Exam (elaborations)
TAX 4001 Final, Tax accounting test 3, accct, Federal Taxation Exam #2
- Module
- REE 3433 Chapter 3 Q
- Institution
- REE 3433 Chapter 3 Q
TAX 4001 Final, Tax accounting test 3, accct, Federal Taxation Exam #2
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TAX 4001 Final, Tax accounting test 3,accct, Federal Taxation Exam #2
"Little Magician" is the name of a painting created by artist Lion-o Messy. The owner
recently recognized a $43,500 gain on sale of the figurine. Which of the following
statements is false? - ANS-If a commercial art gallery that had held Little Magician in its
inventory was the seller, the gain is ordinary.
If a private collector who purchased Little Magician from an art gallery was the seller,
the gain is capital gain.
None of these choices are false.
If Lion-o was the seller, the gain is ordinary.
Answer: none of these choices are false
"Tiny Dancer" is the name of a bronze figurine created by artist Diego Ossa. The owner
recently recognized a $43,500 gain on sale of the figurine. Which of the following
statements is false? - ANS-none of the above is false
A business generates profit of $100,000. The owner has a 37% marginal tax rate. What
amount of corporate and individual income tax will be paid on this profit if the business
is a regular corporation and no income is distributed?
CH. 12 - ANS-Corporate tax, $21,000; individual tax, $0
A business generates profit of $100,000. The owner has a 37% marginal tax rate. What
amount of corporate and individual income tax will be paid on this profit if the business
is a regular corporation and no income is distributed? - ANS-Corporate tax, $21,000;
individual tax, $0
A business generates profit of $100,000. The owner has a 37% marginal tax rate. What
amount of corporate and individual income tax will be paid on this profit if the business
is an S corporation and no income is distributed?
CH. 12 - ANS-Corporate tax, $0; individual tax, $37,000
A business generates profit of $100,000. The owner has a 37% marginal tax rate. What
amount of corporate and individual income tax will be paid on this profit if the business
,is an S corporation and no income is distributed? - ANS-Corporate tax $0 and individual
tax $37,000
A business generates profits of $150,000. The owner currently has a 32% marginal tax
rate. What is the total amount of taxes paid if the business is a regular corporation and
$20,000 in dividends is distributed to its sole individual shareholder? - ANS-Corporate
tax, $31,500; individual tax, $3,000
Corporate tax= 150,000 x 21%= 31,500
Individual= 20,000 x 15%= 3,000
A corporation that incurs $33,500 organization costs must capitalize the costs and
amortize them over 180 months - ANS-False
A fire completely destroyed a warehouse owned by Della Company and used for nine
years in its shipping business. Della's adjusted basis in the warehouse was $748,200,
and its replacement value was $1 million. Unfortunately, the warehouse was uninsured.
As a result of the destruction, Della
recognizes - ANS-$748,200 ordinary loss
A fire completely destroyed a warehouse owned by Della Company and used for nine
years in its shipping business. Della's adjusted basis in the warehouse was $748,200,
and its replacement value was $1 million. Unfortunately, the warehouse was uninsured.
As a result of the destruction, Della recognizes: - ANS-$748,200 ORDINARY loss
A fire destroyed furniture and fixtures used in Jock's business. Jock's adjusted basis in
the furniture and fixtures was $81,300. Jock received a $100,000 reimbursement from
his insurance company and immediately spent $93,000 to purchase new furniture and
fixtures. How much gain or loss must Jock recognize on this involuntary conversion? -
ANS-$7,000
A firm can use LIFO for computing cost of goods sold for tax purposes only if it uses
LIFO for
financial reporting purposes. - ANS-True
A firm must capitalize start-up expenditures of a new business in excess of $5,000 but
may deduct expansion costs of an existing business - ANS-True
A firm's choice of taxable year is usually dictated by the annual operating cycle of the
firm's
,business - ANS-True
A guaranteed payment may be designed to compensate a partner for personal services
rendered to the partnership.
T/F
CH. 10 - ANS-True
A nonprofit corporation may incur a federal income tax if it has unrelated business
income.
T/F
CH. 11 - ANS-True
A partnership deducts guaranteed payments paid to its partners in computing ordinary
income, and partners report guaranteed payments received as ordinary income.
T/F
CH. 10 - ANS-True
A taxpayer that operates more than one business may use a different method of
accounting
for each business. - ANS-True
A taxpayer who pays boot in a nontaxable exchange includes the value of the boot in
the basis of the qualifying property received.
T/F
CH. 9 - ANS-True
A taxpayer who pays boot in a nontaxable exchange includes the value of the boot in
the basis of the qualifying property received. - ANS-True
A taxpayer who realizes a loss on the exchange of like-kind property can elect to
recognize the loss. - ANS-False
, A taxpayer who receives boot in a nontaxable exchange must recognize gain equal to
the lesser of the FMV of the boot or the gain realized.
T/F
CH. 9 - ANS-True
A taxpayer who receives boot in a nontaxable exchange must recognize gain equal to
the lesser of the FMV of the boot or the gain realized. - ANS-True
A taxpayer who receives or pays boot in a nontaxable exchange must recognize gain to
the extent of the FMV of the boot.
T/F
CH. 9 - ANS-False
Payment of boot does not trigger gain recognition.
A tornado demolished several delivery vans owned for three years by Wadham
Company. Wadham's adjusted basis in the vans was $28,400, and Wadham paid
$90,000 to purchase new vans. Wadham received a $25,000 settlement from its
casualty insurance company. Consequently, Wadham recognizes: - ANS-none of these
choices are correct
Aaron James has a qualifying home office. The office is 500 square feet and the entire
house is 2,500 square feet. Use the following information to determine his allowable
home office deduction:
Net income from self-employment before home office deduction$ 150,000Expenses
from home (100%)Home mortgage interest12,000Property taxes4,000Homeowner's
insurance2,500Utilities2,200Depreciation on office portion of home1,100 -
ANS-Allowable home deduction= $5,240
Aaron, Incorporated is a nonprofit corporation that collects and distributes food for
needy families. Aaron, Incorporated also operates a small grocery store for profit. Which
of the following statements is true?
CH. 11 - ANS-Only the income from the grocery store is taxable.
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