Description

Chapter: 8 -Problem: 30 >> Oscar owns a building that is destroyed in a hurricane. His adjusted basis in the building before the hurricane is $130,000. His insurance company pays him $140,000 and he immediately invests in a new building at a cost of $142,000. What is the amount of recognized gain or loss on the destruction of Oscar’s building?a. $0b. $10,000 gainc. $8,000 gaind. $12,000 gaine. $2,000 loss
Answer Preview: A All proceeds f…

, Chapter: 9 -Problem: 13 >> Amy’s prior year adjusted gross income was $70,000. In order to avoid penalty, what is the required annual payment Amy must make in the current year?a. 110% of the current year tax liability.b. Any amount that reduces the amount Amy owes for the current year to no less than $5,000.c. The lesser of 90 percent of the current year tax liability or 100 percent of the prior year tax liability.d. An amo
Answer Preview: C Lesser of 90 …

, Chapter: 9 -Problem: 30 >> Tom quits his job with $150,000 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. $120,000b. $100,000c. $96,000d. $24,000e. Some other amount
Answer Preview: A 120000 150000 …

, Chapter: 10 -Problem: 24 >> 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 lossb. $30,000 lossc. $50,000 lossd. $50,000 short-term capital loss, limit
Answer Preview: A Because Kendra …

, Chapter: 8 -Problem: 8 >> James purchased office equipment for his business. The equipment has a depreciable basis of $16,000 and was put in service on June 1, 2022. James decides to elect straight-line depreciation under MACRS for the asset over the minimum number of years (seven years), and does not use bonus depreciation or make the election to expense. What is the amount of his depreciation deduction for the equipment
Answer Preview: E …

, Chapter: 1 -Problem: 8 >> All of the following are itemized deductions in 2022 except:a. Charitable contributionsb. Deductible IRA contributionsc. State and local taxesd. Medical expensese. All of the above are itemized deductions
Answer Preview: B The deduct…

, Chapter: 10 -Problem: 3 >> In the current year, Hoffa Partnership allocates ordinary business income of $4,000 to Jimmy, a 40-percent partner. In addition, the partnership makes a cash distribution to Jimmy of $1,000, which is less than his basis in his partnership interest. What is the amount of partnership income Jimmy will need to recognize in the current year?a. $0b. $3,000c. $4,000d. $5,000
Answer Preview: c Income alloca…

, Chapter: 2 -Problem: 8 >> Which of the following is likely to indicate classification of a worker as an employee:a. The worker must provide their own tools and equipment.b. The worker can provide services at a location they choose.c. The worker receives benefits like health care.d. The worker makes their services available to the general public.
Answer Preview: C Benefits are often reserve…

, Chapter: 5 -Problem: 15 >> Linda installed a special pool for the hydrotherapeutic treatment of severe arthritis, as prescribed by her doctor. The cost of installing the pool was $20,000, and her insurance company paid $5,000 toward its cost. The pool increased the value of Linda’s house by $7,000, and it has a useful life of ten years. Determine the amount of the deduction Linda is entitled to and explain why.
Answer Preview: 8000 20000 5000 7000 Since the pool was prescribed it qualifies as a medical exp…

, Chapter: 1 -Problem: 21 >> Margaret and her sister support their mother and together provide 85 percent of their mother’s support. If Margaret provides 40 percent of her mother’s support:a. Her sister is the only one who can claim their mother as a dependent.b. Neither Margaret nor her sister may claim their mother as a dependent.c. Both Margaret and her sister may claim their mother as a dependent.d. Margaret and her siste
Answer Preview: E Either Margaret or he…

, Chapter: 5 -Problem: 21 >> Which of the following is not considered a deductible medical expense?a. Once daily multivitaminb. Prescription eyeglassesc. Acupunctured. Filling a tooth cavity
Answer Preview: A Vitamins a…

, Chapter: 3 -Problem: 5 >> Which of the following expenses is generally deductible in the year incurred?a. Payments to remediate the contaminated ground water surrounding an oil refineryb. Interest expense associated with debt incurred to purchase municipal bondsc. A speeding fine paid by an express delivery company for one of its driversd. Rent for a retail store in which medical marijuana is sold
Answer Preview: A Expenses to …

, Chapter: 8 -Problem: 29 >> What is Sarajane’s basis in the land received in the exchange described in Question 28, assuming her basis in the land given up was $12,000?a. $0b. $12,000c. $14,000d. $16,000e. None of the above
Answer Preview: D Basis of…

, Chapter: 1 -Problem: 2 >> The amendment to the United States Constitution that authorized the federal income tax is:a. Thirteenth Amendment in 1865b. Fourteenth Amendment in 1868c. Sixteenth Amendment in 1913d. Twenty-first Amendment in 1933
Answer Preview: C The income …

, Chapter: 5 -Problem: 12 >> What is the deadline for making a contribution to a traditional IRA or a Roth IRA for 2022?a. April 18, 2023b. July 15, 2022c. December 31, 2022d. October 15, 2023
Answer Preview: A Contrib…

, Chapter: 2 -Problem: 7 >> The classification of a worker as an employee or an independent contractor is:a. Made by the employerb. Made by the employeec. Based on a negotiation between the employer and employeed. Based on a set of common law factors related to control and independence
Answer Preview: D Classification is b…

, Chapter: 9 -Problem: 7 >> Lamden Company paid its employee, Chuck, wages of $163,000 in 2022. Calculate each of the following: Social Security withheld from Chuck’s wages, Medicare withheld from Chuck’s wages, Social Security paid by Lamden, and Medicare paid by Lamden.
Answer Preview: Chuck Social Security 911400 147000 …

, Chapter: 5 -Problem: 30 >> Stanley donates a hotel to a university for use as a conference center. The building was purchased three years ago for $1,200,000 and has a fair market value of $1,500,000 on the date the contribution is made. If Stanley had sold the building, the $300,000 difference between the sales price and cost would have been a long-term capital gain. What is the amount of Stanley’s deduction for this contri
Answer Preview: B Contributions of pro…

, Chapter: 2 -Problem: 20 >> Yorick purchases a $10,000 bond with a 5 percent interest rate from Hamlet on March 31, 2022. The bond pays interest semiannually on June 30 and December 31. Prevailing interest rates have risen since Hamlet first purchased the bond for $10,000 at issuance. Yorick pays $9,561 for the bond. Explain the items that are affecting Yorick’s purchase price for the bond and what effect these items will ha
Answer Preview: Yoricks purchase price is affected by two items 1 Yorick pa…

