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Problem A - I ? Multiple Choice (24 x 3 = 72 point...

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Problem A - I ? Multiple Choice (24 x 3 = 72 points) Chose the best answer. 1. Indigo Company acquires a new machine (ten-year property) on January 15, 2008, at a cost of $100,000. Indigo also acquires another new machine (seven-year property) on November 5, 2008, at a cost of $20,000. No election is made to use the straight-line method. The company does not make the ? 179 election. Indigo does elect not to take additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machines for 2008. a. $12,000. b. $12,858. c. $51,000. d. $66,429. e. None of the above. 2. Sierra purchased a new factory building on February 15, 2008, for $1,000,000. Determine the cost recovery deduction for 2009. a. $25,640. b. $22,470. c. $36,360. d. $90,000. e. None of the above. 3. Glory Company acquires a new machine (seven-year property) on January 10, 2008, at a cost of $340,000. Glory makes the election to expense the maximum amount under ? 179. No election is made to use the straight-line method. Determine the total deductions in calculating taxable income related to the machine for 2008 assuming Glory has taxable income of $500,000. a. $48,586. b. $250,000. c. $262,861. d. $301,431. e. None of the above. 4. Douglas works as an auditor for a major CPA firm. During the months of August and September of each year, he is permanently assigned to the team auditing Coyote Corporation. As a result, every day he drives from his home to Coyote and returns home after work. Mileage is as follows: Miles Home to office 12 Home to Coyote 32 Office to Coyote 8 For the period of August and September, Douglas?s deductible mileage for each workday is: a. 8. b. 12. c. 52. d. 64. e. None of the above. 5. During the year, Darcy went from Chicago to Miami, Florida. After five days of business meetings, he took four days of vacation to go sightseeing. Darcy?s expenses for the trip are as follows: Air fare $ 400 Lodging (9 days X $80) 720 Meals (9 days X $70) 630 Airport limo 60 Darcy?s deduction is: a. $927. b. $1,035. c. $1,750. d. $1,810. e. None of the above. 6. Becky, who holds a bachelor of education degree, is a middle school teacher in Billings, Montana. The school board recently changed its minimum education requirement by prescribing five years of college training. Existing teachers, such as Becky, are allowed 5 years in which to acquire the additional year of education. Pursuant to this requirement, Becky spends her 2008 summer break attending University of Montana taking education courses. Her expenses are as follows: Books and tuition $6,500 Meals 800 Lodging 900 Laundry while in travel status 350 Transportation 950 Her education expense deduction is: a. $9,500. b. $9,100 c. $8,750. d. $6,500. e. None of the above. 7. Lulu made the following gifts during the year: To Joan, a key client ($10 of the amount listed was for gift wrapping) $40 To Demitria, Lulu's secretary, on Demitria?s birthday 50 To Francoise, Lulu's boss, at Christmas 60 Presuming proper substantiation, Lulu's deduction is: a. $60. b. $85. c. $90. d. $150. e. None of the above. 8. Danny and Lilly are married and together have AGI of $50,000. They have two dependents and file a joint return. Each pays $1,200 for hospitalization insurance. During the year, they paid the following amounts for medical care: $5,000 in doctor and dentist bills and hospital expenses, and $1,700 for prescribed medicine and drugs. In December, they received an insurance reimbursement of $1,700 for hospitalization. Determine the deduction allowable for medical expenses paid during the year. a. $9,100. b. $7,400. c. $5,350. d. $3,650. e. None of the above. 10 Christopher owned stock in Thyme Corporation that he donated to a university (a qualified charitable organization) on December 30, 2008. What is the amount of Christopher?s deduction assuming that he had purchased the stock for $22,000 on January 3, 2008, and the stock had a fair market value of $58,000 when he made the donation? Christopher?s AGI is $400,000. a. $0. b. $22,000. c. $40,000. d. $58,000. e. None of the above. 11. Which of the following items would be a miscellaneous itemized deduction on Schedule A of Form 1040 subject to the 2 percent of AGI floor? a. Safe deposit box rental. b. Job-hunting costs. c. Hobby losses. d. Professional dues. e. All of the above. 12. Carl owns five activities. He elects not to group them together as a single activity under the "appropriate economic unit" standard. He participates for 100 hours in Activity A, 140 hours in Activity B, 240 hours in Activity C, 99 hours in Activity D, and 125 hours in Activity E. Which of the following statements is correct? a. Activities A, B, C and D are all significant participation activities. b. Carl is a material participant with respect to Activities A, B, C, D, and E. c. Carl is a material participant with respect to Activities B, C, and E only. d. Activities A, B, C, D and E are all significant participation activities. e. None of the above. 