Q. 1 Ford Corporation has taxable income of $100,000 in 2015. It pays corporate tax of $22,250 and distributes the balance as dividends to John, the sole shareholder. What is Johns taxable income? For 2015, the standard deduction is $6,350 & personal deduction $4,050. A. $77,750 B. $67,350 C. $22,250 D. None of the above.

Q. 2 Same facts as in Question 1, except John operates his business as a sole proprietorship. What is Johns taxable income? (Use the same standard and personal deduction listed above.) A. $77,750 B. $89,600 C. $22,250 D. None of the above.

Q. 3 Abe is a 40% partner in the ABC Partnership. Both Abe and the partnerships tax years end on December 31. In 2017, the partnership generates $200,000 of ordinary taxable income. However, because the partnership needs capital for expansion and debt reduction, Abe makes no cash withdrawals during the year. What is Abes taxable income for 2017? A. $200,000 B. $80,000 C. $40,000 D. None of the above.

Q. 4 Same facts as in Question 3, except the partnership realizes a taxable loss of $100,000 and no ordinary taxable income. The partnership wants to keep the losses and hopes to distribute it in 2018. Can Abe deduct his losses in 2017 and if so how much? A. $40,000 in 2017 B. $100,000 in 2017 C. $200,000 in 2017 D. None of the above.

Q. 5 In 2017, The Long Clinic contributes $20,000 of cash to acquire 30% capital and profits interest in Short LLC. In its first year of operation, the LLC earns ordinary income of $40,000 and makes no distribution to its members. What is The Long Clinics basis at the end of 2017? A. $20,000 B. $32,000 C. $60,000 D. None of the above.

Q. 6 In 2017, The Long Clinic contributes $20,000 of cash to acquire 30% capital and profits interest in Short LLC. In its first year of operation, the LLC earns ordinary income of $40,000 and losses of $10,000 and makes no distribution whatsoever to its members. What is The Long Clinics basis at the end of 2017 the LLC. A. $20,000 B. $32,000 C. $29,000 D. None of the above.

Q. 7 In 2018, The Beautiful Organization contributes $10,000 of cash + Land with a basis of $10,000 and market value of $30,000 to acquire 30% capital and profits interest in the Short LLC. What is The Beautiful Organizations initial basis in the LLC? A. $20,000 B. $40,000 C. $50,000 D. None of the above.

Q. 8 Steve Jobs purchased a building in 2015 for $500,000. A fire destroyed the building on March 2017. Fortunately the building was partially insured. He received a reimbursement of $400,000. Can he claim anything on his tax return in 2017? A. Loss of $500,000 B. Loss of $400,000 C. Loss of $100,000 D. None of the above.

Q. 9 Steve Jobs divorced his wife in 2017. In 2010, Steve Jobs and his wife purchased a home for $400,000. At the time of divorce, the home is worth $900,000. As part of the divorce, Steve Jobs receives the home. He sells the home in 2018 for $1,000,000. Is there a gain or loss on the sale of the property? A. Gain of $600,000 B. Gain of $100,000 C. Gain of $1,000,000 D. None of the above.

Q. 10 A&B, a CPA firm uses the cash method of accounting. In 2016 the firm performs an audit of Blue Corporation and bills the client for $5,000, which is collected in 2017. In 2016, the firm also audits Pink Corporation. Because Pink Corporations precarious financial position, A&B requires Pink to issue an $8,000 secured negotiable note in payment of the fee. The note has a fair market value of $6,000. The firm collects $8,000 on the note in 2017. What are A&Bs gross incomes for 2016 and 2017? A. For 2016, Gross Income of $7,000 and for 2017, Gross Income of $6,000 B. For 2016, Gross Income of $6,000 and for 2017, Gross Income of $7,000 C. For 2016, Gross Income of $5,000 and for 2017, Gross Income of $8,000 D. None of the above.