, Chapter: 8 -Problem: 4 >> Proudfoot, Inc. would like to deduct expenditures for tangible personal property under $4,000 as maintenance and repairs costs. To implement this policy, which of the following is not required?a. A written policy describing a matching treatment for the company’s financial statements.b. Proudfoot’s financial statements are audited and have an accompanying opinion.c. Proudfoot must be a small busine
Answer Preview: C Small busin…

, Chapter: 2 -Problem: 17 >> Veruca’s employer offers both a dependent care flexible spending account (FSA) and a dependent care assistance program in which employees can receive occasional dependent care at no cost. In 2022, the maximum total amount Veruca can exclude from her gross income for both dependent care programs is:a. $0b. $2,850c. $5,000d. $10,000
Answer Preview: C 50…

, Chapter: 10 -Problem: 20 >> Khushboo’s basis in her 25-percent interest in the Rishi Partnership is $40,000 at the start of the current year. During the current year, Rishi reports ordinary business income of $80,000. Rishi also makes a $10,000 guaranteed payment and $16,000 cash distribution, both to Khushboo. What will Khushboo’s basis be at the end of the current year and how much income will Khushboo recognize from these
Answer Preview: A Income is …

, Chapter: 9 -Problem: 24 >> The FUTA tax is:a. An unemployment tax with a rate of 2.9 percent on wages up to $147,000 per employee.b. A disability tax with a rate of 2.9 percent on wages up to $7,000 per employee.c. An unemployment tax with a rate as low as 0.6 percent on wages up to $7,000 per employee.d. A disability tax with a rate of 0.6 percent on wages up to $100,000 per employee.
Answer Preview: C FUTA tax is 6 …

, Chapter: 9 -Problem: 4 >> Flo is a server at a diner in Phoenix and earns a significant portion of her pay through tips from customers. Some of these tips are paid via credit card and others are paid in cash. Flo’s employer will:a. Withhold employment taxes but no income taxes on the tips.b. Withhold both employment and income taxes on the cash tips but only employment taxes on the tips paid by credit card.c. Withhold both
Answer Preview: C Tips are ta…

, Chapter: 6 -Problem: 21 >> The 3.8 percent Medicare tax on net investment income applies to:a. Tax-exempt interest incomeb. Interest and dividendsc. IRA distributionsd. Wages
Answer Preview: B Interest …

, Chapter: 1 -Problem: 1 >> List three major purposes of the tax system.
Answer Preview: 1 Raising revenue to operate the g…

, Chapter: 10 -Problem: 18 >> Which of the following items is generally reported as a separately stated item on a partnership return?a. Gross ordinary income from the operations of the partnership businessb. Typical MACRS depreciationc. Employee salaries expensed. Insurance expensee. Guaranteed payments to a partner
Answer Preview: E Guaranteed payments are pa…

, Chapter: 8 -Problem: 16 >> Derek purchases a small business from Art on August 30, 2022. He paid the following amounts for the business:a. How much of the $240,000 purchase price is for Section 197 intangible assets?b. What amount can Derek deduct on his 2022 tax return as Section 197 intangible amortization? Section 197 intangiblesThe category of intangibles that consists of those acquired by a taxpayer as part of the acqu
Answer Preview: a 70000 50000 …

, Chapter: 5 -Problem: 31 >> Rico a single taxpayer, makes $5,000 of cash donations in 2022. His standard deduction exceeds his itemized deductions including the contribution. What amount will Rico deduct for charitable contributions? His AGI in 2022 is $48,000.a. $300b. $5,000c. $4,800d. $0e. $48,000
Answer Preview: D He is …

, Chapter: 8 -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 five-year class property acquired during the year must als
Answer Preview: C Real prope…

, Chapter: 5 -Problem: 27 >> Carrie, a single taxpayer, finished her undergraduate degree using money from a student loan. She earned $56,000 her first year and paid $2,600 in interest in 2022. She can take a deduction for student loan interest in the amount of:a. $2,600b. $2,500c. $1,500d. $0e. None of the above
Answer Preview: B L…

, Chapter: 7 -Problem: 10 >> Which of the following is not a requirement to receive the premium tax credit for health care in 2022?a. Health care through the employer is not availableb. Health insurance is purchased through the state or federal exchangec. Income must be below 200 percent of the federal poverty lined. The taxpayer cannot be claimed as a dependent
Answer Preview: C For 2022 the …

, Chapter: 8 -Problem: 27 >> Pat sells land for $20,000 cash and a $80,000 four-year note with a reasonable interest rate. If her basis in the property is $30,000 and she receives the $20,000 down payment and the first $20,000 payment on the note in the year of sale, how much is Pat’s taxable gain in the year of sale using the installment sales method?a. $0b. $40,000c. $20,000d. $28,000e. $70,000
Answer Preview: To calculate the taxable gain using the installment sales method we n…

, Chapter: 8 -Problem: 17 >> The amortization period for Section 197 intangibles is:a. 5 yearsb. 7 yearsc. 10 yearsd. 15 yearse. 40 years
Answer Preview: D Section 19…

, Chapter: 5 -Problem: 29 >> Which of the following donations are not deductible as a charitable contribution?a. A donation of clothing to Goodwill Industriesb. A cash contribution to a churchc. A contribution of stock to a public universityd. A contribution of a taxpayer’s time picking up trash on the beache. A painting contributed to a museum
Answer Preview: D Contribu…

, Chapter: 10 -Problem: 19 >> Feela is a one-third owner of Alchemy LLC, which is taxed as a partnership. Her basis prior to Alchemy paying Feela an $11,000 cash distribution is $6,000. How much income does Feela recognize from the distribution and what is her basis in her interest in Alchemy after the distribution?a. $11,000 income and $6,000 basisb. $6,000 income and $5,000 basisc. $5,000 income and $0 basisd. $0 income and
Answer Preview: C Income is the 5…

, Chapter: 8 -Problem: 5 >> Alice purchases a rental house on June 22, 2022, 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 2022 using MACRS?a. $1,970b. $1,667c. $1,177d. $1,061e. $3,485
Answer Preview: A 1…

, Chapter: 9 -Problem: 23 >> Thibodeau Corporation pays Loretta $3,300 for providing services to Thibodeau during 2022. The nature and scope of the relationship between Thibodeau and Loretta is one of employer-employee. Which of the following best describes the income and employment tax requirements for Thibodeau?a. Withhold income and employment taxes and issue a timely Form W-2 to Loretta.b. Withhold income taxes but no emp
Answer Preview: A Employee…

, Chapter: 1 -Problem: 33 >> Describe how a tax preparer can obtain a taxpayer signature on an electronically-filed tax return.
Answer Preview: One of the following approaches can be used by tax preparers in Canada to get a taxpayers signature …

