QUESTION 5

Jake Corp. exchanged land valued at $250,000 (adjusted basis = $175,000) for a building owned by Tiger Corporation valued at $350,000 (adjusted basis = $200,000) and $50,000 cash. In addition, Jake Corp. assumed the $150,000 mortgage on Tigers building. What are Jakes and Tigers recognized gain or loss, respectively?

a) 0, 0

b) $50,000, $100,000

c) $50,000, $150,000

d) $75,000, $150,000

QUESTION 6

TJX Corp. donates last years inventory to Goodwill for use in its disaster relief efforts. The clothes have a fair market value of $200,000 and a basis to the corporation of $75,000. What is its charitable contribution deduction?

$200,000

$150,000

$137,500

$100,000

QUESTION 7

Michael purchased a 30% interest in Michelangelo Colors general partnership for $40,000 cash and materially participated in the partnership for the entire year. Michelangelo Colors had $50,000 in liabilities when Michael purchased his interest in it and the liabilities increased $10,000 during the year. If the partnership incurred a $300,000 loss this year, how much of this loss can Michael deduct?

0

$40,000

$58,000

$65,000

QUESTION 8

An exempt organization will not be assessed an unrelated business income tax if:

1. Volunteers perform substantially all the work.
2. The business sells primarily donated merchandise
3. It is a religious or educational institution and the business benefits members
4. All of the above

QUESTION 9

Bruce owns a commercial building which he leases to an unrelated S Corporation. To qualify for the real property business exception for rental activities

1. Bruce must materially participate for at least 500 hours.
2. Bruce must materially participate for at least 750 hours.
3. Bruce and spouse must materially participate for at least 1000 hours.
4. Half of Bruces time must be spent in the activity and must equal at least 500 hours in the activity.

QUESTION 10

Susan is a Partner in a business which publishes college textbooks. When would Susan recognize gain on a partnership distribution?

1. In a liquidating distribution when the fair market value of the property received exceeds partnership interest basis.
2. In a nonliquidating distribution and the cash received exceeds the basis of the partnership interest.
3. In a nonliquidating distribution and the property received exceeds the fair market value of the partnership interest.
4. Gain is not recognized until the property received for the partnership interest is sold.