for business. The automobile originally cost $35,000 and the taxpayer has taken $18,000 in depreciation. The old automobile is currently worth $20,000. Assume that the new automobile the taxpayer wants in exchange is only worth $17,500, so the other party agrees to give the taxpayer cash of $2,500 in addition to the new automobile. What is the taxpayer's basis in the new property received on this like-kind exchange?
A. $20,000 B. $0 C. $17,500 D. $17,000 |
-D. $17,000
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R1-63a. Assume that a taxpayer had $400,000 in installment sales in Year 1 and a December 31, Year 1, balance in installment accounts receivable of $150,000. If the taxpayer had $300,000 as its cost of goods sold, what is his gross profit?
A. $400,000 B. $550,000 C. $100,000 D. $450,000 |
-C. $100,000
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R1-63b. Assume that a taxpayer had $400,000 in installment sales in Year 1 and a December 31, Year 1, balance in installment accounts receivable of $150,000. If the taxpayer had $300,000 as its cost of goods sold, what is his gross profit percentage?
A. 33% B. 25% C. 38% D. 27% |
-B. 25%
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R1-63c. Assume that a taxpayer had $400,000 in installment sales in Year 1 and a December 31, Year 1, balance in installment accounts receivable of $150,000. If the taxpayer had $300,000 as its cost of goods sold, what is his earned revenue (taxable income)?
A. $62,500 B. $100,000 C. $125,000 D. $75,000 |
-A. $62,500
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R1-65a. TRUE or FALSE: Treasury and capital stock transactions by a corporation, such as sales of stock by a corporation, repurchases of stock by a corporation, or a reissuance of stock are not taxable events.
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-TRUE
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R1-65b. On 1/4/08, you purchase one share of a stock for $100. On 3/5/09, you buy another share for $40. Then, on 3/15/09, you sell the first share for $41. What is your realized gain/loss?
A. $1 B. $0 C. $(59) D. $41 |
-C. $(59)
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R1-65c. On 1/4/08, you purchase one share of a stock for $100. On 3/5/09, you buy another share for $40. Then, on 3/15/09, you sell the first share for $41. What is your recognized gain/loss?
A. $1 B. $0 C. $(59) D. $41 |
-B. $0, this constitutes a wash sale and no losses can be recognized.
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R1-65d. TRUE or FALSE: The 30 day selling restriction on wash sales apply to sales which result in gains too, whereby the gain is not recognized if it is sold for a gain within 30 days of the purchase date.
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-FALSE, gains will always be recognized.
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R1-65e. A taxpayer purchased 100 shares of IBM stock on 09/08/1982 for a cost of $22,000 and sold them on 04/20/2009 for $21,000. He then purchased 100 shares of IBM stock on 04/25/2009. What is his recognized gain/loss?
A. $(1,000) B. $21,000 C. $0 D. $(22,000) |
-C. $0
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R1-66a. TRUE or FALSE: If you own 50% of an entity and you incur a loss from trading with that entity, you may deduct the loss.
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-TRUE, it must be MORE THAN 50% ownership for it to be classified as a related party transaction; thus, a disallowed loss.
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R1-66b. TRUE or FALSE: In-laws are not related parties.
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-TRUE
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R1-66c. TRUE or FALSE: Capital gain taxes are imposed on all sales of nondepreciable property (i.e. land) between all related parties.
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-FALSE, transactions which result in a gain between a husband and a wife; and an individual and his 50% or more owned entity, are NOT TAXABLE.
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R1-66d. TRUE or FALSE: The basis rules for related party transactions are the same rules as gift basis rules.
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-TRUE
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R1-67a. TRUE or FALSE: A deduction may be allowed for the loss on a non-business asset (i.e. disposal), especially if a loss occurs due to casualty or theft.
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-FALSE, no deduction is allowed for the loss on a non-business disposal or loss. An itemized deduction may be available in the category of casualty and theft.
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R1-67b. TRUE or FALSE: In order for a capital gain or loss to get long-term treatment, the holding period must be more than 1 year; hence if it is under 1 year, it will receive short-term treatment.
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-TRUE
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R1-67c. The tax rate for short-term capital gains/losses is __________.
A. 0% B. 10% C. 15% D. Treated as ordinary income. |
-D. Treated as ordinary income.
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R1-68a. For net capital losses, the max deduction for individuals is __________.
A. $0 B. Unlimited C. $5,000 D. $3,000 |
-D. $3,000
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R1-68b. If you incur a net capital loss and you are married filing a seperate return, the max deduction for each of you is __________.
A. $0 B. Unlimited C. $1,500 D. $3,000 |
-C. $1,500
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R1-68c. TRUE or FALSE: If you incur a net capital loss which exceeds the $3,000 max deduction, you may carry it forward for 5 years and carry it back 2 year.
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-FALSE, no carrybacks are permited for capital losses and you are allowed to carry them forward indefinitally.
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R1-69a. TRUE or FALSE: Just as individuals do, corporations get a tax benefit for long-term capital gains.
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-FALSE, there is no special/lower tax rate for corporations.
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R1-69b. TRUE or FALSE: Corporations may not deduct any capital losses from ordinary income - they may only use their capital losses to offset their capital gains.
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-TRUE
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R1-69c. TRUE or FALSE: Corporations may carry their capital losses forward indefinitally.
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-FALSE, net capital losses are carried back three years and forward five years as a SHORT-TERM CAPITAL LOSS.
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