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Which of the following entities is required to report on the accrual basis?a. An accounting firm operating as a Personal Service Corporation. b. A manufacturing business with $15 million of gross receipts operating as a regular C corporation. c. A corporation engaged in tropical fruit farming in Southern California. d. All of the above corporations must report on the accrual basis.
Answer Preview: d All of the above corporations must report on the accrual basis The accrual basis of accounti…

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, Chapter: 6 -Problem: 25 >> Which of the following conditions need not be satisfied in order for a married taxpayer, residing in a community property state, to be taxed only on his or her separate salary?a. The husband and wife must live apart for the entire year. b. A minor child must be living with the spouse. c. The husband and wife must not file a joint income tax return. d. The husband and wife must not transfer earned
Answer Preview: The correct answer is b A minor child must be living with the spouse In a com…

, Chapter: 8 -Problem: 2 >> Which of the following is a capital asset?a. Account receivable b. Copyright created by the taxpayer c. Copyright (held by the writer) d. Business inventory e. A taxpayer’s residence
Answer Preview: The correct answer is e A taxpayers residence Explanation A capital asset is generally a longterm as…

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, Chapter: 8 -Problem: 9 >> In 2016, Tim, a single taxpayer, has ordinary income of $29,000. In addition, he has $2,000 in short-term capital gains, long-term capital losses of $10,000, and long-term capital gains of $4,000. What is Tim’s AGI for 2016?a. $26,000 b. $27,000 c. $29,000 d. $32,000
Answer Preview: To calculate Tims Adjusted Gross Income AGI we need to start with hi…

, Chapter: 7 -Problem: 16 >> Pekoe sold stock to Rose for $12,000, its fair market value. The stock cost Pekoe $16,000 5 years ago. Also, Pekoe sold Earl (an unrelated party) stock for $6,500 that cost $8,500 3 years ago. Rose and Pekoe are brother and sister. What is Pekoe’s recognized loss?a. $6,500 b. $4,000 c. $3,000 d. $2,000 e. $1,000
Answer Preview: In this scenario Pekoe has sold stock to both Rose and Earl and we need to calculate Pekoes recogniz…

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, The Au Natural Clothing Factory has changed its year-end from a calendar year-end to March 31, with permission from the IRS. The income for its short period from January 1 to March 31 is $24,000. Calculate the tax for this short period.
Answer Preview: To calculate the tax for a short period that spans from January 1 to March 31 youll need to annualiz…

, Chapter: 6 -Problem: 23 >> Which of the following is not a tax preference or adjustment item for the individual alternative minimum tax computation?a. Miscellaneous itemized deductions b. State income taxes c. State income tax refunds d. Private activity bond interest e. All of the above are adjustments or tax preference items
Answer Preview: The correct answer is e All of the above are adjustments or tax preference items In the context of t…

, Chapter: 7 -Problem: 10 >> Explain the use of the mid-quarter convention for MACRS depreciation.
Answer Preview: The midquarter convention is a rule used for calculating depreciation deductions for tangible property under the Modified Accelerated Cost Recovery Sy…

, Chapter: 5 -Problem: 27 >> Ramon, a single taxpayer, has adjusted gross income for 2016 of $350,100. His itemized deductions total $50,000 consisting of $30,000 of state income taxes and $20,000 of charitable contributions. What is the amount of itemized deductions Ramon can claim after reduction for the itemized deduction phase-out for high-income taxpayers? a. $0 b. $30,000 c. $47,246 d. $47,279 e. $50,000
Answer Preview: To calculate Ramons itemized deductions after reduction for the itemized deduction …

, Chapter: 6 -Problem: 6 >> James did not have minimum essential coverage for any part of 2016. If James is single and has 2016 adjusted gross income of $40,950, what is his individual shared responsibility payment?a. $0 b. $695 c. $765 d. $754
Answer Preview: For the tax year 2016 the individual shared responsibility payment also known as the penalty for not …

, Chapter: 5 -Problem: 1 >> While preparing Massie Miller’s 2016 Schedule A, you review the following list of possible charitable deductions provided by Massie:What would you say to Massie regarding her listed deductions? How much of the deduction is allowed for charitable contributions?
Answer Preview: When advising Massie Miller regarding her listed deductions for charitable contributions on her 2016 …

, Chapter: 8 -Problem: 17 >> What is Sarajane’s basis in the equipment received in the exchange described in Question 16, assuming her basis in the equipment given up was $12,000?a. $0 b. $12,000 c. $14,000 d. $15,000 e. None of the aboveData From Question 16:Fred and Sarajane exchanged equipment in a qualifying like-kind exchange. Fred gives up equipment with an adjusted basis of $12,000 (fair market value of $15,000) in exc
Answer Preview: New Basis Basis of Old …

, Chapter: 7 -Problem: 19 >> BJT Corporation is owned 40 percent by Bill, 35 percent by Jack, and 25 percent by Teresa. Bill and Jack are father and son. What is Jack’s total direct and indirect ownership under Section 267?a. 65 percent b. 40 percent c. 75 percent d. 35 percent e. None of the above
Answer Preview: Under Section 267 of the Internal Revenue Code in the United State…

, Chapter: 6 -Problem: 4 >> Which of the following payments does not qualify as a child care expense for purposes of the child and dependent care credit? a. Payments to a day care center b. Payments to the taxpayer’s sister (21 years old) for daytime babysitting c. Payments to a housekeeper who also babysits the child d. Payments to the taxpayer’s dependent brother (16 years old) for daytime babysitting e. All of the above q
Answer Preview: The Child and Dependent Care Credit allows taxpayers to claim a credit for qualifying child care expenses that enable them to work or look for work To …

, Chapter: 8 -Problem: 18 >> Oscar, a single taxpayer, sells his residence of the last 10 years in January of 2016 for $190,000. Oscar’s basis in the residence is $45,000, and his selling expenses are $11,000. If Oscar does not buy a new residence, what is the taxable gain on the sale of his residence?a. $145,000 b. $134,000 c. $45,000 d. $9,000 e. $0
Answer Preview: The correct answer is a 145000 Explanation To calculate Oscars taxable gain on the sale …

, Chapter: 8 -Problem: 11 >> In 2016, Mary sells for $14,000 a machine used in her business. The property was purchased on May 1, 2014, at a cost of $13,000. Mary has claimed depreciation on the machine of $8,000. What is the amount and nature of Mary’s gain as a result of the sale of the machine?a. $9,000 Section 1231 gain b. $9,000 ordinary income under Section 1245 c. $8,000 ordinary income and $1,000 Section 1231 gain d.
Answer Preview: The correct answer is c 8000 ordinary income and 1000 Section 1231 gain Heres how the calcul…

