Please answer the following as accurately as possible.
1. Which of the following property exchanges does NOT qualify as a like-kind exchange?
A. Exchange of city property for farm property.
B.
Exchange of partnership interests.
C.
Exchange of improved property for unimproved property.
D.
Exchange of an ownership in real estate for a thirty year lease in real estate.
2. Which of the following transactions is NOT a transaction that results in a gain or loss subject to section 1231 treatment?
A. Sales or exchanges of leaseholds.
B. Sales or exchanges of cattle and horses.
C. The sale of a copyright, literary, musical, or artistic composition that you
created.
D. Sales or exchanges of unharvested crops sold together with land to the same
buyer.
3. Larry owned 35 shares of Flower Corporation stock for which he had paid $3,500. He sold this stock to this sister, Karen, for $3,000. Karen later sold this stock to her cousin, Joe, for $10,000. What is Larry's and Karen's recognized gain or loss, if any?
A. $0 loss for Larry and $6,500 gain for Karen.
B. $0
loss for Larry and $7,000 gain for Karen.
C.
$500 loss for Larry and $7,000 gain for Karen.
D. $0
for Larry and $0 for Karen.
4. Which of the following transactions qualifies as a like-kind exchange?
A. The exchange of a copyright on a novel for a copyright on a song.
B. An
exchange of the "goodwill or going concern value" of another business.
C. An
exchange of land improved with an apartment house for land improved with a store
building.
D. An
exchange of personal property used predominantly in the United States for
personal property used predominantly outside the United States.
5. Special rules apply to like kind exchanges between related persons. Under these rules, related persons are:
A. The taxpayer and a member of his/her family.
B. The
taxpayer and a corporation in which the taxpayer has a 25% ownership.
C.
The taxpayer and a partnership in which the taxpayer directly or indirectly owns
a 25% interest in the capital or profits.
D. All
of the above.
6. Which of the following does not qualify as a nontaxable exchange or transfer?
A. A life insurance contract for an annuity contract.
B. A
general partnership interest for a general partnership interest in the same
partnership.
C. A
transfer of property from an individual to a former spouse, incident to divorce.
D.
None of the above.
7. Walter is an accrual basis taxpayer who has a business with significant accounts receivables. In 2007, Walter had an $8,000 receivable owed to his business from Fred. Fred was unable to pay the full amount, but did transfer a parcel of land with a fair market value of $6,000 to Walter in partial payment. Walter entered on his books the $2,000 difference as a business bad debt, but was unable to take a tax benefit from this bad debt deduction as he had no taxable income at the end of 2007. In 2008, Walter sold the land received from Fred at a $3,000 gain. At the end of 2008, how much gain from the sale of this land must Walter report in taxable income?
A. $3,000 - the entire gain.
B.
$1,000 - the gain less the bad debt.
C. $0
- any gain is limited to the amount of bad debt.
D.
None of the above.
8. In 2008 you used a fishing lodge as an entertainment facility. Which of the following incurred expenditures may be partially deductible?
A. Depreciation expense.
B. Fishing
bait.
C.
Natural gas to heat the lodge.
D. Repairs
to the lodge roof.
9. The standard meal allowance cannot be used to figure a deduction for:
A. Business travel if you are self-employed.
B. Travel
in connection with investment property.
C.
Travel for qualifying educational purposes.
D. Travel
to obtain medical treatment.
10. Under which situation below is a deduction allowance for an office in your home?
A. Your home is the only fixed location of your business of selling mechanics'
tools at retail. You regularly use your walk-in closet for storage of inventory
and product samples. You also use this area occasionally for personal purposes.
B. You
are an attorney and use a den in your home to write legal briefs. Your family
also uses the den for recreation.
C.
You use part of your home exclusively and regularly to read financial
periodicals and reports, clip bond coupons, and carry out similar activities to
monitor personal investments.
D. You use
your walk-in closet at home exclusively and regularly to bill customers,
clients, or patients; to set up appointments; and to order supplies. You also
rent office space downtown where you also conduct those same activities. You use
the home office three days a week and the rented office space two days a week.
11. Pleasant Beach City, to improve downtown commercial business, converted a downtown business area street into an enclosed pedestrian mall. The city assessed the full cost of construction, financed with 10-year bonds, against the affected business properties. The city is paying the principal and interest with the annual payments made by the property owners. The portion that the business owners were assessed to pay the construction costs is:
A. Deductible as taxes.
B.
Deductible as a business expense.
C. A
non-depreciable capital expenditure.
D. A
depreciable capital expenditure.
