1. Monica and Thomas, ages 32 and 36, are married and file a joint return. In addition to having THREE dependent children (Lemisse, Cristine and James), Monica and Thomas have adjusted gross income (AGI) of $90,000 and itemized deductions of $22,000. What is their taxable income for 2014? a. $48,250 b. $56,150 c. $68,000 d. $90,000 2. In 2014, Jonathan, age 15, had $1,000 of interest from a certificate of deposit and $2,000 from working as a waiter. Assume Jonathan is claimed by his parents as a dependent. What is Jonathans standard deduction? a. $6,200 b. $2,350 c. $1,350 d. $0 3. What is Dys Taxable Income for 2014? Assume she is 34 years old and is single and has no dependents. Assume further that Dys AGI is $75,000 and that she made a charitable contribution of $500 (which would be her only itemized deduction). a. $64,850 b. $70,550 c. $74,500 d. $75,000 4. What is Amys taxable income for 2014? Assume she is single and claimed TWO dependent children, Sagi and Damian. Assume further that Amys AGI is $44,000 and that her itemized deductions are $10,000. a. $22,150 b. $26,100 c. $34,000 d. $44,000 5. A few years ago, Miranda and Mary formed a partnership called M&Ms. Whichof the following is most likely TRUE regarding the U.S. income taxation of Miranda, Mary and M&Ms? a. The M&Ms entity is NOT required to file an informational tax return b. The M&Ms entity is NOT required to pay federal income taxes c. The M&Ms entity will most likely be taxed like a corporation d. Mary and Miranda will NOT be required to pay taxes on their respective shares of M&Ms income until M&Ms distributes its earnings to them 6. Which doctrine will most likely prevent Sandra from reducing her tax liability by voluntarily assigning her income to another taxpayer? a. The constructive receipt doctrine b. The economic benefit doctrine c. The fruit-of-the-tree doctrine d. None of the above 7. During 2014, Tim was supported by his three wealthy CPA daughters, in the following percentages: Crucilena: 25.0% Veronica: 19.0% Luisa: 11.0% Which daughter is UNABLE to claim Tim as a dependent, even if a multiple support agreement is in place and the other daughters agree NOT to claim Tim as a dependent? a. Crucilena b. Veronica c. Luisa d. Each daughter would be eligible to claim Tim as a dependent 8. On January 1, 2014, Gonzalo signed a three year lease to rent office space from Ellice. The lease commenced immediately on January 1, 2014. During 2014, Gonzalo paid Ellice, $24,000 for the first years rent, $2,000 for the last months rent, and $2,000 as a security deposit. Gonzalo and Ellice agree that the security deposit will be NOT returned by Ellice at the end of the lease. How much gross income should Ellice report for 2014 as a result of these items? a. $74,000 b. $28,000 c. $26,000 d. $24,000 9. What is Jhoslens taxable income for 2014? Assume Jhoslen is 46 years old and is single and has no dependents. Assume further that Jhoslens 2014 AGI is $55,000 and that he has no itemized deductions. a. $55,000 b. $51,050 c. $48,800 d. $44,850 10. Kevin, a single taxpayer, had 2014 wages of $65,000 from his job at Big Company, Inc. What is Kevins AGI if he has the following (and only the following) additional items in 2014? Itemized deductions of $15,000 Exemption amount of $3,950 Alimony of $10,000 received by Kevin (from his former spouse, Nicole) Business income of $10,000 from Kevins sole proprietorship Ignore any deduction that may relate to self-employment taxes. a. $85,000 b. $75,000 c. $66,050 d. $65,000 11. Assume the same facts as in the previous question (again, ignore any deduction that may relate to self-employment taxes). Kevins Taxable Income for 2014 is: a. $85,000 b. $75,000 c. $66,050 d. $65,000 12. Ariadna and Alexander are married taxpayers who file a joint return. In 2012, they had AGI of $600,000 and their preliminary itemized deductions totaled $40,000. In 2014, they will also have AGI of $600,000 and preliminary itemized deductions of $40,000. In 2012 and 2014 their itemized deductions include mortgage interest. Which of the following is TRUE? a. When comparing their 2012 and 2014 returns, they will deduct the same amount of itemized deductions on each return b. When comparing their 2012 and 2014 returns, they will deduct more itemized deductions on their 2014 return c. When comparing their 2012 and 2014 returns, they will deduct more itemized deductions on their 2012 return d. They will not deduct any itemized deductions on either their 2012 return or their 2014 return 13. Which of the following statements is TRUE? a. Taxpayers usually prefer deductions FOR AGI to deductions FROM AGI b. The U.S. government always breaks-even with regards to alimony payments (i.e., because the reduction in taxes for the spouse paying the alimony will always equal