, Chapter: 10 -Problem: 7 >> A partner’s interest in a partnership is decreased by:a. Increases in the partner’s share of the partnership liabilitiesb. Debt relief that a partner experiences when contributing to the partnership property subject to a liabilityc. The partner’s share of tax-exempt income earned by the partnershipd. Contributions of cash from the partner to the partnershipe. None of the above
Answer Preview: B Debtr…

, Chapter: 10 -Problem: 17 >> TYVM Partnership allocates ordinary business income, long-term capital gains, and guaranteed payments of $13,000, $1,000, and $7,000, respectively, to Ariana Extensa, a general partner. Based on this information, what is Ariana’s self-employment income?a. $0b. $7,000c. $8,000d. $20,000e. $21,000
Answer Preview: D 13000 of incom…

, Chapter: 9 -Problem: 8 >> The rate for the Social Security portion of FICA taxes for a non-self-employed individual is:a. 12.4 percent for the employer.b. 15.3 percent for the employee.c. 7.65 percent total for the employee and employer.d. 6.2 percent each for the employee and employer up to the FICA cap amount.
Answer Preview: D Social Security tax…

, Chapter: 10 -Problem: 18 >> Rhianna owns a two-thirds interest in the ANTI Partnership and a 75-percent interest in the LOUD Partnership. In the current year, ANTI sells property to LOUD at a loss of $10,000. Later in the same year, LOUD sells the same property to an unrelated party for a $2,000 gain. What is the amount of gain or loss recognized by ANTI and LOUD on the sale of this property?
Answer Preview: Because Rhianna owns more than 50 each of both ANTI and LOUD ANTI is not permitted to r…

, Chapter: 8 -Problem: 19 >> Which of the following is Section 1231 property?a. Land held for investment purposesb. A machine used in a businessc. Accounts receivabled. Inventorye. Paintings owned by the artist
Answer Preview: B 1231 property …

, Chapter: 11 -Problem: 9 >> In 2022, Citradoria Corporation is a corporation that contributes $35,000 cash to qualified charitable organizations during the current tax year. The corporation has net operating income of $91,000, before deducting the contributions, and adding dividends received from domestic corporations (ownership in all corporations is less than 20 percent) in the amount of $25,000.a. What is the amount of Ci
Answer Preview: a 11600 10 x 91000 25000 b 25000 10 x 250000 Unused charitabl…

, Chapter: 11 -Problem: 10 >> Which of the following statements is true regarding the dividends received deduction in 2022?a. Dividends from an 80 percent-owned corporation are eligible for a 65 percent dividends received deductionb. Dividends from a 20 percent-owned corporation are eligible for a 50 percent dividends received deductionc. Dividends from a 100 percent-owned corporation are eligible for a 100 percent dividends r
Answer Preview: C Th e DR…

, Chapter: 8 -Problem: 25 >> Virginia has business property that is stolen and partially destroyed by the time it was recovered. She receives an insurance reimbursement of $5,000 on property that had a $14,000 basis and a decrease in market value of $10,000 due to damage caused by the theft. What is the amount of Virginia’s casualty loss?a. $14,000b. $5,000c. $10,000d. $4,000e. None of the above
Answer Preview: B Insurance pr…

, Chapter: 8 -Problem: 20 >> Which of the following taxpayers would be subject to the Section 1231 lookback rule?a. Gun-Joh sold depreciable business property held for more than one year at a gain this year and has Section 1231 losses in the prior year.b. Tawny sold business property held for less than one year at a gain.c. Hubie sold depreciable business property held for more than one year at a loss this year and has Sectio
Answer Preview: A Section …

, Chapter: 10 -Problem: 15 >> Describe the rules for selecting a partnership year-end.
Answer Preview: Partnerships generally must adopt the same t…

, Chapter: 5 -Problem: 28 >> 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 add a new bedroom and bathroom to an existing primary residence.c. Investment interest expense of $1,200, assuming the taxpayer has no
Answer Preview: C Investment …

, Chapter: 11 -Problem: 4 >> Harrison Corporation generates capital gains/(losses) of ($2,000), $4,000, ($14,000) in 2020, 2021, and 2022, respectively. Harrison started operating in 2020. What is Harrison’s capital loss carryforward into 2023?a. $0b. $10,000c. $12,000d. $14,000e. None of the above
Answer Preview: C 2020 net capital loss can off set 2000 of the 40…

, Chapter: 10 -Problem: 22 >> Which of the following circumstances will not cause a partnership to close its tax year early?a. The partnership terminates by agreement of the partners.b. The business activity of the partnership permanently ceases.c. All the partners decide to retire, permanently close their stores and stop conducting business.d. A new partner enters the partnership.
Answer Preview: D The entry of …

, Chapter: 9 -Problem: 10 >> Xinyi worked for two different employers in 2022 and her total wages were $80,000 for one and $87,000 for the other (total $167,000). Which of the following best describes Xinyi’s 2022 FICA taxes?a. Xinyi and the employer will each pay half of Social Security and Medicare taxes on her total wages and both will claim an income tax credit for the portion of each tax in excess of the 2022 FICA cap.b.
Answer Preview: D Excess Social Security withh…

, Chapter: 10 -Problem: 1 >> Debbie and Alan open a web-based bookstore together. They have been friends for so long that they start their business on a handshake after discussing how they will share both work and profits or losses from the business. Explain whether Debbie and Alan formed a partnership given that they have signed no written partnership agreement?
Answer Preview: Unlike corporations limited partnerships LLCs and LL…

, Chapter: 8 -Problem: 28 >> Fred and Sarajane exchanged land in a qualifying like-kind exchange. Fred gives up land with an adjusted basis of $11,000 (fair market value of $16,000) in exchange for Sarajane’s land with a fair market value of $12,000 plus $4,000 cash. How much gain should Fred recognize on the exchange?a. $5,000b. $4,000c. $1,000d. $0e. None of the above
Answer Preview: B Realized gai…

, Chapter: 8 -Problem: 7 >> An asset (not an automobile) put in service in June 2022 has a depreciable basis of $24,000 and a recovery period of 5 years. Assuming bonus depreciation is used, half-year convention and no election to expense is made, what is the maximum amount of cost that can be deducted in 2022?a. $4,800b. $12,000c. $24,000d. $2,000e. $5,600
Answer Preview: C …

, Chapter: 5 -Problem: 24 >> Antonio is a small business owner and files jointly with his spouse. In 2022, he generates $100,000 of net profits from his business. His spouse, Maria, has $4,000 of state income tax withheld from her wages in 2022. They also pay $4,500 in property taxes on their home. Antonio determines that their state income taxes associated with his business are about $5,600 and makes estimated state income t
Answer Preview: C 4000 56…

, Chapter: 5 -Problem: 31 >> Kathy, a single taxpayer, donates cash of $600 and also provides some gently-used clothing worth $150 to a local church. Kathy does not itemize deductions. What is the nature of any deduction for these items for Kathy in 2022?
Answer Preview: Since Kathy does …

