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    "answer_date_js": "2024-06-28T04:35:26-04:00",
    "answer_date": "2024-06-28 04:35:26",
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    "question_id": "4238924",
    "url": "\/study-help\/questions\/26-on-january-1-of-the-current-taxable-year-sam-4238924",
    "question_creation_date_js": "2024-06-28T04:35:26-04:00",
    "question_creation_date": "Jun 28, 2024 04:35 AM",
    "meta_title": "[Solved] 26. On January 1 of the current taxable y | SolutionInn",
    "meta_description": "Answer of - 26. On January 1 of the current taxable year, Sam and Barbara form an equal partnership. Sam makes a cash contribution | SolutionInn",
    "meta_keywords": "26,january,1,current,taxable,year,sam,barbara,form,equal,partnership,makes",
    "question_title_h1": "26. On January 1 of the current taxable year, Sam and Barbara form an equal partnership. Sam makes a cash contribution of $60,000 and a",
    "question_title": "26. On January 1 of the current taxable year, Sam and Barbara",
    "question_title_for_js_snippet": "26  On January 1 of the current taxable year, Sam and Barbara form an equal partnership  Sam makes a cash contribution of $60,000 and a contribution of property with an adjusted basis to him of $160,000 and a fair market value of $140,000 in exchange for his interest in the partnership  Barbara contributes property with an adjusted basis to her of $120,000 and a fair market value of $200,000in exchange for her partnership interest  Which of the following statements is accurate regarding the income tax consequences of this transaction  a  Sams adjusted basis in his partnership interest is $200,000  b  The partnerships adjusted basis in the property contributed by Sam is $140,000  c  Barbara recognized a gain of $80,000 with respect to her contribution of property  d  Barbaras adjusted basis in her partnership interest is $120,000  27  Tina and Betty formed a partnership  Tina received a 40 percent interest in the partnership in exchange for land with an adjusted basis to her of $60,000 and a fair market value of $80,000  Betty received a 60 percent interest in the partnership in exchange for $120,000 of cash  Three years after the date of contribution, the land contributed by Tina was sold by the partnership to an unrelated third party for $90,000  How much gain was required to be allocated to Tina as a result of the sale by the partnership  a  $4,000  b  $12,000  c  $24,000  d  $30,000  28  When inventory that was contributed to a partnership in exchange for a partnership interest is eventually sold by the partnership, how will the character of the income or loss be determined  a  The character of any income or loss will be ordinary regardless of when the contributed property is sold by the partnership and regardless of the character of the asset in the hands of the partnership  b  The character of any income or loss will be ordinary if the contributed property is sold by the partnership within five years after the date of contribution regardless of the character of the asset in the hands of the partnership c  The character of any income or loss will be based on the character of the asset in the hands of the partnership regardless of when the contributed property is sold by the partnership  d  The character of any income or loss will be ordinary to the extent of the contributing partners built in gain or loss in the property at the time of the contribution regardless of when the contributed property is sold, and any balance will based on the character of the asset in the hands of the partnership  29  Barbara and Bill formed an equal partnership, B B, a general partnership, on January 1, 2011  Barbara contributed $100,000 in exchange for her one half interest  Bill contributed land worth $100,000 that had an adjusted basis to him of $30,000 in exchange for his one half interest  Which of the following statements is accurate with respect to this transaction  a  None of Barbara, Bill, or B B recognized any gain or loss  b  Bill recognized gain of $70,000 , but Barbara and B B did not recognize any gain or loss  c  B B recognized gain of $70,000 , but Barbara and Bill did not recognize any gain or loss  d  Bill and B B each recognized $70,000 of gain, but Barbara did not recognize any gain or loss  30  Which of the following decreases a partners basis in the partners partnership interest  a  Additional contributions the partner makes during the year  b  The partners allocable share of tax exempt income  c  The partners allocable share of partnership items of income and gain  d  Cash distributions to the partner during the year  31  Jim, one of two equal partners of the JJ Partnership, a general partnership, contributed business property with an adjusted basis to him of $15,000 and a fair market value of $10,000 to the JJ Partnership  Jims capital account was credited with $10,000  The property later was sold for $12,000  As a result of this sale, how much gain or loss must Jim report on his personal income tax return  a  $1,000 gain  b  $1,500 loss  c  $2,000 gain  d  $3,000 loss 32  Ronald and Roy formed an equal partnership, R R Partnership, a general partnership, on January 1, 2011  Ronald contributed $100,000 in exchange for his one half interest in R R partnership  Roy contributed land worth $100,000 and with an adjusted basis to Roy of $30,000 in exchange for his one half interest in the partnership  Roy is a real estate