the increase in taxes for the spouse receiving the alimony) c. A dependents earned income amount could never impact the size/amount of his/her standard deduction amount d. The amount of tax-exempt interest received by a taxpayer could never impact the amount of his/her Social Security benefits that are subject to taxation 14. Assume that Pamela received some unique payments in 2014. Which of the following items may Pamela exclude from gross income? a. $75,000 of punitive damages received from a lawsuit against Dangerous Co. b. $15,000 received as a gift from Pamelas high school buddy c. $200 received from her Fantasy Football league winnings d. None of the above 15. In early 2014, Mayelin received a gift of a home valued at $500,000 (from Mayelins Uncle, Guerol). Guerol also gave Mayelin a $5,000 cash gift. During 2014, Mayelinrented the home to Ahn. As a result of the lease with Ahn, Mayelin earned net rental income of $24,000 (for 2014). What amount of income should Mayelins 2014tax return include from these transactions? a. $529,000 b. $29,000 c. $24,000 d. $0 16. In 2014, Jeanette, a calendar-year taxpayer, purchased business equipment (5-year property) for $100,000. The property was placed in service in January 2014 (and is being used exclusively in Jeanettes extremely profitable business). No other personal property is purchased by Jeanette in 2014. What is the most that Jeanettemay deduct in 2014 under Section 179 of the Code (ignore any potential deductions resulting from bonus deprecation or MACRS)? a. $0 b. $25,000 c. $100,000 d. $200,000 17. Assume the same facts as in the previous question. However, for this question, assume that Jeanette purchased the business equipment for $210,000 (instead of $100,000). What is the most that may be deducted in 2014 under Section 179 of the Code (ignore any potential deductions resulting from bonus deprecation or MACRS)? a. $0 b. $15,000 c. $25,000 d. $210,000 18. Which of the following is most likely deductible FOR AGI (i.e., PRE-AGI)? a. Amounts paid for state income taxes b. Amounts paid for an employees unreimbursed travel expenses (i.e., the travel was related to taxpayers fulltime position at a large corporation) c. Amounts paid for interest on a student loan d. Each of the above items would be deducted FROM AGI (i.e., POST-AGI) 19. Jorge has AGI of $100,000 in 2014. During 2014, Jorge also had an uninsured personal casualty loss of $15,000 (after the $100 reduction). The personal casualty loss related to an accident that Jorge had with Zoff. Jorge carried no collision insurance and Zoff was also an uninsured motorist. Assume Jorge itemizesdeductions in 2014. What is the casualty loss amount that Jorge may deduct on his return? a. $15,000 b. $10,000 c. $5,000 d. $020. 20. Refer to the facts in the previous question. However, for purposes of this question assume that Jorge takes the standard deduction in 2014. What is the casualty loss amount that Jorge may deduct on his return? a. $15,000 b. $10,000 c. $5,000 d. $0 21. If Sascha is insolvent with assets of $40,000 and liabilities of $55,000 and one of Saschas creditors then cancels a debt of $20,000, what amount must Sascha recognize as income? a. $20,000 b. $15,000 c. $5,000 d. $0 22. TXX5761 Inc. paid all of the premiums for a $350,000 group-term life insurance policy on its 66-year-old President, Anne-Emilie. Assume that pursuant to the applicable table, the cost per $1,000 of protection for a 1-month period is $1.27 (for a person aged 65 to 69). What amount relating to the policy (if any) must be included in Anne-Emilies Gross Income for the year (assume Anne-Emilie was covered for all twelve months)? a. $300,000 b. $5,334 c. $4,572 d. $0 23. On January 1, 2014, Kayanna purchased a 20-year annuity for $40,000 from WESLEY FINANCIAL (an established insurance company). Under the annuity, Kayanna will receive payments of $370 for each month of the annuitys life. What amount of the annuity payments must be included in Kayannas Gross Income for 2014 (assume all 12 monthly payments are made in 2014)? a. $4,440 b. $2,440 c. $2,000 d. $0 24. Assuming the same facts as in the previous problem, what amount of the annuity payments from WESLEY FINANCIAL may be excluded from Kayannas Gross Income for 2014? a. $4,440 b. $2,440 c. $2,000 d. $0 25. In February 2013, Jose, a calendar-year taxpayer, purchased new 7-year property for $1,500,000. The property was immediately placed into service (and is still being used exclusively in Joses extremely profitable business). No other personal property was purchased by Jose in 2013. Jose took the largest possible tax deduction in 2013 relating to the equipment. Compute the largest tax deduction possible in 2013 for the equipment (consider the Section 179 election, Bonus Depreciation, and MACRS, if