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UOP ACC547 final exam

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Question;Which of the following statements is true?;?;All income, whether realized or;unrealized, is reported on the individual tax return.;?;Individuals generally report all;excluded income on statements supporting their tax returns.;?;Always report annual licensing fees.;?;Individuals;generally report deferred income on their tax returns.;The estate and gift taxes share several common features. Which of the;following characteristics are common to both the estate and gift taxes?;?;A unified credit and a marital deduction;?;A charitable deduction and the amount;of the exemption equivalent;?;A gift-skipping election and a;deduction for income taxes paid by the fiduciary;?;A charitable deduction and an annual;exclusion;Beth's business purchased only one asset during the current year. It placed in;service machinery (7-year property) on December 1 with a basis of $50,000.;Calculate the maximum depreciation expense (ignoring Section 179 or bonus;expensing);?;$7,145;?;$10,000;?;$1,785;?;$2,500;Hector is a married self-employed taxpayer, and this year he paid $3,000;for his health insurance premiums. Under which of the following alternative;conditions can Hector deduct the cost of the premiums for AGI?;?;Hector's;spouse participates in an employer-sponsored plan, but Hector is not eligible;to participate in this plan.;?;Hector can deduct the health insurance;premiums regardless of the insurance status of his spouse.;?;Neither Hector nor his spouse;participates in an employer-sponsored plan although both are eligible to;participate in a plan.;?;Hector chose not to participate in the;employer-sponsored plan of his spouse.;Sue and Andrew form SA general partnership. Each person receives an;equal interest in the newly created partnership. Sue contributes $10,000 of;cash and land with a FMV of $55,000. Her basis in the land is $20,000. Andrew;contributes equipment with a FMV of $12,000 and a building with a FMV of;$33,000. His basis in the equipment is $8,000, and his basis in the building is;$20,000. How much gain must the SA general partnership recognize on the;transfer of these assets from Sue and Andrew?;?;$0;?;$48,000;?;$4,000;?;$52,000;Roberta transfers property with a tax basis of $400 and a fair market;value of $500 to a corporation in exchange for stock with a fair market value;of $350 in a transaction that qualifies for deferral under Section 351. The;corporation assumed a liability of $150 on the property transferred. What is;the amount realized by Roberta in the exchange?;?;$250;?;$350;?;$500;?;$400;Clampett, Inc. has been an S corporation since its inception. On July 15, 2011;Clampett, Inc. distributed $50,000 to J.D. His basis in his Clampett, Inc.;stock on January 1, 2011, was $45,000. For 2011, J.D. was allocated $10,000 of;ordinary income from Clampett, Inc. and no separately stated items. What is the;amount of income J.D. recognizes related to Clampett, Inc. in 2011?;?;$60,000;?;$20,000;?;$50,000;?;$10,000;Clampett, Inc. has been an S corporation since its inception. On July;15, 2011, Clampett, Inc. distributed $50,000 to J.D. His basis in his Clampett;Inc. stock on January 1, 2011, was $45,000. For 2011, J.D. was allocated;$10,000 of ordinary income from Clampett, Inc. and no separately stated items.;What is the amount of income J.D. recognizes related to Clampett, Inc. in 2011?;?;$60,000;?;$20,000;?;$50,000;?;$10,000;Congress allows self-employed taxpayers to deduct the cost of health;insurance above the line (for AGI) because;?;self-employed taxpayers need an;alternate mechanism for reducing the cost of health care.;?;health insurance premiums cannot be;deducted otherwise.;?;this;deduction provides a measure of equity between employees and the self-employed.;?;employers are allowed to deduct social;security (FICA) taxes as a business expense.;Vanessa contributed $20,000 of cash and;land with a fair market value of $100,000 and an adjusted basis of $40,000 to;Cook, Inc. (an S corporation) when it was formed. The land was encumbered by a;$30,000 mortgage executed two years before. What is Vanessa's tax basis in;Cook, Inc. after formation?;?;$20,000;?;$80,000;?;$60,000;?;$30,000;Which of the following stock dividends;would be tax-free to the shareholder?;?;Stock dividend where;the shareholder could choose between cash and stock;?;A 2-for-1 stock split to all holders of common;stock;?;A stock dividend to;all holders of preferred stock;?;All answers are correct.;After a meeting with a prospective client, Holly paid for dinner. After;dinner, Holly took the prospective client to the theatre. Holly paid $290 for;the meal and $250 for the tickets, amounts that were reasonable under the;circumstances. What amount of these expenditures can Holly deduct as a business;expense?;?;$415;?;$270;?;$540;?;None?the meals and entertainment are;not deductible except during travel.;Which of the following statements regarding tax credits is true?;?;Tax;credits