Question 5: A room in a residence that is used both for personal and business cannot qualify for the office in the home deduction even if the business use predominates. True False

Question 6: Richard owns a principal residence in New Orleans, a vacation lodge in Montana, and a yacht (with living quarters - cooking, sleeping, bathroom facilities) on the Mississippi River. All three properties have mortgages on which Richard pays interest. Qualified residence interest cannot include the interest paid on the mortgage covering the yacht. True False

Question 7: If a taxpayer makes a contribution of ordinary income property, the amount of the deduction is equal to the basis usually of the property. True False

Question 8: Tom pays half of the premiums related to coverage under his employer's group medical plan, and his employer pays the other half. No portion of the total premium is deductible as a medical expense by Tom. True False

Question 9: Ina pays $320 to license her car, of which $280 is based on the value of the car. She can deduct $320 as an itemized deduction. True False

Question 10: In no case may the cutback adjustment (on the itemized deductions) be more than 70 percent of the covered itemized deductions. True False

Question 12: The adjusted basis of property is not increased by the cost of repairs and maintenance to the property. True False

Question 13: Gift property has a zero basis to the donee because the donee did not pay anything for the property. True False

Question 21: John performs services for Paul. Which, if any, of the following factors would help to verify John's status as an independent contractor (rather than as an employee):

a. John furnishes his own tools.

b. Paul specifies John's work schedule.

c. John is paid by the hour rather than for the job performed

d. Paul tells John what to do and supervises his work.

e. None of the above.

Question 26: Irene is a resident of a state that imposes an income tax. Information regarding Irene's state income tax transactions is as follows:

Taxes withheld this year $5,400

Refund received this year from overpayment of last year's tax liability 1,200

Deficiency assessed for two years ago (as a result of audit by the state) 2,000

Interest on the deficiency 300

Both the two-year-old deficiency and interest thereon were paid by Irene this year. If Irene elects to itemize her deductions this year, how much of the above transactions can be claimed?

a. $7,700

b. $7,430

c. $7,400

d. $6,230

e. None of the above.

Question 29: Which of the following items would be an itemized deduction, On Schedule A of Form 1040, not subject to the 2 percent of AGI floor?

a. Casualty and theft losses.

b. Appraisal fee paid to a valuation expert to determine the fair market value of art work donated to a qualified museum.

c. Professional dues paid by an accountant (employed by Ford Motor Co.) to the Institute of Management Accountants.

d. Job hunting costs.

e. None of the above.

Question 36: Which of the following are capital assets?

a. Investment property held by a trade or business.

b. Inventory.

c. Certain copyrights, literary or musical compositions held by the person whose efforts created the property.

d. Accounts receivable associated with the sale of inventory.

e. None of the above.

Question 42: A professor living in San Diego (with a home there) and with a one-year contract at CSU-SB could most likely, under IRS rules, regard the appointment as temporary and deduct expenses of staying overnight in San Bernardino. True False

Question 43: A medical doctor at a continuing medical education seminar in Orlando from his Anchorage home could most likely deduct the cost of the seminar and the travel to and from it and lodging. True False

Question 44: The threshold for cutback of itemized deductions (the phaseout) is based on AGI but is not adjusted for inflation. True False

Question 45: Code section 1231 often (barring non-recaptured 1231 losses) gives the best of both worlds: capital gain and ordinary loss. True False

Question 46: The Soliman case, regarding home offices, was repealed by legislative changes to I.R.C. 280A. True False

Question 58: On August 5, this year, taxpayer (who is under age 55) sells his principal residence with an adjusted basis of $65,000 for $175,000. He pays $10,500 in commissions and $1,200 in legal fees in connection with the sale. One month before the sale, taxpayer painted the house at a cost of $1,500 and repaired various items at a cost of $2,500. On August 15, this year, taxpayer purchases a new home for $125,000. The taxpayer owned the sold principal residence for more than five years and lived in it for more than two years just prior to the sale.

58. The amount realized on the sale of this house is: a. $175,000 b. $164,500 c. $163,300 d. d. Zero e. e. None of the above

Question 59: The gain realized on the sale of the above house is: a.a. $98,300 b. b. $99,500 c. $110,000 d. d. None of the above

Question 60: The "adjusted basis" of the old residence for taxpayer is: a.a. $175,000 b. b. $163,300 c. c. $161,800 d. d. $159,300 e. e. None of the above

Question 61: The recognized gain on the sale of the old principal residence is: a.a. Zero b. b. $34,300 c. c. $98,300 d. d. $50,000 e. e. None of the above

Question 62: The basis of the new residence acquired is: a.a. $54,000 b. b. $61,000 c. c. $98,300 d. d. $125,000e. e. None of the above

Question 66: Eighteen-year ACRS nonresidential real property owned by an individual has accumulated accelerated depreciation of $975,000 at January 1, of this year. This property is sold on January 1, this same year. The original cost of the property was $975,000. The sale price was $1,000,000.

66. The amount of the realized and recognized gain is:

a.a. $60,000 b. b. $150,000 c. c. $175,000 d. d. $1,000,000 e. e. None of the above

Question 67: The character or nature of the gain realized and recognized is:

a.a. All ordinary gain b. b. All capital gain c. c. $105,000 capital gain, $70,000 ordinary income d. d. $25,000 capital gain, $975,000 ordinary income e. e. None of the above

Question 68: If the property had been depreciated using the straight-line method, which of the answers to question 67 would now be correct?

a.a. All ordinary gain b. b. All capital gain c. c. $105,000 capital gain, $70,000 ordinary income d. d. $25,000 capital gain, $975,000 ordinary income e. e. None of the above

Question 69: The half-year conventions used by the ACRS rules and the MACRS rules are the same. True False

Question 70: Under MACRS rules, a mid-quarter convention is required if more than 40% of the value of personal property is placed in service during the fourth quarter of the year. True False

Question 71: For personal property placed in service after December 31, 1992, the S 179 maximum deduction is limited to $17,500. True False

Question 72: The more-than 50% business use only test applies to passenger automobiles. True False

Question 73: The Alternate Depreciation System (ADS) is used to calculate depreciation for AMT. True False

Question 74: Acquired goodwill is amortized over a 15-year period, with a half-year convention. True False

Question 75: 75-76. Polly purchased a new factory building in April, 5 years ago for $5,000,000. On March 3, this year, the building was sold.

75. To calculate the cost recovery in the year of disposition, the percentage from the table must be multiplied by: a.a. 2 b. b. 1 c. c. 2.5 over 12 d. d. 3.5 over 12 e. e. None of the above

Question 76: The allowable cost recovery in the year of disposition is: a.a. $26,708 b. b. $33,073 c. c. $66,146 d. d. $396,876 e. e. None of the above

Question 77: 77-78. Rocky bought 7-year class property on January 4, this year, for $120,000. Assume his business income is $6,000 before the deduction for the Section 179 expense.

77. The amount of the currently deductible 179 expense is: a.a. $4,000 b. b. $6,000 c. c. $10,000 d. d. None of the above

Question 78: The MACRS table percentage (if the table is to be used) which would be applied to the remaining basis of the asset to calculate cost recovery in the first year (in addition to the 179 expense) is: a.a. .1429 b. b. 0 c. c. .20 d. d. None of the above