Please answer the following as accurately as possible.
1. Which of the following amounts should be included as income to John?
A. John owns a rental house and the rental agreement directs the lessee to pay
the $1,000 monthly rent to Michelle, his ex-wife.
B. The
lessee erects a carport on the rental property without notifying John. Upon
inspection, John estimates the value of the carport is approximately $2,000.
C.
John ships goods on consignment to a vendor. The fair market value of the goods
is $10,000.
D. The
consignment vendor sells $3,000 of John's goods and places the proceeds in an
escrow account controlled by the vendor.
2. In regards to the credit for Employer-Provided Childcare facilities and services, which of the following is NOT true?
A. The employer applies for the credit on Form 8882, Credit for
Employer-Provided Child Care Facilities and Services.
B. The credit allows for 25% of qualified expenses paid for employee childcare.
C. The credit allows for 10% of qualified expenses paid for childcare resource
and referral services.
D. The dollar amount of the credit is not limited.
3. Paul owns and operates a gourmet food store as a sole proprietorship out of a building he also owns. Based on the following information regarding 2008, compute his self-employment income (for SE tax purposes) for 2008.
| Gross receipts | $125,000 |
| Cost of goods sold | $63,000 |
| Utilities | $7,000 |
| Real estate taxes | $1,500 |
| Gain on sale of business truck | $2,000 |
| Depreciation expense | $4,000 |
| Section 179 deduction | $1,500 |
| Mortgage interest on building | $8,000` |
| Contributions to Keogh retirement plan | $2,000 |
A. $25,000.
B.
$27,000.
C.
$38,000.
D.
$40,000.
4. Which of the following earnings is not subject to self-employment tax?
A. Gains and losses, by a dealer in options or commodities, from dealing or
trading in foreign currency contracts.
B. Fees
earned by a professional fiduciary who administers a deceased person's estate.
C.
Fees received for services performed as a notary public.
D. All
of the above.
5. Hahn Company, a calendar year taxpayer operating as a sole proprietorship, reports Federal income taxes employing the accrual method of accounting. Hahn Company shows the following items of income and expense for 2008:
| Gross receipts | $230,000 |
| Cost of Sales | (63,000) |
| Operating Expenses | |
| (excluding insurance) | (40,000) |
| Insurance | |
| Self-employed health insurance premium | (4,000) |
| Self-insurance reserve | (2,000) |
| Business liability insurance -premium for 3-year policy from 7-1-08 to 6-30-11 | (15,000) |
For 2008 year tax purposes, what is the amount of Hahn Company's net income reportable on Schedule C, "Profit or Loss from Business (Sole Proprietorship)"?
A. $117,500.
B.
$111,500.
C.
$111,000.
D.
$115,500.
6. John has three employees who are certified as members of a targeted group. Two of the employees worked for John for 2 months in 2006 and came back to work for John on January 1, 2008. The other employee began working for John on January 1, 2008. Each employee makes $1,000 per month. How much can John claim as qualified first year wages in computing the Work Opportunity Credit?
A.
$12,000.
B. $6,000).
C. $36,000.
D.
$0.
7. Rob and George own an office building that was built in 1979. They opened a tax return business in 2007 and made numerous renovations during 2008 to the building to bring it into compliance with the Americans with Disabilities Act of 1990. They had gross receipts of $750,000 dollars and ten full-time employees during 2007. They spent $15,000 in eligible access expenditures. What is the current year Disabled Access Credit?
A. $5,000.
B.
$1,500.
C.
$14,750.
D.
$7,500.
8. Ryan runs a manufacturing business employing several people with young children. These employees require daycare as both parents work. He decided that, in order to make it easier for his employees to come to work each day, he would allocate some of the unused space in his manufacturing facility to a child care facility. In 2008, he incurred $20,000 in qualified childcare facility expenditures. He had no qualified childcare resource and referral expenditures and had no pass through credits. What is Ryan's credit for 2008.
A.
$20,000.
B. $2,000.
C. $10,000.
D.
$5,000.
9. The Investment Credit is:
A. A
credit for purchasing a business.
B. Based on 20% of investment interest.
C. A total of the Energy Credit, Qualified advanced coal project credit,
Qualified gasification project credit, and the Rehabilitation Credit.
D.
Available only for businesses with loans from the Small Business Administration.
10. In 2008, Santergraph, Inc. remodeled and converted a portion of their building into a licensed child care facility open for the care of any of their employee's children. The cost of this remodeling qualifies for which of the following:
A.
An asset to be depreciated over the remaining useful life of the building.