, Chapter: 8 -Problem: 16 >> Fred and Sarajane exchanged equipment in a qualifying like-kind exchange. Fred gives up equipment with an adjusted basis of $12,000 (fair market value of $15,000) in exchange for Sarajane’s equipment with a fair market value of $13,000 plus $2,000 cash. How much gain should Fred recognize on the exchange?a. $3,000 b. $2,000 c. $1,000 d. $0 e. None of the above
Answer Preview: Lets break down the given information Freds equipment given up Adjusted b…

, Chapter: 6 -Problem: 21 >> In 2016, Irene, an unmarried individual, pays $6,500 in qualified adoption expenses to an adoption agency for the final adoption of an eligible child who is not a child with special needs. In the same year, the individual’s employer, under a qualified adoption assistance program, pays an additional $4,000 for other qualified adoption expenses to an attorney on behalf of Irene for the adoption of t
Answer Preview: The maximum exclusion for employerprovided adoption assistance …

, Chapter: 8 -Problem: 14 >> Virginia has a casualty gain of $5,000 and a casualty loss of $2,500, before reduction by the $100 floor. The gain and loss were the result of two separate casualties, and both properties were personal-use assets. What is Virginia’s gain or loss as a result of these casualties?a. $5,000 capital gain and $2,500 capital loss b. $5,000 capital gain and $2,400 itemized deduction, subject to the 10 per
Answer Preview: The tax treatment of casualty gains and losses can be a bit complex and it depends on various factor…

, Chapter: 7 -Problem: 6 >> An asset (not an automobile) put in service in June 2016 has a depreciable basis of $34,990 and a recovery period of 5 years. Assuming half-year convention, no bonus depreciation, and no election to expense is made, what is the maximum amount of cost that can be deducted in 2016?a. $3,500 b. $5,000 c. $6,998 d. $35,000 e. None of the above
Answer Preview: The halfyear convention assumes that an asset placed in service during the year is treated as if it …

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, Chapter: 6 -Problem: 9 >> Taxpayers without minimum essential coverage for part of the year that are not eligible for an exemption musta. Purchase double health insurance for the following tax year b. Buy a catastrophic insurance policy for their children until they reach age 18 c. Determine their shared responsibility payment d. Attach a copy of Form 1095-A to their tax return to show they did not have coverage
Answer Preview: c Determine their shared responsibility payment Taxpayers who do not have minimu…

, Chapter: 8 -Problem: 8 >> Harold and Wanda (married filing jointly) have $30,000 of ordinary income after the standard deduction and personal exemptions, and $50,000 in unrecaptured depreciation on the sale of rental property, for total taxable income of $80,000. For 2016, the 10 percent tax bracket for married taxpayers filing jointly ends at $18,550, the next $56,750 in taxable income is taxed at 15 percent, and 25 perce
Answer Preview: To calculate Harold and Wandas tax we need to determine the t…

, Chapter: 7 -Problem: 3 >> Which of the following is an acceptable method of accounting under the tax law?a. The accrual method b. The hybrid method c. The cash method d. All of the above are acceptable e. None of the above
Answer Preview: The correct answer is d All of the above are accepta…

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, Chapter: 5 -Problem: 8 >> Which of the following is deductible as interest on Schedule A? a. Loan fees that are not “points” b. Fees for having a new home inspected prior to purchase c. Interest on a loan for a 90-foot yacht with a kitchen, 3 baths and 5 bedrooms d. Interest on loans to finance tax-exempt bonds e. None of the above are deductible as interest
Answer Preview: Interest on Schedule A can be deductible for certain types of loans and situations Lets evaluate eac…

, Chapter: 5 -Problem: 15 >> Which of the following is not a qualified casualty loss? a. Damage to a home from termites b. An automobile accident c. A fire loss d. A tornado loss e. A flood loss
Answer Preview: a Damage to a home from termites Damage to a home from termites is typical…

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, Chapter: 5 -Problem: 25 >> During 2016, Carl (a single taxpayer) has a salary of $91,500 and interest income of $15,500. Calculate the maximum contribution Carl is allowed for an educational savings account. a. $0 b. $400 c. $1,600 d. $2,000 e. Some other amount
Answer Preview: The maximum contribution that an individual can make to an Education Savings A…

, Chapter: 8 -Problem: 6 >> In 2016, the top tax rates are percent on individual long-term capital gains on sale of stock, and percent on capital gains on sales of collectible items, assuming the ACA Medicare surtax does not apply.a. 10; 20 b. 15; 25 c. 20; 28 d. 25; 28
Answer Preview: In 2016 the top tax rates for different types of capital gains are as follows In…

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, Chapter: 5 -Problem: 14 >> Three years ago, Barbara donates a painting that cost $8,000, to a university for display in the president’s office. The fair market value of the painting on the date of the gift is $14,000. If Barbara had sold the painting, the difference between the sales price and her cost would have been a long-term capital gain.a. How much is Barbara’s charitable contribution deduction for this donation? $b.
Answer Preview: a Barbaras charitable contribution deduction for this donation is the fair market value of …

, Chapter: 3 -Problem: 17 >> Kathy is a self-employed taxpayer working exclusively from her home office. Before the home office deduction, Kathy has $3,000 of net income. Her allocable home office expenses are $5,000 in total (includes $2,000 of allocated interest and property taxes). How are the home office expenses treated on her current year tax return?a. All home office expenses may be deducted, resulting in a business lo
Answer Preview: The correct answer is b Only 3000 of home office expenses may be deducted resulting in net busin…

, Chapter: 6 -Problem: 1 >> The following information is available for the Albert and Allison Gaytor family in addition to that provided in Chapters 1–5.Albert’s grandfather died and left a portfolio of municipal bonds. In 2016, they pay Ivan $80,000 in tax-free interest. Since the bonds are private activity bonds, the $80,000 is a tax preference for purposes of the AMT. Assume for Chapters 6, 7, and 8 that Albert’s federal
Answer Preview: To complete a tax return youll need to use tax software or consult a tax professional Tax software w…

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, Chapter: 8 -Problem: 15 >> Pat sells real estate for $30,000 cash and a $90,000 5-year note. If her basis in the property is $90,000 and she receives only the $30,000 down payment in the year of sale, how much is Pat’s taxable gain in the year of sale using the installment sales method?a. $0 b. $7,500 c. $22,500 d. $30,000 e. $120,000
Answer Preview: To calculate Pats taxable gain in the year of sale using the …

, Chapter: 2 -Problem: 16 >> For 2016, the minimum percentage of Social Security benefits that could be included in a taxpayer’s gross income is:a. 0% b. 25% c. 50% d. 75% e. 85%
Answer Preview: For tax year 2016 the correct answer is b 25 In 2016 up to 85 of your Social Secu…

, Chapter: 8 -Problem: 10 >> Which of the following is Section 1231 property?a. Land held for investment purposes b. A machine used in a business c. Accounts receivable d. Inventory e. Paintings owned by the artist
Answer Preview: Section 1231 property refers to certain types of property used in a trade or busin…

