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Question;TXX 5772 ?;1. The sales tax is the;perfect example of a (or an);a. direct tax;b. income tax;c. head tax;d. progressive tax;e. none of the above;2. In the McDonell case;the first determination the Tax Court made was;a. it excluded the benefit of the trip;from taxpayer?s gross income.;b. that the trip was not;a prize or award under Section 74.;c. it included the;benefit of the trip in the taxpayer?s gross income.;d. that the trip was a;prize or award under Section 74.;e. none of the above.;3. Congress?s purpose in;enacting Section 117 was;a. to provide a clear-cut;method for distinguishing between taxable and non-taxable educational grants.;b. to include in gross income amounts;received as grants by degree candidates.;c. to clearly define the term;scholarships.;d. to clearly define;educational expenses for purposes of educational grants.;e. none of the above.;4. If an employee;receives an amount from his or her employer for educational assistance, he or;she may exclude a certain amount. The code Section which permits this is;Section;a. 74;b. 102;c. 132;d. 274;e. none of the above.;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;26. ABC, Inc. of Jasper;Georgia suffered a casualty loss of $150,000 in March 2012. This loss was;caused by heavy rains that completely flooded their factory. As a result of;these rains, the President declared North Georgia (including Jasper) a disaster;area on March 23, 2012. In what year can ABC, Inc. elect to deduct the casualty;loss?;a. 2012 or 2013;b. 2011 or 2012;c. 2012;d. 2011;27. Which of the;following is not a passive activity?;a. Owning a business and;not materially participating;b. Having rental condos;c. Owning a limited;partnership interest in a real estate limited partnership;d. Owning a working interest in oil and gas properties;28. All of the;outstanding stock of a closely held C corporation is owned equally by Evelyn;Humo and Steve Bufusno. In 2012, the corporation generates taxable income of;$20,000 from its active business activities. In addition, it earns $20,000 of;interest from investments and incurs a $40,000 loss from a passive activity.;How much income does the C corporation report for 2012?;a. $10,000 of portfolio;income;b. $0;c. $20,000 of portfolio income;d. None of the above;29. All of the;outstanding stock of a closely held C corporation is owned equally by Evelyn;Humo and Steve Bufusno. In 2012, the corporation generates taxable income of;$20,000 from its active business activities. In addition, it earns $20,000 of;interest from investments and incurs a $40,000 loss from a passive activity.;How much of a passive loss carryover does the corporation have?;a. $20,000;b. $0;c. $40,000;d. None of the above;30. During 2012, Hugh;Hughes reported the following income and loss;Activity X ($50,000);Activity Y $20,000;Both Activity X and;Activity Y are passive to Mr. Hughes. Hugh purchased Activity X in 1987 and;Activity Y in 1993. How much is the loss that Mr. Hughes may deduct in 2012?;a. $50,000;b. $30,000;c. $3,000;d. $0;e. none of the above;31. John Mapp dies with;passive activity property having an adjusted basis of $50,000, suspended losses;of $20,000, and a fair market value at the date of Mr. Mapp?s death of $77,000.;How much suspended loss can be taken on Mr. Mapp?s final Form 1040 return?;a. $20,000;b. $77,000;c. $7,000;d. $0;e. none of the above;32. John Mapp dies with;passive activity property having an adjusted basis of $50,000, suspended losses;of $20,000, and a fair market value at the date of Mr. Mapp?s death of $60,000.;How much suspended loss can be taken on Mr. Mapp?s final Form 1040 return?;a. $10,000;b. $20,000;c. $0;d. None of the above;33. Billy Ray owns;several parcels of rental real estate, and he actively participates in managing;the properties. His total loss from these activities in 2012 is $30,000.;Assuming that his AGI for 2012 is $110,000, what is the allowable deduction;from these properties in 2012?;a. $0;b. $15,000;c. $20,000;d. $30,000;e. none of the above;34. Billy Ray owns;several parcels of rental real estate, and he actively participates in managing;the properties. His total loss from these activities in 2012 is $30,000 and his;AGI for 2012 is $110,000. How much of the disallowed loss from rental real;estate activities may be carried over to future years?;a. 0%;b. 10%;c. 50%;d. 100%;e. None of the above;35. Billy Ray owns;several parcels of rental real estate, and he actively participates in managing;the properties. His total loss from these activities in 2012 is $30,000 and his;AGI for 2012 is $110,000. For how many years may the disallowed loss be carried;forward?;a. The disallowed loss;may not be carried forward.;b. The disallowed loss;may be carried forward for 15 years.;c. The disallowed loss;may be carried forward for 15 years, but only after it has been carried back;for 3 years.;d. The disallowed loss may be carried forward indefinitely.;e. none of the above;36. Fines and penalties;paid to the government for the violation of a law are;a. Generally deductible;for tax purposes as business expenses;b. Not deductible for tax purposes;c. Deductible if ordinary;and necessary;d. Deductible if;reasonable in amount;e. none of the above;37. Which of the following statements is false?;a. Even if an employee has contributed his own taxed;dollars to the purchase of an annuity under a qualified plan, his receipts under the annuity, whether variable or fixed;will be fully taxable to him or her as ordinary