Tax100 week 4 final exam 2017 may

Tax100 week 4 final exam 2017 may

Subject: Business    / General Business
Question

Question 1

This year Amanda paid $749 in Federal gift taxes on a gratuitous transfer to her nephew. Amanda lives in Texas and does not pay any state or local income taxes. Which of the following is a true statement?

Amanda cannot deduct Federal gift taxes.

Amanda can deduct Federal gift taxes for AGI.

Amanda can deduct Federal gift taxes paid as an itemized deduction.

Amanda must include Federal gift taxes with other miscellaneous itemized deductions.

None of these is true.

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Question 2

The earned income credit is sometimes referred to as a negative income tax.

True

False

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Question 3

In 2015, personal and dependency exemptions are $6,200 for single taxpayers.

True

False

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Question 4

Taxpayers may use historical data to determine the recovery period for tax depreciation.

True

False

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Question 5

Which of the following is NOT a from AGI deduction?

Standard deduction.

Itemized deduction.

Personal exemption.

None of these. All of these are from AGI deductions.

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Question 6

Taxpayers must maintain written contemporaneous records of business purpose when entertaining clients in order to claim a deduction for the expenditures.

True

False

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Question 7

Which of the following is false regarding a section 83(b) election?

The election freezes the value of the employee’s compensation at the grant date.

The election is an important tax planning tool if the stock is expected to increase in value.

The election must be made within 30 days of the grant date.

If an employee leaves before the vesting date, any loss is limited to $3,000.

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Question 8

Which of the following does not ultimately result in a capital gain or loss?

Sale of a personal use asset.

Sale of inventory.

Gain on equipment used in a trade or business held for more than one year, if it is the only asset sale during the year.

Sale of capital stock in another company.

None of these.

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Question 9

Which of the following statements regarding compensation is false?

Wages are usually paid by the hour.

Salary is usually a form of fixed compensation.

Bonuses are a form of compensation obtained if certain criteria are met.

Bonuses paid within 2½ months of year-end are included in employee’s compensation in the year they were earned.

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Question 10

An installment sale is any sale where at least a portion of the sales proceeds is recognized in a subsequent taxable year.

True

False

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Question 11

Which of the following describes a defined contribution plan?

Provides guaranteed income on retirement to plan participants.

Employers and employees generally may contribute to the plan.

Generally set up to defer income for executives and highly compensated employees but not other employees.

Retirement account set up to provide an individual a fixed amount of income on retirement.

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Question 12

How long does a taxpayer have to identify replacement property in a like-kind exchange?

The like-kind property to be received must be identified within 45 days.

The like-kind property to be received must be identified by the earlier of 45 days or the last day of the taxpayer’s taxable year.

The like-kind property to be received must be identified within 180 days.

There is no deadline for the identification of replacement property.

All of these.

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Question 13

Sequoia purchased the rights to cut timber on several tracts of land over a fifteen year period. It paid $500,000 for cutting rights. A timber engineer estimates that 500,000 board feet of timber will be cut. During the current year, Sequoia cut 45,000 board feet of timber, which it sold for $900,000. What is Sequoia’s cost depletion expense for the current year?

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Question 14

Kim has decided to go to litigate a tax issue with the IRS. Describe the trial level courts that Kim may use to litigate the case.

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Question 15

Suzanne received 20 ISOs (each option gives her the right to purchase 20 shares of stock for $12 per share) at the time she started working when the stock price was $13 per share. Three years later, when the share price was $23 per share, she exercised all of her options. If Suzanne holds the shares for one additional year and sells them when the market price is $30, how much gain will Suzanne recognize on the sale and how much tax will she pay assuming her marginal tax rate is 35 percent?

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Question 16

Sarah sold 1,000 shares of stock to her brother, David, for $18,000 last year. Sarah had purchased the stock for $20,000 several years earlier. What is the amount and character of David’s recognized gain or loss in the current year if he sells the stock for $15,000 and $25,000, respectively?

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