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Denver ACCOUNTING 3090 FALL 2014 INCOME TAX

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Question;Assignment III1.. Determine the proper classification(s) of the asset discussed in the following scenario:"An author of computer instruction manuals receives a copyright for a new manuscript."I.Personal use property.IV.Intangible property.II.Business use property.V.Real estate.III.Tangible property.VI.Personal property.a.b.c.d.e.Statements I and III are correct.Only statement IV is correct.Statements II and IV are correct.Statements II, IV, and VI are correctStatements II and VI are correct.2. Determine the proper classification(s) of a house owned and used by a taxpayer as aninsurance agency office.I.Personal use property.IV.Intangible property.II.Business use property.V.Real estate.III.Tangible property.VI.Personal property.a.b.c.d.e.3.Statements I, III, and V are correct.Statements II, III, and V are correct.Only statements I and V are correct.Only statement V is correct.Only statement II is correct.Which of the following is/are adjustment(s) to the basis of property after the initial basisis determined?I.Add the costs of protecting ownership of the property.II.Add the capital expenditures for improvements and betterments.III.Add the capital recovery resulting from collections for easements.IV.Add the capital recovery resulting from depreciation deductions.a. Only statement I is correct.b.c.d.e.Statements I and II are correct.Statements III and IV are correct.Statements I, II, and III are correct.Statements I, II, III, and IV are correct.4.Vijay buys a 10% interest in Duvall Corporation paying $82,000 cash on January 1,2013. During 2013, Duvall Corporation reports a loss of $30,000 and pays cashdividends to shareholders of $10,000. For 2014, Duvall Corporation has a loss of$60,000 and pays cash dividends of $20,000. If Duvall Company is organized as an SCorporation, Vijay's basis in the Duvall Corporation stock at the end of 2014 is:a. $ 70,000b. $ 76,000c. $ 82,000d. $ 88,000e. $ 94,0005.Harold purchases land and a building by paying cash of $35,000, and assuming theseller's $82,000 mortgage. In addition, Harold pays $3,000 of legal fees related to thepurchase. For property tax purposes, the land is valued at $17,000 and the building at$34,000. Harold's basis in the building isa. $ 17,000b. $ 34,000c. $ 40,000d. $ 80,000e. $120,0006.Christy purchases all of the assets of Michael's Security Service for $200,000. Theassets are as follows:AssetInventoryEquipmentSuppliesBuildingLandAdjusted Basis$ 25,00060,00020,00080,00010,000$195,000What is Christy's basis in the equipment?a. $17,776b. $35,556c. $40,000d. $60,000e. $61,538Fair Market Value$ 50,00040,00020,00095,00020,000$225,0007.John purchases all of the common stock of Clarke Corporation for $280,000. The assetsof the corporation are:AssetInventoryEquipmentSuppliesBuildingLandAdjusted Basis$ 25,00060,00020,00080,00010,000$195,000Fair Market Value$ 50,00040,00020,00095,00020,000$225,000What is John's basis in the common stock he acquired?a. $195,000b. $215,000c. $225,000d. $250,000e. $280,0008.Willis receives a gift of rare books valued at $7,000. The books have an adjusted basisof $11,000 to the donor. No gift tax was paid on the transfer. Several months later, Willissells the books to a professional collector for $8,000. What is Willis 's gain or (loss) onthe sale?a. $1,000 gainb. $4,000 gainc. No gain or loss is recognizedd. $1,000 losse. $3,000 loss9.Larry gives Linda 3,000 shares of stock he had purchased several years ago for $8,000.On the date of the gift, the stock has a fair market value of $6,000. Linda sells the 3000shares for $5,500 one month after the gift, Linda realizes aa. $ - 0 - gain or lossb. $ 500 short-term capital lossc. $ 500 long-term capital lossd. $2,500 short-term capital losse. $2,500 long-term capital loss10. Emily inherits 1,000 shares of Lexus Airline Corporation stock from the estate of herUncle Tony. Tony died on August 4, 2014. The stock's value on August 4, 2014, is$2,000. Tony's basis in the stock was $3,000. The alternate valuation date is not used.Emily plans to sell the stock within the week following the transfer. What is Emily's basisin the stock?a.b.c.d.e.11.$-0$1,000$2,000$3,000$4,000Elise sells 100 shares of Terrace Corporation stock on April 4, 2014. She inherited thestock from Christine, who died on January 30, 2014. The executor of the estate used theprimary valuation date. Elise's holding period for the stock isa. Long-term.b. Short-term.c. Long-term if sold at a gain, short-term if sold at a loss.d. Short-term if sold at a gain, long-term if sold at a loss.12. If the executor of a decedent's estate elects the alternate valuation date and none of theestate's property is sold or distributed, the estate's assets are valued as of how manymonths after the date of death?a. 0, date of death is the correct valuation date.b. 3 months.c. 6 months.d. 9 months.e. 12 months.13. Bill died on April 5, 2014. As part of his will, he leaves land that he paid $6,000 for in1993 to his