income.;b. Life benefits (i.e.;received during the life of the insured) received under a life insurance policy;are subject to tax.;c. The legislative;history of the 1954 Code makes it clear that, while sec. 61 omits the phrase;?in whatever form paid,? the definition of gross income still includes ?income;realized in any form.?;d. Debt discharge that is;intended as a gift is treated as a gift rather than under the debt discharge;rules.;e. all of the above are;true.;38. Jerome Judson?s;divorce decree calls for him to pay his former wife $200 a month as child;support and $200 a month as alimony. This year he paid only $3,600. Jerome may;deduct $1,800 as alimony.;a. True;b. False;39. On August 1 of this;year, Bart Barnes transferred property to his former spouse in settlement of;marital rights, under a divorce instrument effective July 26. The property cost;$10,000 and had a fair market value of $20,000 when transferred. Bart will recognize;gain on the transfer.;a. True;b. False;40. Cal Cotton, under a;divorce instrument, is required to make mortgage payments and pay real estate;taxes and insurance premiums on property owned by him but used by his former;wife as her residence. Cal may deduct these payments as alimony.;a. True;b. False;41. In order to limit the;extent that ?front-loaded? payments may qualify as alimony, a recapture rule;may apply to the part of the payments made in the first two post-separation;years that exceed $25,000 a year.;a. True;b. False;42. Paul and Joan;divorced in 2012. They have two children, ages five and ten. The divorce decree;requires Joan to pay $300 a month to Paul and does not specify the use of the;money. According to the decree, the payments will stop after the children reach;18. Joan may deduct payments as alimony.;a. True;b. False;43. Bob Bixby gave his;daughter, Jane, his personal residence with an adjusted basis to him of;$260,000 and a fair market value of $250,000. Jane lived in the house for two;years and then sold it for $240,000. As a result of the sale, Jane will;a. Report no gain or loss;b. Report a $10,000 loss;c. Report a $20,000 loss;d. Have her father report;a $20,000 loss;e. none of the above;44. A Treasury Regulation contains the following;statement: ?the price at which the property would change hands between a;willing buyer and a willing seller, neither being under any compulsion to buy;or to sell and both having reasonable knowledge of the facts.? This statement refers to which of the;following concepts?;a. the economic reality test;b. fair allocation of;income and expenses;c. transfer pricing rule;d. fair accounting in;order to reflect true accretion to income;e. none of the above;45. Upon winning an;award, the recipient, and if he or she wants to avoid inclusion in income, he;or she must;a. disavow the award in;favor of a charitable or governmental entity prior to the award being granted.;b. disavow the award in favor of a;charitable or governmental entity within 30 days of the date the award is;granted.;c. disavow the award in;favor of a charitable or governmental entity within 45 days of the date the;award is granted.;d. disavow the award in;favor of a charitable or governmental entity within 90 days of the date the;award is granted.;e. none of the above.;46. All of the following;statements are true, except;a. Retroactive income;taxes may not be passed by Congress because they are unconstitutional.;b. In general, the Treasury Department;may not issue retroactive regulations.;c. Robert Hall was one of;the academic proponents of the flat tax.;d. The first;internal-revenue law was enacted in March 1791.;e. all of the above are;true.;47. The formal origin of tax law is a bill which;is introduced in the House of Representatives.;a. Commonly, the bill;passed by the House is passed by the Senate almost identically to the way it;was passed by the House.;b. Commonly, the;president passes the bill, introduced in the House, prior to the House passing;it, but before there is a chance that it be vetoed.;c. Commonly, the Treasury;Department has little to do with the drafting of a bill having to do with;federal taxation.;d. Commonly, the primary;author of a tax bill is the majority leader of the House.;e. none of the above.;48. In 1913, the XVI;Amendment to the U.S. Constitution gives Congress the power to tax.;a. True;b. False;49. Sometimes, albeit;rarely, federal income taxation statutory law can be found in other federal;statutes (other than the Internal Revenue Code). An example of this is;a. deductibility of;office in the home deduction for anesthesiologists;b. deductibility of;moving expenses of armed forces personnel;c. deductibility of;passive real estate losses in excess of revenue;d. deductibility of;excess revenue from oil from excess costs;e. none of the above;50. The text states that;reading the Internal Revenue Code cold is not very productive. They posit that;it must be read;a. in the abstract;b. with a philosophical;eye;c. with a specific;circumstance in mind;d. with general thoughts;in mind;e. with an open mind;51.Which of the following in not a payment;deductible as alimony?;a. Payments for life;insurance premiums required by the divorce decree.;b. Payments for medical;expenses of your spouse under the terms of the divorce decree.;c. Half of the mortgage;payment on a home jointly owned with your ex-spouse when required by the;divorce decree;d. Payments for child support required;by the divorce decree

 

Paper#59387 | Written in 18-Jul-2015

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