reduce taxes payable dollar for dollar.;?;Tax credits reduce taxable income;dollar for dollar.;?;Tax credits provide a greater tax benefit;the greater the taxpayer's marginal tax rate.;?;None of the answer choices are correct.;Suppose at the beginning of 2010, Jamaal's basis in his S corporation;stock was $27,000 and that Jamaal has loaned the S corporation $10,000. During;2010, the S corporation reported an $80,000 ordinary business loss and no;separately stated items. How much of the ordinary loss is deductible by Jamaal;if he owns 50% of the S corporation?;?;$27,000;?;$40,000;?;$10,000;?;$37,000;What happens when a taxpayer experiences a net loss from a rental home?;?;If the taxpayer is not allowed to;deduct the loss due to the passive activity limitations, the loss is suspended;and carried forward until the taxpayer generates passive income or until the;taxpayer sells the property.;?;The loss is fully deductible against;the taxpayer's ordinary income, no matter the circumstances.;?;If the taxpayer is not an active;participant in the rental, the taxpayer may be allowed to deduct the loss even;if the taxpayer does not have any sources of passive income.;?;The;taxpayer will not be allowed to deduct the loss under any circumstance if the;taxpayer does not have passive income from other sources.;5;At his death, Trevor had a probate estate consisting of $4 million of;property. Which of the following is a true statement about Trevor's estate or;estate tax?;?;Trevor;must have a gross estate of at least $4 million.;?;Trevor must have a taxable estate of at;least $4 million.;?;Trevor must have estate tax base;(cumulative taxable transfers) of at least $4 million.;?;Trevor must have an adjusted gross;estate of at least $4 million.;Foreaker LLC sold a piece of land that it uses in its business for;$52,000. Foreaker bought the land two years ago for $42,500. What is the;character of Foreaker's gain?;?;$9,500;Section 1231;?;$9,500 Section 1250;?;$9,500 Section 1221;?;$9,500 Section 1245;The sale of machinery for more than the original cost basis (before;depreciation), used in a trade or business, and held for more than one year;results in the following types of gain or loss;?;Section;1245 and Section 1231;?;Ordinary only;?;Capital and ordinary;?;Capital and Section 1231;Tone Loc and 89 of his biggest fans formed an S corporation, 2hit, Inc.;as the original ninety shareholders. Tone then transferred some of his stock to;his grandfather, four of Tone's cousins, five of Tone's children, three of;Tone's grandchildren, and 2 close friends. For the S corporation shareholder;limit rules, how many shareholders does 2hit, Inc. have?;?;92;?;97;?;90;?;95;What is the minimum ownership percentage an owner must have in the;entity to avoid gain recognition when property is contributed?;?;S corporation ? No minimum ownership;percentage is required.;?;Partnership ? 80% after the property;contribution;?;Taxable corporation ? 80% before;property contribution;?;LLC;? No minimum ownership percentage is required.;20;When must a partnership file its return?;?;By the 15th day of the 2nd month after;the partnership?s tax year-end;?;By the 15th day of the 3rd month after;the partnership?s tax year-end;?;By;the 15th day of the 4th month after the partnership?s tax year-end;?;By the 6th month after the original due;date if an extension is filed;Which of the following requirements do not have to be;met in a Section 351 transaction?;?;Only property transferred to a;corporation is eligible for deferral.;?;All transfers of property to a;corporation must be made simultaneously to qualify for deferral.;?;In the aggregate, the transferors of;property to the corporation must collectively control the corporation;immediately after the transfers.;?;Each;transferor of property must receive stock equal to at least 80 percent of the;fair market value of the property transferred.;Which of the following has the highest authoritative weight?;?;Private letter ruling;?;Revenue;ruling;?;Tax article;?;Text book;Clampett, Inc. (an S corporation) previously operated as a C;corporation. Distributions from Clampett, Inc. are deemed to be paid in the;following order;?;Prior C corporation earnings and;profit, the AAA account, shareholder's remaining stock basis;?;Shareholder's remaining stock basis;prior C corporation earnings and profit, the AAA account;?;Shareholder's remaining stock basis;the AAA account, prior C corporation earnings and profit;?;The;AAA account, prior C corporation earnings and profit, shareholder's remaining;stock basis;Gerald received a 33% capital and profit (loss) interest in XYZ Limited;Partnership (LP). In exchange for this interest, Gerald contributed a building;with an FMV of $30,000. His adjusted basis in the building was $15,000. In;addition, the building was encumbered with a $9,000 nonrecourse mortgage that;XYZ, LP assumed at the time the property was contributed. What is Gerald's;outside basis immediately after his contribution?;?;$24,000;?;$6,000;?;$21,000;?;$9,000;25;A budget deficit would result