Please look into the attached folder and answer the questions

1. A sole proprietorship purchased an asset for $1,000 in 2013 and its value was $1,500 at the end of 2013. In 2014, the sole proprietorship sold the asset for $1,400. Which statement is incorrect? a The sole proprietorship realized a taxable gain of $400 in 2014 . b The sole proprietorship has a deduction loss of $100 in 2014. . c Under the economic concept of income, the asset declined . d All of the choices are correct. . e None of the choices are correct. . in value by $100 in 201. 2. Frank and Sarah are married, ages 33 and 32, and together have AGI of $120,000 in 2015. They have four dependents and file a joint return. They pay $4,000 for a high deductible health insurance policy and contribute $2,600 to a qualified Health Savings Account. During the year, they paid the following amounts for medical care: $9,200 in doctor and dentist bills and hospital expenses, and $3,000 for prescribed medicine and drugs. In October 2015, they received an insurance reimbursement of $2,000 for the hospitalization. They expect to receive an additional reimbursement of $1,000 in January 2016. Determine the maximum itemized deduction allowable for medical expenses in 2015. a $7,200 . b $3,400 . c $2,200 . d $14,200 . e None of the . choice are correct. 3. Dan and Patricia form Crane Corporation. Dan transfers land (worth $200,000, basis of $60,000) for 50% of the stock in Crane. Patricia transfers machinery (worth $150,000, adjusted basis of $30,000) and provides services worth ($50,000) for 50% of the stock. What are the tax consequences to Dan? a His basis in the . b His basis in the . c Dan recognizes . Crane stock is $200,000. Crane stock is $60,000. a gain of $140,000. d The . transfer of the land does not qualify under 351 e None of the above. . 4 Ken owns a 60% interest in the KTT LLC. On December 31 of the current tax year, his basis in the LLC interest is $128,000. The fair market value of the interest is $140,000. KTT then distributes to Ken $30,000 cash and equipment with an adjusted basis of $5,000 and a fair market value of $8,000. Compute Ken's basis in KTT after the distribution. a $128,000. . b $93,000. . c $5,000. . d $98,000. . e None of the above. . 5 In 1962, Richard received land worth $15,000. The donor's adjusted basis was $20,000. He sells the land for $9,000 in 2015. What is the recognized gain or loss from the transactions? Assume for each of the gift transactions that no gift tax was paid. a $0. . b $6,000 loss. . c $11,000 loss. . d $5,000 loss. . e None of the choices are correct. . 6. Lee is the sole shareholder of an S corporation. At a time when his stock basis is $20,000, the corporation distributes appreciated property worth $60,000 (basis of $20,000). There is no built-in gain. His basis in the property is: 7. Fort, Inc., a calendar year corporation, elects S corporation status for 2015. The company generated a $74,000 NOL in 2014 and another NOL of $43,000 in 2015. Fort stock always is owned by the same four shareholders, each owning 25% of the stock. Paul, one of the shareholders, holds a $6,020 basis in this Fort stock at the beginning of 2015. Which statement is incorrect? a The 2014 C corporation NOL of $74,000 does not carry forward into the S corporation . year. b The 2014 C corporation NOL of $74,000 carries forward into the S corporation year. . c Paul cannot deduct $10,750, a total share of his 2015 NOL. . d Paul has a loss carry over of $4,730. . e None of the choices is correct. . 8. Lilian sued an overzealous bill collector and received the following settlement: Damage to her automobile that the collector attempted to repossess Physical damage to her arm caused by the collector Loss of income while her arm was healing Punitive damages $3,300 15,000 6,000 80,000 Lilian also collected $25,000 of damages for slander to her personal reputation caused by the bill collector misrepresenting the facts to her employer and other creditors. Which statement is correct? a She must include in gross income the punitive damages of $80,000. . b The $3,300 amount received for damage to her automobile is a nontaxable recovery of capital. . c The $25,000 is included in Leigh's gross income because it did not arise out of a physical personal . injury. d Lilian includes $126,000 in her gross income. . e None of the choices are correct. . 9. James and Cathy are divorced this year. As part of the divorce settlement, James transferred stock to Cathy. James purchased the stock for $25,000, and it had a market value of $43,000 on the date of the transfer. Cathy sold the stock for $40,000 a month after receiving it. In addition, James is required to pay Cathy $1,500 a month in alimony. He made five payments to her during the year. When Cathy sells the stock, how much gain or loss does she report? a $0. . b gain $15,000. . c loss ($3,000). . d gain $18,000. . e None of the choices are . correct. 