applicable): a. $1,500,000 b. $1,071,450 c. $1,000,000 d. $142,857 26. During 2014, 5-year MACRS property was placed in service by Sabrina, a calendar year taxpayer. Assume that Sabrina does not make a Section 179 election. The property will most likely be depreciated over: a. six calendar years b. five calendar years c. two and one-half calendar years d. once calendar year 27. Stephanie is a cash-basis taxpayer. Which doctrine will most likely limit Stephanies ability to choose the year in which to recognize income? a. The economic benefit doctrine b. The fruit-of-the-tree doctrine c. The constructive receipt doctrine d. None of the above 28. Riphard contributed some inventory from his sole proprietorship to a public charityfor its use. On the date of the contribution, Riphards basis in the inventory was $10,000 and the fair market value was $30,000. What is the amount of charitable contribution allowed (before considering any potential percentage limitation)? a. $30,000 b. $20,000 c. $10,000 d. $0 29. Which of the following items most resembles an interest free loan from the U.S. government? a. Student loan interest being deducted b. Amounts being deducted under Section 179 c. Travel expenses being deducted d. Unreimbursed employee business expenses being deducted 30. Which of the following statements is TRUE about Pablos hobby activity? a. A loss from Pablos hobby activity may not be used to offset his dividend income b. When compared to Pablos business, Pablos hobby activity is subject to exactly the same tax laws c. Expenses relating to Pablos hobby activity could never be deductible d. A loss from Pablos hobby activity may be used to offset wages from his full-time employment 31. What was Kathryns Taxable Income for 2014? Assume Kathryn is single and has TWO dependent children, Shicquonna and Andrea. Assume further that Kathryns 2014 AGI is $60,000 and that Kathryn had itemized deductions of $12,000. a. $60,000 b. $48,000 c. $40,100 d. $36,150 32. What was Catherines 2014 Net Operating Loss amount assuming that she had the following items listed on her income tax return? Business Income $52,000 Interest income on personal investments $5,000 Less: Business Expenses ($72,000) Less: Personal exemption ($3,950) Less: Nonbusiness deductions ($7,000) Loss shown on return ($25,950) a. $0 b. $12,000 c. $20,000 d. $25,950 33. Jasimon incurred the following expenses during 2014. Which expense is Jasimon LEAST likely to deduct as a medical expense (assume Jasimon itemizes and that Jasimons medical expenses will exceed 10.0% of Jasimon AGI)? a. Uninsured expenses relating to back surgery b. Medical insurance premiums (purchased by Jasimon with Jasimons after-tax dollars) c. Travel expenses to obtain treatment at a clinic in Texas (assume that the potentially lifesaving procedure to be performed can only be performed at that particular clinic) d. Cosmetic surgery (to make Jasimons chin look more appealing) 34. Alix contributes some common stock that Alix held long-term to a public charity. On the date of the contribution, Alixs basis in the common stock was $2,000 and the fair market value was $15,000. What is the amount of charitable contribution allowed (before considering any potential percentage limitation)? a. $15,000 b. $13,000 c. $2,000 d. $0 35. Timothy sold stock Timothy owned in a small business that was formed as a corporation. Timothy sold the stock to Danita. Which Section of the U.S. Tax Code might allow Timothy to convert what would otherwise be a capital loss into an ordinary loss? a. Section 1244 b. Section 1221 c. Section 1202 d. None of the above 36. Kevins business incurred a casualty loss in 2014. Immediately before the casualty, her business truck had an adjusted basis of $45,000 and a fair market value of $40,000. Immediately after the casualty, the truck had a fair market value of $10,000. Because of the truck damage, Kevins insurance company provided $10,000 as a reimbursement in 2014. What was Kevins 2014 casualty loss deduction? a. $45,000 b. $30,000 c. $20,000 d. Unknown (because we must know Kevin's AGI) 37. In 2005, Mary (a single taxpayer) loaned $30,000 to her friend Nicole. In 2014, Nicole declared bankruptcy, with the result that the debt became totally worthless. How should Mary treat the loss relating to this debt (assume that the debt is a nonbusiness debt that is a bona fide debt that arose from a debtor-creditor relationship)? a. As an itemized deduction b. As a short-term capital loss c. As a long-term capital loss d. Mary may not take any deduction relating to the debt (it is a nonbusiness debt) 38. Assume the facts stated in the prior question. Assume further that Mary has no other capital gains or losses in 2014 (or any prior years). What is the maximum amount (related to the bad debt) that Mary