12. On November 15, 2008, Partnership Z paid $10,000 in accounting and legal fees to prepare and file the partnership agreement. The partnership began business on December 1, 2008. Which of the following is a permissible election for treatment of the $10,000 payment?
A. Deduct $10,000.
B. Deduct $5,000 and amortize the remaining $5,000 over a 5-year period.
C. Deduct $5,000 and amortize the remaining $5,000 over 180 months.
D. Amortize $10,000 over a 5-year period.
13. Amounts paid or incurred to demolish a structure are:
A.
Deductible as a casualty loss.
B. Capitalized and amortized over a 180 month period.
C. Treated as a reduction of the basis of the structure.
D.
Capitalized and added to the basis of the land where the demolished structure
was located.
14. Kayla exchanged her unimproved land with an adjusted basis of $80,000 and a fair market value of $130,000 for unimproved land with a fair market value of $100,000 and $10,000 in cash. Kayla also paid $5,000 in closing costs. The unimproved land Kayla gave up was subject to a $300,000 mortgage for which she was liable. The other party assumed this mortgage. What is Kayla's realized gain on this exchange?
A.
$40,000.
B. $55,000.
C. $35,000.
D.
$25,000.
15. In 2004, you purchased a candy making machine for your business. The machine cost $50,000 and you claimed a $20,000 Internal Revenue Code section 179 deduction for that machine. IN 2008, you sold the machine for $52,000. Your accumulated depreciation from 2004 through 2008 was $18,974 (not including the section 179 deduction). How much is your taxable gain and what portion of that gain must be reported as ordinary income under Internal Revenue Code section 1245?
A.
Taxable gain of $40,974 and ordinary income of $38,974.
B. Taxable gain of $40,974 and ordinary income of $40,974.
C. Taxable gain of $20,974 and ordinary income of $18,974.
D.
Taxable gain of $2,000 and ordinary income of $2,000.
16. In 2002, XYZ Corporation issued qualified small business stock to you at a costs of $1,500. In 2008, you sold that stock for $50,000. How much of the gain on that sale is excludable from gross income?
A. $0.
B.
$7,500.
C.
$24,250.
D.
$48,500.
17. In 2002 Adam purchased 100 shares of Call Corporation stock for $60 per share. During 2008 Call Corporation completely liquidated. After paying its liabilities, Call Corporation distributed to its shareholders $10,000 in cash and appreciated property sold for $90,000. Adam's portion received a liquidating distribution from Call Corporation of $10,000. Adam must report what amount of capital gains income from this distribution?
A. $4,500.
B.
$5,000.
C.
$22,500.
D.
$25,000.
18. The Andee Partnership traded its panel truck with an adjusted basis of $10,000 for a pick-up truck with a fair market value of $15,000. Andee also received $3,500 cash on the trade. What is the gain, if any, on this trade?
A. $0.
B.
$3,500.
C.
$5,000.
D.
$1,500.
19. The Sprinkly and Meato Partnership bought investment property on March 9, 2007 and sold it on March 9, 2008. The property cost $100,000 and it was sold for $135,000. What is the character of the gain or loss?
A. Long
term gain of $35,000.
B. Ordinary income $135,000.
C. Short term gain of $35,000.
D. Long
term gain of $135,000.
20. The Post and Rail Partnership traded a piece of farm land with an adjusted basis of $4,000 for a farm land with an adjusted basis of $4,000 for a farm tractor that has a fair market value of $9,000 and an adjusted basis of $8,000. What is the recognized gain or loss?
A. $5,000.
B. $4,000.
C. $1,000.
D.
None, it is a like kind exchange.
21. Arthur is a proprietor of Arthur's Pizza Emporium. He bought a commercial building several years ago. He made a down payment of $20,000 in cash and assumed a mortgage for $100,000. After he paid off the mortgage, Arthur later sold the building for $180,000. Straight line depreciation taken up to the date of sale was $18,000. What is the total gain on the sale?
A. $78,000.
B. $80,000.
C.
$60,000.
D.
$160,000.
22. Clarence sold his business backhoe for $65,000. He purchased the backhoe in 2005 for $90,000. He has taken $60,000 of depreciation, which includes $10,000 section 179 expensing election. Clarence will report the following on the sale of the backhoe:
A. Ordinary loss of $25,000.
B. Long-term capital gain of $35,000.
C. Ordinary income of $35,000.
D. Ordinary income of $10,000 and long-term capital gain of $25,000.
23. In 2008, Jason sold a business lot to his son Adam for $12,000. Jason received this lot in a tax-deferred exchange in 2006 for a lot that cost him $175,000 in 2003. Jason will recognize the following on his 2008 tax return:
A. No gain or loss.
B. An ordinary loss of $55,000.
C. A long term gain of $120,000.
D. A long term loss of $175,000.
24. Sally's business office was condemned to make way for an expanded highway on May 1, 2008. Sally's adjusted basis in her building was $20,000 ($80,000 original costs less $60,000 in depreciation). Her proceeds from condemnation were $220,000. Sally replaces her office on November 10, 2008 at a cost of $185,000. Sally must recognize a gain of:
A. $200,000.
B. $0.
C. $35,000.
D.