13. Several years ago, Miller purchased a structure for $200,000 that was originally placed in service in 1929. In the current year, he incurred qualifying rehabilitation expenditures of $250,000. The amount of the tax credit for rehabilitation expenditures, and the amount by which the building?s basis for cost recovery would increase as a result of the rehabilitation expenditures are the following amounts: a. $25,000 credit, $225,000 basis. b. $25,000 credit, $250,000 basis. c. $25,000 credit, $450,000 basis. d. $50,000 credit, $220,000 basis. e. None of the above. 14. Annie gives her son stock with a basis in her hands of $52,000 and a fair market value of $48,000. No gift tax is paid. Son subsequently sells the stock for $49,000. What is his recognized gain or loss? a. $0. b. ($3,000). c. ($1,000). d. $1,000. e. None of the above. 15. Bianca and Dion exchange real estate in a like-kind exchange. Bianca's basis in the real estate, subject to a $100,000 mortgage, is $250,000 and the fair market value is $300,000. She receives real estate with a fair market value of $200,000 and Dion assumes the mortgage. What is Bianca?s recognized gain and adjusted basis for the real estate received? a. $0, $150,000. b. $50,000, $200,000. c. $50,000, $300,000. d. $100,000, $300,000. e. None of the above. 16 Taxpayer receives stock as a gift from his uncle. The adjusted basis of the stock is $20,000 and the fair market value is $37,000. Taxpayer trades the stock for bonds with a fair market value of $35,000 and $2,000 cash. What is his recognized gain and the basis for the bonds? a. $2,000, $22,000. b. $0, $20,000. c. $2,000, $20,000. d. $17,000, $35,000. e. None of the above. 17. In 2008, Marcus, the sole proprietor of a video rental store, pays a $4,000 premium for medical insurance for himself and his family. Cleo, one of Marcus?s employees, pays a $3,000 premium for a medical insurance policy for herself. Which of the following statements is true? a. Marcus may deduct $4,000 as a deduction from AGI. b. Marcus may deduct $4,000 as a deduction for AGI. c. Cleo may deduct $2,400 as a deduction for AGI. d. Cleo may deduct $3,000 as a deduction for AGI. e. None of the above. 18. During 2008, Molly paid the following taxes: Taxes on residence (for the period from March 1 through August 31, 2008) $7,155 State motor vehicle tax (based on the value of the personal use automobile) 220 Molly sold her personal residence on May 30, 2008, under an agreement in which the real estate taxes were not prorated between the buyer and the seller. What amount qualifies as a deduction from AGI for 2008 for Molly? a. $7,375. b. $7,155. c. $3,720. d. $3,500. e. None of the above 19. Aaron and Hazel, married taxpayers, took out a mortgage on their home for $350,000 in 2002. In May of 2008, when the home had a fair market value of $375,000 and they owed $300,000 on the mortgage, they took out a home equity loan for $220,000. They used the funds to purchase a single engine airplane to be used for recreational travel purposes. What is the maximum amount of debt on which they can deduct home equity interest? a. $75,000. b. $100,000. c. $220,000. d. $375,000. e. None of the above. 20. Which of the following is not deductible as a charitable contribution? a. Donations to a veterans? organization. b. Donations to a cemetery company. c. Donations to a state or possession of the United States. d. Donations to a homeowners association. e. All of the above. . 21. In 2008, Bryant pays $3,000 to become a charter member of Rosemary University?s Athletic Council. The membership ensures that Bryant will receive choice seating at all of Rosemary?s home football games. Also in 2008, Bryant pays $500 (the regular retail price) for season tickets for himself and his wife. For these items, how much qualifies as a charitable contribution? a. $0. b. $500. c. $2,400. d. $3,000. e. None of the above. 21. Christopher owned stock in Thyme Corporation that he donated to a university (a qualified charitable organization) on December 30, 2008. What is the amount of Christopher?s deduction assuming that he had purchased the stock for $22,000 on January 3, 2008, and the stock had a fair market value of $58,000 when he made the donation? Christopher?s AGI is $400,000. a. $0. b. $22,000. c. $40,000. d. $58,000. e. None of the above. 22. Which of the following items would be a miscellaneous itemized deduction on Schedule A of Form 1040 subject to the 2 percent of AGI floor? a. Safe deposit box rental. b. Job-hunting costs. c. Hobby losses. d. Professional dues. e. All of the above. 23. On June 1, 2008, Carolyn places in service a new automobile that cost $25,000. The car is used 70% for business and 30% for personal use. (Assume this percentage is maintained for the life of the car.) She does elect not to take additional first-year depreciation. Determine the cost recovery deduction for 2009. a. $3,060. b. $3,430. c. $5,600. d. $8,000. e. None of the above. 24. During the past two years, through extensive advertising and improved customer relations, Extreme Corporation estimated that it had developed customer goodwill worth $400,000. For the current year, 2008, determine the amount of goodwill Extreme Corporation may amortize. a. $13,336. b. $20,000. c. $26,667. d. $80,000. e. None of the above.

 

Paper#4491 | Written in 18-Jul-2015

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