developer, and at the time of the contribution, the land was inventory in his hands  The land is a capital asset in the hands of R R Partnership  If R R Partnership sells the land in 2017 to an unrelated taxpayer for $180,000,how much gain will be recognized by R R Partnership and what will be the character of the gain  a  $80,000, all of which gain will be ordinary income b  $150,000,all of which gain will be capital gain  c  $150,000,all of which gain will be ordinary income  d  $150,000, consisting of $80,000 capital gain and $70,000 ordinary income  33  Glenda received a proportionate nonliquidating distribution from the EFG Partnership  The distribution consisted of $10,000 cash and property with an adjusted basis to the partnership of $34,000 and a fair market value of $42,000  Immediately before the distribution, Glendas adjusted basis in her partnership interest was $60,000  How much is Glendas basis in the noncash property distributed to her  a  $10,000  b  $34,000  c  $42,000  d  $50,000  34  The following will result in a corporations loss of S status or failure to qualify except a  issuing two types of stock, voting common stock and non voting common stock  b  having a partnership as a shareholder  c  being incorporated in Canada  d  having 101 shareholders, all unrelated to each other  35  An S corporation will not be subject to federal income tax unless a  75  of its shareholders so elect  b  it has foreign source income  c  it is the successor to a C corporation  d  it elects to become a limited liability company(LLC)  36  Passive investment income may cause an S corporation to lose S status a  if it exceeds 30  of the corporations adjusted gross income for 3 consecutive tax years  b  unless it is not a successor to a C corporation  c  if it is a successor to a C corporation having assets in excess of $10 million fair market value  d  if the passive investment income was generated by real estate investments  37  S corporation owns real estate having a basis of $50,000  When the real estate has appreciated in value to $100,000 S corporation distributes it to a shareholder  The distribution a  has no immediate tax effect and the shareholder takes a basis of $50,000 in the real estate  b  results in the corporation realizing and recognizing gain of $50,000  c  causes any gain recognized by the corporation to be taxed to the corporation  d  is a tax deferred transaction that may cause the corporation to lose its S status if the shareholder distributee is a more than 50  shareholder  38  Distributions to a shareholder from an S corporations Accumulated Adjustments Account(AAA) are a  tax free to the shareholder  b  tax free to the extent of pre 1982 gross income  c  income taxable to the shareholder if the S corporation is the successor to a C corporation  d  forbidden until the S corporations Other Adjustments Account (OAA) is exhausted  39  Bill owns 50  of the outstanding shares of stock of S corporation  a  Bill may revoke the corporations S status  b  Bill may not revoke the S status of the corporation  c  Bill may sell all of his shares to a third party thus causing the deemed dissolution of the S corporation and the deemed creation of a successor C corporation  d  Bill may sell all or any of his shares to Igor, a citizen of Transylvania residing in Stateboro,GA, thus causing the corporation to lose its S status  40  S corporation borrows $5,000 from Bank  6  interest for one year  a  If Bill, one of several shareholders of S corporation, signs an agreement with Bank guaranteeing repayment of the loan, he may add $5,000 to the basis of his S stock  b  If shareholder Bill signs a repayment guarantee he will be entitled to have his Schedule K 1 from S corporation list 100  of the loan interest paid as his deduction to the exclusion of the other shareholders  c  Even if shareholder Bill signs a repayment guarantee he will not be permitted to increase his S corporation stock basis by $5,000  d  Partnership and S corporation tax rules allowing partners shareholders to increase the basis of partners shareholders by the amount of partnership corporation debt are identical  Assume for 2013 that Don made one transfer involving his granddaughter as follows  Don opened a joint checking account with his granddaughter, with right of survivorship, for her college expenses  Don made an initial deposit of $100,000  During 2013, granddaughter wrote checks on the account to the school for tuition of $15,000 and living expenses of $20,000  What is the amount of the taxable gift for federal gift tax purposes  a  0  b  $6,000  c  $21,000  d  $35,000  2  Oliver gave his wife $5,250,000 worth of publicly traded stock in August 2013, outright  Oliver's basis in the stock was $50,000  What is the amount of the taxable gift for federal gift tax purposes  (Oliver made no other gifts to anyone in 2013)  a  0  b  $87,000  c  $100,000  d  $5,087,000  3  For 2013, what is the amount of the maximum gift tax annual exclusion per donor from the value of a gift of a future interest made to any one donee  a  0  b  $14,000  c  $28,000  d  $5,250,000  Facts for Questions 4 and 5  Mr  Grey died on January 1, 2013  Mr  Grey made no gifts during his life  Under his will, Mr  Grey devised all of his probate assets to his wife  Mr  Grey owned the following assets, probate and nonprobate, at the date of his death  Asset 1  Home in Mr  Grey's and Mrs  Grey's (his surviving spouse) names as tenants by the entireties