, Chapter: 9 -Problem: 27 >> Greta and Greta’s employer have both been making contributions to a qualified retirement plan for the last twenty-five years. Greta is looking forward to her retirement in a few more years and is extremely pleased to see a balance in her retirement account of $480,000 at the start of 2022. During 2022, the account earned interest, dividends, and capital gains and is now worth $500,000. Greta takes
Answer Preview: B The earnings …

, Chapter: 11 -Problem: 6 >> Clarion Corporation generated taxable income of $15,000 in 2021 and a net operating loss of $12,000 in 2022. If Clarion generates taxable income of $5,000 in 2023, what is the NOL carryforward into 2024?a. $0b. $2,000c. $7,000d. $8,000
Answer Preview: D The 2022 NOL …

, Chapter: 5 -Problem: 19 >> The cost of which of the following expenses is not deductible as a medical expense on Schedule A, before the 7.5 percent of adjusted gross income limitation?a. A psychiatristb. Botox treatment to reduce wrinkles around eyesc. Acupunctured. Expense to hire and train a guide dog for a visually-impaired taxpayer
Answer Preview: B Cosmetics …

, Chapter: 5 -Problem: 32 >> On January 3, 2022, Carey discovers his diamond bracelet has been stolen. The bracelet had a fair market value and adjusted basis of $7,500. Assuming Carey had no insurance coverage on the bracelet and his adjusted gross income for 2022 is $45,000, calculate the amount of his theft loss deduction.
Answer Preview: 0 Only personal casu…

, Chapter: 10 -Problem: 5 >> Theodore has an investment in YYZ Corporation and a different investment in CXB Partnership. He has a 50-percent ownership stake in each. YYZ generates $100,000 of taxable income after paying corporate tax and makes no distribution to Theodore. CXB generates $50,000 of income and makes a $10,000 cash distribution (not in excess of Theodore’s basis). Assuming he does not sell either investment, wha
Answer Preview: C Shareholders recognize in…

, Chapter: 10 -Problem: 23 >> Van makes an investment in an LLC in the current year. Van’s capital contributions to the LLC consist of $30,000 cash and a building with an adjusted basis of $70,000, subject to a nonrecourse liability (seller financing) of $20,000. Calculate the amount that Van has at risk in the LLC immediately after making the capital contributions.
Answer Preview: 80000…

, Chapter: 9 -Problem: 26 >> Which of the following best describes the typical treatment of contributions in an amount below the annual maximum to a qualified retirement plan?a. Employee contributions are currently taxable, but employer contributions are not currently taxable.b. Employee contributions are not currently taxable, but employer contributions are currently taxable.c. Employee and employer contributions are not cur
Answer Preview: C Contributions …

, Chapter: 5 -Problem: 25 >> The itemized deduction for state and local taxes in 2022 isa. Total taxes less 10 percent of AGIb. Limited to no more than $10,000c. Unlimitedd. Only deductible if the taxes are business relatede. Deductible if your home value is less than $750,000
Answer Preview: B The deduct…

, Chapter: 11 -Problem: 15 >> Which of the following statements is true about estimated tax payments? a. The annualized income method uses four quarters of estimated income to determine required estimated payments. b. A large corporation (for purposes of estimated payments) is permitted to use the prior year tax liability only when determining the first quarter estimated payment. c. Estimated payments of corporate federal inco
Answer Preview: B A large corporatio…

, Chapter: 11 -Problem: 2 >> Tayla Corporation generated $400,000 of taxable income in the 2022. What is Tayla’s corporate tax liability?a. $71,400b. $84,000c. $115,600d. $136,000e. None of the above
Answer Preview: B …

, Chapter: 10 -Problem: 15 >> When calculating ordinary income, partnerships are not allowed which of the following deductions?a. Miscellaneous expensesb. Qualified business income deductionc. Depreciationd. Cost of goods solde. Employee wages
Answer Preview: B The qualified bus…

, Chapter: 9 -Problem: 6 >> 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 2022, the maximum wage base for Social Security tax withholding is $147,000.c. In 2022, 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 for S
Answer Preview: D Any excess Social …

, Chapter: 5 -Problem: 22 >> Which of the following taxes may be deducted as an itemized deduction?a. State gasoline taxesb. Local property taxesc. Federal income taxesd. Social Security taxese. Medicare taxes
Answer Preview: B Prope…

, Chapter: 2 -Problem: 18 >> Which of the following transportation-related costs paid by an employer to or on behalf of an employee cannot be excluded from gross income?a. Providing bus passes to employees for a $20 discount.b. Paying for the parking of only senior executives at a cost of $250 per month.c. Paying the occasional ride-sharing fare for an employee that has worked overtime late into the evening.d. Paying $10 per
Answer Preview: D The bicycl…

, Chapter: 5 -Problem: 18 >> Jessica is a U.S. Army Reservist and in 2022 traveled 130 miles each way to serve duty at a local military installation. She was required to report four times in 2022, two times before June 30 and two times after. Her normal route from home to the base included a $1.75 toll each way. Jessica’s for AGI deduction for these costs is:a. $0b. $622.40c. $596.40d. $643.00e. $643.20
Answer Preview: E 130 x …

, Chapter: 8 -Problem: 21 >> In 2022, Mary sells for $24,000 a machine used in her business. The machine was purchased on May 1, 2019, at a cost of $21,000. Mary has deducted depreciation on the machine of $5,000. Mary has no previous Section 1231 gains or losses. What is the amount and nature of Mary’s gain as a result of the sale of the machine?a. $8,000 Section 1231 gainb. $8,000 ordinary income under Section 1245c. $5,000
Answer Preview: C Recognized gain of …

, Chapter: 9 -Problem: 12 >> Typically, estimated payments for individual taxpayers are due on the following dates:a. Twice a year on April 15 and September 15b. Four installments on April 15, June 15, September 15, and January 15 of the next yearc. Four times a year on April 15, July 15, September 15, and December 15d. Twice a year on June 15 and December 15
Answer Preview: B These are th…

, Chapter: 9 -Problem: 9 >> Carlotta is an employee and generates wages of $150,000 in 2022. Which of the following best describes the rate of tax associated with the Medicare portion of FICA taxes?a. 7.65 percent payable by Carlotta’s employer.b. 1.45 percent payable by Carlotta and 6.2 percent payable by the employer.c. 1.45 percent each payable by Carlotta and the employer.d. 2.9 percent but only up to the current year FI
Answer Preview: C The tax rate …

