Question;Parent and Subsidiary Corporations have filed calendar-year;consolidated tax returns for several years. Parent Corporation uses the cash;method of accounting while Subsidiary Corporation uses the accrual method of;accounting. If Parent lends Subsidiary money;Answer;the interest expense is deductible when accrued.;the interest expense and interest income may be reported in;different consolidated return years.;the interest income is reported when the interest expense is;accrued by Subsidiary.;the interest expense deduction is taken when Parent reports;the interest income.;A consolidated return's tax liability is owed by;Answer;all group members in equal portions.;the group member responsible for that portion of the tax;liability.;all group members who are severely liable.;the parent corporation.;Albert contributes a Sec. 1231 asset to a partnership on June 1;of this year in exchange for a 10% partnership interest. He had purchased the;asset on March 1, 2002. His holding period for the partnership interest begins;Answer;March 1, 2002.;March 2, 2002.;June 1 of the current year.;June 2 of the current year.;Meg and Abby are equal partners in the AM Partnership, which earns $40,000;ordinary income, $6,000 long-term capital gain (LTCG), and $2,000 Sec. 1231;loss during the current year. What is the amount and character of income that;must be reported on Abby's tax return for this year's partnership operations?;Answer;$20,000 ordinary income, $3,000 LTCG, $1,000 Sec. 1231 loss;$19,000 ordinary income, $3,000 LTCG;$23,000 ordinary income, $1,000 Sec. 1231 loss;$22,000 ordinary income;Allen contributed land, which was being held for sale to Allen's;customers, to a partnership in exchange for a 20% interest. The partnership;uses the land in its business for three years and then sells the property. When;the property was contributed, it had a basis in Allen's hands of $500,000 and;an FMV of $600,000. The partnership sells the land for $700,000. The gain;reported by the partnership is;Answer;$100,000 of ordinary income and $100,000 of Sec. 1231 gain.;$100,000 of Sec. 1231 gain and $100,000 of capital gain.;$200,000 of ordinary income.;$200,000 of Sec. 1231 gain.;The AB Partnership has a machine with an FMV of $25,000 and a;basis of $20,000. The partnership has taken an $8,000 depreciation on the;machine. The unrealized receivable related to the machine is;Answer;$0.;$5,000.;$8,000.;$20,000.;The definition of "inventory" for purposes of Sec. 751;includes;Answer;cash.;land held for investment.;marketable securities not held by dealers.;depreciation recapture potential on Sec. 1231 assets.;An S corporation is not treated as a corporate;taxpayer with respect to which one of the following fringe benefits?;Answer;stock options;qualified retirement plans;group term life insurance premiums;nonqualified deferred compensation;Which one of the following individuals or entities is ineligible;to be an S corporation shareholder?;Answer;an estate;resident alien of the United States;a voting trust where all of the beneficiaries are U.S.;citizens;a partnership where all of the partners are U.S. citizens;The recognition period for the built-in gains tax extends for;how many years after the S election takes effect?;Answer;one year;three years;five years;ten years;In 1998, Delores made taxable gifts to her son of property with;an FMV of $200,000. In the current year when Delores dies, the property is;worth $800,000. The amount included in Delores's estate tax base because of the;1998 gift is;Answer;$0.;$189,000.;$200,000.;$800,000.;Hu makes a gift of his home to a local homeless shelter (a;501(c)(3) charity). Hu will retain his home for 10 years, after which the;homeless shelter will take possession. The value of Hu's 10-year interest is;$30,000 and the remainder interest is valued at $120,000. Which of the;following statements is correct?;Answer;Hu is allowed a charitable deduction on his gift tax return;for $150,000 in the current year.;Hu is allowed an exclusion of $12,000 on his gift of $120,000;to the charity.;Hu is not allowed to deduct the contribution until the charity;takes possession in 10 years.;Hu has a charitable contribution deduction of $120,000 on his;current gift tax retur;Gordon died on January 1 and by his will left land with an;adjusted basis of $60,000 and an FMV of $100,000 to Becky. Becky disclaims the;property on December 31 of the year of death, when the land was still worth;$100,000. Becky has made a gift (before the annual gift tax exclusion) of;Answer;$100,000.;$60,000.;$50,000.;$0.;In 2012, Paul transfers $1,000,000 to a trust benefiting his;three children. As trustee, he has the power to determine the