, Chapter: 4 -Problem: 23 >> What is the maximum tax-deferred contribution that can be made to a Section 401(k) plan for an employee under age 50?a. $7,500 b. $10,000 c. $15,000 d. $18,000 e. $19,000
Answer Preview: The maximum taxdeferred contribution …

, Chapter: 6 -Problem: 12 >> Jane graduates from high school in June 2016. In the fall, she enrolls for twelve units at Big State University. Big State University considers students who take twelve or more units to be full-time. Jane’s father pays her tuition and fees of $2,500 for the fall semester and in December prepays $2,500 for the spring semester. In 2016, the American Opportunity tax credit for Jane’s tuition and fees
Answer Preview: The American Opportunity Tax Credit AOTC is a tax credit that he…

, Chapter: 4 -Problem: 19 >> Marge has a Roth IRA held more than 5 years to which she has contributed $30,000. The IRA has a current value of $62,000. Marge is 65 years old and she takes a distribution of $38,000. How much of the distribution will be taxable to Marge?a. $0 b. $8,000 c. $30,000 d. $38,000 e. Some other amount
Answer Preview: In this scenario since Marge is 65 years old and has held …

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, Chapter: 4 -Problem: 20 >> Mindy has a Roth IRA held longer than 5 years to which she has contributed $30,000. The IRA has a current value of $62,000. Mindy is 55 years old and she takes a distribution of $38,000 after retiring on disability. How much of the distribution will be taxable to Mindy?a. $0 b. $8,000 c. $30,000 d. $38,000 e. Some other amount
Answer Preview: In your scenario Mindy has a Roth IRA held longer than 5 years which means she has met the qualifica…

, Chapter: 6 -Problem: 8 >> Taxpayers with minimum essential coverage for the entire year for all members of their household willa. Pay any unpaid health care insurance premiums with their tax return b. Check a box indicating “full coverage” on their tax return and are generally done reporting under the ACA c. Attach copies of Form 1095-A with their tax return d. Complete Form 8965 to claim an exemption from any taxes
Answer Preview: b Check a box indicating full coverage on their tax return and are generally done repo…

, Daniel is a self-employed consultant. Until this year he was always an employee. He comes to discuss his new business with you. As his tax accountant, you should:a. Discuss setting up a good record-keeping system for his new business b. Discuss the substantiation requirements for meals and entertainment c. Discuss the self-employment tax, as well as the income tax, on business earnings in order to
Answer Preview: As Daniels tax accountant you should cover all the mentioned aspects to ensure he is wellprepared and compliant with tax regulations for his new selfe…

, Chapter: 7 -Problem: 1 >> The Au Natural Clothing Factory has changed its year-end from a calendar year-end to March 31, with permission from the IRS. The income for its short period from January 1 to March 31 is $24,000. Calculate the tax for this short period.
Answer Preview: To calculate the tax for the short period from January 1 to March 31 …

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, Chapter: 6 -Problem: 14 >> In November 2016, Simon pays $6,200 to take a course to improve his job skills to qualify for a new position at work. Simon’s employer reimbursed him for the cost of the course. For 2016, Simon’s lifetime learning credit is:a. $0 b. $1,000 c. $2,500 d. $1,500 e. Some other amount
Answer Preview: The lifetime learning credit allows individuals to clai…

, Chapter: 5 -Problem: 5 >> Wilma had $3,100 in state income taxes withheld from her paychecks during 2016. In April of 2016, Wilma paid the $50 due for her 2015 state tax return. Wilma’s total tax liability on her state tax return for 2016 is $2,850. How much should Wilma deduct as an itemized deduction for state income taxes on her 2016 federal income tax return?a. $3,400 b. $3,150 c. $3,100 d. $2,850 e. None of the above
Answer Preview: To determine how much Wilma should deduct as an itemized deduction for state income t…

, Chapter: 7 -Problem: 5 >> Is land allowed to be depreciated? Why or why not?
Answer Preview: Land is not allowed to be depreciated for tax purposes The main reason for this is that land is cons…

, Chapter: 4 -Problem: 14 >> All of the following are deductible as moving expenses, except:a. The cost of moving household goods b. Transportation to the new job location c. Packing expenses d. Lodging during the move e. All of the above are deductible moving expenses
Answer Preview: d Lodging during the move All of the provided options a b c and e are …

, Chapter: 6 -Problem: 20 >> In connection with the adoption of an eligible child who is a U.S. citizen and who is not a child with special needs, Sean pays $4,000 of qualified adoption expenses in 2015 and $3,000 of qualified adoption expenses in 2016. The adoption is finalized in 2016. There is no phase-out of the adoption credit. What are the adoption credits for both 2015 and 2016, respectively?a. $0; $7,000 b. $4,000; $1
Answer Preview: To calculate the adoption credit for each year you need to consider …

, Chapter: 3 -Problem: 4 >> Which of the following formulas represents the proper method of calculating cost of goods sold?a. Beginning inventory + Ending inventory ? Purchases b. Ending inventory ? Purchases ? Beginning inventory c. Purchases ? Beginning inventory ? Ending inventory d. Beginning inventory + Purchases ? Ending inventory e. None of the above
Answer Preview: The correct formula for calculating the cost of goods sold COGS is c Purchases Beginning …

, Chapter: 7 -Problem: 13 >> Which of the following is not considered listed property for purposes of determining the taxpayer’s depreciation deduction?a. A computer used exclusively by the taxpayer in managing his investment portfolio b. An automobile used 40 percent by an employee in providing services to his employer c. A computer used by a bank executive, on the bank premises, in performing services as an employee d. A co
Answer Preview: e None of the above All of the options described are considered listed property for …

, Mary has a Roth IRA held more than 5 years to which she has contributed $30,000. The IRA has a current value of $62,000. Mary is 55 years old and she takes a distribution of $40,000. How much of the distribution will be taxable to Mary?a. $0 b. $8,000 c. $10,000 d. $40,000 e. Some other amount
Answer Preview: In this scenario Mary has a Roth IRA which is important because Roth I…

, B Corporation, an accrual basis taxpayer, is owned 75 percent by Bonnie, a cash basis taxpayer. On December 31, 20X1, the corporation accrues interest of $4,000 on a loan from Bonnie and also accrues a $15,000 bonus to Bonnie. The bonus is paid to Bonnie on March 1, 20X2; the interest is not paid until 20X3. How much can B Corporation deduct on its 20X1 tax return?a. $0 b. $4,000 c. $15,000 d. $19
Answer Preview: The tax deduction rules for accrual basis taxpayers can be a bit complex especially when transaction…

, Chapter: 4 -Problem: 29 >> Betty owns three separate IRA accounts with different banks. She wishes to consolidate her three IRAs into one IRA in 2016. How many distribution rollovers may Betty make in 2016?a. One b. Two c. Four d. Ten e. There is no limit
Answer Preview: The correct answer is e There is no limit As of my last knowled…

