20. Why does 1250 recapture generally no longer apply?

A) Congress repealed the code section.

B) Real property is depreciated using the straight-line method after 1986.

C) 1245 recapture trumps 1250 recapture.

D) Because unrecaptured 1250 gains now apply to all taxpayers instead.

E) None of the choices are correct.

23. Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and purchases a $1,500 dress that is shipped to her Maryland residence using a common carrier. Assuming that Virginia's sales tax rate is 5 percent and that Maryland's sales tax rate is 7 percent, what is Roxy's sales and use tax liability?

A) $0.

B) $75 to Virginia.

C) $75 sales tax to Virginia and $15 use tax to Maryland.

D) $90 to Maryland.

24.Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and purchases a $1,500 dress. Lisa returns to Virginia a few weeks later to pick up the dress and drive it back to her Maryland residence where she will use the property. Assuming that Virginia's sales tax rate is 5 percent and that Maryland's sales tax rate is 6 percent, what is Roxy's sales tax liability?

A) $0.

B) $75 to Virginia.

C) $75 sales tax to Virginia and $15 use tax to Maryland.

D) $90 to Maryland.

25. What was the Supreme Court's holding in National Bellas Hess?

A) An out-of-state mail-order company did not have a sales tax collection responsibility because it lacked physical presence.

B) Reaffirmed that an out-of-state business must have physical presence in the state before the state may require the business to collect sales tax from in-state customers.

C) Spelled out four criteria for determining whether states may subject nondomiciliary companies to an income tax.

D) Defined solicitation for purposes of Public Law 86-272.

26. What was the Supreme Court's holding in Quill?

A) An out-of-state mail-order company did not have a sales tax collection responsibility because it lacked physical presence.

B) Reaffirmed that an out-of-state business must have physical presence in the state before the state may require the business to collect sales tax from in-state customers.

C) Spelled out four criteria for determining whether states may subject nondomiciliary companies to an income tax.

D) Defined solicitation for purposes of Public Law 86-272.

28. Horton Corporation is a 100 percent owned Canadian subsidiary of Cruller Corporation, a U.S. corporation. During the current year, Horton paid a dividend of C$600,000 to Cruller. The dividend was subject to a withholding tax of C$30,000. Assume an exchange rate of C$1 = $1. Cruller reported U.S. source taxable income of $2,000,000 before considering the dividend received from Horton Corporation. Compute the tax consequences to Cruller as a result of this dividend.

A) Taxable income of $2,600,000,net U.S. tax of $516,000, and FTC carryover of $0

B) Taxable income of $2,600,000, net U.S. tax of $546,000, andFTC carryover of $30,000

C) Taxable income of $2,000,000, net U.S. tax of $390,000, and FTC carryover of $0

D) Taxable income of $2,000,000, net U.S. tax of $420,000, and FTC carryover of $0

30. Which of the following tax benefits does not arise when a U.S. corporation forms a corporation in Ireland through which to earn business profits in Ireland?

A) Potential exemption of U.S. tax on income earned by the corporation.

B) Treaty benefits on cross border payments between the Irish corporation and the U.S. corporation.

C) Use of transfer pricing to shift income between the United States and Ireland.

D) Flow-through of losses from the Irish corporation to the tax return of the U.S. corporation.

31. Which of the following tax or non-tax benefits does not arise when a U.S. corporation forms a hybrid entity in Germany through which to earn business profits in Germany and elects to have the entity treated as a branch for U.S. tax purposes?

A) Potential exemption of U.S. tax on income earned by the corporation.

B) Flow-through of losses from the German corporation to the tax return of the U.S. corporation.

C) Limited liability to the U.S. corporation for acts committed by the hybrid entity.

D) Free transferability of the stock of the hybrid entity by the U.S. corporation.

37. Which of the following transfers is a completed gift?

A) Payment of child support by a former spouse.

B) Transfer of property to a revocable trust.

C) Transfer of cash to a bank account held in joint tenancy with the right of survivorship.

D) Income paid to the beneficiary of a revocable trust.

E) None of the choices is a completed gift.

38. The calculation of the value of a life estate in a trust generally does not depend upon which of the following factors?

A) the age of the life tenant.

B) the Section 7520 interest rate.

C) the value of the property at the time of the transfer.

D) the manner in which the trust corpus is invested.

E) All of these factors are utilized in the calculation of the value of a life estate in a trust.