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Accounting Exam Multiple Choice Test bank

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Question;Question 1 (8 points)Section 179 expense is subtracted from the property's basis before the MACRSdepreciation is computed.Question 1 options:1) True2) FalseSaveQuestion 2 (8 points)Bonus depreciation cannot be taken on property used 50% or less for business.Question 2 options:1) True2) FalseSaveQuestion 3 (8 points)Individual taxpayers deduct expenses related to a rental activity from grossincome to arrive at AGI.Question 3 options:1) True2) FalseSaveQuestion 4 (8 points)Regardless of the number of passive activities the taxpayer owns, taxpayers fileonly one Form 8582.Question 4 options:1) True2) FalseSaveQuestion 5 (8 points)A taxpayer cannot recognize the loss on the sale of stock if the taxpayerpurchases substantially identical stock within 60 days before or 60 days after thesale.Question 5 options:1) True2) FalseSaveQuestion 6 (8 points)For purposes of the wash sale rules, substantially identical securities are alwayssecurities in the same company.Question 6 options:1) True2) FalseSaveQuestion 7 (8 points)An individual's current year capital loss from investment property not offsetagainst capital gains and ordinary income is carried forward indefinitely.Question 7 options:1) True2) FalseSaveQuestion 8 (8 points)An individual's net long-term capital losses retain their long-term status whencarried over to a future year.Question 8 options:1) True2) FalseSaveQuestion 9 (8 points)The monthly penalty for failing to file a timely tax return is less severe than themonthly penalty for late payment of taxes.Question 9 options:1) True2) FalseSaveQuestion 10 (8 points)Employers with more than 10 full-time equivalent (FTE) employees must reducetheir small employer health insurance credit by 4% for each FTE employee inexcess of 10.Question 10 options:1) True2) FalseSaveQuestion 11 (8 points)Residential realty costing $100,000 is placed in service in 2000. MACRS for 2012is:Question 11 options:1) $2,500.2) $2,564.3) $3,175.4) $3,636.5) $14,286.SaveQuestion 12 (8 points)What is the maximum depreciation in 2012 for a new computer used 100% forbusiness acquired on July 2, 2012, for $3,000? Assume Section 179 is notelected and that this is the only property placed in service during 2012.Question 12 options:1) $3,0002) $6003) $3004) $1,5005) $1,800SaveQuestion 13 (8 points)On July 1, 2011, a taxpayer enters into a 36-month lease. The terms of the leaserequire the taxpayer to pay $1,000 a month. Based on the value of theautomobile, the inclusion amounts for 2011, 2012, and 2013 are $313, $590,and $602, respectively. If the taxpayer uses the car 70% for business, what netamount can be deducted for lease expense in 2012?Question 13 options:1) $7,9872) $5,7053) $11,5874) $12,0005) $4,920SaveQuestion 14 (8 points)The MACRS basis of 5-year property acquired on March 3, 20X1 is $10,000. NoSection 179 or bonus depreciation is taken on the property. The property is soldon November 4, 20X2. If the half-year convention applies to personal propertyacquired in 20X1 and regular (accelerated) MACRS is used, depreciation expensefor 20X2 is:Question 14 options:1) $2,000.2) $1,000.3) $1,600.4) $3,200.5) $2,800.SaveQuestion 15 (8 points)The MACRS basis of 5-year property acquired on January 13, 20X1 is $10,000.No Section 179 or bonus depreciation is taken on the property. The property issold on July 31, 20X3. If the half-year convention applies to personal propertyacquired in 20X1 and the regular (accelerated) MACRS method is used,depreciation expense for 20X3 is:Question 15 options:1) $2,000.2) $1,920.3) $1,600.4) $960.5) $800.SaveQuestion 16 (8 points)A taxpayer acquires a business on June 1 of the current year. Included in thepurchase price was $12,000 for the purchase of a three-year covenant not tocompete. The taxpayer's amortization expense with respect to the covenant forthe current year is:Question 16 options:1) $800.2) $4,000.3) $467.4) $2,333.5) none of the above.SaveQuestion 17 (8 points)Which of the following uses of a dwelling unit does not count as personal use?Question 17 options:1) The taxpayer's parents use the unit for two weeks and pay a fair rental price.2) The dwelling is rented to a friend for less than a fair rental price.3) The taxpayer stays at the dwelling while working full-time to replace the roof.4) All of the above count as personal use.5) None of the above count as personal use.SaveQuestion 18 (8 points)A taxpayer is