10. In December 2015, Gary, a cash basis taxpayer, paid $1,200 fire insurance for the calendar year 2016 on a building he held for rental income. He deducted the $1,200 insurance premiums on his 2015 tax return. He had $150,000 of taxable income that year. On June 30, 2016, he sold the building and, as a result, received a $500 refund on his fire insurance premiums. As a result of the above: a He should include the $500 in 2016 gross income in accordance with the claim of right doctrine. . b He should add the $500 to his sales proceeds from the building. . c He should include the $500 in 2016 gross income in accordance with the tax benefit rule. . d He should amend his 2015 return and claim $500 less insurance expense. . e None of these choices are correct. . 11. Will's at-risk amount in a passive activity is $25,000 at the beginning of the current year. His current loss from the activity is $35,000 and he has no passive activity income. At the end of the current year, which of the following statements is correct? a Will has a gain of $25,000 suspended under the passive loss rules. . b Will has an at-risk amount in the activity of $35,000. . c Will has a loss of $10,000 suspended under the at-risk rules. . d Will has a loss of $35,000 suspended under the passive loss rules. . e None of the choices are correct. . 12. Turkey, Inc., has determined its taxable income as $215,000 before considering the results of its capital gain or loss transactions. Turkey has a short-term capital loss of $24,000, a long-term capital loss of $38,000, and a short-term capital gain of $39,000. What is Turkey's taxable income? a $215,000. . b $212,700. . c $177,000. . d $230,000. . e None of the choices are correct. . 13. Laura receives $40,000 of cash and land with a $30,000 inside basis to the partnership (value $50,000) in partial liquidation of her interest. Her outside basis for her partnership interest immediately before the distribution is $80,000. Her outside basis in the partnership after the distribution is: a $0. . b $10,000. . c $30,000 . d ($10,000) . e None of the . above. 15. Henry purchased a new business asset (three-year personalty) on July 23, 2013, at a cost of $40,000. Henry takes additional first-year depreciation Determine the cost recovery deduction for 2013. a. $26,666. b. $41,665. c. $33,333. d. $8,333. e. None of the choices are correct. 16. Yates, a calendar year S corporation, distributes $15,000 cash to its only shareholder, Mark, on December 31. Mark's basis in his stock is $20,000, The corporation's AAA balance is $8,000, and it holds $2,500 AEP before the distribution. Mark's basis after distribution is: a $2,500. . b $8,000. . c $5,000. . d $7,500. . e None of the choices are . correct. Mei's adjusted basis for 10,000 shares of Copper, Inc. common stock is $1,000,000. During the year, she receives a 5% stock dividend that is a nontaxable stock dividend. What is her total basis for the stock? 17. a $1,050,000 . b $50,000 . c $1,000,000 . d $100 . e None of the choices . are correct. 18. The taxpayer is a Ph.D. student in accounting at City University. The student is paid $1,500 per month for teaching two classes. Which statement is correct? a The $13,500 is not excludible from taxable income even if the money is . used to pay for tuition and books. b The $13,500 is taxable compensation. . c The $13,500 is not considered a scholarship and, but is compensation. . d A university teaching is considered an employee. . e All of the choices are correct. . 19. Nikeya sells land (adjusted basis of $120,000) to her adult son, Shamed, for its appraised value of $95,000. Which of the following statements is correct? a Nikeya's recognized loss is $25,000 ($95,000 amount realized - $120,000 adjusted basis). . b Shamed's adjusted basis for the land is $120,000 ($95,000 cost + $25,000 disallowed loss for . Nikeya). c If Shamed subsequently sells the land for $112,000, he has a gain of $17,000. . d Nikeya's realized loss of $25,000 is disallowed. . e a., b., and c. are correct. . 20. The BBD Partnership plans to distribute cash of $20,000 to partner Emma at the end of the tax year. The partnership reported a loss for the year, and Emma's share of the loss is $10,000. She holds a basis of $15,000 in the partnership interest, including her share of partnership liabilities. The partnership expects to report substantial income in future years. How much income or loss must Emma report for the tax year? a A loss of . $10,000. b No loss can . be deducted. c No gain must . be reported d A gain of . $20,000. e None of the . above. 21. Albatross Corporation has a deficit in accumulated E & P of $600,000 and has current E & P of $450,000. On July 1, Albatross distributes $500,000 to its sole shareholder, Eugene, who has a basis in his stock of $105,000. As a result of the distribution, Eugene has: a Dividend income of $450,000 and reduces his stock basis to $55,000. . b No dividend income, reduces his stock basis to zero, and has a capital . gain of $500,000. c Dividend income of $105,000 and reduces his stock basis to zero. . d None of the choices. . e Dividend income of $450,000 . and no adjustment to stock basis. 