1. In 2013, Gregory invested $10,000 in a cattle-feeding partnership that used nonrecourse notes to purchase $100,000 of feed, which was used to feed the cattle and expensed. If Gregory’s share of the expense was $20,000, what is the most that Gregory can deduct in 2013?a. $10,000b. $20,000c. $30,000d. $100,0002. Betsy, a corporate executive, exercised an incentive stock option (“ISO”) granted by Betsy’s employer to purchase 10,000 shares of the corporation’s stock at the option price of $1 per share (i.e., the exercise price was $1 per share). The stock is freely transferable. At the time the option was exercised, the stock was selling for $11 per share. What is the AMT adjustment that results from Betsy exercising the ISO (assume that Betsy will NOT dispose of any of the stock during the year)?a. $110,000b. $100,000c. $10,000d. $03. Jessie, a single parent, lives in an apartment with Jessie’s TWO minor children (John and Jacqueline), whom Jessie supports. For 2013, Jessie will have AGI and earned income of $20,000. Calculate the amount, if any, of Jessie’s earned income credit.a. $0b. $4,852c. $5,372d. $20,0004. Andrew and Irma are married and file a joint return. In 2013, Irma worked fulltime and earned $15,000, while Andrew worked fulltime and earned $13,000. Assume their 2013 AGI equaled $28,000. Assume they incurred $9,000 of child care expenses during 2013 for their ONE dependent child, Pavlina (who is 5 years old). What is their child and dependent care CREDIT amount?a. $9,000b. $3,000c. $1,000d. $8405. In 2007, Jennifer received stock from Betsy worth $50,000 at the time of the GIFT. At the time of the gift, Betsy’s adjusted basis in the stock was $75,000. What is the gain or loss that Jennifer should report for 2013 if she sold the stock to Olga in 2013 for $60,000 (ignore any gift tax that may have been paid on the transfer from Betsy to Jennifer)?a. There is no gain or lossb. $60,000 gainc. $10,000 gaind. $15,000 loss6. Now, assume that in the previous question Jennifer sold the stock to Olga for $90,000 (instead of $60,000). What is the gain or loss that Jennifer should report (again, ignore any gift tax that may have been paid on the transfer from Betsy to Jennifer)?a. There is no gain or lossb. $15,000 gainc. $40,000 gaind. $90,000 gain7. Now, assume that in Question 5 Jennifer sold the stock to Olga for $25,000 (instead of $60,000). What is the gain or loss that Jennifer realized on the sale to Olga (again, ignore any gift tax that may have been paid on the transfer from Betsy to Jennifer)?a. There is no gain or lossb. $25,000 lossc. $50,000 lossd. $25,000 gain8. Michael traded in office equipment with an adjusted basis of $50,000 (and value of $60,000) for other (like-kind) office equipment then valued at $40,000. Michael also received $20,000 in cash as part of the deal. What was Michael’s recognized gain on the exchange, if any?a. $60,000b. $20,000c. $10,000d. $09. Dennis traded in computer equipment with an adjusted basis of $15,000 (and a value of $15,000) for other (like-kind) computer equipment then valued at $7,000. Dennis also received $8,000 in cash as part of the deal. What was Dennis’s realized gain on the exchange, if any?a. $15,000b. $8,000c. $7,000d. $010. In 2013, Katherine and Dave sold a house to Alexander for $1,200,000. Prior the 2013 sale, neither Katherine nor Dave had ever excluded a gain from the sale of a personal residence. Katherine and Dave had lived in the house for the last five years and used it exclusively for personal purposes. Katherine and Dave had purchased the house for $500,000. Katherine and Dave started living in the house immediately after purchasing it and never made any capital improvements to the house or took any depreciation (or other deductions) against it. Assume there were no selling expenses. How much of a gain did Katherine and Dave realize on the sale to Alexander (assume that Katherine and Dave are married and file a joint return)?a. $0b. $200,000c. $700,000d. $1,200,00011. Assume the facts stated in the previous question. How much of a gain must Katherine and Dave recognize on the sale to Alexander?a. $0b. $200,000c. $700,000d. $1,200,00012. In 2013, Yessenia will have taxable income of approximately $60,000. In 2013, Yessenia