when a person's or family's;?;actual;expenses are greater than planned expenses.;?;actual expenses are less than planned;expenses.;?;assets exceed liabilities.;?;net worth decreases.;A family with $45,000 in assets and $22,000 of liabilities would have a;net worth of;?;$23,000;?;$22,000;?;$45,000;?;$67,000;7;Rhianna and Jay are married filing jointly in 2009. They have six;children for whom they may claim the child tax credit. Their AGI was $123,440.;What amount of child tax credit may they claim on their 2009 tax return?;?;$4,000;?;$5,300;?;$6,000;?;$12,000;BTW Corporation has taxable income in the current year that can be;offset with an NOL from a previous year. What is the nature of the book-tax;difference created by the net operating loss deduction in the current year?;?;Temporary, unfavorable;?;Temporary;favorable;?;Permanent, favorable;?;Permanent, unfavorable;29;The unified credit is;?;is set at $1 million for any single;transfer.;?;designed to apply to amounts not;already eliminated by the exemption equivalent.;?;designed;to prevent taxation of cumulative transfers that do not exceed a certain;minimum amount.;?;designed to apply only to taxable;transfers included in the gross estate.;30;The regulation with the highest authoritative weight is the;?;proposed regulation;?;procedural regulation;?;legislative;regulation;?;interpretative regulation;Which of the following would be considered active income?;?;Rental real estate income;?;Dividends;?;Salary;for part-time job;?;Capital gains from sale of mutual funds;Which of the following would be considered portfolio income?;?;Dividends;?;Salary for part-time job;?;Rental real estate income;?;Self-employment income for a business;Graham has accepted an offer to do graduate work in the chemistry;department at State University. The chemistry department offered Graham a scholarship;that will pay $5,000 toward his tuition, $500 toward his university fees, and;$3,500 toward the cost of room and meals. Under the terms of the scholarship;Graham must work in the chemistry labs during the summer. What amount must;Graham include in his gross income?;?;$3,500;?;$9,000;?;$4,000;?;$5,500;The tax base for an individual tax return is;?;adjusted gross income.;?;realized income from whatever source;derived.;?;adjusted;gross income minus from AGI deductions.;?;gross income.;Which of the following statements is true when property is contributed;in exchange for a partnership interest?;?;Any contributed property in a partnership;has a carryover basis, and the character of the property is determined by the;way the contributing partner used the property.;?;Services are not allowed to be;contributed to a partnership in return for a partnership interest.;?;The partnership's inside basis is;typically increased by any gain the partner recognizes from the property;contribution.;?;The;holding period for a partner's partnership interest depends on the type of;assets a partner contributes.;Which requirement must be satisfied in order to specially allocate;partnership income or losses to partners?;?;Special allocations must reduce the;combined tax liability of all the partners.;?;At least one partner must agree to the;special allocations.;?;Special;allocations must have economic effect.;?;Special allocations must be;insignificant.;What is the tax impact to a taxable corporation or an S corporation when;it makes a property distribution to a shareholder?;?;Recognizes loss only;?;Recognizes;gain only;?;Recognizes either gain or loss;?;Does not recognize gain or loss;8;Studios reported a net capital loss of $30,000 in year 5. It reported;net capital gains of $14,000 in year 4 and $27,000 in year 6. What is the;amount and nature of the book-tax difference in year 6 related to the net capital;carryover?;?;$11,000 favorable;?;$16,000 unfavorable;?;$11,000 unfavorable;?;$16,000;favorable;As customary, Jayden gave Olivia a ring when she agreed to marry him. The ring;is a family heirloom valued at $67,000. What is the amount of the taxable gift?;?;$54,000;?;Zero ? The marital deduction offsets;the gift as long as Jayden and Olivia are married by year-end.;?;Zero ? This transfer is not gratuitous.;?;$67,000;0;Ilene rents her second home. During 2009, Ilene reported a net loss of;$15,000 from the rental. If Ilene is an active participant in the rental and;her AGI is $140,000, how much of the loss can she deduct against ordinary;income in 2009?;?;$5,000;?;$15,000;?;$0;?;$10,000;41;A personal balance sheet presents;?;earnings on savings and investments.;?;amounts budgeted for spending.;?;income and expenses for a period of;time.;?;items;owned and amounts owed.;42;Which of the following is a completed taxable gift?;?;$15,000 in cash given to Valley;Hospital for the care of a neighbor who was in an auto accident.;?;$55,000 in cash transferred to a former;spouse under a written property settlement shortly after a divorce.;?;$18,000;in cash given to a needy student to pay for college tuition.;?;$20,000 in cash contributed to the;committee to reelect Senator Cone.;Camille