Accounting Expert Answers & Study Resources : Page 94

80) Everest Corp. acquires a machine (seven-year property) on January 10, 2013 at a cost of $2,015,000. Everest makes the election to expense the maximum amount under Sec. 179, but elects out of bonus depreciation. a.Assume that the taxable income from trade or business is $1,000,000. (1) What is the amount.

51) Rosa exchanges business equipment with a $60,000 adjusted basis for a like-kind piece of equipment with a $100,000 FMV and $20,000 of marketable securities. What is Rosa's basis for the new equipment? A) $60,000 B) $80,000 C) $100,000 D) $120,000 52) If there is a like-kind exchange of property between related parties, how long.

31) A loss on the sale of a taxpayer's personal residence is deductible if the taxpayer owned and lived in the home for two of five years. 32) In order for the gain on the sale of a personal residence to be excluded under Section 121, a replacement residence must be.

93) Nick sells land with a $7,000 adjusted basis for $10,000. Nick receives a $2,000 down payment with the balance of $8,000 due the following year. Nick is unable to collect the remaining $8,000 and, after incurring legal fees of $500, he repossesses the land when it has a fair.

1) Realized gain or loss must be recognized unless a specific Code section provides for nonrecognition treatment. 2) In a like-kind exchange, both the property transferred and the property received must be held either for productive use in a trade or business or for investment. 3) The exchange of a personal-use automobile.

41) Reva and Josh Lewis had alternative minimum taxable income of $350,000 in 2013 and file a joint return. For purposes of computing the alternative minimum tax, their exemption is A) $31,775. B) $51,900. C) $49,025. D) $80,800. 42) In computing AMTI, tax preference items are A) excluded. B) added only. C) subtracted only. D) either added or subtracted. 43).

11) The receipt of boot as part of a nontaxable exchange causes a realized loss to be recognized. 12) Where non-like-kind property other than cash is received as boot, the amount of the boot is the property's fair market value. 13) If each party in a like-kind exchange assumes a liability of.

41) Gena exchanges land held as an investment with a $60,000 basis for other land with a $80,000 FMV and a motorcycle with a $10,000 FMV. The acquired land is to be held for investment and the motorcycle is for personal use. What is the amount of recognized gain? A) $0 B).

103) Amber receives a residence ($750,000 FMV, $500,000 adjusted basis) owned for eight years by Jonathan, her former spouse, as part of a divorce settlement. Amber and Jonathan had lived in the home for the four years before the divorce. Seven months after the transfer of the residence, Amber sells.

89) Trent, who is in the business of racing horses, exchanges a racehorse with a basis of $80,000 for $40,000 cash and a trotter (another racehorse) with a $150,000 fair market value. a.What is the amount of gain realized by Trent? b.What is the amount of gain recognized by Trent? c.What is the.

41) Interest is not imputed on a gift loan between two individuals totaling $100,000 except when the borrowed funds are used to purchase income-producing property. 42) In general, a change in accounting method must be approved by the IRS. 43) A new business is established.  It is not a seasonal business.  All.

31) Installment sales of depreciable property which result in recaptured income under Secs. 1245 or 1250 require that the recaptured income be recognized in the year of sale. 32) Costs of tangible personal business property which are expensed under Sec. 179 are subject to recapture if the property is converted to.

51) John has $55,000 net earnings from a sole proprietorship. John is also employed by a major corporation and is paid $25,000. John's self-employment tax (rounded) for 2013 is A) $3,886. B) $4,208. C) $7,771. D) $8,415. 52) Joe has $130,000 net earnings from a sole proprietorship. Joe's self-employment tax (rounded) for 2013 is A) $17,581. B).

61) In year 1 a contractor agrees to build a building for $2,500,000 by the end of year 2. The builder's cost is estimated to be $1,800,000. The actual costs year 1 are $900,000 and year 2's actual costs are $1,100,000. Under the percentage of completion method year 2's gross.

86) On June 1, 2010, Buffalo Corporation purchased and placed in service 7-year MACRS tangible property costing $100,000. On November 10, 2013, Buffalo sold the property for $102,000 after having taken MACRS $47,525 in depreciation deductions. What is the amount and character of Buffalo's gain? 87) An unincorporated business sold two.

81) Elaine owns equipment ($23,000 basis and $15,000 FMV) and a building ($136,000 basis and $148,000 FMV), which are used in her business. Elaine uses straight-line depreciation for both assets, which were acquired several years ago. Both the equipment and the building are destroyed in a fire, and Elaine collects.