active in three different passive activities, none of which are realestate rental activities. The income (loss) from these activities follows:ActivityIncome or (Loss)ABC$10,000(20,000)(30,000)The passive loss carryover attributable to Activity B is:Question 18 options:1) $0.2) $10,000.3) $20,000.4) $24,000.5) none of the aboveSaveQuestion 19 (8 points)A taxpayer reports the following income and losses from these passiveactivities:ActivityIncome or (Loss)ABC$(40,000)(10,000)20,000The suspended (carryover) loss for Activity A is:Question 19 options:1) $0.2) $40,000.3) $24,000.4) $16,000.5) none of the above.SaveQuestion 20 (8 points)A vacation home is rented out for 10 days during the year and used personallyby the owner for 20 days during the year. What percentage of real estate taxesshould be deducted on Schedule A?Question 20 options:1) 0%2) 33%3) 67%4) 100%5) None of the aboveSaveQuestion 21 (8 points)The special deduction for active participation in a rental real estate activity iscomputed on:Question 21 options:1) Schedule A.2) Schedule E.3) Form 8332.4) Form 8829.5) Form 8582.SaveQuestion 22 (8 points)In order to meet the material participation test for a rental real estate activity,over what percentage of the taxpayer's personal service rendered during theyear must be rendered for a trade or business involving real estate?Question 22 options:1) 10%2) 25%3) 50%4) 75%5) 80%SaveQuestion 23 (8 points)Benito died on May 23, 2012, bequeathing his entire $3,000,000 estate to hisbrother, Alfonso. The executor of Benito's estate validly elected to use thealternative valuation date. Benito's estate included 4,000 shares of listed stock,for which Benito's basis was $500,000. The stock was distributed to Alfonso eightmonths after Benito's death. The fair market values of this stock on variousdates follow:May 23, 2012$600,000November 23, 2012 550,000January 23, 2013530,000Alfonso's basis in the stock is:Question 23 options:1) $500,000.2) $530,000.3) $550,000.4) $600,000.5) None of the above.SaveQuestion 24 (8 points)Tom purchased 1,000 shares of stock in his corporation for $20 a share. The FMVwas $25 a share and Tom reported the $5,000 difference between FMV andamount paid in gross income. What is Tom' basis in the 1,000 shares?Question 24 options:1) $02) $5,0003) $20,0004) $25,0005) Not enough information is provided to answer this questionSaveQuestion 25 (8 points)Which of the following is not taken into consideration in computing the seller'samount realized from the exchange of property?Question 25 options:1) Debt that the buyer assumes2) Commissions paid by the seller3) Legal fees paid by the seller in conjunction with the sale4) All of the above are taken into consideration in computing amount realized5) None of the above are taken into consideration in computing amount realizedSaveQuestion 26 (8 points)In 2000, Darlene received stock worth $100,000 from her aunt. The auntpurchased the stock for $15,000 in 1970. Using the $100,000 value of the stock,the aunt paid $30,000 of gift tax on the transfer. Darlene's basis in the stock is:Question 26 options:1) $15,000.2) $40,500.3) $45,000.4) $100,000.5) $130,000.SaveQuestion 27 (8 points)Years ago, Fran purchased stock in ABC company for $33,000. Last year, Fransold the stock to her son, Steve, for $25,000 (its current market value). Stevelater sells the shares for $20,000. Steve's adjusted basis in the stock and hisrecognized gain or loss on the sale are:Question 27 options:1) $33,000adjusted basis, $13,000 recognized loss2) $33,000adjusted basis, $5,000 recognized loss3) $25,000adjusted basis, $13,000 recognized loss4) $25,000adjusted basis, $5,000 recognized loss5) $33,000adjusted basis, $0 recognized gainSaveQuestion 28 (8 points)Nate sold his principal residence for $400,000. He paid commissions totaling$20,000. Nate purchased the home 15 years ago for $110,000. Over the years,he has spent $13,000 on improvements and $22,000 on repairs to the home.Nate's recognized gain is:Question 28 options:1) $02) $20,000.3) $7,000.4) $270,000.5) $257,000.SaveQuestion 29 (8 points)A married taxpayer sells 5,000 shares of Section 1244 stock ("small businesscorporation" stock) at a loss of $150,000. How will this loss be treated on a jointreturn?Question 29 options:1) $150,000 ordinary loss2) $150,000 capital loss3) $50,000 ordinary loss and $100,000 capital loss4) $100,000 ordinary loss and $50,000 capital loss5) None of the aboveSaveQuestion 30 (8 points)A taxpayer sold land for $80,000. It originally cost $60,000. Selling expenseswere $4,000. The proceeds are to be collected in installments over a four-yearperiod. The taxpayer received $30,000, plus interest, in the current year. Underthe installment method of reporting income, how much gain should berecognized in the current year?Question 30 options:1) $4,0002) $5,0003) $6,0004) $16,0005) None of the aboveSaveQuestion 31 (8 points)Land purchased for $60,000 in 2000 and used in the taxpayer's business is soldin the current year for $67,000. The sale of the land results in:Question 31 options:1) $7,000 of short-term capital gain.2) $7,000 of long-term capital gain3) $7,000 of ordinary income.4) $7,000 of Section 1231 gain.5) none of the aboveSaveQuestion 32 (8 points)An individual purchased an apartment building for use in a business for $300,000in 2004. The building was sold for $350,000 in October 2012. Depreciation takenwas $84,000. If there is no other Section 1231 gain (loss) during the year, howwill the gain on the sale of this apartment building be treated?Question 32 options:1) $134,000 15% long-term capital gain2) $84,000 15% long-term capital gain, $50,000 25% long-term capital gain3) $50,000 15% long-term capital gain, $84,000 25% long-term capital gain4) $134,000 25% long-term capital gain5) None of the aboveSaveQuestion 33 (8 points)Equipment used in the taxpayer's business is purchased in 2009 for $50,000. Itwas sold in 2012 for $22,000. Depreciation information is as follows:Accelerated depreciation taken$23,758Straight-line depreciation (7-year life) would have been 21,500What is the gain or loss on the sale of this equipment, and how will it be treatedon the tax return?Question 33 options:1) $4,242 Section 1231 loss2) $1,758 Section 1231 loss3) $2,258 ordinary loss, $1,984 Section 1231 loss4) $4,242 ordinary loss5) $6,500 ordinary lossSaveQuestion 34 (8 points)An unmarried taxpayer sells the following capital assets during the year.Property Date Acquired Date Sold Sales Price Adjusted Basis16/4/114/6/12$10,000$14,00021/8/1012/15/1215,00017,000The taxpayer carries over to the next tax year:Question 34 options:1) a $4,000 short-term capital loss.2) a $1,000 short-term capital loss and a $2,000 long-term capital loss.3) a $3,000 short-term capital loss.4) a $2,000 short-term capital loss and a $1,000 long-term capital loss.5) A $3,000 long-term capital loss.SaveQuestion 35 (8 points)A married couple sells the following capital assets during the year.Property Date Acquired Date Sold Sales Price Adjusted Basis18/4/116/6/12$15,000$16,00021/8/101/15/1228,00017,00038/9/119/8/122,0008,000The couple's net capital gain is:Question 35 options:1) $4,000.2) $12,000.3) $5,000.4) $11,000.5) None of the aboveSaveQuestion 36 (8 points)Al started a qualified child care program for his employees in 2010. In thecurrent year, he spent $5,000 on qualified child care expenditures and $500 inqualified child care referral expenses. Al's current year employer-provided childcare credit is:Question 36 options:1) $550.2) $1,000.3) $1,300.4) $1,375.5) $1,500.SaveQuestion 37 (8 points)Which of the following credits are not part of the general business credit?Question 37 options:1) Rehabilitation credit2) Disabled access credit3) Work opportunity tax credit4) Employer-provided child care credit5) All of the above are part of the general business creditSaveQuestion 38 (8 points)During 2012, Jane hired a veteran with service-related disabilities to help her outin her business. The veteran had been unemployed for 8 weeks in the yearleading up to the hire date. He was paid $36,000 during his first year, of which$18,000 was paid in 2012. Jane's wounded warrior's tax credit (part of the workopportunity credit) for 2012 is:Question 38 options:1) $9,600.2) $4,800.3) $5,600.4) $2,400.5) $7,200.SaveQuestion 39 (8 points)Which of the following statements is incorrect regarding the small employerpension plan startup credit?Question 39 options:1) The maximum credit allowed each year is $500.2)The credit is available for the first five years in which the new pension plan isoffered.3)The credit is not available to employers who have maintained a qualified pensionplan during any of the past three years.4) To be eligible for the credit, a new pension plan must be established.5) All of the above statements are correct.SaveQuestion 40 (8 points)Jeff paid $75 a share for 1,000 shares of stock under an incentive stock optionplan where he works. At the time he exercised his option, the stock was sellingfor $100 a share. For purposes of computing alternative minimum taxableincome, which of