22. Jasmine purchased a warehouse on July 15, 2007, for $3,000,000. She sells the factory building on April 2, 2013. Determine the cost recovery deduction for the year of the sale. a $9,615. . b $3,204. . c $15,876. . d $76,920. . e None of the . above. 23. Sally, a majority shareholder in ABC, Inc., received a $150,000 interest-free loan from the corporation. She is not an employee of the corporation. a Neither Sally's nor the corporation's gross income is affected by the loans because . no interest was charged. b Sally must recognize imputed dividend income and the corporation may recognize . imputed interest expense. c Sally must recognize imputed interest income and the corporation must recognize . imputed interest expense. d All of the choices are correct. . e None of the choices are correct. . 24. Martin transfers real estate with an adjusted basis of $260,000 and fair market value of $350,000 to a newly formed corporation in exchange for 100% of the stock. The corporation assumes the liability on the transferred real estate in the amount of $300,000. Which statement is correct? . a. He recognizes gain of $0 on the transfer. b. Martin's stock basis is $$300,000. c. Martin's stock basis is $$260,000. d. He recognizes gain of $40,000 on the transfer. e. None of the above. 25. Tim wants to upgrade its old machinery. On November 1 of the current year, Tim sells the old machinery for $130,000 cash and marketable securities valued at $70,500. He paid a broker $500 to find a buyer. What's his amount realized on the sale of the machinery? a $200,500 . b $130,000 . c $200,000 . d $0 . e None of the choices are correct. . 26. Dan and Patricia form Crane Corporation. Dan transfers land (worth $200,000, basis of $60,000) for 50% of the stock in Crane. Patricia transfers machinery (worth $150,000, adjusted basis of $30,000) and provides services worth ($50,000) for 50% of the stock. Which statement is incorrect? a . Patricia recognizes no gain on the transfer of the machine. b Patricia has a basis of $30,000 in her Crane stock. . c . Patricia recognizes compensation income of $50,000 on the transfer. d All of the choices are correct. . e . All of the above are incorrect. 27. Suta and David are equal members of the SD LLC, formed on June 1 of the current year. Suta contributed land that he inherited from his uncle in 2007. Suta's uncle purchased the land in 1982 for $30,000. The land was worth $100,000 when his uncle died. The fair market value of the land was $200,000 at the date it was contributed to SD. David has significant experience developing real estate. After SD is formed, he will prepare a plan for developing the property and secure zoning approvals for the LLC. He normally would bill a third party $50,000 for these efforts. He will also contribute $150,000 of cash in exchange for his 50% interest in SD. The value of his 50% interest is $200,000. What basis will David take in his LLC interest? a. $200,000. b. $150,000. c. $30,000. d. $100,000. e. None of the above. 28. Jane, Jon, and Clyde incorporate their respective businesses and form Starling Corporation. On March 1 of the current year, Jane exchanges her property (basis of $50,000 and value of $150,000) for 150 shares in Starling Corporation. On April 15, Jon exchanges his property (basis of $70,000 and value of $500,000) for 500 shares in Starling. On May 10, Clyde transfers his property (basis of $90,000 and value of $350,000) for 350 shares in Starling. If the exchanges are part of a prearranged plan, what gain will Clyde recognize on the exchanges? a $0. . b $260,000. . c $90,000. . d Cannot determine. . e None of the choices are . correct. 29. Heather, an individual, owns all of the outstanding stock in Silver Corporation. Heather purchased her stock in Silver nine years ago, and her basis is $56,000. At the beginning of this year, the corporation has $76,000 of accumulated E & P and no current E & P (before considering the effect of the distributions as noted below). Silver distributes land to Heather. The land was held as an investment and has a fair market value of $54,000 and an adjusted basis of $42,000. Which statement is correct? a Silver doesn't recognize any gain on the distribution of the land to Heather. . b The distribution is tax free to Heather. . c Heather's basis in the land is $54,000. . d Heather's basis in the land is its $42,000. . e None of the choices are correct. . 30. On November 1, 2015, Bill, a cash basis taxpayer, gave Doug common stock. On October 30, 2015, the corporation had declared the dividend payable to shareholders of record as of November 22, 2015. The dividend was paid on December 15, 2015. The corporation has paid the $1,200 dividend once each year for the past ten years, during which Bill owned the stock. When Doug collected the dividend on December 15, 2015: a Bill must include $1,000 (10/12 x $1,200) of the dividend in his gross . income. b Bill must include all of the dividend in his gross income. . c Doug must include all of the dividend in his gross income. . d Doug should treat the $1,200 as a recovery of capital. . e None of the choices are correct. . 