that was purchased in 2006  The home was had a fair market value of $2,000,000 both at the date of Mr  Grey's death and six months after the Mr  Grey's death  Asset 2  Publicly traded stocks and bonds solely in , Mr  Greys name that had a fair market value of $3,000,000 on the date of Mr  Greys death and a fair market value of $2,000,000 six months after Mr  Grey's death  Asset 3  Undeveloped real estate in Mr  Grey's name and the name of his daughter, Sue Smith, jointly with right of survivorship that Mr  Grey purchased in 2006 for $100,000  The property had a fair market value of $2,500,000 at the date of Mr  Greys death and a fair market value of $1,000,000 six months after the date of Mr  Grey's death  Asset 4  A condominium in the decedent's name alone purchased in 2002 and used as a vacation home that had a fair market value of $500,000 on the date of Mr  Greys death  The condominium was sold by the personal representative of the decedent's estate for $250,000 four months after Mr  Greys death  Based on the facts for questions 4 and 5, which of the following options are available to Mr  Greys estate for valuation of the assets includible in the gross estate  a  The estate may use date of death values or it may elect alternate valuation  b  The estate must use date of death values  c  The estate must elect alternate valuation  d  Valuation is not required as no Federal Estate Tax Return is required to be filed  5  Facts for Questions 4 and 5  Mr  Grey died on January 1, 2013  Mr  Grey made no gifts during his life  Under his will, Mr  Grey devised all of his probate assets to his wife  Mr  Grey owned the following assets, probate and nonprobate, at the date of his death  Asset 1  Home in Mr  Grey's and Mrs  Grey's (his surviving spouse) names as tenants by the entireties that was purchased in 2006  The home was had a fair market value of $2,000,000 both at the date of Mr  Grey's death and six months after the Mr  Grey's death  Asset 2  Publicly traded stocks and bonds solely in , Mr  Greys name that had a fair market value of $3,000,000 on the date of Mr  Greys death and a fair market value of $2,000,000 six months after Mr  Grey's death  Asset 3  Undeveloped real estate in Mr  Grey's name and the name of his daughter, Sue Smith, jointly with right of survivorship that Mr  Grey purchased in 2006 for $100,000  The property had a fair market value of $2,500,000 at the date of Mr  Greys death and a fair market value of $1,000,000 six months after the date of Mr  Grey's death  Asset 4  A condominium in the decedent's name alone purchased in 2002 and used as a vacation home that had a fair market value of $500,000 on the date of Mr  Greys death  The condominium was sold by the personal representative of the decedent's estate for $250,000 four months after Mr  Greys death  Based upon the facts presented in the fact pattern for questions 4 and 5, what is the amount of Mr  Greys gross estate for federal estate tax purposes  a  0  b  $2,500,000  c  $3,500,000  d  $4,250,000  e  $7,000,000  6  Louise, who died in January 2013, was survived by her husband, Larry  Louises gross estate was equal to $6,000,000 on the date of death  When Louise died, Louise and Larry owned an undeveloped parcel of real estate in Ocala  The fair market value of the land on the date of Louise's death was $750,000  Larry provided all of the consideration for the purchase of the land, paying $200,000 for it in 2010  Alternate valuation is not available to Louises estate as all assets owned by Louise will pass, either under Louises last will and testament or by operation of law, to Larry and hence, no estate tax will be due because of the marital deduction  What is the amount, if any, includible in Louise's gross estate for federal estate tax purposes with respect to the land  a  0  b  $200,000  c  $375,000  d  $750,000  7  Under Carl's will, Carl created a testamentary trust to be funded with $700,000 worth of assets  All of the income of the trust is payable to Carls child, Jane, for her life, and thereafter, the remaining assets of the trust will pass to The Public Charity  Jane is serving as the trustee  In addition, the trustee has the discretion to distribute all or such portion of the principal as the trustee shall determine for Janes heath, support, and maintenance  Janes father, Carl, died during the current taxable year with a gross estate of $5,350,000  Carls spouse died in 1985 and no estate tax return was due at her death  Which of the following statements is accurate with respect to the federal estate tax  a The estate tax charitable deduction is available to Carls estate for the assets passing to The Public Charity  b  Jane powers with respect to the assets of the trust constitute a general power of appointment  c  Carls estate is not required to file Form 706, the Federal Estate and Generation Skipping Tax Return  d  When Jane dies, her right to trust income for life will not cause inclusion of the assets in her gross estate  8  At the time of his death, Nick owned the following property  Land held by Nick and his sister Ellen, as joint tenants with right of survivorship  The fair market value of the land on the date of Nicks death was $600,000, and the land was purchased by Nick for himself and his sister 20 years before his death for $150,000  Land held by Nick and Amy as tenants by the entirety  The fair market value of the land on the date of Nicks death was $800,000, and the land was purchased by