, Chapter: 7 -Problem: 6 >> Is it possible to depreciate a residential rental building when it is actually increasing in value? Why?
Answer Preview: Yes it is possible to depreciate a residential rental building even when its market value is increasing Depreciation is a taxrelated concept that allo…

, Chapter: 5 -Problem: 11 >> Which of the following donations are not deductible as a charitable contribution?a. A donation of clothing to Goodwill Industries b. A cash contribution to a church c. A contribution of stock to a public university d. A contribution of a taxpayer’s time picking up trash on the beach e. A painting contributed to a museum
Answer Preview: d A contribution of a taxpayers time picking up trash on the beach While …

, Chapter: 8 -Problem: 5 >> Bob sells a stock investment for $35,000 cash, and the purchaser assumes Bob’s $32,500 debt on the investment. The basis of Bob’s stock investment is $55,000. What is the gain or loss realized on the sale?a. $10,000 loss b. $10,000 gain c. $12,500 gain d. $22,500 loss e. $22,500 gain
Answer Preview: To calculate the gain or loss realized on the sale you need to determine the d…

, Chapter: 7 -Problem: 8 >> James purchased office equipment for his business. The equipment has a depreciable basis of $14,000 and was put in service on June 1, 2016. James decides to elect straight-line depreciation under MACRS for the asset over the minimum number of years (7 years), and does not use bonus depreciation or make the election to expense. What is the amount of his depreciation deduction for the equipment for
Answer Preview: Since the equipment is being depreciated under the Modified Accelerated Cost Recovery System MACRS u…

, Chapter: 8 -Problem: 3 >> Yasmeen purchases stock on January 30, 2015. If she wishes to achieve a long-term holding period, she will have to wait until at least to sell the stock.a. January 20, 2016 b. January 31, 2016 c. February 1, 2016 d. July 31, 2015 e. July 30, 2015
Answer Preview: To achieve a longterm holding period for the stock …

, Chapter: 2 -Problem: 6 >> Nomi is in the highest individual tax bracket and receives $500 in qualified dividends from Omega Corp. Nomi’s tax liability with respect to these dividends is:a. $0 b. $277.20 c. $100.00 d. $75.00 e. $50.00
Answer Preview: Qualified dividends are subject to different tax rates t…

, Chapter: 6 -Problem: 18 >> Taxpayer L has income of $55,000 from Norway, which imposes a 40 percent income tax, and income of $45,000 from France, which imposes a 30 percent income tax. L has taxable income from U.S. sources of $200,000 and U.S. tax liability before credits of $105,000. What is the amount of the foreign tax credit?a. $16,500 b. $35,000 c. $35,500 d. $100,000 e. $45,000
Answer Preview: To calculate the foreign tax credit we need to determine the amount of US tax that would have been p…

, Chapter: 4 -Problem: 17 >> Donna, age 42 and a single taxpayer, has a salary of $100,000 and interest income of $20,000. What is the maximum amount Donna can contribute to a Roth IRA?a. $2,500 b. $3,300 c. $4,400 d. $5,500 e. Some other amount
Answer Preview: Donnas eligibility to contribute to a Roth IRA depends on her modified adjusted gross income …

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, Chapter: 5 -Problem: 12 >> Stanley donates a hotel to a university for use as a conference center. The building was purchased 3 months ago for $1,500,000 and has a fair market value of $1,900,000 on the date the contribution is made. If Stanley had sold the building, the $400,000 difference between the sales price and cost would have been a short-term capital gain. What is the amount of Stanley’s deduction for this contribu
Answer Preview: The deduction for a contribution of property to a charita…

, Chapter: 7 -Problem: 15 >> Which of the following intangibles is defined as a Section 197 intangible asset?a. An interest in land b. A partnership interest c. An interest in a corporation d. A covenant not to compete acquired as part of a business e. A separately acquired sound recording
Answer Preview: The correct answer is d A covenant not to compete acquired …

, Chapter: 5 -Problem: 6 >> Which of the following taxes are not deductible as an itemized deduction?a. Property tax on land held for investment b. State income taxes c. Auto registration fees based on the value of the auto d. Federal income taxes
Answer Preview: d Federal income taxes Federal income taxes are not deductible as an itemized deduction on your fede…

, Chapter: 7 -Problem: 1 >> E Corporation is a subchapter S corporation owned by three individuals with calendar year-ends. The corporation sells a sports drink as its principal product and has similar sales each month. What options does E Corporation have in choosing a tax year?a. E Corporation may choose any month end as its tax year. b. Because the owners of E Corporation have tax years ending in December, E Corporation m
Answer Preview: Option c is the correct answer E Corporation may choose an October November or December …

, Chapter: 3 -Problem: 11 >> Which of the following expenses is deductible as an entertainment expense?a. The depreciation on an airplane used to entertain customers b. The cost of a hunting camp used to entertain customers c. The dues of a racket club used to keep in shape d. The cost of a cocktail party for clients paid for by a computer salesman at a computer fair e. The cost of a meal at the taxpayer’s country club with a
Answer Preview: The correct answer is d The cost of a cocktail party for clients paid for by a computer sa…

, Chapter: 6 -Problem: 17 >> Becky, a college freshman, works part-time and pays $1,650 of her college tuition expenses. Although Becky files her own tax return, her parents claim her as a dependent on their tax return. Becky’s parents file jointly and have AGI of $50,000. What is the amount of American Opportunity tax credit her parents can claim on their tax return for the tuition Becky paid?a. $0 b. $495 c. $1,600 d. $1,65
Answer Preview: In order for Beckys parents to claim the American Opportunity Tax Credit b…

, Chapter: 5 -Problem: 23 >> For married taxpayers filing a joint return in 2016, at what AGI level does the phase-out limit for contributions to Qualified Tuition Programs start? a. $110,000 b. $190,000 c. $220,000 d. There is no phase-out limit on QTP contributions
Answer Preview: b 190000 For married taxpayers filing a joint return in 2016 the ph…

, Chapter: 7 -Problem: 14 >> The amortization period for Section 197 intangibles is:a. 5 years b. 7 years c. 10 years d. 15 years e. 40 years
Answer Preview: The amortization period for Section 197 intangibles is e 40 years Section 1…

, Chapter: 3 -Problem: 6 >> Which of the following taxpayers may use the standard mileage method of calculating transportation costs?a. A taxi driver who owns a fleet of six cars for hire b. A taxpayer who used accelerated depreciation on his automobile c. A business executive who claimed bonus depreciation in the first year she used the car d. An attorney who uses his Porsche for calling on clients e. None of the above
Answer Preview: The correct answer is d An attorney who uses his Porsche for calling on clients The standard milea…

