1. This question will test your ability to research a tax issue and reach a conclusion. Kenneth, who employed as a financial consultant at a large firm, travels extensively on business related to the firm. This year such travel earned him 100,000 frequent flyer miles, all of which he used to take a personal vacation to Hawaii. Will Kenneth be taxed on the value of the miles? a. Yes. b. No.

2.

This question will test your ability to research a tax issue and reach a conclusion. Gary and Monica are married and each are 50% shareholders in their family owned business. The couple decide to divorce. Under the terms of the divorce decree, Monica will relinquish for all her stock in the business to Gary in exchange for a cash payment from Gary in the amount of $400,000. Marys basis in her stock is $50,000. The divorce is finalized December 15, 2020 and Gary and Monica transfer the property to each other on January 15, 2021. Based on these facts:

a. Monica will have to recognize $350,000 of gain when she receives the $400,000 from Gary.

b. Monica will not have to recognize any gain when she receives the $400,000 from Gary.

3.

23. This question will test your ability to research a tax issue and reach a conclusion. Robert graduates from college, passes the CPA exam, and decides to start his own business as a self-employed tax return preparer. Robert works from home and uses one of his bedrooms in the residence as an office for his accounting business. Robert also built a bathroom across the hall from this bedroom for his clients use. Robert can prove that the bedroom is used exclusively for his accounting business. Although the vast majority of use of the bathroom is from clients, occasionally a family member or guest uses the bathroom. Can Chris deduct the portion of his home office expenses allocable to the bedroom and bathroom?

a. Yes for both the bedroom and bathroom.

b. No for both the bedroom and bathroom.

c. Yes for the bedroom, no for the bathroom.

d. No for the bedroom, yes for the bathroom.

4.This question will test your ability to research a tax issue and reach a conclusion. Becky, who is 28 years old, wants to purchase a home for herself but does not have any money for a down payment, except for what she has in her Individual Retirement Account (IRA). While Becky knows she will have to pay income tax on any money she withdraws from the IRA, she wants to know whether she will also have to pay a 10% penalty for withdrawing the money before she turns 59 . Assume that Becky wishes to withdraw $15,000 from her IRA for the down payment and that Becky has never before purchased or owned a home. How much of Beckys withdrawal will be subject to the 10% penalty? a. $15,000. b. $10,000. c. $5,000. d. zero.