Strayer Acc 565 week 11 final Exam

Question
1
Parent
and Subsidiary Corporations have filed calendar-year consolidated tax returns
for several years. Parent Corporation uses the cash method of accounting while
Subsidiary Corporation uses the accrual method of accounting. If Parent lends
Subsidiary money,
Answer
the
interest expense is deductible when accrued.
the
interest expense and interest income may be reported in different consolidated
return years.
the
interest income is reported when the interest expense is accrued by Subsidiary.
the
interest expense deduction is taken when Parent reports the interest income.
Question
2
A
consolidated return’s tax liability is owed by
Answer

all
group members in equal portions.
the
group member responsible for that portion of the tax liability.
all
group members who are severely liable.
the
parent corporation.
Question
3
Albert
contributes a Sec. 1231 asset to a partnership on June 1 of this year in
exchange for a 10% partnership interest. He had purchased the asset on March 1,
2002. His holding period for the partnership interest begins
Answer
March
1, 2002.
March
2, 2002.
June
1 of the current year.
June
2 of the current year.
Question
4
Meg
and Abby are equal partners in the AM Partnership, which earns $40,000 ordinary
income, $6,000 long-term capital gain (LTCG), and $2,000 Sec. 1231 loss during
the current year. What is the amount and character of income that must be
reported on Abby’s tax return for this year’s partnership operations?
Answer
$20,000
ordinary income, $3,000 LTCG, $1,000 Sec. 1231 loss
$19,000
ordinary income, $3,000 LTCG
$23,000
ordinary income, $1,000 Sec. 1231 loss
$22,000
ordinary income
Question
5
Allen
contributed land, which was being held for sale to Allen’s customers, to a
partnership in exchange for a 20% interest. The partnership uses the land in
its business for three years and then sells the property. When the property was
contributed, it had a basis in Allen’s hands of $500,000 and an FMV of
$600,000. The partnership sells the land for $700,000. The gain reported by the
partnership is
Answer
$100,000
of ordinary income and $100,000 of Sec. 1231 gain.
$100,000
of Sec. 1231 gain and $100,000 of capital gain.
$200,000
of ordinary income.
$200,000
of Sec. 1231 gain.
Question
6
The
AB Partnership has a machine with an FMV of $25,000 and a basis of $20,000. The
partnership has taken an $8,000 depreciation on the machine. The unrealized
receivable related to the machine is
Answer
$0.
$5,000.
$8,000.
$20,000.
Question
7
The
definition of “inventory” for purposes of Sec. 751 includes
Answer
cash.
land
held for investment.
marketable
securities not held by dealers.
depreciation
recapture potential on Sec. 1231 assets.
Question
8
An
S corporation is not treated as a corporate taxpayer with
respect to which one of the following fringe benefits?
stock
options
qualified
retirement plans
group
term life insurance premiums
nonqualified
deferred compensation
Question
9
Which
one of the following individuals or entities is ineligible to be an S
corporation shareholder?
Answer
an
estate
resident
alien of the United States
a
voting trust where all of the beneficiaries are U.S. citizens
a
partnership where all of the partners are U.S. citizens
Question
10
The
recognition period for the built-in gains tax extends for how many years after
the S election takes effect?
Answer
one
year
three
years
five
years
ten
years
Question
11
In
1998, Delores made taxable gifts to her son of property with an FMV of
$200,000. In the current year when Delores dies, the property is worth
$800,000. The amount included in Delores’s estate tax base because of the 1998
gift is
Answer
$0
$189,000
$200,000
$800,000
Question
12
Hu
makes a gift of his home to a local homeless shelter (a 501(c)(3) charity). Hu
will retain his home for 10 years, after which the homeless shelter will take
possession. The value of Hu’s 10-year interest is $30,000 and the remainder
interest is valued at $120,000. Which of the following statements is correct?
Answer
Hu
is allowed a charitable deduction on his gift tax return for $150,000 in the
current year.
Hu
is allowed an exclusion of $12,000 on his gift of $120,000 to the charity.
Hu
is not allowed to deduct the contribution until the charity takes possession in
10 years.
Hu
has a charitable contribution deduction of $120,000 on his current gift tax
return
Question
13
Gordon
died on January 1 and by his will left land with an adjusted basis of $60,000
and an FMV of $100,000 to Becky. Becky disclaims the property on December 31 of
the year of death, when the land was still worth $100,000. Becky has made a
gift (before the annual gift tax exclusion) of
Answer
$100,000.
$60,000.
$50,000.
$0.
Question
14
In
2012, Paul transfers $1,000,000 to a trust benefiting his three children. As
trustee, he has the power to determine the amount of distributions each year.
Paul dies in the current year when the trust has a value of $1,200,000. How
much of the trust’s value is included in Paul’s estate?
Answer
$0
$400,000
$1,000,000
$1,200,000
Question
15
Following are the
fair market values of Wilma’s assets at her date of death:
Personal effects
and jewelry $150,000

