The first and last years of MACRS depreciation deductions for a 5-year

asset costing $10,000 using the half-year convention are:

a. $2,000 and $576

b. $2,000 and $1,000

c. $2,000 and $1,152

d. $2,000 and $2,000

18. Brandon purchased a new car on August 1, 2016 for $14,500. His

records indicate that he uses the car 45 percent for business and 55

percent for personal use. What are his cost recovery deductions for

2016 and 2017?

a. $653; $1,305

b. $1,377; $2,205

c. $1,305; $2,088

d. $798; $1,595

19. Orange Corporation had income from operations of $29,000. What

is the corporation's taxable income including the following property

transactions: Gain on investment stock = $8,000; loss on machinery

held three years = $6,000; $4,000 loss on equipment held 10

months; $4,000 gain on land used for six years for storage of trucks.

What is Orange's Corporation's taxable income?

a. $33,000

b. $27,000

c. $31,000

d. $25,000

20. Alma sells the following depreciable assets from her sole

proprietorship:

Asset Cost

Office furniture $10,000

Age Gain/Loss

4 years ($2,400)

Truck $2,000 5 years 3,100

Bakery equipment $25,000 9 months (4,500)

What should Alma report on her income tax return relative to

these property transactions?

a. $3,800 capital loss

b. $3,100 Section 1245 recapture; $2,400 Section 1231 loss; $4,500

ordinary loss

c. $3,800 ordinary loss

d. $700 Section 1231 gain; $4,500 ordinary loss

e. None of the above

21. Sue has a $10,000 loss on some collectibles, a $5,000 Sec. 1202

gain, and an $11,000 gain on some securities. If all gains and losses

are long-term and Sue is in the 25 percent tax bracket, how is her net

gain taxed?

a. $5,000 at 25%; $1,000 at 15%

b. $6,000 at 28%

c. $5,000 at 28%; $1,000 at 15%

d. $6,000 at 15%

e. None of the above

22. Owl corporation exchanges a building (fair market value =

$800,000, adjusted basis = $600,000) that has a $100,000 mortgage

for another building owned by Dan Corporation (fair market value =

$1,100,000, adjusted basis = $600,000) that is encumbered by a

$400,000 mortgage. Each party assumed the mortgage on the

building received. What are Owl's and Dan's realized gains on this

exchange, respectively?

a. $500,000, $500,000

b. $200,000, $600,000

c. $500,000, $600,000

d. $200,000, $500,000

e. None of the above

23. Pat's investment real estate was condemned on November 14,

2016. On February 14, 2017, he received $250,000 for the property

that had a basis of $210,000. What is the last date that Pat can

acquire replacement property to avoid gain recognition?

a. November 14, 2019

b. February 14, 2020

c. December 31, 2019

d. December 31, 2020

e. None of the above

24. Dan owned a small rental property, which was condemned by the

county to expand a local park. His adjusted basis in the property was

$40,000 and he received a payment of $75,000 from the county. A

year later he purchased a similar piece of real estate for

$70,000. What is Dan's recognized gain on the involuntary

conversion of his rental property?

a. 0

b. $35,000

c. $30,000

d. $10,000

e. $5,000

25. Corporation Parent (P)owns 85 percent of Corporation A1;

Corporation A1 owns 60 percent of Corporation A2; Corporation A2

owns 90 percent of A3; Corporation A3 owns 60 percent of Corporation

A4 and 15 percent of Corporation A2; Corporation A4 owns 100 percent

of Corporation A5. Identify the consolidated group(s) of corporations.

a. P---A1---A2---A3---A4---A5

b. P---A1 only

c. P---A1and A2---A3---A4---A5

d. P---A1; A2---A3; and A4---A5

e. P---A1 and A2---A3

26. Craig received a $25,000 distribution from Yellow Corporation that

the corporation identified as $15,000 dividend and $10,000 return of

capital. What effect does this distribution have on Craig's taxable

income if his basis in the stock of Yellow is $8,000?

a. Increase of $25,000

b. Increase of $17,000

c. Increase of $15,000

d. Increase of $10,000

27. Samuel Co. has had taxable income of $450,000, $570,000,

$760,000 and $680,000 in years 2013 through 2016, respectively.

What were the equal minimum quarterly estimated tax payments for

2016 that Samuel Co. should have made in 2016 to avoid any penalty?

a. $58,000

b. $64,676

c. $57,676

d. $170,000

28. Which of the following is not a separately stated item on a

partnership's Schedule K?

a. A $5,000 long---term capital loss

b. $20,000 of unrecaptured Section 1250

c. $3,000 charitable contribution

d. $5,000 bond interest

e. All are separately stated.

29. Ryan is a 30 percent general partner in ABC Partnership. His basis in his

partnership interest at the beginning of the year was

$40,000. During the year, the partnership reported a $30,000 loss and paid off a

$120,000 recourse debt. What is Ryan's year-end basis in his partnership interest?

a. $0

b. $4,000 c. $5,000

d. $9,000

30. May and Lori form the ML General Partnership. May contributed $20,000 cash in

exchange for her 50 percent partnership interest. During the first year of

partnership operations, the partnership reported net taxable income of $10,000,

May withdrew $8,000 cash from the partnership, and the partnership took out an

$18,000 loan on the last day of the year. May's adjusted basis for her partnership

interest at year end is:

a. $38,000 b. $30,000

c. $26,000 d. $25,000

e. $20,000 f. $17,000

Short Answer Questions

Show and label all your work, zero points will be given if your work is not

labeled and/ or all calculations are not shown, on all the following questions.

Show me what you have learned. Show even very simple and obvious

calculations.

1. BeBe had a tough year! She had two different unfortunate casualties during the

year. First, her car was in an accident. Her car had a value of $20,000. Her basis (her

cost) had been $30,000. After the accident, the value was reduced to only $10,000.

Her insurance company reimbursed her for $3,000 only. Second, she had a separate

free-standing storage she on her property, which burned down. The shed had a fair

market value of $4,000, and a cost adjusted basis to BeBe of $3,500. Her insurance

company reimbursed her $3,000 for her loss. If BeBe's adjusted gross income is

$60,000, what is her deductible casualty loss, if any?

2. June uses her personal car for work as an employee. For the year, June drove 5,000

business miles and 30,000 total miles. Her car-related expenses include $4,000 for

gas; $600 for insurance; $200 for registration fees; $3,000 depreciation, and $100 for

business-related parking and tolls. June's employer does not reimburse her for the use

of her car. Using the actual method, not mileage method, What is June's car expense

deduction for the year?

3. Jackson reports $60,000 sales from his Schedule C business. He has utility and

wages expenses of $20,000, and depreciation of $5,000. Jackson also has $20,000

income from wages as an employee. What is Jackson's self-employment tax for the

year?

4. Dana forms a small manufacturing company. Her company places the following

ng properties into service during the year, on the dates indicated:

Type of property Date placed in service Cost_____

Business building April 6 $275,000

Furniture June 5 $57,000

Machinery September 2 $65,000

Computer December 27 $25,000

She chooses not to

accept any Section 179 expense, and also elects not to take bonus

depreciation. She uses MACRS depreciation. Calculate the first year depreciation on

the building, and also on the machinery:

5. Christina had a $12,000 gain on the sale of stock purchased three years ago, a

$4,000 loss on selling stock she had only owned for 3 months, a $5,000 loss on the sale

of her personal use auto, and a $5,000 loss from the sale of land used in her business

(owned for six years). Chris had no other property transactions this year. What will

be the net effect of these transactions on Chris' tax return, in terms of gains and/or