B. An adjustment to income of 75% of the costs, with the balance depreciable.
C. A tax credit of 25% of the qualified childcare facility expenditures plus 10%
of the qualified childcare resource and referral expenditures paid or incurred,
maximum credit of $150,000, with balance depreciable.
D.
Section 179 expensing election.
11. Maude has a small business that has a profit of $15,000. Her husband, Harold, has a farm that has a loss of $7,000. They are married. Which of the following is correct regarding their self-employment tax computation?
A. If they file separately, Harold may not elect to use the optional method.
B.
Maude must pay self-employment tax on $15,000.
C. On
a joint return, the self-employment tax may be computed based on $8,000 of
income for Maude only.
D. If
they file separately, they may elect to split the net profit for self-employment
tax purposes, each paying based on $4,000.
12. In 2008, Animor, a self-employed business man, has prepared payroll tax returns and income tax returns for Yethir, Inc. on a continuous basis. In 2008, Yethir, Inc. paid Animor $900 for his services. What is Yethir, Inc.'s reporting responsibility?
A. File a W-2 for $900.
B. File a 1099 MISC for $900.
C. No documents need to be filed because the payee is a sole proprietor.
D. No documents need to be filed because the payer, Yethir, Inc., is
incorporated.
13. Luck and Charm Partnership provides consulting services to the public. In 2008, the firm performed services and in exchange received a truck with a fair market value of $10,000, adjusted basis of $7,500: and also received lawn care services with a fair market value of $5,000. Luck and Charm uses the cash basis method for accounting purposes. What must Luck and Charm report as income for 2008?
A.
$12,500.
B. $10,000.
C. $5,000.
D.
$15,000.
14. The taxpayer earned $1,000 in interest in 2006. Taxpayer withdrew $700 in 2007 and $300 in 2008. How much of the original $1,000 should taxpayer report as interest in 2008?
A. $0.
B. $300.
C.
$700.
D.
$1,000.
15. Dawn meets the requirements for deducting expenses for the business use of her home. She uses 20% of her home for her business. She had the following income and expenses. What amount of depreciation will be allowed under the office in home deduction limitation rules?
| * Gross income from business | $6,000 |
| * 20% of the Home mortgage and interest expense | $3,000 |
| * 100% of business supplies & business phone | $2,000 |
| * 20% of home maintenance, insurance, & utilities | $800 |
| * Depreciation (calculated on 20% of cost of the home) | $1,600 |
A.
$0.
B. $200.
C. $800.
D.
$1,600.
16. Mary, a seamstress, made loans of $5,000 and $1,000 to Buttons & Bows and Thread Bare, respectively. Both of these establishments are partnerships. Mary also made a loan of $2,000 to her cousin Sarah, who was starting her own business as a proprietorship. The loans to both partnerships improved Mary's business, which was the reason Mary made the loans. If all three loans become uncollectible, what amount may Mary deduct as a business bad debt?
A.
$5,000.
B. $6,000.
C. $1,000.
D.
$2,000.
Form 8826-
17. The F&E Partnership spent $100,000 on eligible access expenditures that qualify for the disabled access credit. The partnership had gross receipts of $1 million and 30 full-time employees during the preceding tax year. What is the amount of the disabled access credit for the year 2008?
A.
$5,000.
B. $10,000.
C. $250.
D.
$50,000.
You will need IRS Publication 15 to complete the following questions:
18. Supplemental wages are compensation paid in addition to an employee's regular wages. They DO NOT include payment for:
A. Accumulated sick leave.
B.
Nondeductible moving expenses.
C.
Vacation pay.
D.
Travel reimbursements paid at the Federal Government per diem rate.
You will need IRS Publication 15A to complete the following questions:
19. Supplemental wages are compensation paid in addition to an employee's regular wages. They DO NOT include payment for:
A. Accumulated sick leave.
B.
Nondeductible moving expenses.
C.
Vacation pay.
D.
Travel reimbursements paid at the Federal Government per diem rate.
20. Ray owns a delivery truck and delivers bread to retailers locally for the Gorman Bakery. He owns his delivery route. In 2008, Ray received a W-2 with gross wages of $30,000 in Box 1. Ray's Federal income tax rate is 15%. For the year 2008, Ray is considered what type of employee and had what amount withheld for Federal income tax (FIT)?
A. Statutory $4,500.
B.
Common Law $4,500.
C.
Statutory $0.
D.
Common Law $0.
You will need IRS Publication 15B to complete the following questions:
21. A cafeteria plan is a written plan that allows employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages (deferral). Which of the following can be included in a cafeteria plan?
A. Life insurance premiums.
B.
Membership dues to athletic facilities.
C.
Transportation benefits.
D.
Tuition reduction.