Which of the following properties is a capital asset? a. Artwork displayed in the taxpayers home b. Inventory c. Equipment used in a business d. Offi ce building e. None of the above A single taxpayer sells 3,000 shares of Section 1244 stock (small business corporation stock) at a loss of $125,000. How will this loss be treated on the tax return? a. $125,000 ordinary loss b. $125,000 capital loss c. $50,000 ordinary loss and $75,000 capital loss d. $100,000 ordinary loss and $25,000 capital loss e. None of the above An individual purchased an apartment building for use in a business for $300,000 in 2005. Th e building was sold for $350,000 in October 2013. Depreciation taken was $84,000. If there is no other Section 1231 gain (loss) during the year, how will the gain on the sale of this apartment building be treated? a. $134,000 15% long-term capital gain b. $84,000 15% long-term capital gain; $50,000 25% long-term capital gain c. $50,000 15% long-term capital gain; $84,000 25% long-term capital gain d. $134,000 25% long-term capital gain e. $134,000 short-term capital gain Which of the following is not an example of carryover basis property? a. Stock acquired in a wash sale b. Property inherited from a decendent dying in 2013 c. A nontaxable stock dividend d. Gifted property where the value of the property at the time of the gift exceeds the donors basis. e. All of the above are examples of carryover basis property In 2013, Rick had a $12,000 gain on the sale of stock purchased three years ago, a $7,000 loss on the sale of a personal use automobile, and a $3,000 loss from the sale of land used in his business (owned for six years). Th ese are Ricks only property transactions during the year. Once the netting process is complete, on his tax return Ricks gains and losses will be treated as: a. a $3,000 ordinary loss and a $9,000 net long-term capital loss. b. a $2,000 net long-term capital gain. c. a $3,000 ordinary loss and a $12,000 net long-term capital gain. d. a $9,000 net long-term capital gain. e. none of the above. Th e lookback period for purposes of computing nonrecaptured Section 1231 losses is: a. 7 years. b. 3 years. c. 10 years. d. 5 years. e. indefi nite. A taxpayer whose fi ling status is married fi ling separately recognizes a $5,000 net short-term capital loss and a $1,000 net long-term capital gain during the year. If the taxpayers only other item of income or deduction is his $55,100 of wages, his AGI is: a. $52,100. b. $53,600. c. $55,100. d. $56,100. e. None of the above. CHAPTER 12 Al started a qualifi ed child care program for his employees in 2010. In the current year, he spent $5,000 on qualifi ed child care expenditures and $500 in qualifi ed child care referral expenses. Als current year employerprovided child care credit is: a. $550. b. $1,000. c. $1,300. d. $1,375. e. $1,500. Which of the following credits are not part of the general business credit? a. Rehabilitation credit b. Disabled access credit c. Work opportunity tax credit d. Employer-provided child care credit e. All of the above are part of the general business credit Th e small employer health insurance credit is not available to: a. employers that employ more than 10 full-time equivalent employees. b. employers that pay 50% or less of their employees health insurance premiums. c. employers whose employees wages average more than $25,000. d. both a. and c. e. all of the above. CHAPTER 13 Which of the following statements is correct? a. Th e IRS has the burden of proof in situations where the IRS has reconstructed a taxpayers using statistics. b. Th e IRS has the burden of proof in situations where the taxpayer has complied with the IRSs substantiation and record-keeping requirements. c. Th e IRS has the burden of proof in situations where the IRS is assessing the taxpayer with a penalty. d. Th e IRS has the burden of proof in situations where the IRS is accusing the taxpayer of fraud with intent to evade taxes. e. All of the above statements are correct. Th e penalty for each failure to provide certain specifi ed information, like social security numbers, is: a. $50 with an annual maximum of $100,000. b. $30 with an annual maximum of $250,000. c. $100 with an annual maximum of $100,000. d. $60 with an annual maximum of $500,000. e. $100 with an annual maximum of $250,000. Taxpayers who pay estimated taxes must fi le their Estimated Tax Worksheets with the IRS before what date in the year to which the estimate applies? a. January 15 b. February 15 c. March 15 d. April 15 e. None of the above On May 21, 2013, a company triggers the one-day rule. Which of the following statements is correct regarding the companys deposit method? a. Th e company becomes a semiweekly depositor until December 31, 2013. b. Th e company becomes a semiweekly depositor until May 21, 2014. c. Th e company becomes a semiweekly depositor until December 31, 2014. d. Th e company becomes a semiweekly depositor until May 21, 2015. e. Th e company becomes a semiweekly depositor until December 31, 2015. On the employees worksheet for withholding allowances, an additional exemption is allowed if the taxpayer expects his child and dependent care credit to be at least: a. $500. b. $1,500. c. $1,900. d. $2,500. e. $950. FUTA is required to be paid on: a. wages paid to the employers 21-year-old daughter. b. wages paid to the employers spouse. c. wages paid to the employers parents. d. wages paid to statutory employees. e. wages paid to a domestic worker who was paid $800 during the current year and the previous year. CHAPTER 14 For corporations, capital losses are deductible: a. to the extent of the capital gains included in gross income. b. to the extent they exceed capital gains included in gross income. c. to the extent of the capital expenditures included in gross income. d. to the extent of capital gains plus $3,000. e. none of the above. Costs incurred in investigating entering into or acquiring a new active trade or business are called: a. acquisition costs. b. start-up costs. c. organizational costs. d. investigation costs. e. none of the above. A U.S. corporation has a long-term capital loss of $20,000 for the current year and has a $7,000 short-term capital gain. Last year, its fi rst year of operations, it had $9,000 of short-term capital losses. What is the corporations capital loss carryover to next year? a. $22,000 short-term b. $20,000 long-term and $2,000 short-term c. $13,000 long-term and $9,000 short-term d. $19,000 long-term e. None of the above A calendar-year corporation incurs $54,000 of start-up costs. If the corporation begins business on August 1, 2013, what is the maximum amount of the $54,000 of start-up costs that it can deduct against business income in 2013? a. $1,500. b. $5,389. c. $5,000. d. $6,361. e. $2,472. Personal holding companies (PHCs) are taxed using: a. a progressive rate structure. b. a fl at rate of 33%. c. a fl at rate of 35%. d. a fl at rate of 15%. e. a fl at rate of 25%. Schedules L, M-1, and M-2 must be completed by corporations with: a. total assets at the end of the year of at least $250,000. b. total receipts for the year of at least $250,000. c. total assets at the end of the year of at least $500,000. d. Both a. and b. e. Both b. and c. CHAPTER 15 Which one of the following is not a deductible expense in computing partnership ordinary income? a. Guaranteed payments to partners b. Salaries and wages other than to partners c. Investment interest d. Contributions to employee benefi t plans e. All of the above are deductible in computing partnership ordinary income Which of the following types of businesses would not be considered as a fl ow-through entity? a. LLP b. LLC c. S corporations d. C corporations e. All of the above are considered fl ow-through entities. Which of the following is not a separately stated item? a. Rental income b. Guaranteed payments c. Interest expense d. Interest income e. All of the above are separately stated items Where on the tax return does the partnership show the beginning and end of the year balances in the assets, liabilities, and capital accounts? a. Schedule K b. Schedule K-1 c. Schedule M-1 d. Schedule M-2 e. Schedule L A partnership distributes land with a fair market value (FMV) of $80,000 and an adjusted basis to the partnership of $65,000, to one of its partners, Ted. Teds basis in his partnership interest immediately before the distribution is $33,000: What amount of gain will the partnership recognize on the distribution, and what is Teds basis in the land he receives on the distribution? a. $15,000 gain; $48,000 basis in the land b. $0 gain; $65,000 basis in the land c. $15,000 gain; $65,000 basis in the land d. $0 gain; $33,000 basis in the land e. $0 gain; $80,000 basis in the land Which of the following is an incorrect statement? a. A partner never recognizes a loss on a current distribution of cash from a partnership. b. When a distribution from a partnership consists of cash and noncash property, the cash is considered to be distributed fi rst, followed by the noncash property. c. A partner never recognizes gain or loss on the contribution of property to a partnership solely in exchange for an interest in the partnership. d. When a partnership pays personal expenses on behalf of a partner, the benefi tting partners basis in his partnership interest is not aff ected. e. All of the above are correct statements. CHAPTER 15 An S corporation may not have more than how many shareholders? a. 99 b. 24 c. 25 d. 100 e. 49 Income from an S corporation is taxed: a. always at the shareholder level. b. always at the corporate level. c. always at both the shareholder level and the corporate level. d. at the shareholder level, but only if it is distributed to the shareholders. e. at the corporate level if the income is not distributed to the shareholders. An S corporations separately stated items include all of the following except: a. gross income from business operations. b. tax credits. c. investment interest expense. d. charitable contributions. e. All of the above are separately stated items. Which of the following can be a shareholder in an S corporation? a. Another S corporation b. A partnership with all partners who are individuals c. A trust owned by a single individual d. A C corporation e. None of the above can be shareholders in an S corporation Which of the following is not a separately stated item on an S corporations tax return? a. Dividend income b. Section 179 expense c. Charitable contributions d. Tax credits e. All of the above are separately stated items