Amy for Nick and Amy five years before Nicks death for $450,000  A one half undivided interest in land held with Lance as tenant in common  The fair market value of the land on the date of Nicks death was $400,000, and the land was purchased by Lance for Nick and Lance four years before Nicks death for $300,000  City of Dayton bonds worth $500,000 purchased by Nick five years before his death, and titled in Nicks sole name  What amount is includible in Nicks gross estate assuming alternate valuation is not available to Nicks estate  a  $800,000  b  $1,100,000  c  $1,200,000  d  $1,700,000  9  If an election is available and is made to use alternate valuation for federal estate tax purposes, then if property X is sold within six months after the decedents death, property X is valued for federal estate tax purposes as of which date  a  The date of the decedents death  b  The date that is six months after the decedents of death  c  The date of sale of the property  d  The date the property is distributed to the beneficiaries  10  Leslie died on October 31, 2013  Prior to 2012, Leslie had never made any gifts, but in 2012 she made some transfers  Specifically, on January 10, 2012, Leslie gave her vacation beach house to her five children outright, as tenants in common  The fair market value of the vacation beach house on the date of the transfer was $50,000  The fair market value of the vacation beach house at the date of Leslie's death was $100,000  When Leslie died on October 31, 2013, she owned a vacant lot jointly with her sister, Melissa, as joint tenants with right of survivorship  Leslie and her sister each contributed $10,000 toward the $20,000 purchase price  The basis of the property did not change subsequent to the purchase, and at Leslie's death, the fair market value of the property was $60,000  There is $90,000 of life insurance on the life of Leslie, and her estate is named as the beneficiary  (Assume all assets have the same value on the alternate valuation date as on the date of death)  What is the amount of Leslies gross estate for federal estate tax purposes  a  $120,000  b  $170,000  c  $220,000  d  $250,000  11  Section 1014 of the Internal Revenue Code a  requires adjustment, after the death of the decedent, to the basis of most items included in a decedents gross estate  b  permits the exclusion from a decedents gross estate of real property located in a foreign country  c  provides mortgage foreclosure relief for real property comprising part of a decedents gross estate  d  will be repealed effective January 1, 2015  12  The maximum federal estate tax charitable deduction is a  50  of the adjusted gross estate  b  100  of the fair market value of gross estate property contributed to charity  c  35  of the adjusted gross estate  d  limited to the cash plus fair market value of securities included in the gross estate and contributed to charity  13  The 2013 and 2014 annual gift tax exclusion per donee is a  $14,000  b  $12,000  c  one half of the fair market value of the gift to a maximum of $20,000  d  not available to reduce the value of present interest gifts  14  The decedent died on March 12, 2013  The longest first income tax year the decedents executor can choose for the estate will end on a  December 31, 2013  b  January 31, 2014  c  February 28, 2014  d  March 31, 2014  15  The trustee of a testamentary trust has distributable net income of $30,000 on December 31, 2013, the last day of the trusts income tax year  On March 3, 2014 the trustee makes a distribution of all distributable net income on hand as of December 31, 2013 to the trust beneficiaries   The trustee a  may elect to have the distribution treated as though made on December 31,2013  b  cannot elect to have the distribution treated as though made on December 31,2013  c  is limited to the lesser of distributable net income or trust accounting income to be deemed as distributed on December 31, 2013  d  cannot elect to have the distribution treated as though made on the prior December 31 for the first income tax year of the trust  16  All of the following are separately stated items on a partners Schedule K 1 except a  short term capital gain  b  ordinary business income of the partnership  c  dividends  d  interest  17  A partnership may deduct start up expenses in the first year of operation to a maximum amount of a  $5,000  b  $50,000  c  25  of start up expenses  d  5  of first years gross income  18  When a partner dies a  the tax year closes for all the partners on date of death  b  the partnership tax year closes with respect to the deceased partner on date of death  c  the partnership tax year closes for all partners on the last day of the tax year as it normally would  d  the partnership may elect a fiscal tax year for all surviving partners beginning on the day after date of death  19  A Family Partnership a  is subject to income taxation as an entity, like a C corporation  b  must register as such with the states business regulation agency, much like a limited partnership  c  must report its annual income on Form 1065 FP and Schedule K 1 FP  d  is subject to having its annual reported income re allocated among family member partners by the IRS  20  A sale of a general partnership interest a  automatically makes the purchaser a general partner  b  is only the sale of the selling partners economic interest in the partnership  c  is automatically subject to the right of first refusal granted by the Uniform Partnership Code to the other partners  d  must first be approved by the other partners and approval may not be unreasonably withheld",
