25. On January 1, 2021. Stone Corporation acquires all of the net assets of Pebble Corporation for $2,000,000. The following intangible assets are included in the purchase agreement: Acque Cou Goodwill and greece value Patent Coverato che 545.000 5 5132 What is the total amount of amortization allowed in 2021? A) $15,000 B) $22,000 C) $31.000 D) $38,000 26. In calculating depletion of natural resources each period A) cost depletion must be used. B) percentage depletion must be used. C) the greater of cost depiction or percentage depletion must be used D) the smaller of cost depletion or percentage depletion must be used 27. For purposes of the accrual method of accounting, the economic performance test is met when A) the property or services are actually provided. B) the amount of the item can be reasonably estimated. C) all events have occurred that establish the fact of a liability D) all events have occurred that fix the taxpayer's right to receive income. 28. Which of the following statements regarding UNICAP is incorrect? A) The UNICAP rules result in more costs being included in inventory for tax purposes than for financial accounting. B) Taxpayers with gross receipts averaging more than $26,000,000 or more for the prior three years must apply the UNICAP provisions C) Interest must be included in inventory if the property produced is real property or long-lived property D) UNICAP requires that advertising and selling costs he allocated between inventory and cost of sales 29. Inventory may be valued on the tax return at the lower of cost or market unless A) replacement cost is higher than historical cost B) the taxpayer determines inventory cost using the LIFO method. C) the taxpayer determines inventory cost using the FIFO method. D) the cash method of accounting is used by the taxpayer. 30. This year, Hamilton, a local manufacturer of off-shore drilling platforms, entered into a contract to construct a drilling platform that will be placed in the North Atlantic Ocean. The total contract price is $5,000,000, and Hamilton estimates the total construction cost at $3,000,000. Actual costs incurred this year are $600,000. If Hamilton uses the percentage of completion method, the gross profit for this year is A) SO. B) $400,000 C) S600,000 D) $2,000,000 31. In Year 1, a contractor agrees to build a building for $2,500,000 by the end of Year 2. The builder's cost is estimated to be $1,800,000. The actual costs for Year 1 are $900,000 and Year 2's actual costs are $1,300,000. Under the completed contract method the gross profit for Year 2 is A) SO. B) $300,000 C) S350,000 D) $700,000 32. Andi sold land on the installment basis for $100,000. Her basis in the land was $70,000. Andi received a $40,000 down payment and a real estate installment sale contract calling for $60,000 in additional payments in future years. In addition, Andi paid $6,000 in commissions on the sale. What is the gross profit to be recognized in the current year? A) SO B) S9,600 C) $12,000 D) $24,000 33. All of the following are considered related for purposes of Section 453(e) installment sales except A) parents. B) children. C) sister. D) controlled corporation 34. All of the following transactions are exempt from rules regarding imputed interest with the exception of A) taxpayer purchases newly issued bond for S700 (face value of $1,000). B) taxpayer selis land for $135,000 with payment due in 5 years and no stated interest. C) taxpayer sells his home gym equipment for $2.800 with payment due in one year and no stated interest. D) taxpayer purchases a sailboat costing $2,500 for weekend boating trips, the full price payable in five months and no stated interest. 35. Prior Corp. plans to change its method of accounting for supplies. Both the old and new methods are acceptable. Which of the following statements is correct regarding the change? A) The taxpayer will need to amend prior returns to reflect the new method. B) The taxpayer will report the full amount of change in the current tax return C) The taxpayer will report the net adjustment over four years. D) The taxpayer will report the net adjustment and pay the tax when it files the Form 3115. 