amount of;distributions each year. Paul dies in the current year when the trust has a;value of $1,200,000. How much of the trust's value is included in Paul's;estate?;Answer;$0;$400,000;$1,000,000;$1,200,000;Following are the fair market values of Wilma's assets at her;date of death;Personal;effects and jewelry;$150,000;Land;which Wilma bought and held as a joint;tenant;with right of survivorship with her sister;800,000;The executor of Wilma's estate did not elect the alternate valuation date. The;amount includible in Wilma's gross estate is;Answer;$150,000.;$550,000.;$800,000.;$950,000.;Four years ago, David gave land to Mike that he purchased for;$70,000, which is presently worth $100,000. Three years ago, Mike exchanged the;land (then worth $150,000) along with a $100,000 cash contribution made by;David for a new piece of land worth $250,000. The new land is titled with David;and Mike as joint tenants with the right of survivorship. When Mike dies this;year, the land is worth $300,000. Mike's estate will include;Answer;$0.;$150,000.;$180,000.;$300,000.;Administration expenses incurred by an estate;Answer;are deductions in respect of a decedent and may be deducted on;both the estate tax return (Form 706) and the estate income tax return (Form;1041).;an executor must elect where to deduct administration expenses;(Form 706 or;Form 1041).;such expenses are only deductible on Form 706.;such expenses are only deductible on Form 1041;The conduit approach for fiduciary income tax means;Answer;the distributed income has the same character in the hands of;the beneficiary as it has to the trust.;the distributed income goes to all beneficiaries;proportionately.;the distributed income is determined by the trustee annually.;the distributed income of a remainder interest is determined;by the property.;Which of the following activities is protected by;accountant-client privilege?;Answer;written communications between a CPA and a corporation;regarding a tax shelter;communications related to tax return preparation;communications related to criminal tax evasion;advice given regarding tax issues in a divorce;Terry files his return on March 31. The return shows taxes of;$6,000, and Terry pays this entire amount when he files his return. By what;time must he file a claim of refund?;Answer;the later of two years from the return filing or three years;from the date the tax is paid;the later of three years from the return due date or two years;from the date the tax is paid;two years from the payment of tax date, if the IRS mails a;notice of deficiency in the third year following the due date of the return;four years from the payment of tax date, if the IRS mails a;notice of deficiency;Gerald requests an extension for filing his last year's;individual income tax return. His tax liability is $10,000, of which $8,000 was;withheld, leaving a balance due of $2,000 when he files on August 1 of the;current year. His penalty for failure to pay the tax on time is;Answer;$0.;$40.;$300.;$400.;U.S. citizen Barry is a bona fide resident of a foreign country;for all of 2013. Barry uses a calendar year as his tax year and receives;$158,000 in salary and allowances from his employer. Included in the $158,000;is a $25,000 housing allowance. Barry's housing costs are $30,000. The base;housing amount for the current year is $15,616. What amount related to his;housing can Barry exclude on his Form 2555?;Answer;$14,384;$25,000;$30,000;$13,545;U.S. citizen who has a calendar tax year establishes a tax home;and residence in a foreign country and qualifies for the foreign-earned income;exclusion for 60 days in 2010, 365 days in 2011, and 60 days this year, 2012.;The maximum earned income exclusion for this year is?;Answer;$13,733;$16,044;$13,151;$17,522;What are the carryback and carryforward periods for the foreign;tax credit?;Answer;back two years, forward five years;back three years, forward ten years;back one year, forward ten years;back two years, forward twenty years;Charitable contributions made by a fiduciary;Answer;are limited to 50% of fiduciary income.;must be authorized in the trust instrument in order to be;deductible.;flows through to be deducted on the beneficiary's tax return.;are subject to the 2% floor.;Administration expenses incurred by an estate;Answer;are deductions in respect of a decedent and may be deducted on;both the estate tax return (Form 706) and the estate income tax return (Form;1041).;an executor must elect where to deduct administration expenses;(Form 706 or;Form 1041).;such expenses are only deductible on Form 706.;such expenses are only deductible on Form 1041.
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