55. At a time when Nedras basis in her partnership interest was $5,000, she received a current distribution of $6,000 cash and land with an adjusted basis of $2,000 and a fair market value of $3,000. The partnership had no unrealized receivables or substantially appreciated inventory. What is the result of this distribution to Nedra?

$3,000 capital gain, $2,000 basis in land, $0 basis in partnership interest. $1,000 ordinary income, $2,000 basis in land, $0 basis in partnership interest. $0 gain or loss, $0 basis in land, $(1,000) basis in partnership interest. $1,000 capital gain, $0 basis in land, $0 basis in partnership interest.

[59] Gleim #: 17.4.141 We Converted, Inc., elected S corporation status in Year 2, after 10 years as a C corporation. At the date of conversion, the company had a $50,000 net operating loss (NOL) carryover, which it incurred in Year 1, and a $25,000 capital loss carryover. In Year 5, the company sold a vacant piece of property it owned for 11 years. The sales price of the property was $100,000 and an original cost of $25,000. Given the circumstances as stated above, which of the following statements is true? A. $75,000 of the capital gain is taxable, since the S corporation cannot succeed to the beneficial tax attributes of a former C corporation. B. Only $50,000 of the $75,000 capital gain is subject to S corporation tax. C. No amount of gain is taxable to the S corporation because all income items are separately stated to the shareholders. D. No amount of gain is taxable to the S corporation, because the total of the NOL and capital loss carryover ($75,000) can be used to offset the capital gain on the sale of the property.

[60] Gleim #: 4.2.35 Which of the following statements is true regarding deductible travel expenses when attending a convention? A. The daily limit on the amount that can be deducted for a convention held on a cruise ship is the highest federal per diem rate allowable at the time of travel. B. The convention agenda does not have to deal specifically with the official duties and responsibilities of your position. C. Appointment or election as a delegate to a convention is sufficient in itself to make that delegates travel expense deductible. D. Travel expense for attendance at a conference on investments is deductible if the taxpayer is seeking advice on suitable investments for the production of taxable income.

[61] Gleim #: 16.1.9 Mr. Fox owns 500 shares of stock in Ocean Corporation, which represents 52% of Oceans only class of stock issued and outstanding. Mr. Foxs basis in the stock is $50,000 ($100 per share). Ocean redeems 250 shares of Mr. Foxs stock for $40,000. The redemption is properly treated as a distribution of cash in exchange for the stock. What is Mr. Foxs basis in his remaining shares of stock?

[64] Gleim #: 14.3.70 Cat Corporation, a calendar-year, accrual-basis taxpayer, distributed shares of Fish Corporation stock to Cats employees in lieu of salaries. The salary expense would have been deductible as compensation if paid in cash. On the date of the payment, Cats adjusted basis in the Fish Corporation stock distributed was $25,000, and the stocks fair market value was $85,000. What is the tax effect to Cat Corporation?

$25,000 deduction. $25,000 deduction; $60,000 recognized gain. $85,000 deduction. $85,000 deduction; $60,000 recognized gain.

[66] Gleim #: 18.3.109 With regard to a trust, which of the following statements is false? A. Generally, the trust is taxed on the income currently distributed and on the portion it has accumulated. B. A trust is a separate taxable entity. C. The income allocated to a beneficiary retains the same character in his/her hands as it had in the hands of the trust. D. If income is required to be distributed currently or is properly distributed to a beneficiary, the trust is regarded as a conduit with respect to that income.

69. Turbo Corporation distributed land to shareholder Lea in partial liquidation of her interest. At the time of the distribution, the land had an adjusted basis of $80,000 and a fair market value of $125,000. Lea exchanged 90 of 100 shares of Turbo stock for the land. At the time of the partial liquidation, Leas adjusted basis in the 90 shares was $60,000. Other unrelated shareholders of Turbo own a combined 150 shares outstanding. Just prior to the distribution, Turbo had earnings and profits of $150,000. What are the amounts and the character of income that Turbo Corporation and Lea must recognize on the partial liquidation?

70. Orville Corporation had earnings and profits of $82,000 for the current year before distribution of dividends. On December 31 of the current year, the company distributed inventory with a fair market value of $16,000 and an adjusted basis of $12,000 as a dividend to its sole individual shareholder, Wilbur. The corporation values its inventory by the first-in, first-out method. Assume the corporate tax rate is 35%. What is the earnings and profits balance at the end of the current year?

[72] Gleim #: 19.1.6 Antonio is an ordained minister. As a minister, Antonio is a common-law employee of the church where he works, but his earnings and parsonage allowance are treated as selfemployment income on which he pays self-employment tax. If the church had no retirement plan under which Antonio was covered, which of the following would Antonio be permitted to establish for himself? A. Both a traditional IRA and a Savings Incentive Match Plan for Employees (SIMPLE) IRA. B. Simplified employee pension (SEP). C. Savings Incentive Match Plan for Employees (SIMPLE) IRA. D. Traditional IRA.

[76] Gleim #: 17.4.138 If an S corporation recognizes a built-in gain and pays tax on it, the shareholders report A. Their share of the entire gain in their own taxable income and obtain a credit for their share of taxes paid by the S corporation. B. Only gain from the transaction that is in excess of the built-in gain, i.e., on appreciation accruing after the first day of the first taxable year for which the corporation was an S corporation. C. No gain from the transaction. D. Their share of the individual gains reduced by the taxes paid by the S corporation that are attributable to such gains.

[77] Gleim #: 14.4.91 Renton Corporation had a beginning balance of unappropriated retained earnings of $200,000 and net income per the books of $250,000. During the year, it paid cash dividends of $120,000, had a loss on sale of securities of $7,000, and received a refund of the previous years income taxes of $12,000. What is its ending balance of unappropriated retained earnings for the year?

78. Corporation Zs net long-term capital loss exceeded its net short-term capital gain by $5,000 in Year 6. To what taxable year is the net capital loss first carried?

80. Acme Corporation has a fiscal year beginning April 1 and ending March 31. Acme Corporations estimated tax for the fiscal year is $4,000. When is the first installment of Acme Corporations estimated tax due (without considering Saturdays, Sundays, or holidays)?

[81] Gleim #: 3.1.31 Which of the following expenses is deductible as compensation? A. A loan or an advance for services actually performed when repayment is not expected. B. Wages paid to employees for constructing a new building to be used in the business. C. Lump-sum payments for sick pay that are compensated by insurance. D. Payment for an employee to take classes required for the job.

83. Which of the following items does not increase the basis of property? Zoning costs. Freight and installation costs. Missed depreciation deductions in tax years barred by the statute of limitations. Legal fees to perfect the title.

87Given the following facts, what is the amount of Wood Corporations alternative

minimum tax? Taxable income before net operating loss deductions Total adjustments to taxable income Total tax preference items Regular income tax

92. Phillip died last year, leaving all his property to his three children. This year, Phillips

estate had $25,000 in distributable net income. The executor of Phillips estate, who has full discretion as to when income is to be distributed, made a cash payment of $10,000 to each of the children. What is the amount of the estates distribution deduction?

94. Carlos leased 200 acres of farmland for use in his farming operations. The lease term was

10 years starting on January 1, 2004. The annual rental was $100,000. Early in the lease, Carlos constructed a $50,000 drying facility on the leased land. As of January 1, 2011, Carlos assigned all his lease rights to Lindsey for the balance of the lease. Lindsey paid Carlos $150,000 on January 1 for the lease term and for the value of the drying facility $125,000 allocated to the lease term and $25,000 to the drying facility. Additionally, Lindsey paid the $100,000 annual rent payment to the lessor. If the drying facility were depreciated, the deprecation deduction would be $2,000. What is the total amount Lindsey may deduct on her 2011 tax return for the leased 200 acres including depreciation, if any?