TAX 4001 Final Exam Study Guide | Questions & Answers (100 %Score) Latest Updated
2024/2025 Comprehensive Questions A+ Graded Answers | With Expert Solutions
Mrs. Brinkley transferred business property (FMV $340,200; adjusted tax basis
$111,700) to M&W Partnership in exchange for a 36% interest in M&W Partnership.
Compute M&W's recognized gain on its exchange of an equity interest for property and
determine M&W's tax basis in the property received from Mrs. Brinkley. - No gain
recognized; $111,700 tax basis in property
Mr. and Mrs. Upton's marginal tax rate on their joint return is 32%. This year, their
itemized deductions totaled $25,500, and their standard deduction (MFJ) was $25,100.
Compute their incremental tax savings from their itemized deductions. - $128
Mr. Quinn, a single taxpayer, recognized a $900 net short-term capital gain and a
$1,380 long-term capital gain this year. Which of the following statements is false? -
None of these choices are false.
Mr. and Mrs. Borem spent $1,435 for child care for their two dependent children, who
are two and four years old. Mr. Borem's earned income was $55,870, Mrs. Borem had
no earned income, and the AGI on their joint return was $66,210. Calculate their
dependent care credit. - $0
Frederick Tims, a single individual, sold the following investment assets this year.
AssetDate purchasedDate soldTax basisSales price100 shares Gamma
Incorporated01/04/0905/07/21$ 5,000$ 15,00030 shares Land
Incorporated12/31/9110/01/21$ 75,000$ 100,00050 shares Down
Corporation05/10/1311/01/21$ 12,000$ 8,00010 shares Extel
Incorporated03/25/0802/19/21$ 17,000$ 5,000
If Frederick's preferential tax rate on adjusted capital gain is 15%, compute his tax
attributable to the above sales. - $2,850
Kuong Incorporated sold a commercial office building used in the corporate business for
$1.5 million. Kuong purchased the building 20 years ago for a cost of $1.4 million and
had deducted $538,000 MACRS depreciation through date of sale. Kuong should
characterize the $638,000 gain recognized on sale as: - $107,600 ordinary gain and
$530,400 Section 1231 gain
Ms. Dolan, a divorced individual, invited her elderly uncle, Martin, to move into her
home in January of this year. Martin's only income item was $2,390 of taxable interest
on a savings account. Ms. Dolan provides over 90% of her uncle's financial support.
What is Ms. Dolan's filing status for the year? - Head of household
Cramer Corporation and Mr. Chips formed a partnership in which Cramer is the general
partner and Mr. Chips is a limited partner. Cramer contributed $500,000 cash, and Mr.
,Chips contributed a building with a $500,000 FMV and $300,000 tax basis. The
partnership immediately borrowed $700,000 of recourse debt. What is Mr. Chips' tax
basis in its partnership interest? - $500,000
Jackie contributed $60,000 in cash to a partnership for a 50% interest. This year, the
partnership earned $200,000 ordinary business income, made a $20,000 contribution to
the United Way, and distributed $25,000 cash to Jackie. Her tax basis in the partnership
at year end is: - $125,000
At the beginning of year 1, Paulina purchased a 25% general partner interest in Gamma
Partnership for $25,000. Paulina's partnership Schedule K-1 for year 1 reported that her
share of Gamma's debt at year-end was $10,000 and her share of ordinary loss was
$5,000. On January 1, year 2, Paulina sold her interest to another partner for $22,000
cash (including relief of liabilities). Compute Paulina's gain or loss on the sale of her
partnership interest. - $2,000 gain
Mr. and Mrs. Dell, ages 29 and 26, file a joint return and have no dependents for the
year. Here is their relevant information: Standard Deduction Table.
Salaries$ 163,000Dividend income1,900Above-the-line deductions6,200Itemized
deductions30,200
Compute their adjusted gross income (AGI) and taxable income. - AGI $158,700;
taxable income $12,500
Which of the following amounts are not subject to self-employment tax? - Limited
partner's share of partnership income
Which of the following statements regarding the basis limitation on deduction of
partnership losses is false? - Partners can increase tax basis in their partnership
interest only by making additional capital contributions.
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? -
$7,000
Johnson Incorporated and C&K Company entered into an exchange of real property.
Here is the information for the properties to be exchanged.
JohnsonC&KFMV$ 900,000$ 675,000Adjusted tax
basis593,000462,000Mortgage200,000-0-
Pursuant to the exchange, C&K paid $25,000 cash to Johnson and assumed the
mortgage on the Johnson property. Compute Johnson's gain recognized on the
exchange and its tax basis in the property received from C&K. - $225,000 gain
recognized; $593,000 basis in C&K property.
, Fleet, Incorporated owns 85% of the stock of Pete, Incorporated and 35% of the stock
of Zete, Incorporated and 90% of the stock of Bete, Incorporated Bete owns 5% of the
stock of Pete and 5% of the stock of Zete. Zete owns 10% of the stock of Bete. The
remaining stock of Pete and Zete is owned by unrelated individuals. Which of the
following statements is correct?
Group of answer choices - Fleet, Pete, and Bete are an affiliated group.
Which of the following taxpayers can't use the tax rates for married filing jointly in the
current year? - Mr. and Mrs. West were legally divorced on December 21 of the current
year. Mrs. West has not remarried and maintains a home for three dependent children.
Forward Incorporated's book income of $739,000 includes a net long-term capital loss
of $42,000 and charitable contribution of $170,000. Taxable income shown on the
Schedule M-1 would be: - $855,900
Five years ago, Q&J Incorporated transferred land with a $345,000 book and tax basis
for a different parcel of land worth $472,000. Q&J included its $127,000 realized gain in
book income, but the exchange was nontaxable. This year, Q&J sold the parcel of land
received in the exchange for $533,000 cash. Compute Q&J's book and tax gain on sale.
- None of these choices are correct
Gwen and Travis organized a new business as an LLC in which they own equal
interests. The new business generated a $10,000 operating loss its first year. Travis has
no other taxable income for the current year, but expects to have sufficient taxable
income in future years to pay tax in the 24% tax bracket. Which of the following
statements regarding Travis' tax savings from the current LLC loss is true? - Travis can
carry his share of LLC loss forward, and will get tax savings only when he generates
future income.
Marcia is a shareholder in an S corporation and also works for the corporation. This
year, her share of ordinary income was $250,000 and her compensation was $100,000.
Which of the following accurately describes her tax consequences from these earnings?
- Both the ordinary income and the compensation are subject to income tax and the
compensation is subject to payroll tax.
G&G Incorporated transferred an old asset with a $110,300 adjusted tax basis plus
$20,000 cash in exchange for a new asset worth $150,000. Which of the following
statements is false? - The old asset's FMV is $150,000.
Hank exchanged an old asset with a $12,000 adjusted basis for a new asset with a
$32,000 FMV plus $2,000 cash. Compute Hank's realized and recognized gain if the
new and old assets are like-kind properties. - $22,000 realized gain; $2,000 recognized
gain
Ficia Incorporated owned investment land subject to a $294,500 recourse mortgage.
Ficia failed to make timely mortgage payments, so the creditor foreclosed. At date of