, Chapter: 6 -Problem: 10 >> For purposes of determining shared responsibility, household AGI isa. AGI for the taxpayer and spouse b. AGI for the taxpayer, spouse and any other household members required to file a tax return c. AGI for the taxpayer, spouse and any other household members required to file a tax return plus any tax-exempt income d. AGI for the taxpayer, spouse and any other household members required to file a
Answer Preview: For purposes of determining shared responsibility under the Afforda…

, Chapter: 5 -Problem: 26 >> George receives a $1,500 distribution from his educational savings account. He uses $1,200 to pay for qualified higher education expenses. Immediately prior to the distribution, George’s account balance is $5,000, $3,000 of which is his contributions. What is George’s tax-free return of capital from the distribution? a. $1,500 b. $1,200 c. $900 d. $750 e. $600
Answer Preview: To calculate Georges taxfree return of capital fro…

, Chapter: 7 -Problem: 9 >> Which of the following statements with respect to the depreciation of property under MACRS is incorrect? a. Under the half-year convention, one-half year of depreciation is allowed in the year the property is placed in service. b. If a taxpayer elects to use the straight-line method of depreciation for property in the 5-year class, all other 5-year class property acquired during the year must also
Answer Preview: The incorrect statement with respect to the depreciation of property unde…

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, Chapter: 7 -Problem: 5 >> Alice purchases a rental house on June 22, 2016, for a cost of $174,000. Of this amount, $100,000 is considered to be allocable to the cost of the home, with the remaining $74,000 allocable to the cost of the land. What is Alice’s maximum depreciation deduction for 2016 using MACRS?a. $2,373 b. $1,970 c. $1,364 d. $1,061 e. $1,009
Answer Preview: To calculate Alices maximum depreciation deduction for 2016 using MACRS Modified Accelerated Cost Re…

, Chapter: 4 -Problem: 24 >> Paul, age 37, participates in a Section 401(k) plan which allows employees to contribute up to 16 percent of their salary. His annual salary is $90,000 in 2016. What is the maximum he can contribute, on a tax-deferred basis under a salary reduction agreement, to this plan?a. $14,400 b. $20,500 c. $17,500 d. $13,500 e. None of the above
Answer Preview: The maximum amount that Paul can contribute to his Sec…

, Chapter: 6 -Problem: 5 >> Which of the following taxpayers will require a payment for the individual shared responsibility? a. Jim’s income was only $2,000 for the year, his employer did not provide health insurance, and the premiums for the cheapest plan on the exchange were $125 per month which he could not afford and thus did not purchase insurance. b. Peg changed jobs during the year and was without coverage for 2 mont
Answer Preview: The individual shared responsibility provision often referred to as the individual mandate required most Americans to have minimum essential health co…

, Chapter: 3 -Problem: 18 >> Which of the following taxpayers qualifies for a home office deduction?a. An attorney who is employed by a law firm and has a home office in which to read cases b. A doctor who has a regular office downtown and a library at home to store medical journals c. An accounting student who maintains a home office used exclusively to prepare tax returns d. A nurse who maintains a home office to pay bills
Answer Preview: c An accounting student who maintains a home office used exclusively to prepare tax ret…

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, Which of the following is deductible as interest on Schedule A?a. Loan fees that are not “points” b. Fees for having a new home inspected prior to purchase c. Interest on a loan for a 90-foot yacht with a kitchen, 3 baths and 5 bedrooms d. Interest on loans to finance tax-exempt bonds e. None of the above are deductible as interest
Answer Preview: Interest deductions on Schedule A can be claimed for certain types of interest expenses but not all …

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, Chapter: 1 -Problem: 10 >> Jim (age 50) and Martha (age 49) are married with three dependent children. They file a joint return for 2016. Their income from salaries totals $49,500, and they
received $10,125 in taxable interest, $5,000 in royalties, and $3,000 in other ordinary income. Jim and Martha’s deductions for adjusted gross income amount to $3,200, and they have itemized deductions totaling $13,200. Calculate the fol
Answer Preview: Here are the calculations for the amounts you requested a Gross income Salary income 49500 Taxable i…

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, Chapter: 4 -Problem: 26 >> James’ employer makes a $2,000 contribution to a qualified retirement plan for James in the current year. James is only 45 years old and does not expect to retire until age 65, 20 years from now. What is the proper tax treatment of the $2,000 contribution for James’ employer?a. The $2,000 is never deductible. b. The $2,000 is deductible in the current year by the employer. c. The $2,000 is deducti
Answer Preview: The proper tax treatment of the 2000 contribution for James employer is as follows b The 2000 …

, Chapter: 4 -Problem: 2 >> John owns a second home in Palm Springs, CA. During the year, he rented the house for $5,000 for 42 days and used the house for 14 days during the summer. The house remained vacant during the remainder of the year. The expenses for the home included $5,000 in mortgage interest, $600 in property taxes, $900 for utilities and maintenance, and $3,500 of depreciation. What is John’s deductible rental
Answer Preview: To calculate Johns deductible rental loss before considering passive loss limitations we n…

, Chapter: 5 -Problem: 13 >> In March of 2016, Thomas makes a $5,000 cash contribution to a public university. In that month, he also donates $20,000 to an organization subject to the 30 percent limitation. Thomas has adjusted gross income for 2016 of $35,000. What is the amount of Thomas’s 2016 charitable contribution deduction?a. $5,000 b. $23,000 c. $10,500 d. $15,500 e. None of the above
Answer Preview: In 2016 charitable contribution deductions are subject to certain limitations based on the taxpayer…

, Chapter: 3 -Problem: 3 >> Margaret started her own business in the current year and will report a profit for her first year. Her results of operations are as follows:What is the net income Margaret should show on her Schedule C? Show the calculation of her taxable business income.
Answer Preview: To calculate Margarets net income and taxable business income we need to first determine her total g…

, Chapter: 1 -Problem: 9 >> Jonathan is a 35-year-old single taxpayer with adjusted gross income of $46,300. He uses the standard deduction and has no dependents.a. Calculate Jonathan’s taxable income. Please show your work. b. When you calculate Jonathan’s tax liability are you required to use the tax tables or the tax rate schedules, or does it matter? c. What is Jonathan’s tax liability?
Answer Preview: a Calculating Jonathans Taxable Income Adjusted Gross Income AGI 46300 Standard Deduction Assuming t…

, Chapter: 5 -Problem: 20 >> Gina receives a $3,000 distribution from her educational savings account. She uses $1,600 to pay for qualified higher education expenses and $1,400 on a vacation. Immediately prior to the distribution, Gina’s account balance is $5,000, $2,500 of which is her contributions. What is Gina’s taxable income (after any exclusion) from the distribution? a. $1,600 b. $1,400 c. $700 d. $0 e. Some other amo
Answer Preview: To determine Ginas taxable income from the distribution of her educational savings account we need t…