, Chapter: 10 -Problem: 4 >> Nan contributes property with an adjusted basis of $50,000 to a partnership. The property has a fair market value of $60,000 on the date of the contribution. What is the partnership’s basis in the property contributed by Nan?
Answer Preview: 50000 The partnerships basis in th…

, Chapter: 10 -Problem: 31 >> Which of the following properly describes a difference between a partnership and an LLC?a. Partnerships pass income and losses through to the partners while LLCs generally pay an entity level tax and owners pay tax on distributions.b. General partners are often personally responsible for the debts of the partnership while LLC members are not liable for LLC debt.c. Partnerships may have only one pa
Answer Preview: B The LLC …

, Chapter: 5 -Problem: 23 >> In April 2022, Fred paid $40 of state income tax that was due when he filed his 2021 income tax return. During 2022, Fred’s employer withheld $1,200 of state income tax from his pay. In April 2023, Fred determined that his 2022 state tax liability was $1,100 and received his state income tax refund of $100 in May 2023. Assuming Fred itemizes, how much state income tax deduction should he report on
Answer Preview: B 1200 40 The r…

, Chapter: 8 -Problem: 2 >> Describe the requirements to apply a de minimis safe harbor to tangible property expenditures for a business taxpayer.
Answer Preview: For a taxpayer with applicable financial statements the taxpayer must have …

, Chapter: 10 -Problem: 29 >> Mike, an individual taxpayer, purchases a rental property for $200,000 using cash of $100,000 and borrowing the remaining $100,000 from a lending institution. The loan is considered to be qualified nonrecourse financing. What is Mike’s at-risk amount?a. $300,000b. $200,000c. $100,000d. $0
Answer Preview: B The loan represe…

, Chapter: 10 -Problem: 23 >> Joe, Ben, and Melissa are partners in Collins Partnership. All three use a calendar year-end for their individual taxes. Collins Partnership’s year-end is likely to be:a. October 31 since that is only three months prior to calendar year-endb. The end of any month during the yearc. January 31 but only if Collins Partnership’s accounting year-end is January 31d. December 31e. None of the above
Answer Preview: D The partnersh…

, Chapter: 10 -Problem: 21 >> Laura is a non-passive general partner in the Douglass Partnership. At the start of 2022, her outside basis in Douglass is $10,000. During 2022, Douglass allocates loss of $8,000 to Laura and makes a $4,000 cash distribution to Laura. What is Laura’s deductible loss for 2022 and what is her basis at year-end?a. $0 deductible loss and $0 basis.b. $8,000 deductible and $0 basis.c. $6,000 deductible
Answer Preview: D Basis must be redu…

, Chapter: 5 -Problem: 3 >> Kidd is a self-employed single taxpayer in 2022 that files Schedule C for his sole proprietorship. He pays for his own health insurance and the premiums are less than his net profits. Kidd will deduct his self-employed health insurance on which form?a. Schedule Cb. Form 1040 as a from AGI deductionc. Form 1040 as a for AGI deductiond. Self-employed health care insurance is not deductible
Answer Preview: C Selfemp…

, Chapter: 12 -Problem: 8 >> Martha inadvertently failed to file her tax return for eleven months. The tax due on the return was $1,000. Her failure to file penalty will be:a. 55 percent of the tax dueb. 25 percent of the tax duec. $450d. $5,000
Answer Preview: C Marthas penalty woul…

, Chapter: 10 -Problem: 25 >> 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 capitalb. A transaction between a partnership and a partner who has a 40 percent profit interest in the partnershipc. A transaction between two partnerships owned 80 percent by the same partnersd. A transact
Answer Preview: C The greater than 50 …

, Chapter: 10 -Problem: 17 >> Louise owns 45 percent of a partnership, and her brother owns the remaining 55 percent interest. During the current tax year, Louise sold a building to the partnership for $160,000 to be used for the partnership’s office. She had held the building for three years, and it had an adjusted basis of $120,000 at the time of the sale. What is the amount and nature of Louise’s gain on this transaction?
Answer Preview: 40000 ordinary income 160000 120000 The gain is …

, Chapter: 12 -Problem: 1 >> Which of the following is a responsibility of a local office of the IRS?a. Advising the Treasury Department on legislationb. Intelligence operationsc. Appellate proceduresd. Developing IRS rules and regulationse. None of the above
Answer Preview: E None of …

, Chapter: 10 -Problem: 30 >> Gloria is a 30-percent general partner in the VH Partnership. During the year, VH borrows $40,000 from a bank to fund operations and is able to pay back $10,000 before year-end. VH also borrows $100,000 from Gloria’s wealthy retired uncle on a non-recourse basis using land held by the partnership as the collateral. How much does Gloria’s at-risk amount increase or decrease as a result of these tra
Answer Preview: A 30000 …

, Chapter: 10 -Problem: 32 >> Which of the following generate self-employment income for partners/members?a. Partnership income allocated to a limited partnerb. Long-term capital gains allocated to an LLC memberc. Income allocated to an LLC member that is actively engaged in the businessd. Tax-exempt income allocated to both general partners and members
Answer Preview: C LLC members that …

, Chapter: 12 -Problem: 12 >> If a taxpayer’s 2022 individual income tax return is due on April 18, 2023 and was filed on March 3, 2023, the statute of limitations would normally run out on:a. April 18, 2025b. March 3, 2024c. April 18, 2026d. March 3, 2026e. None of the above
Answer Preview: C Generally the stat…

, Chapter: 9 -Problem: 6 >> Lamden Company paid its employee, Trudy, wages of $63,000 in 2022. Calculate each of the following: Social Security withheld from Trudy’s wages, Medicare withheld from Trudy’s wages, Social Security paid by Lamden, and Medicare paid by Lamden.
Answer Preview: Trudy Social Security 390600 6300…

, Chapter: 8 -Problem: 21 >> An office machine with a market value of $10,000 used by Josie in her accounting business was completely destroyed by fire. The adjusted basis of the machine was $8,000 (original basis of $14,000 less accumulated depreciation of $6,000). The machine was not insured. Calculate the amount and nature of Josie’s gain or loss as a result of this casualty.
Answer Preview: 8000 ordinary loss Assuming this is the t…

, Chapter: 10 -Problem: 10 >> List five items of income or deductions that are required to be separately stated on Schedule K-1.
Answer Preview: Common separately stated items include net rental income guaranteed payments interest income ordinar…

, Chapter: 8 -Problem: 31 >> Using the information from Question 30, what is Oscar’s basis on his new building?a. $130,000b. $132,000c. $140,000d. $142,000 Question 30Oscar owns a building that is destroyed in a hurricane. His adjusted basis in the building before the hurricane is $130,000. His insurance company pays him $140,000 and he immediately invests in a new building at a cost of $142,000. What is the amount of recogni
Answer Preview: B 130000 …