son Don. On April 5, 2014, the land is worth $11,000. However, due to localreal estate conditions, the land declines in value. On July 28 it is worth only $10,000, itdeclines further to $9,000 on October 5 and plunges to $7,000 on December 18.I.In the absence of any special elections, Don's basis in the land is $11,000.II.If the executor elects the alternate valuation date and distributes the land to Donon July 28, Don's basis in the land will be $10,000.III.If the executor elects the alternate valuation date and distributes the land to Donon December 18, Don's basis will be $7,000.IV.In the absence of any special elections, if the executor distributes the land toDon on October 5, Don's basis in the land will be $11,000.a.b.c.d.e.Only I is correct.I and II are correct.I, II and IV are correct.II and IV are correct.All the statements are correct.14. Jenny purchased 1,000 shares of Hewlett Corporation preferred stock for $33,000 twoyears ago. During the current year, Jenny receives a 10% nontaxable stock dividend at atime when the stock has a fair market value of $40. What is Jenny's basis in the stockdividend shares?a. $ - 0 b. $3,000c. $3,300d. $4,000e. $4,40015.Terrell buys 200 shares of Orange Corporation common stock on December 10, 2014,for $2,000. He buys an additional 200 shares for $1,800 on December 23, 2014. OnDecember 28, 2014, Terrell sells 100 of the first 200 shares for $800. He sells theremaining 300 shares for $2,500 on November 15, 2015. What is(are) the amount(s)and the year of recognition of losses that Terrell can recognize?2014a. - 0 b. - 0 c. $ 200d. $ 2002015$ 300$ 500$ 500$ 30016.During 1995, Charles purchased 1,000 shares of Flagstaff Corporation stock for$12,000. On February 22, 2014, he sells all the shares for $9,000. On March 15, 2014,he repurchases 1,000 shares of Flagstaff for $8,000 and holds them until May 29, 2014,when he sells them for $10,000. What is Charles' realized gain or loss on the May 29,2014, sale?a. $1,000 loss.b. $2,000 gain.c. $2,000 loss.d. $1,000 gain.e. $ - 0 - gain or loss.17.Which of the following statements related to the Section 179 election to expense is (are)true?I.A Section 179 deduction can be claimed on tangible trade or business personalpropertyII.A Section 179 deduction can be claimed on property held for the production ofincome.III.A Section 179 deduction can be claimed on real property.IV.a.b.c.d.e.A Section 179 deduction is allowed only for corporations and partnerships.Only statement I is true.Only statements I and II are true.Only statements I, II, and III are true.Only statements I and III are true.All of the statements are true.18. Sawback Corporation purchases a new machine in January 2014 for $200,000. No otherfixed assets are placed in service in 2014. Sawback has substantial taxable income anddesires to minimize this amount to the fullest extent possible. How much can Sawbackdeduct under Section 179?a. $34,000b. $12,000c. $25,000d. $28,000e. $200,00019. During 2014, Witt Processing Corporation places $215,000 of Section 179 property inservice for use in its business. What is the amount of Witt Processing's maximumSection 179 deduction for 2014?a. $0b. $25,000c. $215,000d. $10,000e. $15,00020. What is the MACRS recovery period for a video game used in an arcade?a. 3 years.b. 5 years.c. 6 years.d. 7 years.e. 10 years.21. Residential rental real estate placed in service on July 17, 2014, is depreciated overa. 39 years, straight-line method, mid-month convention.b. 40 years, straight-line method, mid-month convention.c. 27.5 years, 150%-declining-balance method, mid-year convention.d. 27.5 years, straight-line method, mid-month convention.e. 31.5 years, 200%-declining-balance method, mid-year convention.22.Nonresidential commercial realty placed in service on March 2, 2014, is depreciatedovera. 27.5 years, 200%-declining-balance method, mid-year convention.b. 31.5 years, straight-line method, mid-month convention.c. 31.5 years, 200%-declining-balance method, mid-year convention.d. 39 years, straight-line method, mid-month convention.e. 40 years, straight-line method, mid-month convention.23. The mid-year convention under MACRS provides thata. Depreciation is allowable in the year of acquisition of qualified property only if theproperty is placed in service in the first one-half of that year.b. One half of the year-of-acquisition depreciation is allowed regardless of when theproperty is placed in service during the year. One-half year's depreciation isallowable for the year of disposition. Disregard the 40% rule.c. Depreciation is allowable in the year of disposition only if the property is disposedof in the last one-half of that year.d. The cost recovery deduction is based on the number of months the property wasin service in the year of acquisition. Therefore, one-half month's cost recovery isallowable for the month in which the property is place in service and for the monthof disposition.24.The mid-month convention under MACRS provides thata. Depreciation is allowable for the month of disposition only if the property isdisposed of in the last one-half of that month.b. Depreciation is allowable for the month of acquisition of qualified property only ifthe property is placed in service in the first one-half of that month.c. One half of the year-of-acquisition depreciation is allowed regardless of when theproperty is placed in service during the year. One-half year's depreciation isallowable for the year of disposition.d. The cost recovery deduction is based on the number of months the property wasin service in the year of acquisition. Therefore, one-half month's cost recovery isallowable for the month in which the property is placed in service and for themonth of disposition.25.Robert purchases equipment classified as 7-year property on January 5, 2012, at a costof $80,000 and a 5% salvage value. Section 179 was not elected. He sells theequipment on February 12, 2014. What is Robert's 2014 depreciation deduction?a. $ - 0 b. $ 3,498c. $ 6,996d. $ 9,794e. $13,99226.Brent purchases a new warehouse building on May 16, 2014, for $6,000,000 (exclusiveof the cost of the land). What is Brent's 2014 depreciation deduction?a. $ - 0 b. $ 76,924c. $ 96,300d. $119,040e. $400,00027.Vernon purchases a taxicab (5-year MACRS property) for $20,000 on December 3,2014. This is the only business asset Vernon acquires in 2014. He does not desire touse the Section 179 election. What is the maximum amount of depreciation that he candeduct in 2014?a. $ 1,000b. $ 3,000c. $ 4,000d. $10,500e. $14,00028. The Cox Accounting Firm places the following property in service during the 2014 taxyear:PropertyDescriptionComputersOffice furnitureFax machinePhone systemPlaced inServiceFeb 6June 24Aug 3Dec 11MACRS Life5 years7 years5 years5 yearsCost Basis$ 52,000$ 80,000$100,000$ 40,000Cox wants to obtain the maximum possible first year depreciation deduction for theseproperty acquisitions including full utilization of the election to expense property underSection 179. Cox will report 2014 taxable income in the amount of $500,000 beforeconsideration of depreciation on their 2014 property acquisitions. What is the maximumcombined amount of depreciation and Section 179 expense that may be obtained underthis set of fact circumstances?a. $71,260b. $38,868c. $54,400d. $49,832e. $25,00029.Sunrise Apratments purchases a residential apartment building on November 9, 2014,for $1,000,000 (exclusive of the cost allocated to the land). What is the 2014 MACRSdepreciation deduction?a. $ 3,970b. $ 4,550c. $ 7,580d. $34,850e. $45,50030. Listed property rules include the following:I.If listed property is not predominantly used in the taxpayer's business, thebusiness-use portion of the asset cannot be depreciated.II.If more than 50 percent of the listed property's total use for each year is relatedto the taxpayer's business, the asset is treated the same as any other mixed-usebusiness asset.III.When listed property is used 50% or less in the taxpayer's business, the Section179 expense election does not apply to the asset.IV.Listed property includes cellular telephones, computers, and passengerautomobiles.a.b.c.d.e.Statements I and III are correct.Only statement IV is correct.Statements II and III are correct.Statements II, III, and IV are correct.Statements I, II, III, and IV are correct.31. Daniel purchases 5-year class listed property (a computer) on March 2, 2014, for$30,000. It is used 75% for business, and the remainder for personal use. Daniel wishesto maximize his 2014 depreciation deduction without regard to section 179. What isDaniel 's 2014 depreciation deduction?a. $ 2,250b. $ 2,700c. $ 3,375d. $ 4,500e. $ 6,00032.Jeanne sells 200 shares of General Motors stock for $80 per share. She pays a $100commission on the sale and has an adjusted basis of $8,000 on the stock.I.The amount realized from the sale is $15,900.II.Jeanne has a recognized gain of $8,000.a.b.c.d.33.Only statement I is correct.Only statement II is correct.Both statements are correct.Neither statement is correct.Gross selling price may includeI.the amount of a seller's debt assumed by the buyer.II.the fair market value of services received by the seller from the buyer.a.b.c.d.Only statement I is correct.Only statement II is correct.Both statements are correct.Neither statement is correct.34. Long-term capital gain classification is advantageous to taxpayers because of which ofthe following?I.Long-term capital gains are taxed at a lower rate than ordinary income.II.The long-term capital gains tax rate is 50% of the rate for ordinary income.a.b.c.d.Only statement I is correct.Only statement II is correct.Both statements are correct.Neither statement is correct.35. Matthew has the following capital gains and losses for the current tax yearShort-term capital gains$12,000Long-term capital gains3,000Short-term capital(7,000)lossesLong-term capital losses(6,000)What is Matthew's net capital gain or loss position for the year?a. $5,000 net short-term capital gain.b. $2,000 net long-term capital loss.c. $2,000 net short-term capital gain.d. $3,000 net long-term capital loss.e. $4,000 net short-term capital loss.36. Lois has the following gains and losses for the