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, Chapter: 4 -Problem: 11 >> Which of the following is false about the self-employed health insurance deduction?a. The deduction cannot be claimed when a subsidized employer health insurance plan is also available. b. The deduction cannot be claimed if the taxpayer has an overall business loss from self-employment. c. Long-term care premiums may be deducted within specified dollar limitations based on age. d. The self-employe
Answer Preview: d The selfemployed health insurance deduction is an it…

, Chapter: 3 -Problem: 20 >> Bonita earns $31,000 from her job, and she has $1,000 of interest income. She has itemized deductions and personal exemptions of $35,000. There are no casualty or theft losses in the itemized deductions. What is Bonita’s net operating loss for the current year?a. $0 b. $1,000 c. $3,000 d. $4,000 e. Some other amount
Answer Preview: The calculation of a net operating loss NOL involves comparing a ta…

, Chapter: 3 -Problem: 21 >> Jim has a net operating loss in 2016. If he does not make any special elections, what is the first year to which Jim carries the net operating loss?a. 2012 b. 2013 c. 2014 d. 2015 e. 2017
Answer Preview: In general a net operating loss NOL can be carried back …

, Chapter: 5 -Problem: 16 >> Which of the following is not a miscellaneous itemized deduction? a. Tax preparation fees b. Professional dues c. Investment interest expense d. Job-hunting expenses
Answer Preview: As of my last knowledge update in September 2021 miscellaneous itemized deductions were subject to v…

, Chapter: 5 -Problem: 4 >> Which of the following taxes may be deducted as itemized deductions for 2016?a. State gasoline taxes b. Fishing license fee c. Federal income taxes d. Social Security taxes e. Local income taxes
Answer Preview: For the 2016 tax year in the United States the following taxes may …

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, Chapter: 4 -Problem: 13 >> Charlene has self-only coverage in qualifying high-deductible health insurance plan. She is 47 years old and wishes to contribute the maximum amount to her HSA. How much is she allowed to contribute and deduct in 2016?a. $1,000 b. $1,300 c. $3,350 d. $4,350 e. $4,600
Answer Preview: In 2016 for individuals with selfonly coverag…

, Chapter: 7 -Problem: 3 >> Geraldine is an accrual basis taxpayer who has the following transactions during the current calendar tax year:Calculate Geraldine’s net income from her business for the current year.
Answer Preview: To calculate Geraldines net income from her business for the current y…

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, Chapter: 7 -Problem: 18 >> Using the same facts as in Question 17, how much can B Corporation deduct on its 20X2 tax return?a. $0 b. $4,000 c. $15,000 d. $19,000 e. $12,000Data From Question 17:B Corporation, an accrual basis taxpayer, is owned 75 percent by Bonnie, a cash basis taxpayer. On December 31, 20X1, the corporation accrues interest of $4,000 on a loan from Bonnie and also accrues a $15,000 bonus to Bonnie. The bo
Answer Preview: In Question 17 it was established that B Corporation accrued a bonus of 150…

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, Chapter: 2 -Problem: 6 >> If a taxpayer holding Series I Bonds does not make an election with respect to the taxation of the bonds, how is the interest that accrues each year on the bonds taxed?
Answer Preview: Series I Bonds are US government savings bonds that offer a combination of a fixed interest rate and …

, Chapter: 3 -Problem: 10 >> Joe is a self-employed information technology consultant from San Francisco, CA. He takes a week long trip to Chicago primarily for business. He takes two personal days to go to museums and see the sights of Chicago. How should he treat the expenses related to this trip?a. One hundred percent of the trip should be deducted as a business expense since the trip was primarily for business. b. Fifty p
Answer Preview: The correct answer is b Fifty percent of the trip should be deducted as a business expense since the …

, Chapter: 2 -Problem: 8 >> Hillary gets divorced in 2015 and is required to pay her ex-spouse $200 per month until her son reaches 18 years of age in 7 years and $120 per month thereafter. How much of her 2016 payments are deductible as alimony?a. $0 b. $2,400 c. $1,440 d. $960
Answer Preview: To determine how much of Hillarys 2016 payments are deductible as alimony we need to consider the ta…

, Chapter: 11 -Problem: 7 >> Which of the following is not required for a corporation to be eligible to make an S corporation election in 2016?a. The corporation must have 100 or fewer shareholders. b. The corporation must be a domestic corporation. c. The corporation must have both common and preferred stock. d. The shareholders of the corporation must not be nonresident aliens. e. All shareholders must be either individuals
Answer Preview: The statement that is not required for a corporation to be eligible to make an S corporation el…

, Chapter: 5 -Problem: 10 >> Which of the following interest expense amounts is not deductible in the current year? a. Education loan interest of $2,000, assuming the taxpayer has income of $30,000. b. Home equity loan interest of $6,000, on a loan of $90,000, the proceeds of which were used to purchase a sports car and designer clothes. c. Investment interest expense of $10,000, assuming the taxpayer has no investment income
Answer Preview: The interest expense that is not deductible in the current …

, Chapter: 12 -Problem: 17 >> If a U.S. Tax Court agrees with the taxpayer on appeal that the IRS position was largely unjustified, which of the following is correct?a. The taxpayer must still pay administrative and litigation costs. b. The taxpayer may recover administrative but not litigation costs. c. The taxpayer may recover litigation but not administrative costs. d. To be eligible to recover some of the administrative an
Answer Preview: If a US Tax Court agrees with the taxpayer on appeal that the I…

, Chapter: 2 -Problem: 9 >> Which of the following prizes or awards is taxable?a. Professional sports awards b. Prizes from a television game show c. Awards for superior performance on the job d. A one-acre lot received as a prize e. All of the above are taxable
Answer Preview: The taxability of prizes and awards depends on the nature of the award its value and the circumstanc…

, Chapter: 11 -Problem: 14 >> Which of the following statements is true about the corporate alternative minimum tax?a. The corporate alternative minimum tax only applies to small corporations. b. The corporate alternative minimum tax preferences and adjustments are exactly the same as those for individuals. c. The corporate alternative minimum tax rate is a flat 28 percent. d. Corporations with alternative minimum taxable inco
Answer Preview: The true statement about the corporate alternative minimum tax AMT is c The corp…

, Chapter: 4 -Problem: 21 >> What is the deadline for making a contribution to a traditional IRA or a Roth IRA for 2016?a. April 15, 2017 b. April 17, 2017 c. December 31, 2016 d. October 15, 2017
Answer Preview: The deadline for making a contribution to a traditional IRA or a …

, Chapter: 11 -Problem: 1 >> Quince Corporation has taxable income of $450,000 for its calendar tax year. Calculate the corporation’s income tax liability for the year before tax credits
Answer Preview: To calculate Quince Corporations income tax liability before tax credits we need to apply the applic…

