1. Which of the following explain why it is important to determine the period in which income is recognized?

a. Marginal tax rates may be different in different periods.

b. Tax laws may change

c. The time value of money

d. All of the above are explanations

e. a. and b. only are explanations

2. All of the following are allowable tax years except:

a. The last Friday of July

b. December 31

c. The Sunday closest to March 1

d. August 31

3. In May 2013, Stephen acquired a used automobile for $12,000 and used the automobile 75% for business. No Sec. 179 election was made. In 2014, Stephen's business use of the automobile decreases to 45%. As a result of this change in business use:

a. The change does not affect the way Stephen computes his 2014 depreciation

b. Stephen's depreciation in 2014 is $2,250.

c. Stephen must recapture $900 as ordinary income in 2014

d. Stephen must amend the 2014 tax return and recompute depreciation.

4. Edna had $20,000 of ordinary income. In addition, she had a $1,500 short-term capital gain on one stock and a $4,900 long-term capital loss on another. What is her adjusted gross income before deductions?

a. $21,500

b. $17,000

c. $16,600

d. $15,100

5. Vero Corporation owns $200,000 of equipment used for its business and the building that the business is located in that is valued at $175,000. The business is successful and has investments in marketable securities valued at $45,000. What is the value of its capital assets?

a. $45,000

b. $75,000

c. $275,000

d. $320,000

6. A sole shareholder receives a piece of land from a corporation as a dividend distribution. The land has a basis of $40,000 and a fair market value of $80,000; the shareholders basis in his stock is $20,000, and this distribution is the only corporate activity for the year except for paying any tax owed on the distribution. At the beginning of the year, the corporation had only $5,000 in accumulated earnings and profits. How will this distribution be treated for tax purposes by the shareholder?

a. $80,000 dividend

b. $39,000 dividend; $41,000 capital gain

c. $39,000 dividend; $20,000 return of capital; $21,000 capital gain

d. $60,000 dividend; $20,000 return of capital

e. None of the above