can deduct in 2014? a. $30,000 b. $27,000 c. $3,000 d. $0 39. Assume the facts stated in the prior two questions. Assume further that for 2014Mary will offset her wages (with any deduction related to the debt) to the maximum extent permitted by law. What is the amount of Marys capital loss carryover to 2015? a. $30,000 b. $27,000 c. $3,000 d. $0 40. Which of the following is most likely deductible FOR AGI (i.e., PRE-AGI)? a. Amounts paid for federal income taxes b. Amounts paid for unreimbursed moving expenses c. Amounts paid for property taxes d. Each of the above items would be deducted FROM AGI 41. Cristines boss gave her two tickets to the Jubbin Beaver concert because she met her sales quota. At the time Cristine received the two tickets, they had a face value of $100 each and were selling on eBay for $300 each (which equaled the fair market value of the tickets). On the date of the concert, the tickets were selling for $300each. Cristine and her daughter (Jeanette) attended the concert. How much gross income should Cristine report as a result of the tickets? a. $0 b. $200 c. $400 d. $600 42. Sagi was a professional soccer player before a career-ending injury caused by a grossly negligent driver. Sagi sued the driver and collected $1 million as compensation for lost estimated future income and $2 million for punitive damages. How much gross income should Sagi report as a result of the damages he received? a. $0 b. $1 million c. $2 million d. $3 million 43. Which of the following is a deduction FROM AGI? a. Ellice paid alimony to a former spouse b. Pamela invested $3,000 in a Roth IRA c. Stephanie paid real estate taxes levied by the county on her personal residence d. Monica paid property taxes levied by the county on her car used exclusively for business 44. Compute the casualty loss on Amys uninsured rental property under the following facts: Adjusted basis $100,000 FMV before the loss $75,000 FMV after the loss $0 a. N/A (we need to know Amys AGI to answer this question) b. $100,000 c. $75,000 d. $25,000 45. Crucilena Corporation acquired new computer equipment on March 13, 2014, for $50,000. Crucilena did not elect immediate expensing under Section 179. Determine Crucilenas cost recovery for 2014. a. $50,000 b. $20,000 c. $10,000 d. $0 46. On August 5, 2014, Kathryn purchased a new office building for $5 million. On October 3, 2014, she began to rent out office space in the building. What is Kathryns cost recovery for 2014? a. $0 b. $26,750 c. $128,200 d. $5,000,000 47. Assume the same facts as in the previous problem. Assume further that Kathrynsells the office building on July 12, 2018. What is Kathryns cost recovery for 2018? a. $0 b. $69,442 c. $128,200 d. $1,000,000 48. Jeff performs services for Nova Corporation. In determining whether Jeff is an employee or an independent contractor, which factor is MOST likely to suggest that Jeff is an employee? a. Nova Corporation determines the details of HOW Jeff performs the applicable work b. Jeff uses his own tools c. Jeff sets his own schedule d. Jeff performs the services from his home BACKGROUND INFORMATION FOR QUESTIONS 49-50 Tim and Jonathan recently formed a corporation named TJ Inc. (or TJ). On December 31, 2013, TJ issued 800,000 shares of common stock to Jonathan and 800,000 shares of common stock to Tim. Jonathan and Tim each paid $0.01 per share for their stock ($0.01 equaled the per share fair market value on December 31, 2013). Their stock is subject to a 4-year repurchase option (at cost) in favor of TJ. Each TJ repurchase option will lapse over time so that on December 31 (of 2014, 2015, 2016 and 2017), 200,000 shares will be released from the repurchase option. For example, if Jonathan quits TJ before December 31, 2017, TJ can repurchase Jonathans unvested shares for $0.01 per share (no matter what the fair market value is on that date). QUESTION 49 Assume that Tim DID NOT file a timely 83(b) election. On December 31, 2014, Tim is still working at TJ and thus 200,000 of Tims 800,000 shares are released from the TJ repurchase option (i.e., 200,000 of Tims shares vest on December 31, 2014). On that same day, the fair market value of the TJ stock equals $10.01 per share. What 2014 income, if any, must Timreport as a result of these events? a. $8,000,000 b. $2,002,000 c. $2,000,000 d. $0 QUESTION 50 Assume that Jonathan DID file a timely 83(b) election. On December 31, 2014, Jonathan isalso still working at TJ and thus 200,000 of Jonathans 800,000 shares are also released from the TJ repurchase option (i.e., 200,000 of Jonathans shares vest on December 31, 2014). On that same day, the fair market value of the TJ stock equals $10.01 per share. What 2014income, if any, must Jonathan report as a result of these events? a. $8,000,000 b. $2,002,000 c. $2,000,000 d. $0