1) A parent purchased 300 shares of Zinco stock for $30,000 in Year 1. On May 23, Year 3, the parent sold all the stock to their child for $20,000, its then fair market value. The parent realized no other gain or loss during Year 3. On July 26, Year 3, the child sold the 300 shares of Zinco for $25,000. What was the child's recognized gain or loss on the sale?

A. $0.

B. $5,000 long-term gain.

C. $5,000 short-term loss.

D. $5,000 long-term loss

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2) Parker, whose spouse died during the preceding year, has not remarried. Parker maintains a home for a dependent child. What is Parker's most advantageous filing status?

A. Single.

B. Head of household.

C. Married filing separately.

D. Qualifying widow(er) with dependent child.

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3) A claim for refund of erroneously paid income taxes, filed by an individual before the statute of limitations expires, must be submitted on Form

A. 1139

B. 1045

C. 1040-X

D. 843

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4) Starr, a self-employed individual, purchased a piece of equipment for use in Starr's business. The costs associated with the acquisition of the equipment were:

Purchase price $55,000

Delivery charges $725

Installation fees $300

Sales tax $3,400

What is the depreciable basis of the equipment?

A. $55,000

B. $58,400

C. $59,125

D. $59,425

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5) In year 7, Standard Corp., a C corporation, sold Section 1250 property for $600,000 that had an adjusted basis of $550,000, resulting in a $50,000 gain. The property had cost Standard $720,000 when purchased in year 1, and $170,000 of accelerated depreciation had been taken. Had straight-line depreciation been used, depreciation would have been $100,000. How should Standard report the gain on its year 7 tax return?

A. $20,588 ordinary gain and $29,417 long-term capital gain

B. $28,824 ordinary gain and $41,176 long-term capital gain

C. $70,000 ordinary gain

D. $50,000 ordinary gain

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6) An individual taxpayer reports the following information:

U.S Treasury bond income $ 100

Manicipal bond income 200

Rental income 500

Investtment interest expense 1,000

What amount of investment interest can the taxpayer deduct in the current year?

A. $100

B. $300

C. $800

D. $1,000

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7) Individual Lark's year 2 brokerage account statement listed the following capital gains and losses from the sale of stock investments:

Short-term capital gain

$6,000

Long-term capital gain

$14,000

Short-term capital loss

$4,000

Long-term capital loss

$8,000

In addition, two stock investments became worthless in year 2. Public Company X stock was purchased in December, year 1, for $5,000, and formal notification was received by Lark on July, year 2, that it was worthless. Private company Section 1244 stock was issued to Lark for $10,000 in January, 20X1, and was determined to be worthless in December, year 2. What is Lark's year 2 net capital gain or loss before any capital loss limitation?

A. $2,000 net capital loss

B. $3,000 net capital gain

C. $7,000 net capital loss

D. $8,000 net capital gain

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8) Which of the following taxpayers may use the cash method of accounting?

A. A tax shelter with $10 million in average annual gross receipts.

B. A qualified personal service corporation with $45 million in average annual gross receipts.

C. A C corporation with $40 million in average annual gross receipts.

D. A partnership with a C corporation as a partner and average annual gross receipts of $50 million.

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9) In year 4 Adams, an individual, changed residences and converted her former residence into a passive rental activity. In 20X14 Adams lived in the former residence for 60 days, incurred $7,000 in qualifying expenses preparing the property for rental, and rented it to a tenant for 90 days, receiving $3,000 in rent. Before considering the rental activity, Adams' adjusted gross income for year 4 is $120,000. After considering the rental activity, what should Adams' year 4 adjusted gross income be?

A. $120,000

B. $116,000

C. $118,500

D. $123,000

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10) Which of the following activities requires the CPA to file a written declaration with the IRS indicating the CPA is currently qualified as a CPA and authorized to represent the party?

Practice before the IRS Provide written tax advice

A. Yes Yes

B. Yes No

C. No Yes

D. No No

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11) An individual with gross income of $78,000 had the following gains and losses from capital transactions during the current year:Loss of $11,000 on the sale of principal residence held for five years; Gain of $5,000 from the sale of securities held for four years;Loss of $9,000 on the sale of municipal bonds held for seven months; Loss of $4,000 on the sale of a painting held for investment for fifteen years. What amount of the capital loss should the individual carry forward?

A. $5,000

B. $ 8,000

C. $16,000

D. $19,000

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12) Which of the following is (are) correct in relation to either a Hope scholarship credit (American Opportunity Tax Credit) or a lifetime learning credit?

I. It may be claimed on either the tax return of the individual paying the education expenses or the dependent.

II. It may be applied to tuition and fees, books and direct supplies, and on-campus residency.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

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13) A calendar year taxpayer makes and sells custom dog collars. In Year 1, cash receipts from dog collar sales were $10,000 and the cost to make the collars was $2,000. In addition, the taxpayer made a $2,000 qualified contribution to a retirement plan. What amount of self-employment income is subject to self-employment tax for the year?

A. $10,000

B. $8,000

C. $6,000

D. $0

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14) In Year 4, an individual taxpayer purchased qualifying depreciable property for $2,800,000 and is making an election under Section 179. Assume the statutory maximum Section 179 expense is $1,020,000 with a $2,550,000 phase-out threshold. What amount, if any, is the taxpayer's Section 179 expense for Year 4?

A. $250,000

B. $520,000

C. $770,000

D. $1,020,000

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15) During Year 5, an unmarried taxpayer donated a refrigerator to a qualified organization that gives household goods to families in need. The taxpayer purchased the refrigerator in Year 1 for $900. The refrigerator's fair market value was $200 on the day of the donation. No other contributions were made in Year 5. What is the maximum amount of charitable contribution that may be deducted as an itemized deduction for the donated refrigerator for Year 5?

A. $0

B. $200

C. $700

D. $900

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16) Pat, a single taxpayer, has adjusted gross income of $40,000 in the current year. During the year, a hurricane causes $4,100 damage to Pat's personal use car on which Pat has no damage insurance. The area in which the damage occurred was a federally declared disaster area. Pat purchased the car for $20,000. Immediately before the hurricane, the car's fair market value was $11,000 and immediately after the hurricane its fair market value was $6,900. What amount should Pat deduct as a casualty loss for the current year after all threshold limitations are applied?

A. $4,100

B. $4,000

C. $100

D. $0