36. Stefan exchanges a business storage facility with a S120.000 adjusted basis for $40,000 cash and a parking lot with a $140,000 FMV. What is the amount of gain which Stefan recognizes on the exchange? A) SO B) $20,000 C) $40,000 D) S60,000 37. Aldo owns a warehouse used in his business which has an adjusted basis of S240,000 and is subject to a mortgage with an $80.000 principal balance. Aldo exchanges the warehouse for land worth $320.000. In addition, he receives cash of $40,000, and the other party will assume the mortgage. What is Aldo's realized gain? A) S120,000 B) $80,000 C) $200,000 D) $190.000 38. Ecvard, a single taxpayer, sold his home this year. He had owned and lived in the house for 10 years. Edvard signed a contract on March 4 to sell his home. Salese Beco Selling expenses 15.000 Repliced and paid for boken www.ce March Basis of old home before rependimevements 10.00 Based on these facts, what is the amount of his recognized gain? A) SO B) $25,000 C) $40,000 D) $275,000 39. Lee recognizes $35,000 of Sec. 1231 gains and S25,000 of Sec. 1231 losses during the current year. The only other Sec. 1231 item was a $4,000 loss three years ago. This year, Lee must report A) NLTCGOrdinary Income $10,000 so B) NLTCG Ordinary Income S6,000 $4,000 NLTCGOrdinary Income $4,000 $6,000 D) NLTCG|Ordinary Income $4.000 $10,000 40. During the current year, Hugo sells equipment for S150,000 The equipment cost $175,000 when placed in service two years ago, and $55,000 of depreciation deductions were allowed. The results of the sale are A) LTCG of $30,000. B) Sec. 1231 gain of $30,000 potentially receiving LTCG treatment after application of the Sec. 1231 netting process. C) Sec. 1245 ordinary income $30,000. D) Sec. 1250 ordinary income of $30,000. 41. Maria purchased a building in 2010 that she uses in her business. Maria uses the straight-line method for the building. Maria's original cost for the building is $420,000 and cost- recovery deductions are $120,000. Maria is in the top tax bracket and has never sold any other business assets. If the building is sold for $560,000, the tax results are A) $260,000 Sec. 1231 gain, all taxable at 20%. B) S260,000 unrecaptured Sec. 1250 gain, all taxable at 25%. C) $260,000 Sec. 1231 gain, of which $120,000 is unrecaptured Sec. 1250 gain taxable at 25% and the $140,000 balance is taxable at 20% D) $120,000 Sec. 1245 ordinary income, $140,000 Sec. 1231 gain taxable at 20% 42. Dominic and Donita are married and file a joint return for 2021 with taxable income of $100,000 and tax preferences and adjustments of $80,000 for AMT purposes. Their regular tax liability is $13,497. What is the amount of their total tax liability? A) S17,004 B) $46,800 C) $30,501 D) S13,497 43. Casimir and Nadia Perko had alternative minimum taxable income of $1,200,000 in 2021 and file a joint return. For purposes of computing the alternative minimum tax, their exemption is A) S76,400. B) $73,600. C) SO. D) $114,600. 44. Nick has $55,000 of self-employment earnings from a sole proprietorship. Nick is also employed part-time by a major corporation and is paid $25,000. Nick's self-employment tax for 2021 is A) $3,886. B) $4,208. C) $7,771. D) $8,415. 45. Tasha and Damien are a married couple with three-year twins. They pay $20,000 in 2021 for daycare for the twins to allow them to work full-time. The couple's AGI is $120,000. For 2021, the couple will be entitled to a child and dependent care credit of (use the American Rescue Plan Act figures for 2021): A) $3,200. B) $1,200. C) $10,000 D) $8,000. 46. Stan and Marta, who are married with modified AGI of $90,000, are sending their son to his first year of college. Their total tuition and related payments during 2021 amounted to $5.500. They have not taken advantage of any other type of tax benefit related to educational expenses. Their American Opportunity Tax Credit for 2021 is A) SI.500. B) S2,000 C) $2.500. D) $5,000 47. Shanice, a single taxpayer, has $100,000 of U.S. source taxable income and $300,000 of foreign source taxable income from countries X and Y for a total worldwide taxable income of $400,000. Countries X and Y levy a total of $89,000 in foreign taxes upon the foreign source taxable income. U.S. taxes before credits are $114,544. The foreign tax credit limitation is A) $28,636 B) $85.908 C) 566,750 D) 589,000 48. In 2021, Isabel is divorced with one child. She has AGI of $20,000 resulting in a federal income tax liability of $120 and an camned income credit of $3,618. She has had 550 of federal income taxes withheld from her pay. Isabel will receive a federal income refund of A) SSSO B) $3.498 C) S3.618 D) $4,048 49. Which of the following statements is incorrect regarding qualifying criteria for the health insurance premium tax credit? A) The insurance policy must be purchased directly from an insurance company. B) Household income must be below designated levels. C) The taxpayer cannot have access to affordable essential coverage through an employer. D) The individual may not be eligible as a dependent of another taxpayer. 50. An individual with AGI equal to or less than $150,000 in the prior year may generally avoid penalties for underpayment of estimated tax in cach of the following cases with the sxception of A) estimated tax is less than $1.500 B) 90% of the tax due for the current year is paid. C) 90% of the tax due for the current year is paid when computed on an annualized basis. D) 100% of the actual tax liability for the prior year is paid