Question $1$

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A corporation owns many acres of timber, which it acquired three years ago, and which has a $$120,000$ basis. The timber was cut last year for use in the corporation's business. The FMV of the timber on the first day of last year was $$270,000.$ The corporation made the appropriate election to treat the cutting as a sale or exchange. The timber is sold for $$300,000$ this year. The tax result this year is

Select one:

a$.$

recognition of capital gain of $$30,000.$

b$.$

recognition of Sec. $1231$ gain of $$30,000.$

c$.$

recognition of ordinary income of $$30,000.$

d$.$

no income recognized since all recognition occurs in the year of the cutting of the timber.

Question $2$

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A corporation owns many acres of timber, which it acquired three years ago, and which has a $$150,000$ basis for depletion. The timber is cut during the current year for use in the corporation's business. The FMV of the timber on the first day of the current year is $$280,000.$ If the corporation makes the appropriate election, the tax result is

Select one:

a$.$

recognition of a Sec. $1231$ gain of $$130,000.$

b$.$

no recognition of gain or loss since the timber is used in the business.

c$.$

recognition of a gain at the time of sale if the timber is later sold with the gain equal to the sales price less the basis in the timber.

d$.$

recognition of a gain if the timber is later sold with the gain equal to the sales price less $$280,000($FMV on the first day of the year of the cutting$).$

Question $3$

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Aamir has $$25,000$ of net Sec. $1231$ gains this year on business assets. In addition, incurred $$18,000$ of loss on the sale of stock held six months. Aamir will include in his AGI

Select one:

a$.$

$$3,000$ short term capital loss and $$25,000$ ordinary gain.

b$.$

$$22,000$ net capital gain.

c$.$

$$7,000$ net capital gain.

d$.$

$$7,000$ short$-$term capital gain.

Question $4$

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Alejandro purchased a building in $1985,$ which he uses in his manufacturing business. Alejandro uses the ACRS statutory rates to determine the cost$-$recovery deduction for the building. Alejandro's original cost for the building is $$500,000$ and cost$-$recovery deductions allowed are $$500,000.$ If the building is sold for $$800,000,$ the tax results to Alejandro are

Select one:

a$.$

$$500,000$ Sec. $1245$ ordinary income and $$300,000$ Sec. $1231$ gain.

b$.$

$$800,000$ Sec. $1245$ ordinary income.

c$.$

$$500,000$ Sec. $1245$ ordinary income and $$300,000$ Sec. $1250$ income.

d$.$

$$800,000$ Sec. $1231$ gain.

Question $5$

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All of the following are allowable deductions under the alternative minimum tax except

Select one:

a$.$

charitable contributions.

b$.$

gambling losses.

c$.$

qualified housing interest.

d$.$

state income taxes.

Question $6$

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All of the following are self$-$employment income except

Select one:

a$.$

net income of a sole proprietorship.

b$.$

dividends received by a corporate shareholder.

c$.$

fees received for serving as a director of a corporation.

d$.$

distributive share of partnership income from a partnership operating a business.

Question $7$

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All of the following statements regarding self$-$employment income$/$tax are true except:

Select one:

a$.$

The self$-$employment tax is imposed on net earnings from self$-$employment when self$-$employment income is over $$400.$

b$.$

Self$-$employment tax is computed separately for married individuals filing joint returns.

c$.$

Independent contractors are subject to self$-$employment tax on the amount of net earnings from the self$-$employment activity.

d$.$

Employees who have a business in addition to their regular employment are not subject to the self$-$employment tax since FICA is withheld on their wages.

Question $8$

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Ava has net earnings from self$-$employment of $$125,000.$ She also earned salary of $$170,000$ from a job held earlier in the year. How much Additional Medicare Tax will be owed on the self$-$employment income?

Select one:

a$.$

$$0$

b$.$

$$769$

c$.$

$$855$

d$.$

$$3,625$

Question $9$

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Blair, whose tax rate is $28\%,$ sells one tract of land at a gain of $$29,000$ and another tract of land at a gain of $$11,000.$ Both tracts of land are Sec. $1231$ property. She has never had any other Sec. $1231$ transactions. How are the gains taxed?

Select one:

a$.$

ordinary income of $$40,000$ taxed at $28\%$

b$.$

a net capital gain of $$40,000$ which is not taxed

c$.$

a net capital gain of $$40,000$ taxed at $15\%$

d$.$

ordinary income of $