Question 1 Betsy Bee has a net short term capital loss of $25,000 in the current tax year She also has a stock she purchased two years ago for $10,000 that is now wrth $30,000 Her best tax planning opportunity with respect to her potential long term capital gain is Question 1 options 1) to recognize the long term gain in the current tax year because she can offset it with the short term capital losses 2) to recognize the long term capital gain because next year the stock may be worth less 3) to postpone recognition of the long term capital gain to receive the benefit of 15 percent preferential capital gains rate when the stock is actually sold 4) to postpone recognition of the long term capital gain until the taxpayer has long term capital losses to offset against it Question 2 Code Sec 469 limits the deductibility of losses for activities in which Question 2 options 1) the taxpayer actively participates 2) the taxpayer does not materially participate 3) the taxpayer is an investor 4) None of the above Question 3 Naomi Grace owns a beach house on Cape Cod She and her family use the home during the summer for one month (28 days) The rest of the summer and into the fall it is rented out for a total of 90 days Naomis Cape Cod property is Question 3 options 1) rented a de minimis amount of time and therefore she includes no income or deductions from the rental in her taxable income calculation 2) used personally for an insignificant amount of time, therefore all her rental income and expenses (allocated between business and personal use) must be reported on Schedule E 3) used personally for a significant amount of time and therefore her rental property is a vacation rental home, and her rental expenses are deductible only to the extent of rental income 4) None of the above Question 4 The following describes the Alternative Minimum Tax Credit Question 4 options 1) It may be used to offset the taxpayers regular tax liability 2) It may be used to offset the taxpayers tentative minimum tax liability 3) It allows the taxpayer a credit against his or her regular tax liability for AMT taxes paid as a result of a permanent adjustment or preference item 4) The credit may be carried forward for five years Save Question 5 Which of the following is a common AMT adjustment Question 5 options 1) The difference between the fair market value and exercise price of an incentive stock option 2) Tax exempt bond interest that is private activity bond interest 3) The deduction for state and local taxes paid 4) Two of the above 5) All of the above Question 6 The goal of the alternative minimum tax scheme is Question 6 options 1) to find a way to tax low income taxpayers who evade the imposition of taxes through tax preferences such as the Earned Income Credit 2) to find a way to tax individuals with significant economic income who do not pay their fair share of regular income taxes because they take advantage of lawful provisions of the tax code that provide tax incentives and preferences such as accelerated depreciation deductions 3) to find a way to tax individuals with significant economic income who do not pay their fair share of regular taxes because they evade taxes by taking advantage of unlawful tax shelters 4) to find a way to tax individuals with significant economic income who do pay their fair share of regular income taxes because they cannot take advantage of lawful provisions of the tax code that provide tax incentives and preferences, such as accelerated depreciation deductions Question 7 Which result is true about a timing difference for AMT purposes Question 7 options 1) An adjustment for AMT depreciation will result in a subtraction from regular taxable income in the early years an asset is placed in service 2) The taxpayer will have a larger adjusted tax basis in a depreciable asset for regular tax purposes rather than for AMT purposes in the early years the asset is placed in service 3) The taxpayer will likely have a gain on the sale of depreciable property for AMT purposes in early years and a loss for regular tax purposes 4) The taxpayer will likely have a larger adjusted tax basis in a depreciable asset for AMT purposes than for regular tax purposes in the early years the asset is placed in service Question 8 In general, a taxpayer who is subject to AMT should consider accelerating income recognition or deferring deduction recognition if the following circumstance exists Question 8 options 1) The taxpayer has primarily permanent adjustments, and thus, little or no tax credit available to offset future regular tax liabilities 2) The taxpayer has primarily timing adjustments, and thus, little or no tax credit available to offset future regular tax liabilities 3) The taxpayers marginal regular tax rate is 25 percent 4) The taxpayers alternative minimum taxable income is close to the exemption phase out levels 5) None of the above Question 9 The starting point for computing a taxpayers alternative minimum tax liability is the taxpayers regular taxable income To reach the alternative minimum tax base Question 9 options 1) adjustment items are added back to regular income and preference items are subtracted 2) adjustment items are added back or subtracted from regular income and preference items are subtracted 3) adjustment items are added back or subtracted from regular income and preference items are added back 4) adjustment items are subtracted from regular income and preference items are added back 5) None of the above Question 10 The general rule of Code Sec 469 is that Question 10 options 1) a taxpayer may deduct losses on passive activities only to the extent of income from passive activities and portfolio income 2) a taxpayer may deduct losses from passive activities only to the extent he or she materially participates in the activity 3) a taxpayer may deduct losses from passive activities only to the extent of passive income 4) a taxpayer may deduct losses from passive activities only when the activity is disposed of in a taxable transaction

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Question 1 Betsy Bee has a net short term capital loss of $25,000 in the current tax year. She also has a stock she purchased

Question 1

Betsy Bee has a net short term capital loss of $25,000 in the current tax year. She also has a stock she purchased two years ago for $10,000 that is now wrth $30,000. Her best tax planning opportunity with respect to her potential long-term capital gain is:

Question 1 options:

1)	to recognize the long-term gain in the current tax year because she can offset it with the short-term capital losses.

