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Mid-Term Law MCQs




Question;5. Which of the following;statements is false?;a. In all situations, the;basis of property in the hands of a done is the same basis the property had in;the hands of the donor.;b. A major revision of;the 1954 Internal Revenue Code occurred in 1969.;c. ?Gestalt,? in the context of learning;the Internal Revenue Code ?Code? refers to the phase of a person?s;understanding when one begins to understand the structure or pattern of the;Code.;d. Gross income does not include the amount of;any damage received on account of personal injuries.;e. all of the above are;true.;6. Kent Knobe gave Larry;Lawson a gift having a fair market value of $133,000 on February 14, 2012. Kent;had purchased the gift property in 2004 for $93,000, the taxable gift was;$120,000, and paid a gift tax of $15,000. What is Larry?s basis in the;property?;a. $93,000;b. $120,000;c. $98,000;d. $108,000;e. $133,000;7. Starting in 2012, Mr.;West must pay his former spouse $20,000 annually under a divorce decree in the;following amounts;$1,000 a month for;mortgage payments (including principal and interest) on a jointly owned home;until she dies;$200 a month for tuition;fees paid to a private school until their son attains the age of 18 or leaves;the school prior to age 18;$5,000 a year cash;payment to former Mrs. West until she dies;In addition to the above;amounts, the former Mrs. West also received in 2012 a lump-sum amount of;$150,000 from the sale of their other marital assets.;Assume the parties did;not file a joint return and were not members of the same household. Also;assume that there were no written statements between the parties as to how the;amounts should be treated. What is the amount of Mr. West?s 2012 alimony;deductions?;a. $20,000;b. $155,000;c. $17,600;d. $11,000;8. Holly and Harp Oaks;were divorced in 2010. The divorce decree was silent regarding the exemption;for their 12-year-old daughter, June. Holly has legal custody of her daughter;and did not sign a statement releasing the exemption. Holly earned $8,000 and;Frank earned $80,000. June had a paper route and earned $3,000. June lived with;Harp 4 months of the year and with Holly 8 months. Who may claim the exemption;for June in 2012?;a. June may, since she;had gross income over $3,000 and files her own return.;b. Since June lived with;both Holly and Harp during the year, they both may claim her as an exemption.;c. Holly may, since she has legal custody and physical;custody for more than half the year.;d. Harp may, since he;earned more than Holly and, therefore, is presumed to have provided more than;50% of June?s support.;9. Based on the following;2012 events, how much should Rachel include in income on her federal income tax;return?;Jury awarded punitive;damages;$10,000;Kickbacks on sale of;goods (not treated as a reduction elsewhere);5,000;Money borrowed from a;bank;8,000;Increase in the value;of an asset;1,000;a. $10,000;b. $15,000;c. $16,000;d. $24,000;10. Insurance policy;dividends used to purchase additional life insurance are not taxable to the policyowner.;a. True;b. False;11. Dividend payments;made by an insurance company that are based on an policy and that exceed the;total amount of premiums paid by the insured are taxable to the insured.;a. True;b. False;12. On a business-related life insurance policy, if it is;cashed out during the life of a terminally-ill or chronically-ill person, the;amount is excluded from gross income.;a. True;b. False;13. Which of the;following is false?;a. Taxability of the;recovery of damages can be determined, in part, by identifying the nature of;the injury.;b. An annuity is a;contract that pays a fixed income at set regular intervals for a specific;period of time.;c. Gross income includes;amounts from the forgiveness of loans made by educational organizations to;refinance existing student loans.;d. Insurance policy;dividends used to purchase additional life insurance are not taxable to the;policyowner.;e. all of the above are true.;14. On February 10, 2012;Rose was in an automobile accident while she was going to work. The doctor;advised her to stay home for six months due to her injuries. On February 25;2012, she files a lawsuit. On July 20, 2012, Rose returned to work. On December;15, 2012 the lawsuit was settled received the following amounts;Compensation for lost;wages;$25,000;Personal injury damages;awarded (none of which was for punitive damages);40,000;How much of the;settlement must Rose include in ordinary income on her 2012 tax return?;a. $0;b. $25,000;c. $40,000;d. $65,000;15. All of the following;would be excluded from income as a qualified scholarship by an individual who;is a candidate for a degree at a qualified educational institution, except;a.Tuition;b. Student fees;c. Course books;d. Room and board;16. To be deductible for;tax purposes, trade or business expenses must be;a. Ordinary and necessary;b. Reasonable in amount;c. Related to an activity;which is deemed to be a trade or business;d. All of the above;17. Business depreciable;property placed in service prior to what year is not eligible for ACRS;depreciation?;a. 1978;b. 1980;c. 1981;d. 1982;18. A nonbusiness bad;debt is deductible for tax purposes as a(n);a. Short-term capital loss;b. Itemized deduction;c. Long-term capital loss;d. Ordinary business;deduction;19. The IRS takes the;position that a taxpayer?s tax home, for purposes of determining travel;expenses, is at the location of the taxpayer?s;a. Principal place of business;b. Personal residence;c. Principal place of;business or personal residence, whichever results in a lower tax deduction;d. Personal residence if;located in excess of 50 miles from principal place of business;20. If a taxpayer has two;places of business in different areas, the IRS usually considers the following;factors in determining the taxpayer?s principal place of business: (Choose the;wrong answer.);a. Taxpayer?s preference for principal place of business;b. Degree of business;activity at each location;c. Amount of income at;each location;d. Amount of time spent;at each location;21. Research and;experimental expenditures connected with a trade or business can be capitalized;and amortized for tax purposes over a period of not less than;a. 30 months;b. 60 months;c. 120 months;d. 180 months;22. A calendar-year;corporation incurs $53,000 of start-up costs. If the corporation began business;on August 1 of the current year, what is the maximum amount of the start-up;costs that it can deduct against business income in the current year? (round;your answer to the nearest dollar);a. $3,417;b. $5,000;c. $2,000;d. $6,333;e. none of the above;23. During the current;year, a calendar year corporation incurred $52,000 of research and experimental;expenditures. The corporation elects to capitalize and amortize the costs over;60 months. If the corporation first realizes benefits from the research and;experimental expenditures on November 1 of the current year, its R&E;deduction will equal;a. $4,633;b. $3,544;c. $2,217;d. $1,733;24. Ann Jones uses a dry;cleaning machine in her business, and it was completely destroyed by fire. At;the time of the fire, the adjusted basis was $20,000 and its fair market value;was $18,000. How much is Ann?s loss?;a. $18,000;b. $2,000;c. $20,000;d. None of the above;25. Ann Jones uses a dry;cleaning machine in her business, and it was partially destroyed by fire. At;the time of the fire, the adjusted basis was $20,000 and its fair market value;was $18,000. The adjusted basis after the fire is $10,000 and the fair market;value after the casualty is $10,000. How much is the casualty loss?;a. $10,000;b. $8,000;c. $18,000;d. $20,000


Paper#59386 | Written in 18-Jul-2015

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