, Chapter: 12 -Problem: 14 >> Which of the following has a six-year statute of limitations?a. Depreciationb. Salariesc. Travel and entertainmentd. A return in which the taxpayer omitted gross income in excess of 25 percent of the gross income shown on the returne. Worthless securities
Answer Preview: D The statute of …

, Chapter: 11 -Problem: 8 >> Which of the following is not a corporate organizational expenditure that may be amortized?a. The cost of organizational meetingsb. Fees paid to the state for incorporationc. Accounting fees incident to organizationd. Legal fees incident to organizatione. All of the above are organizational expenditures
Answer Preview: E All of th…

, Chapter: 8 -Problem: 26 >> Prashant has business property that is stolen and totally destroyed by the time it was recovered. He receives an insurance reimbursement of $5,000 on property that had a $14,000 basis and a market value of $20,000 before destruction. What is the amount of Prashant’s casualty loss?a. $14,000b. $9,000c. $15,000d. $20,000e. None of the above
Answer Preview: B Basis i…

, Chapter: 9 -Problem: 8 >> Lamden Company paid its employee, William, wages of $263,000 in 2022. Calculate each of the following: Social Security withheld from William’s wages, Medicare withheld from William’s wages, Social Security paid by Lamden, and Medicare paid by Lamden.
Answer Preview: William Social Security 911400 14700…

, Chapter: 10 -Problem: 3 >> Explain the difference in the treatment of liabilities between a general partner and a limited partner.
Answer Preview: Limited partners have no obligation …

, Chapter: 9 -Problem: 7 >> FICA taxes are generally paid as follows:a. One-half is withheld from the employee and the other half is paid by the employer.b. The entire amount of Social Security is paid by the employee and the employer pays the Medicare portion.c. The entire amount of Medicare is paid by the employee and the employer pays the Social Security portion.d. Both portions are paid by the employer and thus never wit
Answer Preview: A One half of FICA …

, Chapter: 9 -Problem: 11 >> For most taxpayers in 2022, which of the following temporary COVID-related tax provisions remains in place?a. The employee retention creditb. The sick pay creditc. The family leave creditd. All of these provisions remain in force in 2022e. None of these provisions remain in force in 2022.
Answer Preview: E Except for the repaym…

, Chapter: 2 -Problem: 30 >> In 2022, Yui, a single mother, redeems Series EE bonds and uses the total proceeds ($6,700 par value and $1,300 interest) to pay for her daughter’s college education. If Yui’s 2022 AGI is $75,000, how much of the proceeds from the redemption of the EE bonds can she exclude?a. $0b. $1,300c. $6,700d. $8,000
Answer Preview: D None o…

, Chapter: 12 -Problem: 2 >> The IRS does not have the authority to:a. Examine a taxpayer’s books and recordsb. Summon taxpayers to make them appear before the IRSc. Summon third parties for taxpayer recordsd. Place a lien on taxpayer propertye. None of the above—the IRS has the authority to do all these
Answer Preview: E The IRS h…

, Chapter: 12 -Problem: 15 >> Which of the following tax preparers may not represent their clients in all IRS proceedings?a. An enrolled agentb. A certified public accountantc. An attorneyd. All of the above may represent their clients in IRS proceedings
Answer Preview: D All of these …

, Chapter: 12 -Problem: 13 >> If a taxpayer’s 2022 individual income tax return is due on April 18, 2023 and was filed on June 3, 2023, the statute of limitations would normally run out on:a. April 18, 2025b. June 3, 2024c. April 18, 2026d. June 3, 2026e. None of the above
Answer Preview: D Generally the stat…

, Chapter: 12 -Problem: 10 >> A taxpayer incorrectly reports income and has a substantial understatement of income tax in the amount of $20,000 (but no fraud). The accuracy-related penalty for this error is:a. $20,000b. $1,000 (5 percent)c. $4,000 (20 percent)d. $15,000 (75 percent)
Answer Preview: C …

, Chapter: 12 -Problem: 6 >> Which of the following is not a source of information from which the IRS identifies possible audit targets?a. A computer scoring system that identifies possible errors on tax returnsb. The client records of a particularly abusive tax scheme promoterc. News sourcesd. Whistleblowerse. All of these items could be sources for IRS audit selection
Answer Preview: E All of t…

, Chapter: 8 -Problem: 6 >> An asset (not an automobile) put in service in June 2022 has a depreciable basis of $25,000 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 2022?a. $2,500b. $5,000c. $6,000d. $30,000e. None of the above
Answer Preview: B …

, Chapter: 12 -Problem: 5 >> When the IRS has completed their examination and the result is an assessment of additional tax, which of the following is not a viable option for the taxpayer?a. Disagree with the assessment and request an appealb. Agree to the assessment and pay the additional taxc. Fail to act and wait for the 90-day letter and either pay the tax and file a claim for a refund or petition the Tax Courtd. Do not p
Answer Preview: D A District Co…

, Chapter: 2 -Problem: 19 >> Air Suppliers Inc. provides group term insurance to all its employees for policies up to $250,000. Michelle, an Air Suppliers employee, has a $100,000 policy. The cost of the policy is $50 per month, all of which is paid by Air Suppliers. Which of the following best describes how much gross income Michelle will recognize for this employee benefit?a. Michelle will recognize no gross income.b. Miche
Answer Preview: B Groupt…

, Chapter: 12 -Problem: 18 >> In which of the following situations does the burden of proof in a tax matter not automatically shift to the IRS?a. The IRS uses statistics to reconstruct an individual’s income.b. A court proceeding against an individual taxpayer involves a penalty or addition to tax.c. A taxpayer who did not maintain records.d. a and b are correct.e. a, b, and c are correct.
Answer Preview: C The burden of p…

, Chapter: 12 -Problem: 20 >> The burden of proof remains on the taxpayer for corporations, trusts, and partnerships with net worth exceeding:a. $1 millionb. $3 millionc. $5 milliond. $7 millione. Some other amount
Answer Preview: D The burden …

, Chapter: 12 -Problem: 9 >> Which of the following best describes the interest and interest rates for under and overpayments of income tax liability?a. The underpayment rate is higher than the overpayment rate.b. The interest charged on underpayments is deductible.c. The interest paid on overpayments is tax-exempt income.d. The overpayment rate and underpayment rate are generally equal and underpayment interest is not deduct
Answer Preview: D The over and underpaym…

, Chapter: 2 -Problem: 9 >> State income tax withholding is reported on:a. Form W-2Sb. Form W-4c. Each state has a unique reporting formd. Form W-2 on Box 17
Answer Preview: D State inco…

