Please answer the questions with explanation

1- Which of the following factors should be considered in determining whether an activity is treated as an appropriate economic unit?

a. The similarities and differences in types of business. b. The extent of common control. c. The extent of common ownership. d. The geographic location. e. All of the above.

2- Joe owns four separate activities. Joe elects not to group them together as a single activity under the appropriate economic unit standard. Joe participates for 130 hours in Activity A, 115 hours in Activity B, 260 hours in Activity C, and 100 hours in Activity D. He has one employee, who works 125 hours in Activity D. Which of the following statements is correct?

a. Activities A, B, C, and D are all significant participation activities. b. Joe is a material participant with respect to Activities A, B, C, and D. c. Joe is not a material participant with respect to Activities A, B, C, and D. d. Losses from all of the activities can be used to offset Joes active income. e. None of the above.

3- Joe buys a piece of land in 2006 for $100. He pays cash of $10 and takes on a $90 mortgage. In 2012, he sells the land to Barry for $100 cash. Barry also assumes Joes mortgage, which at the time of sale was $60. What is Joes gain or loss on the sale?

A. $40 loss

B. No gain or loss

C. $30 gain

D. $60 gain

E. $90 gain

4- Joe buys a piece of machinery in 2006 for $100. Depreciation of $40 is taken on the machinery from 2006 to 2011. In 2011, Joe sells the machinery to Sunny for $30 cash and land with a basis in Sunnys hands of $50 and a fair market value of $70. What is Joes gain or loss on the sale?

A. $10 loss

B. No gain or loss

C. $20 gain

D. $30 gain

E. $40 gain

5- A parent corporation reports an ordinary loss upon the stock of its subsidiary becoming worthless if more than 80% of the aggregate gross receipts for all taxable years have been from investment income. True or False.

6- An apartment building with an adjusted basis of $200,000 was sold by Joe in 2013 for $300,000. The property had been purchased in 2005 for $280,000, and $80,000 of straight-line depreciation had been deducted. What amount of section 1231 gain resulted from this sale?

A. $16,000

B. $20,000

C. $80,000

D. $84,000

E. $100,000

7- Joe had the following activity during the year: loss from fire of $3,000, gain (through insurance proceed) from flood of $4,000, and gain from the sale of property used in his trade or business of $7,000. What is Joes net Section 1231 gains or losses for the year?

A. $4,000 gain

B. $7,000 gain

C. $8,000 gain

D. $11,000 gain

E. none of the above

8- Create a gift tax situation where there would be no gain or loss generated when a donee sells a property bequeathed from a donor and state a reason why this treatment makes sense. Explain why?

9- A shareholder receives a nontaxable stock dividend. Which of the following best describes the treatment:

A. Take the basis per share of the shares owned immediately before the dividend, and assign that same amount to each of the new shares received

B. Take the total basis of shares owned immediately before the dividend, and divide that basis over the old and new shares based on the fair market value of the shares when each was purchased or issued

C. Take the total basis of shares owned immediately before the dividend, and divide that basis over the old and new shares based on the fair market value the shares at the time of the stock dividend

D. Use a FIFO approach and allocate basis.

10- A shareholder is issued two warrants in a transaction qualifying as a nontaxable stock dividend. The shareholder owns 10 shares with a basis of $4 each and the dividend is made when each has a value of $10. Each warrant allows the holder to purchase one share for $5. No separate elections are made by the shareholder. Immediately after the dividend, what is the shareholders basis in each warrant

A. Zero

B. $3

C. $5

D. $8

E. $10

11- Joe owns a business with two separate departments. Department A produces $100,000 of income and Department B incurs a $60,000 loss. Joe participates for 550 hours in Department A and 100 hours in Department B. He has full-time employees in both departments.

a. If Joe elects to treat both departments as a single activity, he cannot offset the $60,000 loss against the $100,000 income. b. Joe may not treat Department A and Department B as separate activities because they are parts of one business. c. If Joe elects to treat the two departments as separate activities, he can offset the $60,000 loss against the $100,000 income. d. If Joe elects to treat both departments as a single activity, he can offset the $60,000 loss against the $100,000 income. e. None of the above