, Chapter: 4 -Problem: 28 >> Tom quits his job with $120,000 in his employer’s qualified retirement plan. Since he is broke, Tom instructs the plan trustee to pay him the balance in his retirement account. How much will Tom receive when he gets his check from the retirement plan?a. $120,000 b. $100,000 c. $96,000 d. $24,000 e. Some other amount
Answer Preview: Toms distribution from his qualified retirement pla…

, Chapter: 12 -Problem: 13 >> The IRS does not have to furnish the taxpayer with information concerning which of the following items?a. The way the taxpayer’s return was selected for audit b. The procedures for appealing an IRS ruling c. The refund claims process d. The IRS collection process e. All of the above must be provided to the taxpayer
Answer Preview: e All of the above must be provided to the taxpayer The IRS is …

, Chapter: 5 -Problem: 24 >> Which of the following is not true with respect to education incentives? a. The contributions to qualified tuition programs (Section 529 plans) are not deductible. b. The contributions to educational savings accounts (Coverdell ESA) are not deductible. c. Tuition paid by a taxpayer earning $300,000 of income is not deductible. d. Married taxpayers must have income less than $100,000 to contribute
Answer Preview: c Tuition paid by a taxpayer earning 300000 of income is not deductible Explanation a This is true C…

, Chapter: 4 -Problem: 25 >> Bob earns $40,000 during the current year. His employer contributes $2,000 (5 percent of Bob’s salary) to a qualified retirement plan for Bob. This pension plan is what kind of plan?a. Defined benefit plan b. Defined contribution plan c. Employee Stock Ownership Plan d. Profit-sharing plan e. None of the above
Answer Preview: The correct answer is b Defined contribution plan In a defined contribution plan like a 401k or si…

, Chapter: 1 -Problem: 15 >> Jayne purchased General Motors stock 6 years ago for $20,000. In 2016, she sells the stock for $35,000. What is Jayne’s gain or loss?a. $15,000 short-term gain b. $15,000 long-term gain c. $15,000 ordinary loss d. $15,000 extraordinary gain e. No gain or loss is recognized on this transaction
Answer Preview: To determine Jaynes gain or loss from selling the General Motors stock we need to calculate the dif…

, Chapter: 5 -Problem: 3 >> Which of the following is not considered a deductible medical expense?a. Dental work b. Eyeglasses c. Acupuncture d. Toothbrush
Answer Preview: d Toothbrush A toothbrush is typically not considered a deductible m…

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, Chapter: 5 -Problem: 21 >> Which of the following is correct for Qualified Tuition Programs? a. Contributions are deductible, and qualified educational expense distributions are tax free. b. Contributions are not deductible, and qualified educational expense distributions are tax free. c. Contributions are deductible, and qualified educational expense distributions are  taxable. d. Contributions are not deductible, and qual
Answer Preview: b Contributions are not deductible and qualified educational expe…

, Chapter: 5 -Problem: 7 >> Ramon, a single taxpayer, has adjusted gross income for 2016 of $208,000 and his itemized deductions total $19,000. The itemized deductions consist of $11,000 in state income taxes and $8,000 of charitable contributions. What amount of itemized deductions will Ramon be allowed to deduct in 2016?a. $40 b. $10,133 c. $5,450 d. $18,959 e. $19,000
Answer Preview: To calculate the amount of itemized deductions Ramon will be allowed to deduct we need to consider t…

, Chapter: 2 -Problem: 22 >> Skyler is covered by his company’s health insurance plan. The health insurance costs his company $3,500 a year. During the year, Skyler is diagnosed with a serious illness and health insurance pays $100,000 for surgery and treatment. How much of the insurance and treatment payments are taxable to Skyler?
Answer Preview: In general medical expenses paid by an employers health insurance plan are not considered taxable in…

, Chapter: 12 -Problem: 7 >> Which of the following tax preparers may not represent their clients in all IRS proceedings?a. An enrolled agent b. A certified public accountant c. An attorney d. All of the above may represent their clients in IRS proceedings
Answer Preview: d. All of the above may represent their clients in IRS proceedings. An enrolled agent, a …

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, Chapter: 11 -Problem: 11 >> Carl transfers land with a fair market value of $120,000 and basis of $30,000, to a new corporation in exchange for 85 percent of the corporation’s stock. The land is subject to a $40,000 liability, which the corporation assumes. What amount of gain must Carl recognize as a result of this transaction?a. $0 b. $40,000 c. $30,000 d. $10,000 e. None of the above
Answer Preview: In this scenario, Carl is transferring land with a fair market value of $120,000, a basis of $30,000…

, Chapter: 5 -Problem: 19 >> What form does an employee use to report expenses that are fully reimbursed by an employer under an accountable plan? a. Schedule D b. Schedule A, Miscellaneous Itemized Deductions c. Schedule C d. Form 2106, Unreimbursed Employee Business Expenses e. No form; the expenses are not reported as income to the employee, so they are not deducted on an IRS form in the employee’s tax return
Answer Preview: e No form the expenses are not reported as income to …

, Chapter: 10 -Problem: 11 >> A loss from the sale or exchange of property will be disallowed in which of the following situations?a. A transaction between a partnership and a partner who owns 40 percent of the partnership capital b. A transaction between a partnership and a partner who has a 40 percent profit interest in the partnership c. A transaction between two partnerships owned 40 percent by the same partners d. A trans
Answer Preview: The correct answer is: b. A transaction between a partnership and a partner …

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, Chapter: 10 -Problem: 1 >> Which of the following is not a partnership for tax purposes?a. Willis and James purchase and operate a shoe store. b. Sharon and Gary operate an accounting practice together. c. Lillian and Don purchase real estate together as an investment, not as a business. d. Carlos and Michael purchase and operate a hardware store. e. All of the above are partnerships.
Answer Preview: The correct answer is: c. Lillian and Don purchase real estate together as an investment, not as a b…

, Chapter: 1 -Problem: 3 >> Which of the following is a deduction for adjusted gross income in 2016?a. Personal casualty losses b. Medical expenses c. Student loan interest d. Charitable contributions e. None of the above
Answer Preview: The correct answer is c Student loan interest In 20…

, Chapter: 3 -Problem: 7 >> Which of the following taxpayers is entitled to a travel expense deduction?a. An employee, who worked in the Salt Lake City plant of a company, who is assigned to the Denver plant of the company for 4 years b. An employee who travels between several business locations within the same city each day c. A manager of a chain of department stores who works in the main store 3 weeks out of every month a
Answer Preview: The answer is c A travel expense deduction is allowed for travel expenses incurred while away from h…

, Chapter: 9 -Problem: 5 >> Which of the following is not true about FICA taxes?a. The FICA tax has two parts, Social Security (Old Age, Survivors, and Disability Insurance) and Medicare. b. In 2016, the maximum wage base for Social Security tax withholding is $117,000. c. In 2016, there is no maximum wage base for Medicare tax withholding. d. When employees work for more than one employer and exceed the maximum wage base fo
Answer Preview: The statement that is not true about FICA (Federal Insurance …