the following statements is correct?Question 40 options:1) Jeff must add back to regular taxable income $75,000.2) Jeff must add back to regular taxable income $25,000.3) Jeff must subtract from regular taxable income $75,000.4) Jeff must subtract from regular taxable income $25,000.5) None of the above.SaveQuestion 41 (8 points)A married couple files a joint return. The couple has no net capital gain orqualified dividend income. The couple's AMT base (amount subject to AMT) is$275,000 and their regular income tax liability is $48,500. The couple's AMT for2012 is:Question 41 options:1) $73,500.2) $71,500.3) $25,000.4) $23,000.5) $61,404.SaveQuestion 42 (8 points)Which of the following statements is correct with respect to the penaltyassociated with the failure to report an accurate information return that iscorrected within 30 days of the due date?Question 42 options:1) $30 per return with a yearly maximum of $50,000 for businesses other thansmall businesses.2)$50 per return with a yearly maximum of $100,000 for businesses other thansmall businesses.3)$60 per return with a yearly maximum of $200,000 for businesses other thansmall businesses.4)$50 per return with a yearly maximum of $500,000 for businesses other thansmall businesses.5)$30 per return with a yearly maximum of $250,000 for businesses other thansmall businesses.SaveQuestion 43 (8 points)The penalty imposed on tax preparers for preparing a return in which the taxpreparer intentionally disregards the rules and regulations is:Question 43 options:the greater of $5,000 or 50% of the income derived (or to be derived) from the1)return.2)the lesser of $5,000 or 50% of the income derived (or to be derived) from thereturn.3)the greater of $1,000 or 50% of the income derived (or to be derived) from thereturn.4)the lesser of $1,000 or 50% of the income derived (or to be derived) from thereturn.5) None of the above.SaveQuestion 44 (8 points)For purposes of computing depreciation on the taxpayer's home for the homeoffice deduction, the depreciable basis of the home is:Question 44 options:the taxpayer's adjusted basis in the home at the time it is converted to a home1)office.2) the fair market value of the home at the beginning of the tax year.3) the fair market value of the home at the time it is converted to a home office.4) the lesser of a. or c.5) the lesser of a. or b.SaveQuestion 45 (8 points)Intangible property acquired as part of an acquisition of a business, is amortizedover:Question 45 options:1) 15 years.2) the remainder of the property's useful life.3) the lesser of a. or b.4) the greater of a. or b.5) none of the above.SaveQuestion 46 (8 points)In December 2012, a taxpayer leased out property for three years, receiving$600 for the December rent and $600 for January's rent. A refundable securitydeposit of $500 was also received. How much rental income should be reportedin 2012?Question 46 options:1) $6002) $1,1003) $1,2004) $1,7005) None of the above.SaveQuestion 47 (8 points)A taxpayer rents out a vacation home for 30 days and uses it for personal use 20days. Gross rental income was $6,000 and expenses incurred for the year were:Mortgage interest $3,600Real estate taxes 1,200Utilities600Maintenance720Depreciation4,800Depreciation carryover to the next tax year is:Question 47 options:1) $0.2) $552.3) $2,472.4) $2,800.5) $4,800.SaveQuestion 48 (8 points)Patty converted her principal residence to rental property two years ago when itwas worth $70,000. Patty paid $85,000 for the house. What is Patty's basis inthe house if after taking $10,000 of depreciation deductions she sells it for$66,000?Question 48 options:1) $60,0002) $66,0003) $70,0004) $75,0005) $85,000SaveQuestion 49 (8 points)Which of the following is not included in the taxpayer's basis in businessproperty?Question 49 options:1) Sales taxes paid with the purchase2) Title insurance paid with the purchase3) Amounts paid to have the property installed4) Amounts paid to have the property delivered to the taxpayer's business5) All of the above are included in the taxpayer's basisSaveQuestion 50 (8 points)Joel's principal residence is destroyed in a fire in a federally declared disasterarea. The insurance company compensates Joel for his loss in 2012, whichproduces a $350,000 realized gain. How long does Joel have to purchase a newprincipal residence and avoid being taxed on the gain?Question 50 options:1) December 31, 20122) December 31, 20133) December 31, 20144) December 31, 20155) December 31, 2016

 

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