    "question_description": "26. On January 1 of the current taxable year, Sam and Barbara form an equal partnership. Sam makes a cash contribution of $60,000 and a contribution of property with an adjusted basis to him of $160,000 and a fair market value of $140,000 in exchange for his interest in the partnership. Barbara contributes property with an adjusted basis to her of $120,000 and a fair market value of $200,000in exchange for her partnership interest. Which of the following statements is accurate regarding the income tax consequences of this transaction? a. Sams adjusted basis in his partnership interest is $200,000. b. The partnerships adjusted basis in the property contributed by Sam is $140,000. c. Barbara recognized a gain of $80,000 with respect to her contribution of property. d. Barbaras adjusted basis in her partnership interest is $120,000. 27. Tina and Betty formed a partnership. Tina received a 40 percent interest in the partnership in exchange for land with an adjusted basis to her of $60,000 and a fair market value of $80,000. Betty received a 60 percent interest in the partnership in exchange for $120,000 of cash. Three years after the date of contribution, the land contributed by Tina was sold by the partnership to an unrelated third party for $90,000. How much gain was required to be allocated to Tina as a result of the sale by the partnership? a. $4,000. b. $12,000. c. $24,000. d. $30,000. 28. When inventory that was contributed to a partnership in exchange for a partnership interest is eventually sold by the partnership, how will the character of the income or loss be determined? a. The character of any income or loss will be ordinary regardless of when the contributed property is sold by the partnership and regardless of the character of the asset in the hands of the partnership. b. The character of any income or loss will be ordinary if the contributed property is sold by the partnership within five years after the date of contribution regardless of the character of the asset in the hands of the partnership c. The character of any income or loss will be based on the character of the asset in the hands of the partnership regardless of when the contributed property is sold by the partnership. d. The character of any income or loss will be ordinary to the extent of the contributing partners built-in gain or loss in the property at the time of the contribution regardless of when the contributed property is sold, and any balance will based on the character of the asset in the hands of the partnership. 29. Barbara and Bill formed an equal partnership, B&B, a general partnership, on January 1, 2011. Barbara contributed $100,000 in exchange for her one-half interest. Bill contributed land worth $100,000 that had an adjusted basis to him of $30,000 in exchange for his one-half interest. Which of the following statements is accurate with respect to this transaction? a. None of Barbara, Bill, or B&B recognized any gain or loss. b. Bill recognized gain of $70,000 , but Barbara and B&B did not recognize any gain or loss. c. B&B recognized gain of $70,000 , but Barbara and Bill did not recognize any gain or loss. d. Bill and B&B each recognized $70,000 of gain, but Barbara did not recognize any gain or loss. 30. Which of the following decreases a partners basis in the partners partnership interest? a. Additional contributions the partner makes during the year. b. The partners allocable share of tax-exempt income. c. The partners allocable share of partnership items of income and gain. d. Cash distributions to the partner during the year. 31. Jim, one of two equal partners of the JJ Partnership, a general partnership, contributed business property with an adjusted basis to him of $15,000 and a fair market value of $10,000 to the JJ Partnership. Jims capital account was credited with $10,000. The property later was sold for $12,000. As a result of this sale, how much gain or loss must Jim report on his personal income tax return? a. $1,000 gain. b. $1,500 loss. c. $2,000 gain. d. $3,000 loss 32. Ronald and Roy formed an equal partnership, R&R Partnership, a general partnership, on January 1, 2011. Ronald contributed $100,000 in exchange for his one-half interest in R&R partnership. Roy contributed land worth $100,000 and with an adjusted basis to Roy of $30,000 in exchange for his one-half interest in the partnership. Roy is a real estate developer, and at the time of the contribution, the land was inventory in his hands. The land is a capital asset in the hands of R&R Partnership. If R&R Partnership sells the land in 2017 to an unrelated taxpayer for $180,000,how much gain will be recognized by R&R Partnership and what will be the character of the gain? a. $80,000, all of which gain will be ordinary income b. $150,000,all of which gain will be capital gain. c. $150,000,all of which gain will be ordinary income. d. $150,000, consisting of $80,000 capital gain and $70,000 ordinary income. 33. Glenda received a proportionate nonliquidating distribution from the EFG Partnership. The distribution consisted of $10,000 cash and property with an adjusted basis to the partnership of $34,000 and a fair market value of $42,000. Immediately before the distribution, Glendas adjusted basis in her partnership interest was $60,000. How much is Glendas basis in the noncash property distributed to her? a. $10,000. b. $34,000. c. $42,000. d. $50,000. 