, Chapter: 12 -Problem: 11 >> The taxpayer penalty for writing a check to pay for taxes that has insufficient funds is:a. The same amount the bank charges the IRS for a returned checkb. 5 percent of the amount of the total tax liability of the taxpayerc. 2 percent of the amount of the check unless the check is for $1,250 or lessd. Double the check amount
Answer Preview: C The penalty is 2 o…

, Chapter: 1 -Problem: 29 >> Marta, a single, 19-year-old, full-time student, is claimed as a dependent by her parents in 2022. She has earned income of $3,000 and unearned income of $130. What is Marta’s 2022 standard deduction?a. $0b. $1,150c. $3,350d. $3,400e. $12,950
Answer Preview: D Ear…

, Chapter: 10 -Problem: 14 >> Which of the following items is generally reported as a separately stated item on a partnership return?a. Ordinary income from the operations of the partnership businessb. Bonus depreciationc. Interest expense on business debtsd. Net rental incomee. Factory rent expense
Answer Preview: D Net rental …

, Chapter: 1 -Problem: 34 >> Dorit, a single taxpayer, has a long-term capital loss of $7,000 on the sale of bonds in 2022 and no other capital gains or losses. Her taxable income without this transaction is $43,000. What is her taxable income considering this capital loss?a. $40,000b. $36,000c. $43,000d. $55,000e. Some other amount
Answer Preview: A 43000 3000 Net capi…

, Chapter: 1 -Problem: 26 >> Morgan is 65 years old and single. He supports his father, who is 90 years old, blind, and has no income. What is Morgan’s standard deduction?a. $21,150b. $19,400c. $20,300d. $18,800e. $20,500
Answer Preview: A Head of household …

, Chapter: 12 -Problem: 19 >> Which of the following have privileged communication with a client in a noncriminal tax matter?a. CPAsb. Enrolled agentsc. Attorneysd. a and ce. a, b, and c
Answer Preview: E The IRS grant…

, Chapter: 5 -Problem: 5 >> Which of the following is true 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 can be claimed if the taxpayer has an overall business loss from self-employment.c. Long-term care premiums may not be deducted within specified dollar limitations based on age.d. The self-employed h
Answer Preview: A No selfemployed health …

, Chapter: 5 -Problem: 9 >> Dori is 58 years old and retired in 2022. She receives a pension of $25,000 a year and no other income. She wishes to put the maximum allowed into an IRA. How much can she contribute to her IRA?
Answer Preview: 0 She must…

, Chapter: 5 -Problem: 7 >> Martha and Rob, a married couple, under 50 years of age, have adjusted gross income on their 2022 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. $2,700b. $3,500c. $6,000d. $12,000e. $0
Answer Preview: E Earned incom…

, Chapter: 3 -Problem: 28 >> Carol maintains an office in her home where she conducts a dressmaking business. During the year she collects $4,000 from sales, pays $1,300 for various materials and supplies, and properly allocates $2,500 of rent expense and $500 of her utilities expense to the use of her home office. What amount of the rent and utilities expense may Carol deduct in the current year in computing her net income o
Answer Preview: D Home office ded…

, Chapter: 4 -Problem: 29 >> Which of the following is classified as active income?a. Self-employment income from a small businessb. Interest incomec. Limited partnership incomed. Bonus paid by an employer to an employeee. a. and d.
Answer Preview: E Both selfem…

, Chapter: 12 -Problem: 3 >> Which of the following is the most common type of audit for an individual taxpayer?a. Office auditb. Correspondence auditc. Telephone auditd. Field audite. Service center audit
Answer Preview: B Correspond…

, Chapter: 3 -Problem: 11 >> In which of the following cases is the employer 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 four yearsb. An employee who travels between several business locations within the same city each dayc. A manager of a chain of department stores who works in the main store three weeks out
Answer Preview: C Travel costs are gen…

, Chapter: 2 -Problem: 35 >> The distinction between qualified dividends and ordinary dividends is:a. There is no distinction.b. Ordinary dividends are taxed at preferential rates.c. Qualified dividends are taxed at preferential rates and are a subset of ordinary dividends.d. Qualified dividends are excluded from gross income.
Answer Preview: C Qualifi…

, Chapter: 12 -Problem: 17 >> Which of the following does not result in a minimum $55 fine for an income tax preparer?a. Failure to provide a tax preparer identification numberb. Cashing a refund check for a customerc. Failing to keep any record of the returns preparedd. Failing to provide a copy of their prepared return to a customer
Answer Preview: B The penalty …

, Chapter: 5 -Problem: 8 >> Bob is a single, 40-year-old doctor earning $190,000 a year and is not covered by a pension plan at work. What is the maximum deductible contribution into a Traditional IRA in 2022?
Answer Preview: 6000 He is not covered …

, Chapter: 1 -Problem: 13 >> The gross income threshold to require a federal income tax return for a single taxpayer is equal to:a. The sum of the taxpayer’s itemized deductions.b. The same as the current year standard deduction ($12,950 in 2022).c. Any amount over zero.d. an amount that cannot be determined without knowing if any for AGI deductions will be claimed.
Answer Preview: B Filing thresh…

, Chapter: 3 -Problem: 15 >> Which of the following expenses is deductible as an entertainment expense?a. The depreciation on an airplane used to entertain customersb. The cost of a hunting camp used to entertain customersc. The dues of a racquet club used to keep in shaped. The cost of a paintball party for clients paid for by a computer salesman at a computer faire. None of these are deductible
Answer Preview: E Entert…

, Chapter: 2 -Problem: 4 >> In 2022, which of the following types of income is excluded from gross income?a. Unemployment compensationb. Income earned illegallyc. Dividends from foreign corporationsd. Corporate bond interest incomee. Scholarship used for tuition
Answer Preview: E Scholarshi…

, Chapter: 3 -Problem: 17 >> In 2022, Values R Us, a real estate appraising firm, incurs the following meals expenses:• $1,200 restaurant meals with business clients• $1,600 for an end of year celebratory company dinner for all employees• $400 for bagels once a month for all employees• $300 for prepackaged snacks offered to potential clients at a business fair• $40 for nonrestaurant travel snacks consumed by employees while o
Answer Preview: C The bagels and …

, Chapter: 4 -Problem: 35 >> For 2022, Roberta is a self-employed truck driver with earnings of $45,000 from her business. During the year, Roberta received $2,500 in interest income and dividends of $500. She also sold investment property and recognized a $1,500 gain. What is the amount of Roberta’s self-employment tax (Social Security and Medicare taxes) liability for 2022?a. $7,304b. $6,641c. $6,358d. $6,885e. $7,455
Answer Preview: C 45…

, Chapter: 3 -Problem: 1 >> Which of the following is not a test for the deductibility of a business expense?a. Ordinary and necessary testb. Sales generation testc. Reasonableness testd. Business purpose test
Answer Preview: B Deductible busines…