Land which Wilma
bought and held as a joint tenant 800,000

with right of
survivorship with her sister
The executor of
Wilma’s estate did not elect the alternate valuation date. The amount
includible in Wilma’s gross estate is
Answer
$150,000.
$550,000.
$800,000.
$950,000.
Question
16
Four
years ago, David gave land to Mike that he purchased for $70,000, which is
presently worth $100,000. Three years ago, Mike exchanged the land (then worth
$150,000) along with a $100,000 cash contribution made by David for a new piece
of land worth $250,000. The new land is titled with David and Mike as joint
tenants with the right of survivorship. When Mike dies this year, the land is
worth $300,000. Mike’s estate will include
Answer
$0.
$150,000.
$180,000.
$300,000.
Question
17
Administration
expenses incurred by an estate
are
deductions in respect of a decedent and may be deducted on both the estate tax
return (Form 706) and the estate income tax return (Form 1041).
an
executor must elect where to deduct administration expenses (Form 706 or
Form 1041).
such
expenses are only deductible on Form 706.
such
expenses are only deductible on Form 1041
Question
18
The
conduit approach for fiduciary income tax means
Answer
the
distributed income has the same character in the hands of the beneficiary as it
has to the trust.
the
distributed income goes to all beneficiaries proportionately.
the
distributed income is determined by the trustee annually.
the
distributed income of a remainder interest is determined by the property.
Question
19
Which
of the following activities is protected by accountant-client privilege?
Answer
written
communications between a CPA and a corporation regarding a tax shelter
communications
related to tax return preparation
communications
related to criminal tax evasion
advice
given regarding tax issues in a divorce
Question
20
Terry
files his return on March 31. The return shows taxes of $6,000, and Terry pays
this entire amount when he files his return. By what time must he file a claim
of refund?
Answer
the
later of two years from the return filing or three years from the date the tax
is paid
the
later of three years from the return due date or two years from the date the
tax is paid
two
years from the payment of tax date, if the IRS mails a notice of deficiency in
the third year following the due date of the return
four
years from the payment of tax date, if the IRS mails a notice of deficiency
Question
21
Gerald
requests an extension for filing his last year’s individual income tax return.
His tax liability is $10,000, of which $8,000 was withheld, leaving a balance
due of $2,000 when he files on August 1 of the current year. His penalty for
failure to pay the tax on time is
Answer
$0
$40
$300
$400
Question
22
U.S.
citizen Barry is a bona fide resident of a foreign country for all of 2013.
Barry uses a calendar year as his tax year and receives $158,000 in salary and
allowances from his employer. Included in the $158,000 is a $25,000 housing
allowance. Barry’s housing costs are $30,000. The base housing amount for the
current year is $15,616. What amount related to his housing can Barry exclude
on his Form 2555?
Answer
$14,384
$25,000
$30,000
$13,545
Question
23
U.S.
citizen who has a calendar tax year establishes a tax home and residence in a
foreign country and qualifies for the foreign-earned income exclusion for 60
days in 2010; 365 days in 2011; and 60 days this year, 2012. The maximum earned
income exclusion for this year is?
Answer
$13,733
$16,044
$13,151
$17,522
Question
24
What
are the carryback and carryforward periods for the foreign tax credit?
Answer
back
two years; forward five years
back
three years; forward ten years
back
one year; forward ten years
back
two years; forward twenty years
Question
25
Charitable
contributions made by a fiduciary
Answer
are
limited to 50% of fiduciary income.
must
be authorized in the trust instrument in order to be deductible.
flows
through to be deducted on the beneficiary’s tax return.
are
subject to the 2% floor.
Question
26
Administration
expenses incurred by an estate
Answer
are
deductions in respect of a decedent and may be deducted on both the estate tax
return (Form 706) and the estate income tax return (Form 1041).
an
executor must elect where to deduct administration expenses (Form 706 or
Form 1041).
such
expenses are only deductible on Form 706.
such
expenses are only deductible on Form 1041.