34. The following will result in a corporations loss of S status or failure to qualify except a. issuing two types of stock, voting common stock and non-voting common stock. b. having a partnership as a shareholder. c. being incorporated in Canada. d. having 101 shareholders, all unrelated to each other. 35. An S corporation will not be subject to federal income tax unless a. 75% of its shareholders so elect. b. it has foreign source income. c. it is the successor to a C corporation. d. it elects to become a limited liability company(LLC). 36. Passive investment income may cause an S corporation to lose S status a. if it exceeds 30% of the corporations adjusted gross income for 3 consecutive tax years. b. unless it is not a successor to a C corporation. c. if it is a successor to a C corporation having assets in excess of $10 million fair market value. d. if the passive investment income was generated by real estate investments. 37. S corporation owns real estate having a basis of $50,000. When the real estate has appreciated in value to $100,000 S corporation distributes it to a shareholder. The distribution a. has no immediate tax effect and the shareholder takes a basis of $50,000 in the real estate. b. results in the corporation realizing and recognizing gain of $50,000. c. causes any gain recognized by the corporation to be taxed to the corporation. d. is a tax deferred transaction that may cause the corporation to lose its S status if the shareholder\/distributee is a more than 50% shareholder. 38. Distributions to a shareholder from an S corporations Accumulated Adjustments Account(AAA) are a. tax free to the shareholder. b. tax-free to the extent of pre-1982 gross income. c. income taxable to the shareholder if the S corporation is the successor to a C corporation. d. forbidden until the S corporations Other Adjustments Account (OAA) is exhausted. 39. Bill owns 50% of the outstanding shares of stock of S corporation. a. Bill may revoke the corporations S status. b. Bill may not revoke the S status of the corporation. c. Bill may sell all of his shares to a third party thus causing the deemed dissolution of the S corporation and the deemed creation of a successor C corporation. d. Bill may sell all or any of his shares to Igor, a citizen of Transylvania residing in Stateboro,GA, thus causing the corporation to lose its S status. 40. S corporation borrows $5,000 from Bank @6% interest for one year. a. If Bill, one of several shareholders of S corporation, signs an agreement with Bank guaranteeing repayment of the loan, he may add $5,000 to the basis of his S stock. b. If shareholder Bill signs a repayment guarantee he will be entitled to have his Schedule K-1 from S corporation list 100% of the loan interest paid as his deduction to the exclusion of the other shareholders. c. Even if shareholder Bill signs a repayment guarantee he will not be permitted to increase his S corporation stock basis by $5,000. d. Partnership and S corporation tax rules allowing partners\/shareholders to increase the basis of partners\/shareholders by the amount of partnership\/corporation debt are identical. Assume for 2013 that Don made one transfer involving his granddaughter as follows: Don opened a joint checking account with his granddaughter, with right of survivorship, for her college expenses. Don made an initial deposit of $100,000. During 2013, granddaughter wrote checks on the account to the school for tuition of $15,000 and living expenses of $20,000. What is the amount of the taxable gift for federal gift tax purposes? a. 0. b. $6,000. c. $21,000. d. $35,000. 2. Oliver gave his wife $5,250,000 worth of publicly traded stock in August 2013, outright. Oliver's basis in the stock was $50,000. What is the amount of the taxable gift for federal gift tax purposes? (Oliver made no other gifts to anyone in 2013). a. 0. b. $87,000. c. $100,000. d. $5,087,000. 3. For 2013, what is the amount of the maximum gift tax annual exclusion per donor from the value of a gift of a future interest made to any one donee? a. 0. b. $14,000. c. $28,000. d. $5,250,000. Facts for Questions 4 and 5. Mr. Grey died on January 1, 2013. Mr. Grey made no gifts during his life. Under his will, Mr. Grey devised all of his probate assets to his wife. Mr. Grey owned the following assets, probate and nonprobate, at the date of his death: Asset 1. Home in Mr. Grey's and Mrs. Grey's (his surviving spouse) names as tenants by the entireties that was purchased in 2006. The home was had a fair market value of $2,000,000 both at the date of Mr. Grey's death and six months after the Mr. Grey's death. Asset 2. Publicly traded stocks and bonds solely in , Mr. Greys name that had a fair market value of $3,000,000 on the date of Mr. Greys death and a fair market value of $2,000,000 six months after Mr. Grey's death. Asset 3. Undeveloped real estate in Mr. Grey's name and the name of his daughter, Sue Smith, jointly with right of survivorship that Mr. Grey purchased in 2006 for $100,000. The property had a fair market value of $2,500,000 at the date of Mr. Greys death and a fair market value of $1,000,000 six months after the date of Mr. Grey's death. Asset 4. A condominium in the decedent's name alone purchased in 2002 and used as a vacation home that had a fair market value of $500,000 on the date of Mr. Greys death. The condominium was sold by the personal representative of the decedent's estate for $250,000 four months after Mr. Greys death. Based on the facts for questions 4 and 5, which of the following options are available to Mr. Greys estate for valuation of the assets includible in the gross estate? a. The estate may use date of death values or it may elect alternate valuation. b. The estate must use date of death values. c. The estate must elect alternate valuation. d. Valuation is not required as no Federal Estate Tax Return is required to be filed. 