$60,000.
25. John was one of five incorporators of Builders, Inc. Each received stock valued at $100,000. The other four shareholders each contributed $100,000 for their stock. John contributed $50,000 and his services to build the corporate headquarters. He valued his services at $50,000. How much income must John recognize on this transaction?
A. $100,000 of ordinary income.
B. $50,000 of ordinary income and $50,000 of capital gain income.
C. No income recognition.
D.
$50,000 of ordinary income.
26. Pietro transfers property worth $50,000 to Vino, Inc. and, also, provides personal services worth $5,000 in exchange for stock valued at $55,000. Immediately after the exchange Pietro owns 90% of Vino, Inc.'s outstanding stock. What is Pietro's income recognition, if any?
A. $55,000 Capital Gains, $-0- Ordinary Income.
B. $-0- Capital Gain, $5,000 Ordinary Income.
C. $-0- Capital Gain, $50,000 Ordinary Income.
D.
$5,000 Capital Gain, $-0- Ordinary Income.
27. Jenny transferred a factory building with an adjusted basis of $70,000 and a fair market value of $110,000 to the Crystal Corporation in exchange for 100% of Crystal Corporation stock and $20,000 cash. The building was subject to a mortgage of $25,000, which Crystal Corporation assumed. The fair market value of the stock was $75,000. Which is the amount of Jenny's realized gain and recognized gain?
A. Realized $25,000 Recognized $25,000.
B. Realized $50,000 Recognized $40,000.
C. Realized $50,000 Recognized $20,000.
D.
Realized $35,000 Recognized $20,000.
28. In 2008, pursuant to a complete liquidation, Richards Corporation distributes the following to a shareholder: Inventory, basis $10,000, FMV $20,000; and land held as an investment, basis $5,000, FMV $40,000. The land is subject to a $30,000 liability. What are the amounts and character of income to be recognized by Richards Corporation?
A. $10,000 ordinary income; $35,000 capital gain.
B.
$10,000 ordinary income; $65,000 capital gain.
C.
$0 ordinary income; $0 capital gain.
D.
$10,000 ordinary income; $5,000 capital gain.
29. Colin Corporation acquired 100% of the Lebeck Corporation stock several years ago for $100,000. In 2008 (the current year) Lebeck Corporation was liquidated, and assets having a $130,000 FMV and $50,000 tax basis were transferred to Colin Corporation. Immediately following the liquidation of Colin Corporation sells the assets for $130,000. What is gain or loss if any will Colin Corporation recognize from the sales of the assets?
A. $30,000 gain.
B.
$80,000 gain.
C.
$(50,000) loss.
D.
$-0- none.
30. The total basis for all properties qualifying for nontaxable exclusion that you receive in a partially nontaxable exchange is the total adjusted basis of the properties you give up with the following adjustments, except:
A. Any additional cost you incur.
B. Any money you receive.
C. Unlike property you receive up to its cost on the date of the exchange.
D. Any gain you recognize on the exchange.
31. A taxpayer sold his rental house for $190,000 on May 2008. The depreciation taken under ACRS was $67,840. If the taxpayer had used the straight-line method, the depreciation would have been $64,960. How much Section 1250 gain did this taxpayer have when the house was sold?
A.
$2,880.
B. $64,960.
C. $67,840.
D.
$110,000.
32. A used car lot owner sold an adjacent lot on June 9, 2008, for $125,000. He purchased this lot on August 6, 2005, for $65,000. He did not pave this lot or make any improvements to it. He paid $4,600 in closing costs at the sale. How much gain does he have, and what type of gain is it?
A.
$55,400 Section 1250 gain.
B. $55,400 Section 1231 gain.
C. $4,600 Section 1245 gain, $50,800 Section 1231 gain.
D.
$69,600 Schedule D gain.
33. Jason owns a 55% capital interest in ABC Partnership. His brother owns 60% interest in XYZ Partnership. ABC sold a piece of property with an adjusted basis of $50,000 and a fair market value of $55,000 to XYZ for $45,000. What is ABC's recognized loss?
A.
$0.
B. $5,000.
C. $5,500.
D.
$10,000.
34.