11) Self-employed individuals are subject to the self-employment tax if their net earnings are more than the personal exemption amount. 12) One-half of the self-employment tax imposed is allowed as a for AGI deduction. 13) If an individual is an employee and also has self-employment income, the maximum tax base for computing.

1) The present AMT applies to individuals, corporations, estates, and trusts. 2) The alternative minimum tax applies to individuals only if it exceeds the taxpayer's regular income tax liability. 3) For purposes of the AMT, the standard deduction, but not the personal and dependency exemptions, is allowed. 4) An example of an AMT.

61) Ron's building, which was used in his business, was destroyed in a fire. Ron's adjusted basis in the building was $210,000, and its FMV was $330,000. Ron filed an insurance claim and was reimbursed $300,000. In that same year, Ron invested $240,000 of the insurance proceeds in another business.

71) Mitchell and Debbie, both 55 years old and married, sell their personal residence to Sophie.  Sophie pays $225,000 and assumes their $70,000 mortgage. To make the sale they pay $4,000 in commissions and $1,000 in legal costs. They have owned and lived in the house for seven years and.

92) Eduardo is planning to purchase some new pizza ovens for his business. He knows that there are various incentives in the tax law to acquire new assets in 2013. Discuss the tax incentives available and the issues to consider in deciding whether to elect them. 93) Bert, a self-employed attorney,.

71) In July of 2013, Pat acquired a new automobile for $28,000 and used the automobile 80% for business. No election is made regarding Sec. 179. Assuming her business use remains at 80%, Pat can take a maximum depreciation deduction in 2013 of A) $2,528. B) $3,160. C) $8,928. D) $11,160. 72) On January l.

21) In an involuntary conversion, the basis of replacement property is its cost reduced by the gain deferred. 22) A taxpayer may elect to defer recognition of a loss resulting from an involuntary conversion. 23) If the threat of condemnation exists and the taxpayer has reasonable grounds to believe that the property.

  1) A taxpayer's tax year must coincide with the year used to keep the taxpayer's books and records. 2) A fiscal year is a 12-month period that ends on the last day of any month other than December. 3) A partnership must generally use the same tax year of the partners who.

94) Jacqueline dies while owning a building with a $1,000,000 FMV. The building is classified as Sec. 1245 property acquired in 1985 for $850,000. Cost-recovery deductions of $850,000 have been claimed. Pam inherits the property. a.What is the amount of Pam's basis in the property? b.What is the amount of cost-recovery deductions.

87) Lloyd Corporation, a calendar year accrual basis taxpayer, pays its insurance premium each year on June 1, the anniversary of the policy. The premium paid this year is $9,600 while last year's was $9,000. How much of is Lloyd's deduction for insurance this year? 88) In 2013 Anika Co. adopted.

94) Marinda exchanges an office building worth $800,000 (basis is $820,000) for a warehouse worth $850,000.  A part of the exchange she also transfers $50,000 worth of securities which she purchased for $40,000.  a. What are Marinda's realized and recognized gains (losses) on the two assets exchanged? b. What is Marinda's.

83) Indicate with a "yes" or a "no" which of the following are like-kind exchanges. a.Computer used in trade or business for office furniture used in trade or business. b.Apartment building held as an investment for an office building used in trade or business. c.Land used in trade or business for equipment used.

81) On September 2, of this year, Keshawn sold land to Rex, his nephew, for $400,000. Keshawn's basis in the land was $100,000. Rex agreed to pay his uncle $40,000 this year, and $60,000 each year for the next six years plus interest. One month later, Rex sold the land.

76) Lucy, a noncorporate taxpayer, experienced the following Section 1231 gains and losses during the years 2008 through 2013. Her first disposition of a Sec. 1231 asset occurred in 2008.  Assuming Lucy had no capital gains and losses during that time period, what is the tax treatment in each of.

51) Which of the following statements regarding UNICAP is incorrect? A) The UNICAP rules result in more costs being included in inventory for tax purposes than for financial accounting. B) Taxpayers with gross receipts averaging more than $10,000,000 or more for the prior three years must apply the UNICAP provisions. C) Interest.

51) Emma owns a small building ($120,000 basis and $123,000 FMV) and equipment ($35,000 basis and $22,000 FMV). Both assets were acquired three years ago, are used in Emma's business, and are depreciated using straight-line depreciation. Both are destroyed by fire. Insurance proceeds were equal to their FMVs. Only one.

31) Research expenses eligible for the research credit include costs that are incident to the development or improvement of a product or component. 32) The earned income credit is refundable only if a tax has been withheld. 33) The earned income credit is available only to taxpayers with qualifying children. 34) If an.