5. Facts for Questions 4 and 5. Mr. Grey died on January 1, 2013. Mr. Grey made no gifts during his life. Under his will, Mr. Grey devised all of his probate assets to his wife. Mr. Grey owned the following assets, probate and nonprobate, at the date of his death: Asset 1. Home in Mr. Grey's and Mrs. Grey's (his surviving spouse) names as tenants by the entireties that was purchased in 2006. The home was had a fair market value of $2,000,000 both at the date of Mr. Grey's death and six months after the Mr. Grey's death. Asset 2. Publicly traded stocks and bonds solely in , Mr. Greys name that had a fair market value of $3,000,000 on the date of Mr. Greys death and a fair market value of $2,000,000 six months after Mr. Grey's death. Asset 3. Undeveloped real estate in Mr. Grey's name and the name of his daughter, Sue Smith, jointly with right of survivorship that Mr. Grey purchased in 2006 for $100,000. The property had a fair market value of $2,500,000 at the date of Mr. Greys death and a fair market value of $1,000,000 six months after the date of Mr. Grey's death. Asset 4. A condominium in the decedent's name alone purchased in 2002 and used as a vacation home that had a fair market value of $500,000 on the date of Mr. Greys death. The condominium was sold by the personal representative of the decedent's estate for $250,000 four months after Mr. Greys death. Based upon the facts presented in the fact pattern for questions 4 and 5, what is the amount of Mr. Greys gross estate for federal estate tax purposes? a. 0. b. $2,500,000. c. $3,500,000. d. $4,250,000. e. $7,000,000. 6. Louise, who died in January 2013, was survived by her husband, Larry. Louises gross estate was equal to $6,000,000 on the date of death. When Louise died, Louise and Larry owned an undeveloped parcel of real estate in Ocala. The fair market value of the land on the date of Louise's death was $750,000. Larry provided all of the consideration for the purchase of the land, paying $200,000 for it in 2010. Alternate valuation is not available to Louises estate as all assets owned by Louise will pass, either under Louises last will and testament or by operation of law, to Larry and hence, no estate tax will be due because of the marital deduction. What is the amount, if any, includible in Louise's gross estate for federal estate tax purposes with respect to the land? a. 0. b. $200,000. c. $375,000. d. $750,000. 7. Under Carl's will, Carl created a testamentary trust to be funded with $700,000 worth of assets. All of the income of the trust is payable to Carls child, Jane, for her life, and thereafter, the remaining assets of the trust will pass to The Public Charity. Jane is serving as the trustee. In addition, the trustee has the discretion to distribute all or such portion of the principal as the trustee shall determine for Janes heath, support, and maintenance. Janes father, Carl, died during the current taxable year with a gross estate of $5,350,000. Carls spouse died in 1985 and no estate tax return was due at her death. Which of the following statements is accurate with respect to the federal estate tax? a The estate tax charitable deduction is available to Carls estate for the assets passing to The Public Charity. b. Jane powers with respect to the assets of the trust constitute a general power of appointment. c. Carls estate is not required to file Form 706, the Federal Estate and Generation-Skipping Tax Return. d. When Jane dies, her right to trust income for life will not cause inclusion of the assets in her gross estate. 8. At the time of his death, Nick owned the following property: Land held by Nick and his sister Ellen, as joint tenants with right of survivorship. The fair market value of the land on the date of Nicks death was $600,000, and the land was purchased by Nick for himself and his sister 20 years before his death for $150,000. Land held by Nick and Amy as tenants by the entirety. The fair market value of the land on the date of Nicks death was $800,000, and the land was purchased by Amy for Nick and Amy five years before Nicks death for $450,000. A one-half undivided interest in land held with Lance as tenant in common. The fair market value of the land on the date of Nicks death was $400,000, and the land was purchased by Lance for Nick and Lance four years before Nicks death for $300,000. City of Dayton bonds worth $500,000 purchased by Nick five years before his death, and titled in Nicks sole name. What amount is includible in Nicks gross estate assuming alternate valuation is not available to Nicks estate? a. $800,000. b. $1,100,000. c. $1,200,000. d. $1,700,000. 9. If an election is available and is made to use alternate valuation for federal estate tax purposes, then if property X is sold within six months after the decedents death, property X is valued for federal estate tax purposes as of which date? a. The date of the decedents death. b. The date that is six months after the decedents of death. c. The date of sale of the property. d. The date the property is distributed to the beneficiaries. 