1. Select the correct option (there is only one) for parts a. to g.

a. Interest on a state or local government obligation may be tax exempt for all of the following except:

i. Interest on a debt evidenced only by an ordinary written agreement of purchase and sale

ii. Interest paid by an insurer on default by the state

iii. Interest paid by an insurer on default by a political subdivision

iv. Interest paid on Federally guaranteed state obligations

b. $100 of interest was credited on Lindas frozen deposit during the year. She withdrew $80 but could not withdraw any more as of the end of the year. Linda must include what amount in her income for the current tax year?

i. $0

ii. $20

iii. $80

iv. $100

c. A payor is required to file Form 1099-DIV - Dividends and Distributions, for each person:

i. To whom he or she has paid dividends (including capital gain dividends and exempt-interest dividends) and other distributions on stock of $500 or more

ii. For whom he or she has withheld and paid any foreign tax on dividends and other distributions on stock of $500 or more

iii. For whom he or she has withheld any Federal income tax on dividends under the backup withholding rules of $500 or more

iv. None of the above

d. Laura sold her house. Her amount realized after selling expenses was $385,000. At the time of the sale, the adjusted basis for the house was $300,000. If all of other conditions are met, what is the gain on the sale of her house?

i. $0

ii. $42,500

iii. $85,000

iv. $300,000

e. Many transactions that, in previous years, would have been reported by corporations and partnerships on which schedule must now be reported on Form 8949 - Sales and Other Dispositions of Capital Assets?

i. Schedule A

ii. Schedule B

iii. Schedule C

iv. Schedule D-1

f. The individual taxpayer uses Schedule D for all of the following except:

i. To report nonbusiness bad debts

ii. To figure the overall gain or loss from transactions reported on Form 8949

iii. To report a gain from Form 2439

iv. To report a gain or loss from Form 4684

g. The taxpayer should keep accurate records that show the basis of a property and, if applicable, the adjusted basis of the property should show which of the following?

i. The purchase price

ii. The cost of improvements

iii. Depreciation

iv. All of the above