31. Kareem acquired 100 shares of Robin Corporation stock for $1,000 on December 31, 2011. He transferred the shares by gift to Megan on December 31, 2014, when the stock was worth $2,000. Which statement is correct? a Megan's holding period begins with the date the stock was transferred to her. . b Kareem's . basis of $2,000 becomes the basis for determining gain or loss on a subsequent sale by Megan. c Megan's holding period begins with the date the stock was acquired by Kareem . d b & c. . e None of the choices are correct. . 32. In 2013, Colin's personal residence was damaged by fire. Colin was insured for 80% of his actual loss, and he received the insurance settlement. Colin had adjusted gross income, before considering the casualty item, of $40,000. Pertinent data with respect to the residence follows: Cost basis $170,000, Value before casualty: $250,000, Value after casualty: $150,000. a $20,000 . b $170,000 . c $15,900 . d $6,500 . e $6,900 . 33. Over the past 25 years, Arthur has purchased 380 shares of Sydney, Inc., common stock. His first purchase was in 1987 when he acquired 30 shares for $20 a share. In 1989, he bought 150 shares at $10 a share. In 2008, he acquired 200 shares at $50 a share. He intends to sell 125 shares at $60 per share in the current year. If his objective is to minimize gain, what is his recognized gain? a $0. . b $1,250. . c $7,500. . d $6,250. . e None of the choices are correct. . 34. Alice and Jane form Osprey Corporation. Alice transfers property, basis of $25,000 and fair market value of $200,000, for 50 shares in Osprey Corporation. Jane transfers property, basis of $50,000 and fair market value of $165,000, and agrees to serve as manager of Osprey for one year; in return, Jane receives 50 shares in Osprey. The value of Jane's services to Osprey is $35,000. Which statement is incorrect? a Jane has income of $35,000, the value of the services she renders to Osprey Corporation. . b Osprey Corporation has a basis of $50,000 in the property it acquires . from Jane. c Osprey Corporation has a basis of $85,000 in the property it acquires . from Jane. d All of the above are correct. . e All of the above are incorrect. . Susan was recently employed by an accounting firm. During the year, she spends $2,500 for a CPA exam review course and begins working on a law degree in night school. Her law school expenses were $4,200 for tuition and $450 for books. Assuming no reimbursement, how much can Susan deduct for the law school expenses? 35. a $4,000 . b $450 . c $4,200 . d $0 . e None of . these 36. Mickey exchanges a rental building, which has an adjusted basis of $520,000, for investment land which has a fair market value of $700,000. In addition, Mickey receives $100,000 in cash. What is the basis of the investment land? a $0. . b $520,000. . c $420.000. . d $700,000. . e None of the choices are correct. . 37. On July 1 of the current year, the T&T Partnership was formed to operate a bed-andbreakfast inn. The partnership paid $3,000 in legal fees for drafting the partnership agreement and $5,000 for accounting fees related to organizing the entity. It also paid $10,000 in syndication costs to locate and secure investments from limited partners. In addition, before opening the inn for business, the entity paid $15,500 for advertising and $36,000 in costs related to an open house just before the grand opening of the property. The partnership opened the inn for business on October 1. How much may the partnership deduct for start up costs in its initial year of operations? a $5,050. . b $4,300. . c $5,000. . d $0. . e None of the above. . 38. Michael holds a full-time job with Brown Company and a part-time job with Tan Corporation. During a workday, he drives 20 miles to Brown, returns home, has a meal, and then drives 15 miles to Tan. Tan is located 12 miles from Brown. What is Michael's deductible mileage? a 12 miles. . b 15 miles. . c 27 miles. . d 47 miles. . e None of the . choices are correct. 39. Andy travels from New York to Phoenix primarily on business. He spends five days conducting business and two days sightseeing. His expenses are $400 (airfare), $150 per day (meals), and $300 per night (lodging). What are his deductible expenses? a $775. . b $2,275. . c $2,650. . d $2,050. . e None . of the choices are correct. 40. Terry, a solvent individual but a recovering alcoholic, embezzled $6,000 from her employer. In the same year that she embezzled the funds, her employer discovered the theft. Her employer did not fire her and told her she did not have to repay the $6,000 if she would attend Alcoholics Anonymous. She met the conditions and her employer canceled the debt. a She did not realize any income because her employer made a gift to . her. b She must include $6,000 in gross income under the tax benefit rule. . c She may exclude the $6,000 from gross income because the debt . never existed. d None of the choices are correct. . e All of the choices are correct. . 41. Hazel purchased a new business asset (seven-year asset) on September 30, 2015, at a cost of $100,000. On October 4, 2015, Hazel placed the asset in service. This was the only asset Hazel placed in service in 2015. Hazel did not elect 179 or additional firstyear depreciation if available. On August 20, 2016, Hazel sold the asset. Determine the cost recovery for 2016 for the asset. (Round your answer to the nearest dollar) a $14,250 . b $17,219 . c $23,750 . d 18,350 . e None of the . choices are correct. 42. Which statement(s) is/are not true? a Tax-exempt income is separately stated on Schedule K of Form 1120S. . b Distribution of appreciated property is taxable to a C corporation but not an S corporation. . c The termination of an S election occurs on the day a corporation ceases to be a small . business corporation. d An S shareholder's basis . e B and C are not true. . is decreased by nondeductible expenses. 43. At the beginning of the tax year, George's basis in the TTT Partnership was $50,000, including his $5,000 share of partnership debt. At the end of the tax year, his share of the entity's debt was $8,000. His share of TTT's ordinary income for the year was $20,000, and he received cash distributions totaling $12,000. In addition, his share of the partnership's tax-exempt income was $1,000. Determine George's basis at the end of the tax year. a $62,000. . b $55,000. . c $74,000. . d $12,000. . e None of . the above. 44. Laura is the CEO of Energize, a publicly held corporation. For the year, she receives a salary of $950,000, a bonus of $600,000, and contributions to her retirement plan of $35,000. The bonus was awarded at the December board meeting based on Laura's threat to accept a better paying job with a competitor. What amount may Energize deduct? a $1,035,000 . b $950,000 . c $985,000 . d $1,585,000 . e None of . the choices are correct. 45. Faith purchased one new asset during the year (five-year property) on November 10, 2013, at a cost of $650,000. She made the 179 election. The income from the business before the cost recovery deduction and the 179 deduction was $550,000. She takes additional first-year depreciation. Determine the total cost recovery deduction with respect to the asset for 2013. a $530,000 . b $130,000 . c $507,500 . d $550,000 . e None of . the choices are correct. 46. Mock, Inc., a calendar year S corporation, has no AEP. During the year, John, an individual shareholder of the corporation, receives a cash distribution of $12,200 from the corporation. His basis in his stock is $9,700. What statement is incorrect? a He recognizes a taxable dividend of $9,700. . b He recognizes a taxable dividend of $12,200. . c His basis after distribution reduces to zero. . d He recognizes a capital gain of $2,500. . e None of the choices are correct. . 47. Tom enters a contest sponsored by a local newspaper. Each contestant is required to submit an essay on local environmental issues. The prize is one year's tuition at State University. Tom wins the contest. The newspaper has a legal obligation to Tom (as the contest winner). Which statement is incorrect? a The payment is not compensation for services. . b The payment is a gift. . c The payment is a scholarship. . d All of the choices are correct. . e All of the choices are not correct. . 48. As a general rule: a The recipient of income from services must pay the tax on the income. . b Income from services is taxed to the person who provides the services. . c Income from a CD is taxed to the person who collects the income. . d Income from investment property is always taxed to the person who . receives the income. e None of the choices are correct. . 49. Which statement is incorrect? a . The at-risk limits and the passive activity loss rules decreased the attractiveness of investments in real estate from a tax perspective. b A theft or other casualty of personal use property cannot create an NOL for an individual. . c Under the at-risk limits and the passive activity loss rules, investors . must consider the economics of the venture instead of the tax benefits or tax avoidance possibilities that an investment may generate. d All of the choices are correct. . e All of the choices are incorrect. . 50. Jessica's husband Tim died during the current year. She was the beneficiary of his life insurance policy in the face amount of $200,000. Because she likes to go on expensive vacations, she is concerned that she will spend all the money in a few months. She decides to leave the money with the insurance company and will take the money out over a period of ten years. In the current year, she receives a check for $23,000 from the insurance company. What are the tax consequences, if any, of this payment to Jessica? a $3,000 is taxable. . b $20,000 is taxable. . c $23,000 is taxable. . d No tax. . e None of the choices . are correct