1. A sole proprietorship a. must be owned by an individual b. provides basic liability protection for the owner c. must use the cash method of accounting d. can pay the owner a salary 2. Sam has $80,000 of net income from his sole proprietorship. What is his deduction for AGI for self-employment taxes? a. $12,240 b. $11,304 c. $6,120 d. $5,652 3. Which of the following cannot be taxed as a partnership? a. an accounting PLLC b. an LLC with only one member c. an LLC owning only rental property d. a partnership with no limited partners 4. Ray, Ronnie and Joe are partners in a limited partnership. Ray and Ronnie, the limited partners, each own 45 percent of the partnership and Joe, the general partner, owns the other 10 percent. The partnership incurs $50,000 of nonrecourse debts? Increases by? a. $155,000 b. $105,000 c. $100,000 d. $15,000 5. At the beginning of the year, Jill's basis in her 40 percent limited partnership interest was $10,000. During the year, the partnership reported a loss of $90,000 and the partnership obtained a $40,000 recourse loan on some machinery. How much loss may Jill deduct if she has $40,000 of passive income? a. $10,000 b. $16,000 c. $26,000 d. $36,000 6. The passive activity loss rules apply? a. before the loss limitation rules b. after the loss limitation rules only c. after the at-risk limitation rules only d. after the loss limitation and at-risk limitation rules 7. To qualify for the limited deduction for rental real estate losses, the taxpayer must____activity. a. own at least 15 percent of the rental b. materially participate in the c. actively participate in the d. both a and b 8. An S election terminiates when___ a. a shareholder dies b. there is a nonresident alien shareholders c. the S corporation invests in a C corporation d. an S corporation has excess passive income 9. Corbin has a $15,000 basis in his 50 percent ownership in an S corporation and lent the corporation $5,000 last year. The corporation reported a $100,000 loss. How much of this loss may Corbin deduct? a. $15,000 b. $20,000 c. $35,000 d. $50,000 10. The accumulated adjustment account____? a. is a shareholder account b. can be reduced below zero by an excess distribution c. determines when there is a tax-free distribution during the post-terminiation period d. is important in applying loss limitations rules 11. All of the following are deductions for AGI except____? a. IRA contributions b. student loan interest c. interest on loan to purchase stocks d. health savings account contributions 12. Carl Married and has three childeren. In preparing to go to his accountant, he determines that has $62,300 of salary income and $250 in dividends. He contributes $4000, to a Roth IRA and has $6,800 of itemized deductions. His wife has no income. What is his taxable income on his 2005 return? a. $51,950 b. $49,050 c. $43,250 d. $36,550 13. Which of the following is a requirement to file for head of household? a. a single individual (except abandoned spouse) b. provides over one-half the cost of maintaining a household for a dependent or a child c. qualifying dependent (except a parent) or child must live in the taxpayer's household d. all of the above are requirements 14. All of the following relatives can be claimed as a dependent except? a. cousin b. father in law c. mother's sister d. sister 15. Cloe's husband died in January of 2004. She has a 20-year-old son and a sister who live with her. Her son attends a trade school part-time and earned $11,000 from his part-time job. Cleo's sister is a full-time student and only earned $2,800 from her part-time job. How many personal and dependency exemptions can Cloe claim in 2005 and what is her filing status? a. 3; surviving spouse b. 2; surviving spouse c. 2; head of household d. 3; head of household 16. Toni is 61 and blind; her husband, Saul, is 67. What is their standard deduction if they file a joint tax return, and what is the minimum amount of income they must have to be required to file a tax return, respectively? a. $10,000; $16,400 b. $12,000; $17,400 c. $12,000; $18,400 d. $16,400; $18,400 17. Ikito had a bad year. His home was broken into and his TV, DVD, VCR and computer were all stolen. The properties had a basis of $15,000 and a current fair market value of $9,000. Later that year, his care was hit by a garbage truck. It cost Ikito $9,000 to have the car repaired. Ikito didnt believe in insurance, so he received no reimbursements. In addition, the garbage company filed for bankruptcy after the accident. How much may Ikito deduct as an itemized deduction if his AGI is $68,000? a. $18,000 b. $17,800 c. $11,200 d. $11,000 18. Susan is single but her brother's son lives brother's son lives with her as her dependent. If her AGI is $27,000, what is her tax liability before any allowable tax credits? a. $1,472.50 b. $1,537.50 c. $1,723.50 d. $2,123.50 19. Which of the following is a refundable credit? a. childcare b. hope scholarship c. child tax credit d. earned income credit 20. Cliff is married and files a joint return. His return shows AGI of $268,000 and a net tax liability of $54,512 on taxable income of $224,000. He has $30,000 of preference items and $21,000 of net positive adjustments (including adjustments for itemized deductions and exemptions). What is his AMTI exemption amount? a. $150,000 b. $58,000 c. $31,250 d. $26,750 21. Sue is a 50% working partner in a partnership. She is guaranteed an annual salary of $60,000. Jim, the other 50 percent partner, is to receive the first $10,000 of partnership profits before the balance is divided equally between them. During the year, the partnership's accounting results were $40,000 of income before any partner allocations. What amount of income will Sue be taxed on? 22. A and B are equal shareholders in AB, a calendar-year S corportion. On June 30, A sells one-half of her stock to C. The corporation reports $30,000 of income for the year. How much of this income is allocated to A, B, and C? 23. Sonja is a talented 15-year-old dancer and has earned quite a bit of interest over the last six years from the money that her parents have invest for her. During 2005, she earned $3,800 from dancing and $2,850 in interest. If her parents claim her as a dependent, what is her income tax liability in the current year? 24. Sophie has AGI of $47,000 Her itemized deductions after limitations are $1,400 for medical expenses, $700 in property taxes, $4,500 of mortgage interest and $800 for charitable contributions. What are her AMTI itemized deductions