1. (TCO E) For federal tax purposes, royalty income that is not derived in the ordinary course of a business is classified as _____. (Points : 5) active income portfolio income passive income None of the above

Question 2. 2. (TCO D) Tom Tanner traded in a printing press with an adjusted basis of $20,000 for a smaller press valued at $12,000. In addition to the smaller press, Tom received $3,000 in cash and was relieved of the existing liability of $5,000 on the old press. What is Tom's recognized gain? (Points : 5)

$0 $3,000 $4,800 $5,000

Question 3. 3. (TCO H) Alex files a tax return for the 2010 tax year. His adjusted gross income is $50,000. He had a net investment income of $9,000. In 2010, he had the following interest expenses. Personal credit card interest: $4,000 Home mortgage interest: $8,000 Investment interest (on loans used to buy stocks): $15,000 What is the interest deduction for Alex for the 2010 tax year? (Points : 5)

$27,000 $8,000 $17,000 $18,000

Question 4. 4. (TCO B) Mike and Mindy Miller paid the following medical expenses during the year (all in excess of reimbursement). Hospital and doctor bills: $840 Medicine and drugs: $730 Hospitalization insurance premiums: $6,200 Medicine and drugs (for dependent mother, age 71): $1,060 Assuming that the Millers' adjusted gross income was $50,000, how much of a medical expense deduction may the Millers claim on their joint return? (Points : 5)

$5,080 $6,200 $4,330 $8,830

Question 5. 5. (TCO A) The following taxes were paid by Tim. Real estate taxes on his home: $1,000 State income taxes: $900 Cigarette taxes: $500 State gasoline tax (personal use of automobile): $150 In itemizing his deductions, what is the amount that Tim may claim as a deduction for taxes? (Points : 5)

$2,000 $2,550 $0 $1,900

Question 6. 6. (TCO E) Josh sold a piece of business equipment that had an adjusted basis to him of $50,000. In return for the equipment, Josh received $90,000 cash and a painting with a fair market value of $20,000 from the buyer. The buyer also assumed Josh's $25,000 loan on the equipment. Josh paid $5,000 in selling expenses. What is the amount of Josh's gain on the sale? (Points : 5)

$90,000 $135,000 $75,000 $80,000

Question 7. 7. (TCO I) In October of 2011, Bobby and Betty Bennett sold their residence for $450,000. They purchased it in 2000 for $200,000. They made major capital improvements during their 10-year ownership, which totaled $40,000. What is their recognized gain? (Points : 5)

$250,000 $210,000 $0 $450,000

Question 8. 8. (TCO I) Which of the following entities may select any tax period (calendar or fiscal)? (Points : 5)

Sole partnership Partnership S corporations Corporations other than S corporations

Question 9. 9. (TCO D) Tom Smith had a short-term capital loss of $3,000 in 2010, a short-term capital gain of $1,900, a short-term capital loss carryover from 2010 of $700, a long-term capital gain of $1,800, and a long-term capital loss of $1,000. What is Tom's deductible loss in 2010? (Points : 5)

$1,000 $1,800 $2,000 $3,000

Question 10. 10. (TCO A) Which of the following is not permitted to "practice before the IRS?" (Points : 5)

An attorney A CPA An enrolled agent A bookkeeping service

Question 11. 11. (TCO F) If an expenditure is part business related and part personal, _____. (Points : 5)

the entire expenditure is deductible for tax purposes no part of the expenditure is deductible for tax purposes the personal portion of the expenditure may be deductible for tax purposes only the business-related portion of the expenditure is deductible for tax purposes

Question 12. 12. (TCO A) Which of the following constitutes tax evasion? (Points : 5)

Arranging your affairs to keep your tax liability as low as possible under the tax law Avoiding taxes Failing to disclose a tax liability from a completed transaction Trying to minimize your tax liability

Question 13. 13. (TCO C) Which of the following items is not subject to federal income tax? (Points : 5)

The interest on U.S. Treasury bonds Gambling winnings The interest on loans made in the ordinary course of business The discharge of debt through bankruptcy

Question 14. 14. (TCO B) In return for $1,000, Bobby cancels Sam's debt of $5,000. The cancellation is not a gift, and Sam is neither insolvent nor bankrupt. Which of the following statements is correct? (Points : 5)

Bobby has $1,000 taxable income. Sam has $4,000 of taxable income. Sam has $5,000 of taxable income. Neither Bobby nor Sam has any taxable income from this transaction.

Question 15. 15. (TCO G) All of the following income items are includible in an employee's gross income except _____. (Points : 5)

severance pay for the cancellation of employment the amount received for personal injuries an accrued vacation moving expense reimbursement

Question 16. 16. (TCO F) Fines and penalties paid to the government for the violation of a law are _____. (Points : 5)

generally deductible for tax purposes as business expenses not deductible for tax purposes deductible if they are ordinary and necessary deductible if they are reasonable in amount