, Chapter: 1 -Problem: 10 >> To arrive at adjusted gross income (AGI), deduct _________ from gross income.a. From AGI deductionsb. The greater of the standard deduction or itemized deductionsc. The qualified business income deductiond. For AGI deductions
Answer Preview: D For AGI …

, Chapter: 3 -Problem: 16 >> Which of the following is not likely to be a deductible expense?a. The cost of tickets to a stage play for a client and the taxpayer.b. The cost for Rosa to take a potential customer to lunch to describe a new service Rosa’s company is offering. Unfortunately, the customer explains that they are not interested in the service.c. The cost of a party for all of Dan’s employees to celebrate a recordbr
Answer Preview: A Tickets …

, Chapter: 8 -Problem: 23 >> Jeanie acquires an apartment building in 2011 for $280,000 and sells it for $480,000 in 2022. At the time of sale there is $60,000 of accumulated straight-line depreciation on the apartment building. Assuming Jeanie is in the highest tax bracket for ordinary income and the Medicare tax on net investment income applies, how much of her gain is taxed at 28.8 percent?a. Noneb. $60,000c. $200,000d. $2
Answer Preview: B The unrecaptur…

, Chapter: 3 -Problem: 2 >> In the current year, Mary started a profitable housekeeping business as a sole proprietor. She has ten housekeepers working for her and spends her time selling their services and coordinating her employees’ time. Mary made $50,000 in her first year of operations. In addition to filing a Schedule C to report her business earnings, Mary must also filea. Schedule Ab. Schedule Fc. Schedule Bd. Schedul
Answer Preview: D A profitable sole …

, Chapter: 1 -Problem: 24 >> In 2022, Lakota and Dominique file married filing jointly and have a 13-year-old daughter. They also provide 25 percent of the support for Lakota’s 82-year-old mother, who lives in a nursing home nearby. The amount of the combined child tax credit and other dependent credit for Lakota and Dominique is:a. $0b. $2,000c. $3,000d. $3,500e. $3,600
Answer Preview: B The child tax credit …

, Chapter: 7 -Problem: 25 >> Barbara purchased a new Honda Clarity electric vehicle in 2022 for $36,000. Her federal tax credit will be:a. $0b. $2,500c. $5,000d. $7,500e. $10,000
Answer Preview: D This vehic…

, Chapter: 12 -Problem: 7 >> Which of the following is not a penalty that may be imposed by the IRS?a. Failure-to-file penaltyb. Failure-to-pay penaltyc. Penalty for negligenced. Early filing penaltye. All of the above may be imposed by the IRS
Answer Preview: D There is no penalty for fi …

, Chapter: 4 -Problem: 24 >> Juanita rents a vacation condo for 120 days and uses the condo for herself for twenty days. What allocation percentage will Juanita apply to the condo’s operating expenses (for example, insurance, utilities, etc.) to compute the rental portion under the IRS allocation method?a. 32.8 percent (120/365)b. 5.4 percent (20/365)c. 85.7 percent (120/140)d. 38.4 percent (140/365)
Answer Preview: C Rental …

, Chapter: 7 -Problem: 3 >> Russ and Linda are married and file a joint tax return claiming their three children, ages 4, 7, and 18, as dependents. Their adjusted gross income for 2022 is $421,400. What is Russ and Linda’s total child and other dependent tax credit for 2022?a. $2,000b. $3,400c. $4,900d. $6,000e. $9,600
Answer Preview: B 3400 The original c…

, Chapter: 4 -Problem: 21 >> Gene, a single taxpayer, purchased a house eighteen months ago for $350,000. If Gene sells his house due to unforeseen circumstances for $550,000 after living in it for a full eighteen months, what is his taxable gain?a. $0b. $12,500c. $50,000d. $200,000
Answer Preview: B 5500…

, Chapter: 7 -Problem: 6 >> Which of the following taxpayers would most likely be eligible to claim an earned income credit with a qualifying child?a. Marco is a single parent and files head of household. Marco’s child, Rebecca, obtained her Social Security number after the extended filing deadline for the tax year.b. Bart, a single parent filing head of household, has two daughters ages 21 and 25. The 25-year-old is not sup
Answer Preview: B Meets the …

, Chapter: 12 -Problem: 4 >> In which of the following ways are tax returns selected for audits?a. Through the Discriminant Function Systemb. Through informantsc. Through news sourcesd. Through information matchinge. All of the above
Answer Preview: E The IRS is capabl…

, Chapter: 4 -Problem: 12 >> Sherry rents her vacation home for six months and lives in it for six months during the year. Her gross rental income during the year is $6,000. Total real estate taxes for the home are $2,200, and interest on the home mortgage is $4,000. Annual utilities and maintenance expenses total $2,000, and depreciation expense is $4,500. Calculate Sherry’s deductible depreciation, the net income or loss fr
Answer Preview: Step 1 Gross income Less expenses Rental portion of taxes 2200 x 612 Rental …

, Chapter: 6 -Problem: 7 >> In addition to the liability existing in an estimable amount, an accrual-based taxpayer cannot deduct an expense without this also occurring.a. The expense is paidb. An invoice has been received for the expensec. Economic performance has occurredd. The expense has been paid in cash
Answer Preview: C Economi…

, Chapter: 4 -Problem: 18 >> Jim, a single taxpayer, bought his home 25 years ago for $25,000. He has lived in the home continuously since he purchased it. In 2022, he sells his home for $300,000. What is Jim’s taxable gain on the sale?a. $0b. $25,000c. $125,000d. $275,000
Answer Preview: B Only 25…

, Chapter: 1 -Problem: 35 >> Access the Internet and go to www.irs.gov and select “Search Forms & Instructions.” Enter “1040” into the search box. What is Line 7 of the 2022 Form 1040?a. Other incomeb. Multiply Line 6 by $500c. Capital gain or (loss)d. Earned income credite. Your social security number
Answer Preview: C Line …

, Chapter: 2 -Problem: 31 >> On September 22, 2022, Jerry purchases a corporate bond. The bond pays interest each sixth months on June 30 and December 31 of each year. On December 31, 2022, Jerry receives an interest payment of $400. The amount of interest Jerry will need to include in gross income is:a. Noneb. Exactly $400c. More than $400d. Less than $400
Answer Preview: D Jerry can redu…

, Chapter: 12 -Problem: 16 >> If a tax preparer notes an error on a client’s tax return, under Circular 230, the tax preparer should:a. Report the mistake to the IRS immediatelyb. Prepare an amended tax return and file such return immediatelyc. Notify the client of the error and the consequences of not correcting itd. Contact local authorities and consider whistleblower rewards
Answer Preview: C Notify the …

, Chapter: