1. Mark the correct answer. In cash basis accounting, for tax purposes:

a.	Income is recognized when it is actually or constructively received and expenses are recognized when they are actually or constructively incurred, regardless of when paid.
b.	Income is recognized when it is earned regardless of when received and expenses are recognized when they are actually or constructively incurred.
c.	Income is generally recognized when it is actually or constructively received and expenses are generally recognized when they are paid.
d.	The cash basis is not allowed for businesses reported on Schedule C.

2. From the records of Tom, a cash basis sole proprietor, the following information was available:

Gross receipts	$30,000
Dividend income (on personal investments)	$ 200
Cost of sales	$15,000
Other operating expenses	$ 3,000
State business taxes paid	$ 300

What amount should Tom report as net earnings from self-employment?

a.	$10,900
b.	$11,700
c.	$12,000
d.	$15,000
e.	None of the above

3. Which of the following is not an acceptable method of accounting under the tax law?

a.	The accrual method
b.	The cash method
c.	The hybrid method
d.	All of the above are acceptable
e.	None of the above

4. Becky is a cash basis taxpayer with the following transactions during her calendar tax year:

Cash basis revenue	$54,000
Cash basis expenses, except rent	$25,000
Rent expense (paid on December 1) for use of a building for 18 months	$36,000

What is the amount of Beckys taxable income from her business for this tax year?

a.	$17,000
b.	$23,000
c.	$25,000
d.	$27,000
e.	None of the above

5. Jenny constructed a building for use as a residential rental property. The cost of the building was $180,000, and it was placed in service on August 1, 1990. The building has a 27.5-year MACRS life. What is the amount of depreciation on the building for 2015 for tax purposes?

a.	$2,000
b.	$6,000
c.	$3,000
d.	$6,547
e.	None of the above

6. ABC Corp bought a production machine on January 1, 2013 for $30,000. The company elected out of Section 179 expensing and elected out of claiming bonus depreciation in 2013, and is depreciating the machine using the MACRS accelerated depreciation tables for 5-year property. What is the 2015 depreciation (year 3) deduction for the machine?

a.		$9,600
b.		$24,000
c.		$6,000
d.		$5,760
e.		None of the above is correct

7. Steve Corp bought a $925,000 apartment building in 2013. Of the purchase price, $100,000 is allocated to the value of the land. What is the maximum amount of depreciation that the company can claim in 2015 (year 3) for the building?

a.	$29,997
b.	$825,000 under the election to expense business property
c.	$250,000 under the election to expense business property
d.	$82,500
e.	You cannot depreciate property costing over $800,000

8. What is the number of years over which computers may be depreciated under MACRS?

a.	3 years
b.	5 years
c.	7 years
d.	10 years
e.	15 years

9. During 2015, Travis purchases $130,000 of used manufacturing equipment (7-year property) for use in his business. Travis has taxable income from his business of $500,000. What is the maximum amount that Travis may deduct under the Section 179 election to expense?

a.	$130,000
b.	$18,571
c.	$250,000
d.	$0
e.	None of the above

10. On June 1, 2015, Sandalwood Corporation purchases a passenger automobile for 100 percent use in its business. The automobile is in the 5 year cost recovery class and has a basis for depreciation of $30,000. Assuming that the corporation does not elect to expense any of its cost under Section 179, what is the total tax depreciation deduction for the 2015 calendar tax year (Year 1)?

a.	$3,160
b.	$3,060
c.	$6,000
d.	$4,287
e.	None of the above

11. Which of the following is true with respect to the related party rules?

a.	Bill sells stock to his sister for a $3,000 loss. Bill can deduct the loss on his tax return.
b.	A taxpayers uncle is a related party for purposes of Section 267.
c.	A disallowed loss on a related party transaction can be used to offset any future gain when the property is sold to an unrelated party.
d.	Under the constructive ownership rules of Section 267, a shareholder owns 10 percent of the stock owned by a corporation in which he or she is a shareholder.
e.	None of the above are true.

12. Which of the following is a capital asset?

a.	Inventory held by a manufacturer
b.	Accounts receivable held by a dentist
c.	All property owned by a taxpayer other than property specifically noted in the law as an exception
d.	Depreciable property and real estate used in a trade or business

13. Sol purchased land as an investment on January 12, 2005 for $85,000. On January 31, 2015, Sol sold the land for $60,000 cash. What is the nature of the gain or loss?

a.	Long-term capital loss
b.	Long-term capital gain
c.	Short-term capital gain
d.	Short-term capital loss
e.	None of the above

14. Sol purchased land as an investment on January 12, 2005 for $85,000. On January 31, 2015, Sol sold the land for $20,000 cash. In addition, the purchaser assumed the mortgage of $70,000 on the land. What is the amount of the realized gain or loss on the sale?

a.	$65,000 loss
b.	$15,000 loss
c.	$5,000 gain
d.	$90,000 gain
e.	None of the above

15. An assets adjusted basis is computed as:

a.	Original basis + capital improvements - accumulated depreciation.
b.	Original basis - capital improvements + accumulated depreciation.
c.	Original basis + capital improvements + accumulated depreciation.
d.	Original basis + capital improvements + gain or loss realized.
e.	None of the above.

16. For the year 2015, Susan had salary income of $19,000. In addition she reported the following capital transactions during the year:

Long-term capital gain	$ 7,000
Short-term capital gain	$ 3,000
Long-term capital loss	$(2,000)
Short-term capital loss	$(4,000)

There were no other items includable in her gross income. What is the amount of her adjusted gross income for 2015?

a.	$19,000
b.	$21,400
c.	$23,000
d.	$26,000
e.	None of the above

17. Robert and Becca are in the 25 percent tax bracket. They have a long-term capital gain of $27,000 and a long-term capital loss of $18,000 on sales of stock in 2015. What will their capital gains tax be in 2015?

a.	$4,050
b.	$6,750
c.	$1,350
d.	$9,000
e.	None of the above is correct

18. Which of the following assets is not a Section 1231 asset?

a.	Equipment used in a business
b.	The unharvested crops of a farmer
c.	Timber
d.	Inventory
e.	All of the above are Section 1231 assets

19. On December 31, 2015, Henry, a sole proprietor, sold for $65,000 a machine that was used in his business. The machine had been purchased in 2005 for $50,000, and when it was sold, it had accumulated depreciation of $20,000 and an adjusted basis of $30,000. For the year 2015, how should this gain be treated?

a.	Ordinary income of $35,000
b.	Section 1231 gain of $35,000
c.	Section 1231 gain of $20,000 and ordinary income of $15,000
d.	Section 1231 gain of $15,000 and ordinary income of $20,000
e.	None of the above

20. In 2015, Tim sells Section 1245 property for $28,000 that he had purchased in 2008. Tim has claimed $5,000 in depreciation on the property and originally purchased it for $15,000. How much of the gain is taxable as ordinary income?

a.	$5,000
b.	$8,000
c.	$18,000
d.	$13,000
e.	None of the above is correct

21. Terry has a casualty gain of $1,000 and a casualty loss of $5,400, before the $100 floor and before the adjusted gross income limitation. The gain and loss were the result of two separate casualties occurring during 2015 and both properties were personal-use assets. If Terry itemizes deductions on her 2015 return and has adjusted gross income of $25,000, what is Terrys gain or net itemized deduction as a result of these casualties?

a.	$5,300 itemized deduction, $1,000 capital gain
b.	$4,300 itemized deduction
c.	$1,800 itemized deduction
d.	$2,800 itemized deduction, $1,000 capital gain
e.	None of the above

22. In January 2015, Keyaki Construction Company exchanged an old truck, which cost $54,000 and had accumulated depreciation of $18,000, for a new truck having a fair market value of $65,000. In connection with the exchange, Keyaki paid $35,000 in cash. What is the tax basis of the new truck?

a.	$54,000
b.	$65,000
c.	$71,000
d.	$89,000
e.	None of the above

23. On August 8, 2015, Sam, single, age 62, sold for $210,000 his principal residence, which he has lived in for 10 years, and which had an adjusted basis of $60,000. On November 1, 2015, he purchased a new residence for $80,000. For 2015, Sam should recognize a gain on the sale of his residence of:

a.	$0
b.	$25,000
c.	$50,000
d.	$130,000
e.	None of the above

24. What percentage of gross food and beverage sales is used in determining the amount of tips that an employer must report as allocated to employees?

a.	8 percent
b.	10 percent
c.	12 percent
d.	15 percent
e.	None of the above

25. Which of the following amounts paid by an employer to an employee is not subject to withholding?

a.	Commissions
b.	Travel expense reimbursements from an accountable plan
c.	Salary
d.	Bonus
e.	All of the above are subject to withholding

26. Which of the following taxpayers are not required to make estimated payments?

a.	A car mechanic who is self-employed and earns $50,000 a year.
b.	A wealthy individual whose earnings are from corporate dividends.
c.	An employee who works at a local department store with appropriate withholding and no other income.
d.	All of the above must make estimated payments.

27. Elwin worked at three jobs during 2015. He earned $30,000, $27,000, and $9,000, respectively, from the jobs. What is the total amount of FICA (Social Security and Medicare) tax that would have been withheld from Elwins wages?

a.	$4,054.80
b.	$4,092.00
c.	$5,003.10
d.	$5,049.00
e.	None of the above

28. Which of the following forms should be used by a company to report a payment of $1,500 to a computer consultant who is not an employee of the company?

a.	Form 1099-INT
b.	Form W-4
c.	Form W-2
d.	Form 1099-DIV
e.	Form 1099-MISC

29. Which of the following types of income is subject to the self-employment tax?

a.	Interest income
b.	Gain on sale of real estate
c.	Income from a sole proprietors law practice
d.	Dividends from stock
e.	None of the above

30. On July 1, 2015, Bertram acquired a 70 percent interest in Sycamore Company, a partnership, by contributing property with an adjusted basis of $6,000 and a fair market value of $12,000. The property was subject to a mortgage of $8,000, which was assumed by Sycamore Company. What is Bertrams basis in his partnership interest in Sycamore Company immediately after the partnership contribution?

a.	$400
b.	$3,600
c.	$6,400
d.	$8,400
e.	None of the above