, Chapter: 4 -Problem: 16 >> Martha and Rob, a married couple, under 50 years of age, have adjusted gross income on their 2016 joint income tax return of $45,000, before considering any IRA deduction. Martha and Rob have no earned income. What is the amount of Martha’s maximum deductible IRA contribution?a. $3,500 b. $3,000 c. $2,700 d. $5,000 e. $0
Answer Preview: Martha and Robs adjusted gross income AGI is 45000 and they hav…

, Chapter: 11 -Problem: 7 >> Which of the following is not required for a corporation to be eligible to make an S corporation election in 2016?a. The corporation must have 100 or fewer shareholders. b. The corporation must be a domestic corporation. c. The corporation must have both common and preferred stock. d. The shareholders of the corporation must not be nonresident aliens. e. All shareholders must be either individuals
Answer Preview: The statement that is not required for a corporation to be eligible to make an S corporation elect…

, Chapter: 3 -Problem: 24 >> Pete qualifies for a home office deduction. The amount of space devoted to business use is 300 square feet of the total 1,200 square feet in his apartment. Pete’s total rent for the year is $9,600, and he pays utilities (other than telephone) of $2,500 for the year. Calculate Pete’s deduction for home office expenses before the gross income limitation.
Answer Preview: To calculate Petes deduction for home office expenses before the gross income limitation we need to …

, Chapter: 12 -Problem: 17 >> If a U.S. Tax Court agrees with the taxpayer on appeal that the IRS position was largely unjustified, which of the following is correct?a. The taxpayer must still pay administrative and litigation costs. b. The taxpayer may recover administrative but not litigation costs. c. The taxpayer may recover litigation but not administrative costs. d. To be eligible to recover some of the administrative an
Answer Preview: If a U S. Tax Court agrees with the taxpayer on appeal that the I…

, Chapter: 3 -Problem: 12 >> Which of the following taxpayers may not deduct their educational expense?a. A CPA who attends a course to review for the real estate agents’ exam b. A corporate president who attends a management course at a local university c. An attorney who attends a course on computing legal damages d. A real estate broker who attends a college course on real estate law e. All of the above are deductible
Answer Preview: The deductibility of educational expenses for taxpayers can be complex and depends on various factor…

, Chapter: 11 -Problem: 14 >> Which of the following statements is true about the corporate alternative minimum tax?a. The corporate alternative minimum tax only applies to small corporations. b. The corporate alternative minimum tax preferences and adjustments are exactly the same as those for individuals. c. The corporate alternative minimum tax rate is a flat 28 percent. d. Corporations with alternative minimum taxable inco
Answer Preview: The true statement about the corporate alternative minimum tax (AMT) is: c. The co…

, Chapter: 5 -Problem: 17 >> Which of the following items is not deductible as a miscellaneous deduction on Schedule A? a. Investment expenses b. Gambling losses to the extent of gambling winnings c. Unreimbursed business expenses d. Subscriptions to professional publications e. Charitable contributions
Answer Preview: The Tax Cuts and Jobs Act TCJA passed in 2017 eliminated miscellaneous itemized deductions …

, Chapter: 11 -Problem: 1 >> Quince Corporation has taxable income of $450,000 for its calendar tax year. Calculate the corporation’s income tax liability for the year before tax credits
Answer Preview: To calculate Quince Corporation's income tax liability before tax credits, we need to apply the appl…

, Chapter: 10 -Problem: 5 >> Linda and Ellen form an equal partnership. Linda contributes cash of $20,000 in exchange for a 50 percent partnership interest. Ellen contributes property with a fair market value of $30,000 (adjusted basis of $18,000) and subject to a liability of $10,000 in exchange for her 50 percent interest in the partnership. What amount of gain must Ellen recognize as a result of her transfer of property to
Answer Preview: Ellen must recognize gain on the transfer of property to the partners…

, Chapter: 1 -Problem: 17 >> Shannon has a long-term capital loss of $7,000 on the sale of bonds in 2016 and no other capital gains or losses. Her taxable income without this transaction is $51,000. What is her taxable income considering this capital loss?a. $41,000 b. $44,000 c. $48,000 d. $55,000 e. Some other amount
Answer Preview: When an individual has a capital loss they can use that loss to offs…

, Chapter: 5 -Problem: 22 >> In 2016, Amy receives $8,000 (of which $3,000 is earnings) from a qualified tuition program. She does not use the funds to pay for tuition or other qualified higher education expenses. What amount is taxable to Amy?a. $0 b. $8,000 c. $3,000 d. $11,000
Answer Preview: The taxation of funds received from a qualified tuition progr…

, Chapter: 12 -Problem: 13 >> The IRS does not have to furnish the taxpayer with information concerning which of the following items?a. The way the taxpayer’s return was selected for audit b. The procedures for appealing an IRS ruling c. The refund claims process d. The IRS collection process e. All of the above must be provided to the taxpayer
Answer Preview: e. All of the above must be provided to the taxpayer. The IRS is …

, Chapter: 10 -Problem: 10 >> Kendra is an attorney and owns 60 percent of a law partnership. Kendra sells land to the partnership for $50,000 in the current tax year. She bought the land for $100,000 eight years ago when real estate prices were at their peak. How much gain or loss must Kendra recognize on the land sale to the partnership?a. No gain or loss b. $30,000 loss c. $50,000 loss d. $50,000 short-term capital loss, li
Answer Preview: The correct answer is b 30000 loss Kendra originally bought the land fo…

, Chapter: 2 -Problem: 26 >> Karen is a wealthy retired investment advisor who is in the 35 percent tax bracket. She has a choice between investing in a high-quality municipal bond paying 5 percent or a high-quality corporate bond paying 7 percent. Which investment do you think she will make and why?
Answer Preview: Karens decision on whether to invest in a highquality municipal bond or a highquality corporate bond depends on several factors including her tax situ…

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, Chapter: 8 -Problem: 14 >> Teresa’s manufacturing plant is destroyed by fire. The plant has an adjusted basis of $270,000, and Teresa receives insurance proceeds of $410,000 for the loss. Teresa reinvests $420,000 in a replacement plant.a. Calculate Teresa’s recognized gain if she elects to utilize the involuntary conversion provision. $ b. Calculate Teresa’s basis in the new plant. $
Answer Preview: a To calculate Teresas recognized gain using the involuntary conversion provision we can …

, Chapter: 1 -Problem: 4 >> All of the following are itemized deductions in 2016 except:a. Charitable contributions b. Alimony payments c. Casualty losses d. Medical expenses e. All of the above are itemized deductions
Answer Preview: The correct answer is e All of the above are itemiz…

, The cost of which of the following expenses is not deductible as a medical expense on Schedule A, before the 10 percent of adjusted gross income limitation?a. A psychiatrist b. Botox

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