QUESTION 21

A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.

• Cost of the house (in 1950) $35,000
• Value of the house at date of death (1995): $250,000
• Value at time placed into service as rental property (2005): $400,000
• Depreciation taken on the house: $140,000
• Sales price of the house: $800,000
• Expenses of selling the home: $50,000

In the third year, your friend, who is now your client, was informed by his buyer he is unemployed and wants some leeway on the payments. Your client (without consulting you) defers all payments in year 4 for the client, so he can get back on his feet. Assume the payments were once per year for $25,000 and the gross profit percentage is 40%. What is the gain your client must realize in year 4, even though they receive no cash?

	a.	$25,000
	b.	$0
	c.	$15,000
	d.	$10,000

5 points

QUESTION 22

A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.

• Cost of the house (in 1950) $35,000
• Value of the house at date of death (1995): $250,000
• Value at time placed into service as rental property (2005): $400,000
• Depreciation taken on the house: $140,000
• Sales price of the house: $800,000
• Expenses of selling the home: $50,000

What is the AB of the home at time of sale?

	a.	0
	b.	150,000
	c.	260,000
	d.	110,000

5 points

QUESTION 23

A friend of yours wants to become a client and start a new company, Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 15 years. She inherited this property from her uncle, who owned the home for many years before dying. Below is the information about the property that has been derived from her tax returns.

• Cost of the house (in 1950) $35,000
• Value of the house at date of death (1995): $250,000
• Value at time placed into service as rental property (2005): $400,000
• Depreciation taken on the house: $140,000
• Sales price of the house: $800,000
• Expenses of selling the home: $50,000

Assuming there is 1245 gain, what is the tax rate on the gain?

	a.	3.8%
	b.	15%
	c.	Ordinary rates for the taxpayer
	d.	25%

5 points

QUESTION 24

Fill out the preferential tax rates associated with each marginal tax rate below (numerical value only):

a. 10% - ___%

b. 12% - ___%

c. 22% - ___%

d. 24% - ___%

e. 32% - ___%

f. 35% - ___%

g. 37% - ___%