devry acct324 final exam

Week 8 : Final Week – Final ExamQuestion
1.1. (TCOs 2 & 3) Evelyn sold her personal residence to Drew on
March 1 for $300,000. Before the sale, Evelyn paid the real estate taxes
of $3,000 for the calendar year. For income tax purposes, the real
estate tax deduction is apportioned as follows: $750 to Evelyn and
$2,250 to Drew. Drew’s basis in the residence is: (Points : 5) $297,750.
$299,250. $300,750. $302,250. None of the aboveQuestion 2.2.
(TCOs 3, 4, 5, & 7) In the current year, Galaxy Corporation, a
closely held C corporation that is not a personal service corporation,
has $80,000 of passive losses, $60,000 of active business income, and
$10,000 of portfolio income. How much of the passive loss may Galaxy
deduct in the current year? (Points : 5) $0 $10,000 $60,000 $70,000 None
of the aboveQuestion 3.3. (TCOs 3, 4, 5, & 7) Dorothy holds
two jobs. Her main job is with Eggplant Corporation, and her part-time
job is with Carrot Company. On a typical workday, she drives her car as
follows: home to Eggplant, Eggplant to Carrot, and Carrot to home.
Applicable mileage is as follows: MilesHome to Eggplant 4Eggplant to
Carrot 10Carrot to home 14On a typical day, Dorothy’s deductible mileage is: (Points : 5) 10. 20. 24. 28. None of the aboveQuestion
4.4. (TCOs 3, 4, 5, & 7) Carrie owns a mineral property that had a
basis of $15,000 at the beginning of the year. The property qualifies
for a 22% depletion rate. Gross income from the property was $150,000,
and net income before the percentage depletion deduction was $100,000.
What is Carrie’s tax preference for excess depletion? (Points : 5) $0
$15,000 $18,000 $33,000 None of the aboveQuestion 5.5. (TCOs 3,
4, 5, & 7) During the past two years, through extensive advertising
and improved customer relations, Beech Corporation estimated that it had
developed customer goodwill worth $100,000. For the current year,
determine the amount of goodwill Beech Corporation may amortize. (Points
: 5) $3,334 $5,000 $6,667 $20,000 None of the aboveQuestion
6.6. (TCOs 3, 4, 5, & 7) Damien, not a dealer in real estate, sold
real estate with a basis of $250,000 for $500,000 cash, a note for
$250,000, and the buyer assumed Damien’s mortgage on the property of
$125,000. During the year, the purchaser paid Damien $30,000 principal
and $72,000 interest on the note and paid $6,000 principal and $18,000
interest on the mortgage he assumed. The contract price for the above
transaction is what amount? (Points : 5) $875,000 $750,000 $625,000
$500,000 None of the aboveQuestion 7.7. (TCOs 3, 4, 5, & 7)
Which of the following is not an itemized deduction allowed for AMT
purposes? (Points : 5) Casualty losses Gambling losses State income
taxes Medical expenses in excess of 10% of AGI None of the aboveQuestion
8.8. (TCOs 3, 4, 5, & 7) Alex works as an auditor for a major CPA
firm. During the months of August and September of each year, he is
permanently assigned to the team auditing of Hummingbird Corporation. As
a result, every day he drives from his home to Hummingbird and returns
home after work. Mileage is as follows: MilesHome to office 15Home to
Hummingbird 22Office to Hummingbird 6For the period of August and
September, Alex’s deductible mileage for each workday is: (Points : 5)
12. 15. 30. 44. None of the aboveQuestion 9.9. (TCOs 7, 8, &
9) Matt and Shanekwa, ages 45 and 44, respectively, file a joint tax
return for 2012. They provided all of the support for their 24-year-old
son, who had $2,500 of gross income. Their 23-year-old daughter, a
full-time student until her graduation on June 14, 2012, earned $6,000,
which was 45% of her total support during 2012. Her parents provided the
remaining support. Matt and Shanekwa also provided total support for
Shanekwa’s father who is a citizen and life-long resident of Portugal.
How many personal and dependency exemptions can Matt and Shanekwa claim
on their 2012 income tax return? (Points : 5) Five Four Three Two None
of the aboveQuestion 10.10. (TCOs 2, 8, & 9) Shaquille
operates a drug-running operation and incurred the following
expenses:Salaries $200,000Illegal kickbacks $32,000Bribes to border
guards $24,000Cost of goods sold $300,000Rent $12,000Interest
$18,000Which of the above amounts reduces his taxable income? (Points :
5) $230,000 $300,000 $386,000 $586,000 None of the aboveQuestion
11.11. (TCOs 2, 8, & 9) During 2012, Robin sold the following
assets: business equipment for a $6,000 loss, stock investment for a
$15,000 loss, and her principal residence for a $14,000 loss. Presuming
adequate income, how much of these losses may Robin claim on her 2012
return? (Points : 5) $3,000 $9,000 $21,000 $35,000 None of the aboveQuestion
12.12. (TCOs 2 & 11) Nicholas loaned Lyle (a friend) $30,000 in
2011 with the agreement that the loan would be repaid in two years. In
2012, Lyle filed for bankruptcy and Nicholas learned that he could
expect to receive $0.50 on the dollar. In 2012, final settlement was
made and Nicholas received $16,000. Assuming the loan is a nonbusiness
bad debt, how should Nicholas account for the bad debt? (Points : 5)
$14,000 ordinary loss in 2012 $15,000 ordinary loss in 2010, and $9,000
ordinary loss in 2012 $14,000 short-term capital loss in 2012 275
$15,000 short-term capital loss in 2010, and $9,000 short-term capital
loss in 2012 None of the aboveQuestion 13.13. (TCOs 2 & 11)
Kelsey, a stock broker, owns a separate business in which he
participates in the current year. He has one employee who works
part-time in the business. Which of the following statements is correct?
(Points : 5) If Kelsey participates for 300 hours and the employee
participates for 300 hours during the year, then Kelsey does not qualify
as a material participant. If Kelsey participates for 50 hours and the
employee participates for 2 hours during the year, then Kelsey probably
does not qualify as a material participant. If Kelsey participates for
501 hours and the employee participates for 2,000 hours during the year,
then Kelsey does not qualify as a material participant. Kelsey will
automatically be a material participant in an activity in the current
year if he was a material participant in a personal service activity for
the three prior years. All of the aboveQuestion 14.14. (TCOs 2
& 11) During the year, Clara took a trip from Chicago to Rome. She
was away from home for 20 days. She spent 6 days vacationing and 14 days
on business (including the 3 travel days). Her expenses are as
follows:Airfare $1,600Lodging (20 days x $70) $1,400Meals (20 days x
$120) $2,400Valet service (cleaning of laundry) $160Chris’s deduction is: (Points : 5) $3,100. $4,360. $5,080. $5,560. None of the aboveQuestion
15.15. (TCOs 2 & 11) In January, Charlie sold stock with a cost
basis of $40,000 to his brother Allen for $30,000, the fair market value
of the stock on the date of sale. Five months later, Allen sold the
same stock through his broker for $45,000. What is the tax effect of
these transactions? (Points : 5) Disallowed loss to Allen of $10,000;
recognized gain to Charlie of $5,000 Disallowed loss to Charlie of
$10,000; recognized gain to Allen of $15,000 Deductible loss to Charlie
of $10,000; recognized gain to Allen of $15,000 Disallowed loss to
Charlie of $10,000; recognized gain to Allen of $5,000 None of the aboveWeek 8 : Final Week – Final ExamQuestion
1.1. (TCO 1) Which of the following is a judicial source of the tax
law? (Points : 5) Revenue Procedure 99-12 108 T.C. 384 (1997) § 61 of
the Internal Revenue Code All of the above None of the aboveQuestion
2.2. (TCOs 2, 3, 6, 8, 9, & 10) Which, if any, of the following is a
deduction from AGI? (Points : 5) Individual retirement account
contributions Moving expenses Investment interest expense One-half of
self-employment tax paid All of the aboveQuestion 3.3. (TCOs 2,
3, 6, 8, 9, & 10) Sergio lives in an apartment building and has a
2-year lease that began 13 months ago. His landlord is willing to pay
Sergio $2,000 to vacate the apartment immediately. The landlord wants to
sell the building to a buyer who will convert the building into
condominiums. Sergio’s lease on the apartment is a capital asset, but
has no tax basis. The $2,000 Sergio will receive if he accepts the
landlord’s offer will be: (Points : 5) an ordinary gain. a short-term
capital loss. a long-term capital gain. a short-term capital gain.
excludible from gross income.Question 4.4. (TCOs 2, 3, 6, 8, 9,
& 10) Rockwell purchased a tract of land for $125,000 in 2004 when
he heard that a new highway was going to be constructed through the
property and that the land would soon be worth $300,000. Highway
engineers surveyed the property and indicated that he would probably get
$200,000. The highway project was abandoned in 2012, and the value of
the land fell to $80,000. What is the amount of loss Rockwell can claim
in 2012? (Points : 5) $0 $100,000 $175,000 None of the aboveQuestion
5.5. (TCOs 2, 3, 6, 8, 9, & 10) Donald has a $20,000 disallowed
loss from a sale of property to a related taxpayer. The property was
sold for $70,000. Donald uses the $70,000 to purchase different property
than the property that was sold. Which of the statements below is
correct concerning the property Donald purchased? (Points : 5) The basis
of the property purchased is $50,000 ($70,000-$20,000). The holding
period of the property sold carries over to the property purchased.
Donald will be able to offset his $20,000 disallowed loss against any
realized gain he has when he sells the property purchased. The related
taxpayer will be able to offset as much of this $20,000 disallowed loss
as is necessary to reduce his realized gain to $0 when he sells the
property. None of the aboveQuestion 6.6. (TCOs 2, 3, 6, 8, 9,
& 10) A taxpayer who loses in the U.S. Court of Federal Claims may
appeal directly to the: (Points : 5) U.S. Court of Appeals (Regional
Circuit). U.S. Court of Appeals (Federal Circuit). U.S. District Court.
U.S. Supreme Court. None of the aboveQuestion 7.7. (TCO 6)
Eighteen-year residential real property owned by an individual has
accumulated accelerated depreciation of $275,000 at January 1, 2012. If
depreciation had been computed under the straight-line method,
accumulated depreciation would be $200,000. The property is sold on
January 1, 2012 with a recognized gain of $300,000. What is the amount
of depreciation recapture? (Points : 5) $75,000 $200,000 $275,000
$300,000 None of the aboveQuestion 8.8. (TCO 6) Opal, Inc. owns a
delivery truck that initially cost $40,000. After a depreciation of
$15,000 had been deducted, the truck was traded-in on a new truck that
cost $50,000. Opal was required to pay the car dealer $10,000 in cash.
What is Opal’s basis for the new truck? (Points : 5) $0 $35,000 $50,000
$65,000 None of the aboveQuestion 9.9. (TCO 6) Judy exchanges a
rental house at the beach with an adjusted basis of $165,000 and a fair
market value of $150,000 for a rental house at the mountains with a fair
market value of $100,000 and cash of $50,000. What is the recognized
gain or loss? (Points : 5) $0 $100,000 $50,000 ($15,000) None of the
aboveQuestion 10.10. (TCO 6) Terron gives her son stock with a
basis in her hands of $225,000 and a fair market value of $180,000. No
gift tax is paid. Her son subsequently sells the stock for $190,000.
What is his recognized gain or loss? (Points : 5) $0 ($45,000) ($35,000)
$10,000 None of the aboveQuestion 11.11. (TCOs 2, 6, & 11)
Juaquin owns five activities. He elects not to group them together as a
single activity under the appropriate economic unit standard. He
participates for 140 hours in Activity A, 165 hours in Activity B, 196
hours in Activity C, 100 hours in Activity D, and 85 hours in Activity
E. Which of the following statements is CORRECT? (Points : 5) Activities
A, B, C, D, and E are all significant participation activities.
Activities A, B, C, and D are all significant participation activities.
Juaquin is a material participant with respect to Activities A, B, and C
only. Juaquin is a material participant with respect to Activities A,
B, C, D, and E. None of the aboveWeek 8 : Final Week – Final ExamQuestion
1.1. (TCOs 1, 2, 4, & 7) Dabney and Nancy are married, both
gainfully employed, and have two children who are 3 and 6 years old.
Dabney’s salary is $35,000 while Nancy’s salary is $40,000. During the
year, they spend $7,000 for child care expenses that are required so
both of them can work outside of the home. Calculate the credit for
child and dependent care expenses. (Points : 15) Question 2.2.
(TCOs 1, 3, & 10) In 2012, Walter had the following
transactions:Salary $80,000Capital loss from a stock investment
($4,000)Moving expense to change jobs ($10,000)Received repayment of
$10,000 loan he made to his brother in 2007 (includes interest of
$1,000) $11,000Property taxes on personal residence $2,000Based on the
information given above, determine Walter’s AGI. Be sure to show your
work. (Points : 15) Question 3.3. (TCOs 9 & 12) In
connection with facilitating the function of the IRS in the
administration of the tax laws, comment on the utility of the following:
I) the power to make adjustments to properly reflect a taxpayer’s
income, and II) the availability of interest and penalties for taxpayer
noncompliance. (Points : 15) Question 4.4. (TCOs 1 & 5)
Steve has a tentative general business credit of $85,000 for the current
year. His net regular tax liability before the general business credit
is $95,000, and his tentative minimum tax is $90,000. Compute Steve’s
allowable general business credit for the year. (Points : 20) Week 8 : Final Week – Final ExamQuestion
1.1. (TCOs 1, 6, 8, & 11) Faith inherited an undivided interest in a
parcel of land from her father on February 15, 2012. Her father had
purchased the land on August 25,1965, and his basis for the land was
$325,000. The fair market value of the land is $1,250,000 on the date of
her father’s death and is $1,100,000 six months later. The executor
elects the alternate valuation date. Faith has nine brothers and sisters
and each inherited a one-tenth interest.I) What is Faith’s adjusted
basis for her one-tenth undivided interest?II) What is her holding
period for the land? (Points : 20) Question 2.2. (TCOs 2, 3, & 11) Discuss the computation of percentage depletion. (Points : 15) Question
3.3. (TCOs 1, 2, 3, & 11) Travel status requires that the taxpayer
be away from home overnight. I) What does away from home overnight mean?
II) What tax advantages result from being in travel status? (Points :
10) Question 4.4. (TCOs 1, 2, 3, & 11)
Rachel owns rental properties. When Rachel rents to a new tenant, she
usually requires the tenant to pay an amount in addition to the first
month’s rent. The additional amount serves as security for damages to
the property and the tenant’s failure to pay future rents. How should
the payments be characterized (e.g., on lease documents) to minimize
Rachel’s current tax liability? (Points : 10)