transfers property with a tax basis of $800 and a fair market value of;$1,200 to a corporation in exchange for stock with a fair market value of $850;and $350 in a transaction that qualifies for deferral under Section 351.;Camille also incurred selling expenses of $100. What is the amount realized by;Camille in the exchange?;?;$1,100;?;$1,200;?;$750;?;$850;Jaime recently found a "favorable" trial level court;opinion directly on point for her tax question. Which trial level court;would he prefer to have issued the opinion?;?;Divorce Court;?;Circuit Court;?;Tax;Court;?;District Court;Which of the following statements is true when property is contributed;in exchange for a partnership interest?;?;The;holding period for a partner's partnership interest depends on the type of;assets a partner contributes.;?;Any contributed property in a partnership;has a carryover basis, and the character of the property is determined by the;way the contributing partner used the property.;?;The partnership's inside basis is;typically increased by any gain the partner recognizes from the property;contribution.;?;Services are not allowed to be;contributed to a partnership in return for a partnership interest.;Tammy owns 100 shares in Star Struck Corporation. The other 100 shares;are owned by her husband Tommy. Which of the following statements is true?;?;A;stock redemption that completely terminates Tammy's direct interest in a;corporation will be treated as a dividend if Tammy waives the family;attribution rules and files a "triple i" agreement with the IRS.;?;A stock redemption that completely;terminates Tammy's direct interest in a corporation will be treated as an;exchange for tax purposes.;?;A stock redemption that completely;terminates Tammy's direct interest in a corporation will be treated as a;dividend for tax purposes.;?;A stock redemption that completely;terminates Tammy's direct interest in a corporation will be treated as an;exchange if Tammy waives the family attribution rules and files a "triple;i" agreement with the IRS.;Which of the following is a miscellaneous itemized deduction that is not;subject to the 2 percent of AGI floor?;?;Tax preparation fees;?;Employee business expenses;?;Gambling;losses to the extent of gambling winnings;?;Fees for investment advice;Dan recently purchased a partnership;interest in XYZ, Limited Partnership for $6,000. His share of debt in the;partnership is $2,500, but he is not personally responsible for paying back the;debt if the partnership cannot pay. Dan's share of XYZ, LP's loss for the year;is $3,000. In addition, Dan reported $5,000 in long-term capital gains from the;sale of a stock and $3,000 of income from another real estate partnership. What;is Dan's tax basis in XYZ, LP?;?;$8,500;?;$6,000;?;$11,500;?;$16,500;Grand River Corporation reported taxable income of $500,000 in 2010 and;paid federal income taxes of $170,000. Not included in the computation was a;disallowed meals and entertainment expense of $2,000, tax-exempt income of;$1,000, and deferred gain on an installment sale of $25,000. The corporation's;current earnings and profits for 2010 would be;?;$524,000;?;$331,000;?;$354,000;?;$500,000;Comet Company is owned equally by Pat and his sister Pam, each of whom;hold 100 shares in the company. Pam wants to reduce her ownership in the;company, and it was decided that the company will redeem 50 of her shares for;$1,000 per share on December 31, 2010. Pam's income tax basis in each share is;$500. Comet has total E&P of $250,000. What are the tax consequences to Pam;as a result of the stock redemption?;?;$25,000 capital gain and a tax basis in;each of her remaining shares of $100;?;$50,000 dividend and a tax basis in;each of her remaining shares of $100;?;$25,000;capital gain and a tax basis in each of her remaining shares of $500;?;$50,000 dividend and a tax basis in;each of her remaining shares of $50;1;Which of the following are prohibited from being an S corporation;shareholder?;?;Corporations;?;51 unrelated individuals;?;Foreign citizens that are U.S.;residents;?;U.S. citizens;Which of the following would be;considered passive income?;?;Salary for part-time;job;?;Rental real estate income;?;Capital gains from;sale of mutual funds;?;Dividends;Which legal entity provides the least flexible legal arrangement for;owners?;?;Sole Proprietorship;?;Partnership;?;LLC;?;Corporation;Which of the following statements regarding disproportionate distributions is;false?;?;Disproportionate;distributions will only occur in liquidating distributions.;?;The tax provisions related to;disproportionate distributions attempt to preserve the partners' share of;ordinary income potential.;?;A disproportionate distribution occurs;when a partner receives more than his or her proportionate share of the;partnership's hot assets.;?;A disproportionate distribution occurs;when a partner receives less than his or her proportionate share of the;partnership's hot assets.

 

Paper#39346 | Written in 18-Jul-2015

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