10. Leslie died on October 31, 2013. Prior to 2012, Leslie had never made any gifts, but in 2012 she made some transfers. Specifically, on January 10, 2012, Leslie gave her vacation beach house to her five children outright, as tenants in common. The fair market value of the vacation beach house on the date of the transfer was $50,000. The fair market value of the vacation beach house at the date of Leslie's death was $100,000. When Leslie died on October 31, 2013, she owned a vacant lot jointly with her sister, Melissa, as joint tenants with right of survivorship. Leslie and her sister each contributed $10,000 toward the $20,000 purchase price. The basis of the property did not change subsequent to the purchase, and at Leslie's death, the fair market value of the property was $60,000. There is $90,000 of life insurance on the life of Leslie, and her estate is named as the beneficiary. (Assume all assets have the same value on the alternate valuation date as on the date of death). What is the amount of Leslies gross estate for federal estate tax purposes? a. $120,000. b. $170,000. c. $220,000. d. $250,000. 11. Section 1014 of the Internal Revenue Code a. requires adjustment, after the death of the decedent, to the basis of most items included in a decedents gross estate. b. permits the exclusion from a decedents gross estate of real property located in a foreign country. c. provides mortgage foreclosure relief for real property comprising part of a decedents gross estate. d. will be repealed effective January 1, 2015. 12. The maximum federal estate tax charitable deduction is a. 50% of the adjusted gross estate. b. 100% of the fair market value of gross estate property contributed to charity. c. 35% of the adjusted gross estate. d. limited to the cash plus fair market value of securities included in the gross estate and contributed to charity. 13. The 2013 and 2014 annual gift tax exclusion per donee is a. $14,000. b. $12,000. c. one-half of the fair market value of the gift to a maximum of $20,000. d. not available to reduce the value of present interest gifts. 14. The decedent died on March 12, 2013. The longest first income tax year the decedents executor can choose for the estate will end on a. December 31, 2013. b. January 31, 2014. c. February 28, 2014. d. March 31, 2014. 15. The trustee of a testamentary trust has distributable net income of $30,000 on December 31, 2013, the last day of the trusts income tax year. On March 3, 2014 the trustee makes a distribution of all distributable net income on hand as of December 31, 2013 to the trust beneficiaries . The trustee a. may elect to have the distribution treated as though made on December 31,2013. b. cannot elect to have the distribution treated as though made on December 31,2013. c. is limited to the lesser of distributable net income or trust accounting income to be deemed as distributed on December 31, 2013. d. cannot elect to have the distribution treated as though made on the prior December 31 for the first income tax year of the trust. 16. All of the following are separately stated items on a partners Schedule K-1 except a. short term capital gain. b. ordinary business income of the partnership. c. dividends. d. interest. 17. A partnership may deduct start-up expenses in the first year of operation to a maximum amount of a. $5,000. b. $50,000. c. 25% of start-up expenses. d. 5% of first years gross income. 18. When a partner dies a. the tax year closes for all the partners on date of death. b. the partnership tax year closes with respect to the deceased partner on date of death. c. the partnership tax year closes for all partners on the last day of the tax year as it normally would. d. the partnership may elect a fiscal tax year for all surviving partners beginning on the day after date of death. 19. A Family Partnership a. is subject to income taxation as an entity, like a C corporation. b. must register as such with the states business regulation agency, much like a limited partnership. c. must report its annual income on Form 1065 FP and Schedule K-1\/FP. d. is subject to having its annual reported income re-allocated among family member partners by the IRS. 20. A sale of a general partnership interest a. automatically makes the purchaser a general partner. b. is only the sale of the selling partners economic interest in the partnership. c. is automatically subject to the right-of-first-refusal granted by the Uniform Partnership Code to the other partners. d. must first be approved by the other partners and approval may not be unreasonably withheld",
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    "related_book": {
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        "isbn": "1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516",
        "edition": "31st Edition",
        "authors": "Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill",
        "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/1124.jpg",
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        "name": "Psychotropic Drug Prescribers Survival Guide Ethical Mental Health Treatment In The Age Of Big Pharma",
        "edition": "1st Edition"
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    "question_posted": "2024-06-28 04:35:26",
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