will also have a long-term capital loss of $9,000. Yessenia has no other capital gains or losses (in 2013 or prior years). For 2013, what is the maximum capital loss amount that Yessenia may use to offset her other income?a. $9,000b. $6,000c. $3,000d. $013. Assume the facts stated in the prior question. Assume further that for 2013 Yessenia offset her wages (with her capital loss) to the maximum extent permitted by law. What is the amount of Yessenia’s capital loss carryover to 2014?a. $9,000b. $6,000c. $3,000d. $014. Elaine is a single taxpayer in the 33% tax bracket. Elaine wants to minimize her 2013 tax liability. Which of the following provides the LARGEST tax benefit to Elaine (assume that she may legally take advantage of each item in its entirety for 2013)?a. A $5,000 exclusion from gross income.b. A $5,000 deduction from gross income.c. A $1,500 tax credit.d. Options “a” and “b” would provide the largest tax benefits.15. What was the MAXIMUM EARNED INCOME CREDIT amount that Jennifer and Gabriel could possibly take for 2013? Assume they are U.S. taxpayers filing a joint return with THREE qualifying children.a. $1,200b. $3,000c. $6,000d. $6,04416. Which item MOST resembles an interest free loan from the U.S. government?a. The earned income creditb. First-time homebuyer credit for a closing that occurred in June of 2008c. The American Opportunity tax creditd. The child tax credit17. In early 2013, Irma sold her personal residence to David for $300,000. At the time of the sale, Irma’s adjusted basis was $50,000. Within three months of the sale, Irma moved into a new residence she purchased for $800,000. What is Irma’s basis in her new residence?a. $50,000b. $250,000c. $550,000d. $800,00018. Which of the following is TRUE?a. When compared to exclusions, deferrals are more permanent in natureb. When compared to deferrals, exclusions are more temporary in naturec. Section 1031 provides for a mandatory deferral upon certain exchangesd. All of the above19. Pavlina’s business property (located in Alexanderland USA) was condemned by the proper local authorities. Immediately before the condemnation, the property had a fair market value of $1,000,000 and Pavlina’s adjusted basis in the property was $200,000. The local authorities replaced Pavlina’s condemned property with similar Alexanderland property having a fair market value of $500,000. What is Pavlina’s realized gain or loss relating to these matters?a. $0b. Loss of $500,000c. Gain of $300,000d. Gain of $500,00020. Assume the facts stated in the prior question. What is Pavlina’s recognized gain or loss relating to such matters?a. $0b. Loss of $500,000c. Gain of $300,000d. Gain of $500,00021. Assume the facts stated in the prior two questions. What is Pavlina’s basis in the Alexanderland property she received as a result of the condemnation (i.e., what is Pavlina’s basis in the newly acquired property)?a. $1,000,000b. $500,000c. $200,000d. $022. In 2013, Jennifer and Michael sold a house to Olga for $300,000. Jennifer and Michael had purchased the house for $1,200,000 in 2004 (during the real estate boom). Jennifer and Michael started living in the house immediately after purchasing it and never made any capital improvements to it or took any depreciation (or other deductions) against it. Assume there were no selling expenses. How much of a LOSS may Jennifer and Michael recognize on the sale to Olga (assume that Jennifer and Michael are married and file a joint return and itemize deductions)?a. $0 b. $400,000 less 10% of their AGIc. $900,000 less 10% of their AGId. $900,00023. Katherine purchased land for $100,000 in 1985. The land was valued at $700,000 on July 1, 2013, when Katherine died. Katherine’s son John inherited the land in 2013. What basis would John have in the land as a result of the 2013 inheritance?a. $700,000b. $100,000c. $0d. Katherine’s adjusted basis on July 1, 2013 (if different than $100,000)24. Assume the same facts stated in the previous question. Which of the following is most likely TRUE, if John sold the land in October 2013 for $900,000?a. John’s 2013 gain is short-termb. John’s 2013 gain is long-termc. In 2013, John should “recapture” any depreciation previously taken by Katherine on the landd. In 2013, John will be taxed on the appreciation that occurred while Katherine held the land (provided that such appreciation was previously not taxed)25. Which of the following statements is most likely TRUE for Gabriel (a typical individual taxpayer in the 35% tax bracket)?a. Gabriel usually prefers ordinary income to long-term capital gainsb. Gabriel usually prefers a $1,500 deduction to a $1,000 creditc. Gabriel usually prefers ordinary losses to capital lossesd. All of the above26. Dave, who owns and operates an ICE CREAM SHOP as a sole proprietor, has the following property:• STOCKS held for Dave’s investment• Elaborate ice cream making EQUIPMENT that was inherited from Elaine (Dave’s grandmother) (it is used exclusively in the ICE CREAM SHOP)• CHAIRS that are used exclusively in the ICE CREAM SHOP• a COMPUTER used exclusively in the ICE CREAM SHOPConsidering the above items, which option below lists the capital asset(s) under Section 1221?a. Only the STOCKSb. Only the STOCKS & CHAIRSc. Only the EQUIPMENT, CHAIRS & COMPUTERd. Each of the above assets is a capital asset under Section 122127. Andrew recently purchased a piece of land, a building and a truck for a lump sum of $500,000. The fair market value of the land was $180,000, the fair market value of the building was $500,000, and the fair market value of the truck was $20,000. What is Andrew’s basis in the TRUCK?a. $166,667b. $20,000c. $14,286d. $028. On September 5, 2007, Michael paid $5,500 for 100 shares of TXX-5761 Inc. common stock. On June 13, 2013, Michael received a nontaxable 10% common stock dividend (i.e., 10 additional shares of identical common stock). On June 13, 2013, TXX-5761 Inc. the common stock was trading on the market for $44 a share. On November 15, 2013, Michael sold the 10 shares he received on June 13, 2013 to Yessenia. What is the basis of the 10 shares Michael sold to Yessenia?a. $550 ($55 x 10)b. $500 ($50 x 10)c. $440 ($44 x 10)d. $029. Refer to the facts stated in the prior question. The gain or loss resulting from the November 15, 2013 sale to Yessenia will most likely be:a. Long-termb. Shot-termc. Both short-term and long-termd. Neither short-term nor long-term30. In 2013, Irma sold a piece of equipment from Irma’s business for $800,000. The equipment was purchased in 2009 for $480,000. It had a useful life of five years and was depreciated on a straight-line basis. Assume total of $336,000 depreciation was taken (prior to the sale). What is Irma’s recognized gain on the sale?a. $320,000b. $336,000c. $656,000d. $800,00031. Refer to the facts stated in the prior question. What amount of the gain will be recaptured at Irma’s ordinary income rate?a. $320,000b. $336,000c. $656,000d. $800,00032. Refer to the facts stated in the prior two questions. What amount of the gain will be treated as Section 1231 gain and (possibly) taxed at the long-term capital gain rate?a. $320,000b. $336,000c. $656,000d. $800,00033. Which of the following is most likely Section 1245 property (assume that each item has been held long-term and is used in a trade or business)?a. Inventoryb. Office buildingc. Landd. Office equipment34. Which of the following is most likely Section 1231 property (assume that each item has been held long-term and is used in a trade or business)?a. Section 1245 propertyb. Section 1250 propertyc. Landd. Each of the above items is Section 1231 property35. Which of the following would MOST LIKELY require an adjustment for the alternative minimum tax?a. A deduction for property taxes paid for a personal residenceb. A casualty loss deductionc. A charitable contribution deductiond. Each of the above items requires an adjustment for the alternative minimum tax36. Dave was at risk for $25,000 in Partnership X and $25,000 in Partnership Z on January 1, 2013. Both partnerships are passive activities to Dave (these are Dave’s only passive activities). Dave’s share of net income from Partnership X during 2013 is $15,000. Dave’s share of losses from Partnership Z during 2013 is $50,000. How much is Dave at risk for Partnership X on January 1, 2014?a. $0b. $15,000c. $25,000d. $40,00037. Refer to the facts in the previous question. How much is Dave at risk for Partnership Z on January 1, 2014a. $0b. $25,000c. $50,000d. $75,00038. Refer to the facts in the previous questions. What is Dave’s carryover under the at-risk rules for Partnership Z in 2013?a. $0b. $25,000c. $50,000d. $75,00039. Refer to the facts in the previous question. What is Dave’s deductible loss for Partnership Z in 2013?a. $0b. $15,000c. $25,000d. $50,00040. Refer to the facts in the previous question. What is Dave’s suspended loss under the passive loss rules for Partnership Z in 2013?a. $0b. $10,000c. $15,000d. $25,00041. In 2013, Eric invested in the SAMIR Limited Partnership (“SAMIR L.P.”) by paying $100,000 cash and contributing additional assets worth $40,000 (and having a basis equal to $25,000 on the date of the contribution). What amount did Eric have at risk in SAMIR L.P. as of January 1, 2014, if SAMIR L.P. broke even in 2013 (i.e., if SAMIR L.P. had no income or loss in 2013)?a. $100,000b. $125,000c. $140,000d. $165,00042. Refer to the facts stated in the prior question. But, for this question, assume that SAMIR L.P. allocated to Eric net income of $10,000 from operations in 2013. What amount does Eric have at risk in SAMIR L.P. as of January 1, 2014?a. $10,000b. $110,000c. $135,000d. $150,00043. In 2013, Betsy and Dennis (who file a joint return) had an interest expense of $10,000 on a loan that was used to purchase a variety of stock and bonds (all producing taxable income). Assume further that, in 2013, Betsy and Dennis had net investment income of $2,000. Assume they itemize deductions, what is their maximum interest expense deduction in 2013?a. $0b. $2,000c. $6,000d. $10,00044. Assume that Samir and Olga file a joint return and have the following items for 2013:Taxable income: $75,000Positive adjustments: $50,000Preferences: $25,000Regular tax ability: $10,608What was their 2013 AMT?a. $0b. $7,384c. $10,608d. $17,99245. Assume that a couple that filed a joint return had 2013 AMTI of $300,000. What was the amount of their actual 2013 exemption for the AMT?a. $80,800b. $44,275c. $36,525d. $046. Andrew is negotiating to buy land from Katherine. What will Andrew’s basis be in the land, if Andrew gives Katherine $70,000 and Andrew assumes Katherine’s mortgage on the land of $30,000?a. $30,000b. $40,000c. $70,000d. $100,00047. Which of the following is LEAST likely to qualify as a like-kind exchange under Section 1031 (assume all of the assets are used for business)?a. Improved real estate for unimproved real estateb. Office building for a warehousec. Office furniture for office equipmentd. Unimproved real estate for office equipment48. Eric exchanges undeveloped real estate for developed real estate on May 3, 2013. On May 3, 2013, the fair market value of each property is $500,000. Eric had purchased the undeveloped real estate on February 11, 2009, for $600,000. Which of the following is TRUE?a. Eric’s basis in the developed real estate is $500,000b. Eric’s basis in the undeveloped real estate was $500,000c. Eric’s holding period begins on May 3, 2013 for the developed real estated. Eric’s holding period begins on February 11, 2009 for the developed real estate49. In May 2013, Olga purchased a playground set at a garage sale for $100. Olga is not in the business of buying and selling anything. Olga researched the playground set online and discovered it was worth $300. In July 2013, Olga sold the playground set through an auction website for that amount (i.e., $300). Which of the following is TRUE considering these transactions?a. Olga does not have any incomeb. Had Olga sold the playground set for $50, Olga could have deducted a $50 ordinary lossc. Olga has a $200 short-term capital gaind. Olga has a $200 long-term capital gain50. Gregory had the following net Section 1231 results for each of the years shown.Tax Year Net Section 1231 LOSS Net Section 1231 GAIN2008 $0 $02009 $0 $02010 $0 $02011 $10,000 2012 $10,0002013 $30,000Which of the following is TRUE regarding the net Section 1231 gain in 2013?a. All $30,000 will all be taxed at Gregory’s ordinary income rateb. All $30,000 will all be taxed at Gregory’s long-term capital gain ratec. $10,000 of the $30,000 will be taxed at Gregory’s ordinary income rated. $10,000 of the $30,000 will be taxed at Gregory’s long-term capital gain rate
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