2)	to recognize the long-term capital gain because next year the stock may be worth less.

3)	to postpone recognition of the long-term capital gain to receive the benefit of 15-percent preferential capital gains rate when the stock is actually sold.

4)	to postpone recognition of the long-term capital gain until the taxpayer has long-term capital losses to offset against it.

Question 2

Code Sec. 469 limits the deductibility of losses for activities in which:

Question 2 options:

1)	the taxpayer actively participates.

2)	the taxpayer does not materially participate.

3)	the taxpayer is an investor.

4)	None of the above.

Question 3

Naomi Grace owns a beach house on Cape Cod. She and her family use the home during the summer for one month (28 days). The rest of the summer and into the fall it is rented out for a total of 90 days. Naomis Cape Cod property is:

Question 3 options:

1)	rented a de minimis amount of time and therefore she includes no income or deductions from the rental in her taxable income calculation.

2)	used personally for an insignificant amount of time, therefore all her rental income and expenses (allocated between business and personal use) must be reported on Schedule E.

3)	used personally for a significant amount of time and therefore her rental property is a vacation rental home, and her rental expenses are deductible only to the extent of rental income.

4)	None of the above.

Question 4

The following describes the Alternative Minimum Tax Credit:

Question 4 options:

1)	It may be used to offset the taxpayers regular tax liability.

2)	It may be used to offset the taxpayers tentative minimum tax liability.

3)	It allows the taxpayer a credit against his or her regular tax liability for AMT taxes paid as a result of a permanent adjustment or preference item.

4)	The credit may be carried forward for five years.

Save

Question 5

Which of the following is a common AMT adjustment:

Question 5 options:

1)	The difference between the fair market value and exercise price of an incentive stock option.

2)	Tax-exempt bond interest that is private activity bond interest.

3)	The deduction for state and local taxes paid.

4)	Two of the above.

5)	All of the above.

Question 6

The goal of the alternative minimum tax scheme is:

Question 6 options:

1)	to find a way to tax low-income taxpayers who evade the imposition of taxes through tax preferences such as the Earned Income Credit.

2)	to find a way to tax individuals with significant economic income who do not pay their fair share of regular income taxes because they take advantage of lawful provisions of the tax code that provide tax incentives and preferences such as accelerated depreciation deductions.

3)	to find a way to tax individuals with significant economic income who do not pay their fair share of regular taxes because they evade taxes by taking advantage of unlawful tax shelters.

4)	to find a way to tax individuals with significant economic income who do pay their fair share of regular income taxes because they cannot take advantage of lawful provisions of the tax code that provide tax incentives and preferences, such as accelerated depreciation deductions.

Question 7

Which result is true about a timing difference for AMT purposes?

Question 7 options:

1)	An adjustment for AMT depreciation will result in a subtraction from regular taxable income in the early years an asset is placed in service.

2)	The taxpayer will have a larger adjusted tax basis in a depreciable asset for regular tax purposes rather than for AMT purposes in the early years the asset is placed in service.

3)	The taxpayer will likely have a gain on the sale of depreciable property for AMT purposes in early years and a loss for regular tax purposes.

4)	The taxpayer will likely have a larger adjusted tax basis in a depreciable asset for AMT purposes than for regular tax purposes in the early years the asset is placed in service.

Question 8

In general, a taxpayer who is subject to AMT should consider accelerating income recognition or deferring deduction recognition if the following circumstance exists:

Question 8 options:

1)	The taxpayer has primarily permanent adjustments, and thus, little or no tax credit available to offset future regular tax liabilities.

2)	The taxpayer has primarily timing adjustments, and thus, little or no tax credit available to offset future regular tax liabilities.

3)	The taxpayers marginal regular tax rate is 25 percent.

4)	The taxpayers alternative minimum taxable income is close to the exemption phase-out levels.

5)	None of the above.

Question 9

The starting point for computing a taxpayers alternative minimum tax liability is the taxpayers regular taxable income. To reach the alternative minimum tax base:

Question 9 options: