Ann Jones uses a dry cleaning machine in her business, and it was completely destroyed by fire. At the time of the fire, the adjusted basis was $20,000 and its fair market value was $18,000. How much is Anns loss?

a. $18,000

b. $2,000

c. $20,000

d. None of the above

17. Which of the following is not a passive activity?

a. Owning a business and not materially participating

b. Having rental condos

c. Owning a limited partnership interest in a real estate limited partnership

d. Owning a working interest in oil and gas properties

18. All of the outstanding stock of a closely held C corporation is owned equally by Evelyn Humo and Steve Bufusno. In 2017, the corporation generates taxable income of $20,000 from its active business activities. In addition, it earns $20,000 of interest from investments and incurs a $40,000 loss from a passive activity. How much of a passive loss carryover does the corporation have?

a. $20,000

b. $0

c. $40,000

d. None of the above

19. Billy Ray owns several parcels of rental real estate, and he actively participates in managing the properties. His total loss from these activities in 2017 is $30,000. Assuming that his AGI for 2017 is $110,000, what is the allowable deduction from these properties in 2017?

a. $0

b. $15,000

c. $20,000

d. $30,000

20. When a taxpayer incurs an NOL in 2017, that is not attributable to a casualty or theft loss, the taxpayer may:

a. Carry the NOL forward instead of back.

b. Carry the NOL back three years .

c. Carry the NOL back five years.

d. All of the above.

21. Mike, who is single, has $100,000 of salary, $15,000 of income from a limited partnership, and a $30,000 passive loss from a real estate rental activity in which he actively participates. His modified adjusted gross income is $100,000. Of the $30,000 loss, how much is deductible?

a. $30,000

b. $10,000

c. $25,000

d. $0.

In 2017, Allen Anders sold an asset which cost $70,000. Allen incorrectly claimed $40,000 depreciation over a five-year period. He should have claimed $50,000 depreciation. What was the adjusted basis when sold?

a. $0

b. $20,000

c. $30,000

d. $50,000

e. $70,000

In May 2014, Automatic, Inc. sold land with a basis to Automatic of $100,000, to Jack Jones, its 60% shareholder, for $80,000. In July, Jack sold the land to an unrelated party for $110,000. What is the amount of Jacks recognized gain?

a. $0

b. $10,000

c. $20,000

d. $30,000

Brian Brewster sold property to a buyer who paid him $400,000 cash and assumed an existing mortgage of $150,000. The property had cost $250,000 and he had made improvements of $50,000. Depreciation of $100,000 has been claimed and selling expenses were $20,000. What is the amount of gain?

a. $100,000

b. $200,000

c. $250,000

d. $280,000

e. $330,000

Brenda Baines sells land to Carla Chandler for $15,000 cash and a piece of equipment with an adjusted basis of $15,000 and a fair market value of $20,000. The land was subject to a $25,000 mortgage which Carla assumed. Brenda incurred $2,500 in selling expenses. What is the amount realized by Brenda?

a. $55,000

b. $60,000

c. $52,500

d. $57,500

Bill Burns purchases furniture from his employer for $5,000 during 2017. The fair market value of the furniture is $8,500. What is Bills basis in the furniture?

a. $5,000

b. $8,500

c. $12,500

d. $2,500

Doug Doolittle receives a nontaxable stock dividend of 20 shares of Edwards Corporation common stock with a fair market value at distribution of $800. Doug previously owned 100 shares of Edwards Corporation common stock which he purchased three years ago for $6,000. The basis per share of the 20 shares of Edwards Corporation stock is:

a. $0

b. $40

c. $50

d. $60

George Greco gave Harold Hudson property which George acquired fi ve years ago for $15,000. At the time of the gift, the propertys fair market value was $35,000. Harold subsequently sold the property for $40,000. What amount of gain did Harold realize?

a. $20,000

b. $25,000

c. $5,000

d. $40,000

Kurt Kramer purchased stock five years ago for $12,000 which he gave to Jim Jensen when its fair market value was $9,000. Subsequently, Jim sold the stock for $7,500. What is the amount of Jims loss on the sale?

a. $3,000

b. $1,500

c. $4,500

d. $2,000

On January 1, 2017, Daniel Durrow owned rental property which had an adjusted basis to him of $250,000. Daniel made the following expenditures during 2017:

Ordinary painting of building $ 5,000

Repair of roof section (useful life not appreciably extended) 2,500

Legal fees paid to defend title 10,000

Property taxes 6,000

Assessment for local street improvement (value of property increased greatly) 15,000

Not considering depreciation, what is Daniels basis in the property at year-end?

a. $225,000

b. $240,000

c. $260,000

d. $275,000

e. None of the above

31. When taxpayers sell property in an installment sale and realize gain, they generally recognize the gain:

a. in the first year in which an installment payment is received.

b. over the tax years in which they collect the proceeds from the sale.

c. at the time of the sale.

d. none of the above.