current year:Short-term capital loss$(8,000)Long-term capital gain3,000Section 1231 gain3,000Section 1231 loss(5,000)What is Lois's net capital gain or loss position for the year?a. $7,000 net short-term capital loss.b. $8,000 net short-term capital gain.c. $5,000 net short-term capital loss.d. $3,000 net short-term capital gain.ANS: CPTS: 137. A taxable entity has the following capital gains and losses in 2011:Short-term capital loss$(22,000)Long-term capital gain15,000III.a.b.c.d.If the entity is an individual, a $3,000 deduction is allowed in2011.If the entity is a corporation, a $7,000 deduction is allowed in2011.Only statement I is correct.Only statement II is correct.Both statements are correct.Neither statement is correct.38.Which of the following is not a capital asset?a. Office building used by a CPA firm.b. Antique automobile.c. Land held for investment.d. Stock held for investment.39. Section 1231 assets includea. Inventory.b. Stocks and bonds.c. Personal residence.d. Business-use realty.e. Personal automobile.40. Hank realizes Section 1231 losses of $12,000 and Section 1231 gains of $7,000 duringthe current year. Hank's current-year adjusted gross income will increase (decrease) bywhat amount?a. $(12,000)b. $ (5,000)c. $ (3,000)d. $ 7,00041.During 2014, Thomas has a net Section 1231 gain of $57,000. In 2011, Thomasreported a net Section 1231 loss of $60,000. What is the character of the 2014 gain?a. $60,000 long-term capital gain.b. $60,000 ordinary gain.c. $57,000 ordinary gain.d. $57,000 long-term capital loss.e. $57,000 long-term capital gain.42. Karl paid $200,000 for business-use equipment. Using straight-line depreciation, hisdeduction would have been $22,000, but Karl uses MACRS depreciation and deducts$37,500 for the first two years of usage. At the beginning of the third year, Karl sells theequipment for $190,000. How much of the gain is recaptured under Section 1245 asordinary income?a.b.c.d.e.$ -0$ 5,500$22,000$27,500$37,50043. Which of the following best describes the tax treatment of a taxpayer's net Section 1231loss that resulted from the sale of depreciable equipment used in a business activity?a. Such losses are not deductible.b. Such losses are deducted as ordinary losses.c. Such losses are deducted as long-term capital losses.d. Such losses are deductible as short-term capital losses.e. Such losses are deducted as ordinary losses only to the extent that the businessactivity produces other ordinary net income.44.Unrecaptured Section 1250 gainI.applies to real property owned by individuals and corporations.II.is the gain on the sale of real estate not already classified as ordinaryincome if the property were Section 1245 property.a.b.c.d.45.Only statement I is correct.Only statement II is correct.Both statements are correct.Neither statement is correct.Which of the following qualifies as a like-kind exchange of property?I.Commercial retail building and its land for an office building and its land.II.Yankee Food, Inc. common stock for Yankee Food, Inc. corporate bonds.a.b.c.d.Only statement I is correct.Only statement II is correct.Both statements are correct.Neither statement is correct.46.Which of the following exchanges of property are like-kind exchanges?I.Common stock of Intel traded for preferred stock of Intel.II.Principal residence traded for 20 acres of undeveloped investment land.a.b.c.d.Only statement I is correct.Only statement II is correct.Both statements are correct.Neither statement is correct.47.Rebecca trades in her four-wheel drive truck for a new one. Rebecca's truck cost$20,000 and has an $8,000 basis on the date of the trade-in. The price of the new truckis $27,000 and the dealer gives Rebecca a $10,000 trade in allowance on her old truck.She uses the trucks in her business. What is Rebecca's basis in the new truck?a. $ 8,000b. $18,000c. $25,000d. $27,000e. $29,00048.Which of the following statements is/are correct?I.The carryover-holding period only applies if the property exchanged ispersonal-use property.II.The holding period of like-kind property received includes the holding periodof the property exchanged.a.b.c.d.49.Only statement I is correct.Only statement II is correct.Both statements are correct.Neither statement is correct.Which of the following is/are correct concerning a principal residence?I.A principal residence can be a house, condominium, mobile home, orhouseboat.II.A taxpayer can have more than one principal residence at a time.a.b.c.d.Only statement I is correct.Only statement II is correct.Both statements are correct.Neither statement is correct.50.Which of the following is/are correct concerning a principal residence?I.The maximum amount of gain a single taxpayer can exclude on the sale of aprincipal residence is $500,000.II.To qualify for a $250,000 exclusion, a single taxpayer must have owned andused the property as a principal residence for at least 2 of the previous 5years.a.b.c.d.Only statement I is correct.Only statement II is correct.Both statements are correct.Neither statement is correct.

 

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