1) Mark owns an unincorporated business and has $20,000 of Section 1231 gains and $22,000 of Section 1231 losses. He must report a capital loss of $2,000 on his tax return. 2) A net Sec. 1231 gain is treated as ordinary income to the extent of any nonrecaptured net Sec. 1231.

61) For real property placed in service after 1986, depreciation under the MACRS system is calculated using the A) straight-line method and a half-year convention in the year of acquisition and in the year of disposition. B) straight-line method and a mid-month convention in the year of acquisition and in the year.

97) What is the purpose of Sec. 1245 and what is its significance? 98) Jesse installed solar panels in front of his office building in 2011.  The panels are not attached to the building.  After using the solar panels for 13 months, Jesse decided to replace them with a newer model.

41) Blair, whose tax rate is 28%, sells one tract of land at a gain of $29,000 and another tract of land at a gain of $11,000. Both tracts of land are Sec. 1231 property. She has never had any other Sec. 1231 transactions. How are the gains taxed? A) ordinary.

21) The amount recaptured as ordinary income under either Sec. 1245 or Sec. 1250 can never exceed the realized gain. 22) Section 1250 does not apply to assets sold or exchanged at a loss. 23) In addition to the normal recapture rules of Sec. 1250, corporations which sell depreciable real estate are.

98) What is the significance of the Thor Power Tool Co. case? 99) Xerxes Manufacturing, in its first year of operations, produces solar panels which are sold through large building supply and home improvement stores. Xerxes' year-end results include the following: Office rent and utilities$15,000 Salaries of office staff100,000 Salaries of factory workers500,000 Direct materials.

31) The uniform capitalization rules (UNICAP) require the capitalization of some overhead costs that are expensed for financial accounting purposes. 32) Many taxpayers use the LIFO method of inventory valuation because during inflationary periods, LIFO normally results in the lowest inventory value and hence the lowest taxable income. 33) A taxpayer may.

71) Kevin sold property with an adjusted basis of $58,000. The buyer assumed Kevin's existing mortgage of $40,000 and agreed to pay an additional $60,000 consisting of a cash down payment of $40,000, and payments of $4,000, plus interest, per year for the next 5 years. Kevin paid selling expenses.

82) On June 30, 2013, Temika purchased office furniture costing $259,000 and computers with a cost of $400,000. She uses Sec. 179. Her business income is $900,000 without considering Sec. 179. How should she allocate the 179 election in order to maximize her total cost recovery deductions (depreciation and Sec..

86) On May 1, 2008, Empire Properties Corp., a calendar year taxpayer, purchased an apartment building for $1,000,000, of which $400,000 was allocable to the land. The corporation sold the property this year on September 23, 2013. a.What was the corporation's depreciation for the building, using statutory percentages under MACRS for.

11) If realized gain from disposition of business equipment exceeds total depreciation or cost recovery, a portion of the gain will receive Sec. 1231 treatment if the equipment's holding period is more than one year. 12) The purpose of Sec. 1245 is to eliminate the advantage taxpayers would have if they.

21)  Taxpayers with income below phase-out amounts are allowed a child credit of $1,000 for each qualifying child under age 17. 22) Qualified tuition and related expenses eligible for the American Opportunity Tax Credit are limited to those incurred the first two years of postsecondary education. education. 23) Brad and Shelly's daughter is.

61) With respect to residential rental property A) 80% or more of the gross rental income from the building or structure must be rental income from dwelling units in order for it to be classified as residential rental property. B) hotels are not included in this category if less than half of.

99) Kareem's office building is destroyed by fire on April 11, 2013.  Settlement is reached with the insurance company on November 1, 2013 when he receives a check for $900,000.  The property had recently been appraised for $920,000.  Kareem's adjusted basis in the building was $800,000.  a.What is Kareem's realized.

11) Generally, an income tax return covers an accounting period of 12 months. 12) A subsidiary corporation filing a consolidated return with its parent corporation must change its accounting period to conform with its parent's tax year. 13) The final tax return of Marjorie, a single taxpayer on the calendar basis, who.

90) Julie sells her manufacturing plant and land originally purchased in 1980. Accelerated depreciation had been taken on the building, but the building is now fully depreciated. Julie is in the 39.6% marginal tax bracket. Other information is as follows: PropertyOriginal costTotal depreciationAdjusted basis              Selling price Plant              $2,800,000              $2,800,000$0$3,000,000 Land              $   500,000$500,000$800,000 She has.

21) Points paid on a mortgage to buy a personal residence are deductible in the year paid. 22) Under the cash method of accounting, payment by credit card entitles the taxpayer to deduct the expenditure at the time the charge is made. 23) If a cash basis taxpayer gives a note in.