ACC – Misc. Multiple Choice Questions

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25. Research and experimentation expenditures can be:
a. Expensed when incurred.
b. Amortized over 60 or more months.
c. Either (a) or (b).
d. Neither (a) nor (b).

26. Sheldon had salary income of $40,000. In addition, he had the following gains and losses on his property transactions: Long-term capital gain = $14,000; long-term capital loss = $6,000; short-term capital gain = $4,000; short-term capital loss = $8,000. If Sheldon has no other income items, what is his total income before any deductions for the year?
a. $44,000
b. $47,000
c. $48,000
d. $52,000

27. Cliff owned investment stock purchased three years ago for $16,000 and bonds purchased six months ago for $9,800. When he needed money recently, he sold the stock for $13,800 and the bonds for $10,100. What is the amount and type of net gain or loss that Cliff will include in computing his taxable income?
a. $2,200 long-term capital loss
b. $1,900 long-term capital gain
c. $1,900 long-term capital loss
d. $300 short-term capital gain

28. Ginger sold stock that she had purchased five years ago for $15,000 to her brother, Carl, for $12,000. Next month, Carl sold the stock for $11,000. What is the amount and type of gain or loss included in Carl’s income from this sale?
a. 0
b. $1,000 short-term capital loss
c. $ 1,000 long-term capital loss
d. $4,000 short-term capital loss
e. $4,000 long-term capital loss

29. Shawn, a single taxpayer, sold the house he has lived in for seven years for $700,000. He purchased the house for $285,000. He made improvements at a cost of $125,000 and paid a $30,000 commission on the sale. What are Shawn’s realized and recognized gains on the sale?
a. $260,000 realized and recognized
b. $290,000 realized and recognized
c. $260,000 realized and $10,000 recognized
d. $260,000 realized and no gain recognized
e. None of the above

30. Cal exchanges office furniture (fair market value = $100,000; adjusted basis = $90,000) and a business auto (fair market value = $10,000; adjusted basis = $6,000) for fire retardant filing cabinets (fair market value = $110,000; adjusted basis = $80,000). How much gain or loss does Cal recognize on the exchange?
a. 0
b. $4,000 gain on auto
c. $10,000 gain on furniture
d. $14,000 total gain
e. None of the above

31. Which of the following would not be considered an involuntary conversion?
a. The theft of jewelry
b. Sale of property in a flood zone
c. Condemnation of a building for a highway
d. Destruction of a home by a tornado
e. All are involuntary conversions

32. What is the amount of the casualty loss on a business truck that had a fair market value of $14,000 before an accident and $4,000 after an accident, if its adjusted basis is zero?
a. $14,000
b. $10,000
c. $4,000
d. 0
e. None of the above

33. Cal contributes property valued at $50,000 (adjusted basis = $30,000) to a partnership in exchange for a partnership interest valued at $40,000 and $10,000 cash. What is Cal’s recognized gain or loss on these transfers?
a. 0
b. $4,000
c. $10,000
d. $20,000

34. A corporation that owns 72 percent of all the outstanding stock of another corporation:
a. May not file a consolidate return
b. May file a consolidated return
c. May take a 100 percent dividend received deduction
d. May take a 70 percent dividend received deduction
e. Is the parent of the 72 percent-owned company

35. Soho is a personal service corporation that has $1,100,000 of gross revenue and $1,021,000 of deductible expenses? What is its income tax liability?
a. $79,000
b. $30,494
c. $27,650
d. $26,860
e. $15,110

36. The Shepherd Corporation has $40,000 of taxable income, $200,000 of positive adjustments, and a $10,000 preference item. What is its alternative minimum taxable income?
a. $250,000
b. $235,000
c. $230,00
d. $225,000
e. None of the above

37. What is JJ Corporation’s balance in accumulated earnings and profits at the beginning of year 2 if in year 1 it made a $40,000 distribution to its shareholders, its current earnings and profits was $35,000, and its accumulated earnings and profits was $25,000 at the beginning of year 1?
a. $65,000
b. $30,000
c. $25,000
d. $20,000

38. Sam has $80,000 of net income from his sole proprietorship in 2012. What is his deduction for AGI for self-employment taxes?
a. $9,826
b. $6,120
c. $5,652
d. $4,913
e. None of the above.

39. 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 Section 1245 recapture
c. $3,000 charitable contribution
d. $5,000 bond interest
e. All are separately stated.

40. At the beginning of the year, Jill’s basis in her 40 percent limited partnership interest was $10,000. During the year, the partnership reported a loss of $90,000 and the partnership obtained a $40,000 recourse loan on some machinery. How much loss may Jill deduct if she has $40,000 of passive income?
a. $10,000
b. $16,000
c. $26,000
d. $36,000
e. None of the above

41. Stewart is a 30 percent general partner in STP 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 Stewart’s year-end basis in his partnership interest?
a. 0
b. $4,000
c. $31,000
d. $67,000

42. When does a partner recognize gain on a distribution?
a. In a liquidating distribution when the fair market value of the property received exceeds partnership interest basis.
b. In a nonliquidating distribution and the property received exceeds the fair market value of the partnership interest.
c. In a nonliquidating distribution and the cash received exceeds the basis of the partnership interest.
d. Gain is not recognized until the property received for the partnership interest is sold.

43. Mary purchased 40 percent of an S corporation on February 28 of the current year and sells a 20 percent interest on November 30. If the corporation reports $10,000 of income for the year, what income does it report on Mary’s Schedule K-1.
a. $7,534
b. $3,014
c. $4,000
d. $3,184
e. None of the above

44. What is Cheryl’s AGI if she has a taxable salary of $34,000, receives $6,000 of alimony and $600 of interest on her various savings accounts, contributes $3,000 to her traditional IRA, and paid a $100 penalty for cashing in her Certificates of Deposit early?
a. $40,000
b. $39,600
c. $37,500
d. $36,900

45. John and Mary have two children, Anna, age 16, and Tammy, age 21. Anna works after school and earned $4,000 in 2012. Tammy works 30 hours per week and is a part-time student at the local community college. She earned $8,400 in 2012. John’s mother also lives with them; she receives $7,800 in Social Security and $2,000 in interest income from some bonds. John and Mary provide over $10,000 towards her support. How many dependency exemptions may John and Mary claim on their joint tax return?
a. 1
b. 2
c. 3
d. 5

46. Toni is 61 and blind; her husband, Saul, is 67. What is their standard deduction if they file a joint tax return and what is the minimum amount of income they must have to be required to file a tax return, respectively?
a. $11,900; $20,650
b. $14,200; $20,650
c. $14,200; $22,450
d. $11,900; $22,450

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