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Accounting- Multiple choice questions

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1. Which of the following statements is TRUE about Pablo?s hobby activity?;a. A loss from Pablo?s hobby activity may not be used to offset his dividend income;b. When compared to Pablo?s business, Pablo?s hobby activity is subject to exactly the same tax laws;c. Expenses relating to Pablo?s hobby activity could never be deductible;d. A loss from Pablo?s hobby activity may be used to offset wages from his full-time employment;2. What was Kathryn?s Taxable Income for 2014? Assume Kathryn is single and has TWO dependent children, Shicquonna and Andrea. Assume further that Kathryn?s 2014 AGI is $60,000 and that Kathryn had itemized deductions of $12,000.;a. $60,000;b. $48,000;c. $40,100;d. $36,150;3. Jasimon incurred the following expenses during 2014. Which expense is Jasimon LEAST likely to deduct as a medical expense (assume Jasimon itemizes and that Jasimon?s medical expenses will exceed 10.0% of Jasimon AGI)?;a. Uninsured expenses relating to back surgery;b. Medical insurance premiums (purchased by Jasimon with Jasimon?s after-tax dollars);c. Travel expenses to obtain treatment at a clinic in Texas (assume that the potentially lifesaving procedure to be performed can only be performed at that particular clinic);d. Cosmetic surgery (to make Jasimon?s chin look more appealing);4. Alix contributes some common stock that Alix held long-term to a public charity. On the date of the contribution, Alix?s basis in the common stock was $2,000 and the fair market value was $15,000. What is the amount of charitable contribution allowed (before considering any potential percentage limitation)?;a. $15,000;b. $13,000;c. $2,000;d. $0;5. Timothy sold stock Timothy owned in a small business that was formed as a corporation. Timothy sold the stock to Danita. Which Section of the U.S. Tax Code might allow Timothy to convert what would otherwise be a capital loss into an ordinary loss?;a. Section 1244;b. Section 1221;c. Section 1202;d. None of the above;6. Kevin?s business incurred a casualty loss in 2014. Immediately before the casualty, her business truck had an adjusted basis of $45,000 and a fair market value of $40,000. Immediately after the casualty, the truck had a fair market value of $10,000. Because of the truck damage, Kevin?s insurance company provided $10,000 as a reimbursement in 2014. What was Kevin?s 2014 casualty loss deduction?;a. $45,000;b. $30,000;c. $20,000;d. Unknown (because we must know Kevin's AGI);7. In 2005, Mary (a single taxpayer) loaned $30,000 to her friend Nicole. In 2014, Nicole declared bankruptcy, with the result that the debt became totally worthless. How should Mary treat the loss relating to this debt (assume that the debt is a nonbusiness debt that is a bona fide debt that arose from a debtor-creditor relationship)?;a. As an itemized deduction;b. As a short-term capital loss;c. As a long-term capital loss;d. Mary may not take any deduction relating to the debt (it is a nonbusiness debt);Assume the facts stated in the prior question. Assume further that Mary has no other capital gains or losses in 2014 (or any prior years). What is the maximum amount (related to the bad debt) that Mary can deduct in 2014?;a. $30,000;b. $27,000;c. $3,000;d. $0;9. Assume the facts stated in the prior two questions. Assume further that for 2014 Mary will offset her wages (with any deduction related to the debt) to the maximum extent permitted by law. What is the amount of Mary?s capital loss carryover to 2015?;a. $30,000;b. $27,000;c. $3,000;d. $0;10. Which of the following is most likely deductible FOR AGI (i.e., PRE-AGI)?;a. Amounts paid for federal income taxes;b. Amounts paid for unreimbursed moving expenses;c. Amounts paid for property taxes;d. Each of the above items would be deducted FROM AGI;11. Cristine?s boss gave her two tickets to the Jubbin Beaver concert because she met her sales quota. At the time Cristine received the two tickets, they had a face value of $100 each and were selling on eBay for $300 each (which equaled the fair market value of the tickets). On the date of the concert, the tickets were selling for $300 each. Cristine and her daughter (Jeanette) attended the concert. How much gross income should Cristine report as a result of the tickets?;a. $0;b. $200;c. $400;d. $600;12. Sagi was a professional soccer player before a career-ending injury caused by a grossly negligent driver. Sagi sued the driver and collected $1 million as compensation for lost estimated future income and $2 million for punitive damages. How much gross income should Sagi report as a result of the damages he received?;a. $0;b. $1 million;c. $2 million;d. $3 million;13. Which of the following is a deduction FROM AGI?;a. Ellice paid alimony to a former spouse;b. Pamela invested $3,000 in a Roth IRA;c. Stephanie paid real estate taxes levied by the county on her personal residence;d. Monica paid property taxes levied by the county on her car used exclusively for business;15. Crucilena Corporation acquired new computer equipment on March 13, 2014, for $50,000. Crucilena did not elect immediate expensing under Section 179. Determine Crucilena?s cost recovery for 2014.;a. $50,000;b. $20,000;c. $10,000;d. $0;16. On August 5, 2014, Kathryn purchased a new office building for $5 million. On October 3, 2014, she began to rent out office space in the building. What is Kathryn?s cost recovery for 2014?;a. $0;b. $26,750;c. $128,200;d. $5,000,000;17. Assume the same facts as in the previous problem. Assume further that Kathryn sells the office building on July 12, 2018. What is Kathryn?s cost recovery for 2018?;a. $0;b. $69,442;c. $128,200;d. $1,000,000;18. Jeff performs services for Nova Corporation. In determining whether Jeff is an employee or an independent contractor, which factor is MOST likely to suggest that Jeff is an employee?;a. Nova Corporation determines the details of HOW Jeff performs the applicable work;b. Jeff uses his own tools;c. Jeff sets his own schedule;d. Jeff performs the services from his home;BACKGROUND INFORMATION FOR QUESTIONS 19-20;Tim and Jonathan recently formed a corporation named TJ Inc. (or ?TJ?). On December 31, 2013, TJ issued 800,000 shares of common stock to Jonathan and 800,000 shares of common stock to Tim. Jonathan and Tim each paid $0.01 per share for their stock ($0.01 equaled the per share fair market value on December 31, 2013). Their stock is subject to a 4-year ?repurchase option? (at cost) in favor of TJ. Each TJ repurchase option will ?lapse? over time so that on December 31 (of 2014, 2015, 2016 and 2017), 200,000 shares will be released from the repurchase option. For example, if Jonathan quits TJ before December 31, 2017, TJ can repurchase Jonathan?s ?unvested shares? for $0.01 per share (no matter what the fair market value is on that date).;QUESTION 19;Assume that Tim DID NOT file a timely ?83(b) election.? On December 31, 2014, Tim is still working at TJ and thus 200,000 of Tim?s 800,000 shares are ?released? from the TJ repurchase option (i.e., 200,000 of Tim?s shares ?vest? on December 31, 2014). On that same day, the fair market value of the TJ stock equals $10.01 per share.;What 2014 income, if any, must Tim report as a result of these events?;a. $8,000,000;b. $2,002,000;c. $2,000,000;d. $0;QUESTION 20;Assume that Jonathan DID file a timely ?83(b) election.? On December 31, 2014, Jonathan is also still working at TJ and thus 200,000 of Jonathan?s 800,000 shares are also ?released? from the TJ repurchase option (i.e., 200,000 of Jonathan?s shares ?vest? on December 31, 2014). On that same day, the fair market value of the TJ stock equals $10.01 per share. What 2014 income, if any, must Jonathan report as a result of these events?;a. $8,000,000;b. $2,002,000;c. $2,000,000;d. $0

 

Paper#80149 | Written in 18-Jul-2015

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