Final (Hopefully) Final Review Flashcards
Keith, age 12, has 10,000 in unearned income and 20,000 in earned income. How much will be taxed at the child’s tax rate? A) 0. B) 7,900. C) 15,800. D) 23,700.
Answer C. 15,800
BE CAREFUL HOW YOU READ THE QUESTION. A scholarship recipient at City University must include in gross income the scholarship proceeds used to pay for: A) only tuition. B) tuition, books, and supplies, but not meals and lodging. C) Books, supplies, meals, and lodging. D. Meals and Lodging
D) Meals and Lodging
Which of the following are deductions from AGI? A) Qualified moving expenses. B) Unreimbursed employee business expenses. C) Alimony paid. D) Student loan interest paid.
B) Unreimbursed employee business expenses are a miscellaneous itemized deduction bellow the line.
Paula pursued a hobby of making bedspreads in her spare time. During the year she sold the bedspreads for 6,000. She incurred the following expenses: Supplies 1900, interest on loan to get business started 600, avertisement 400. Assuming that the activity is deemed a hobby and that she cannot itemize this year how should she report these items on her return? A) Include 6,000 in income and deduct 2900 for AGI. B) Ignore both income and expenses since hobby losses are disallowed. C) Include 6,000 in income and deduct nothing for AGI since all hobby expenses must be itemized. D) Include 6,000 in income and deduct interest 600 for AGI. E) None of the above.
C
During the year, Purple Corporation has U.S. sourced income of 900,000 and foreign income of 300,000. The foreign sourc income generates foreign income taxes of 100,000. The U.S. income tax before the foreign tax credit is 408,000. Purple Corporation’s foreign tax credit is: A) 75,000. B) 100,000. C) 102,000. D) 136,000
B) 100,000. Even though 102k is the calculation using 300/1200 times 408. Foreign tax credit can only be deducted to the extent that foreign taxes are paid. So the answer is 100,000
Harry and Wilma are married and file joint income tax return. On their tax return they reported 44,000 of adjusted gross income and claimed two exemptions for their dependent children. During the year they pay the following amounts to care for the 4 year old son and 6 year old daughter while they work: ABC Day Care Center 3200, Blue Ridge Housekeeping Sservices 2,000. MrS Mason 1,000, MIleage expense 500. Harry and WIlma may claim a credit for child and dependent care expenses of: A) 840. B) 1040. C) 1200. D) 1240.
C) 1200. The limit to the child expense tax credit is 3000 and 6000 for two dependent children. Since their qualifying expenses exceed the limit the calculation must be based on the maximal qualifying expense of 6,000 times .20
Grape Corporation purchased a machine in December of the current year. This was the only asset purchased during the current year. The machine was placed in service in February of the following year. No assets were purchased in the following year. Grape Corporation’s cost recover would begin: A) In the current year using a mid-quarter convention. B) In the current year using a half-year convention. C) In the following year using a mid-quarter convention. D) In the following year using a mid year convention
D) In the following year using a mid year convention.
Marc, Inc. placed into service a machine in the current year that cost 2,010,000. What is the maximum Section 179 expense that Marc, Inc. could take for 2016? A) 0. B) 490,000. C) 500,000. D) 200,000
B) 490,000. Max= 500,000 reduced dollar for dollar in excess of threshold of 2,000,000. 2,010,000-2,000,000= 10,000. 500,000-10,000= 490,000
Define Capital asset-
A catch-all category in our income tax system, all assets that are not specified as ordinary income assets under Section 1231 are capital assets. Assets other than: accounts receivable, copyrights, inventory, real or depreciation property.
Copper Corporation sold machinery for 27,000 on December 31 of the current year. The machinery was purchased several years ago for 30,000 and had an adjusted basis of 21,000 at the date of sale. For the current year, what should Copper Corporation report? A) Ordinary income of 6,000. B) A 1231 gain of 3,000 and 3,000 of ordinary income. C) A 1231 gain of 6,000. D) A 1231 gain of 6,000 and 3,000 of ordinary income.
A) Ordinary income of 6,000. The recognized gain from the disposition of the machinery is 6,000 (27,000-21,000. Since the recognized gain is less than the depreciation taken of 9,000 and the asset is depreciable equipment used in a business, 1245 recapture applies.
Which of the following decreases a taxpayer’s at risk amount? A) Cash and the adjusted basis of property contributed to the activity. B) Amounts borrowed for use in the activity for which the taxpayer is personally liable or has pledged as security property not used in the activity. C) Taxpayer’s share of amounts borrowed fo ruse in activity that is qualified nonrecourse financing. D) Taxpayer’s share of the activitiy’s income. E) None of the above.
E) None of the above.
Mitch, who is single and has no dependents, had AGI of 100,000 in 2014, His potential itemized deductions were as follows: Medical expenses- 15,000, state income tax 3,000, real estate taxes 7,000. Mortgage interest 9,000, cash contributions to various charities-4,000, unreimbursed employee expenses-4300. What is mitch’s amt adjustments for itemized deductions? A) 12,300. B) 14,800. C) 16,800. D) 19,300, E) 25,800
B) 12,300. MItch’s adjustements for itemized deductions for AMT purposes are as follows. State income taxes 3,000, real estate taxes 7,000, and unreimbursed employee expenses 2,300
Which of the following is not a form on which individual taxpayers can report their income, deductions, exemptions, and other information required to calculate their federal tax liability? A) Form 1040. B) Form 1040A. C) Form 1040EZ. D) Form 1040 IND
D) There is no such thing as 1040IND
Which of the following is not a dissalowed loss? A) Losses on sale of personal assets. B) Losses on the subsequent sale of property gifted or sold to a related party when its fair market value is less than the original owner’s adjusted basis.C) Wash sales. D) Capital losses in excess of $3,000.D)
D) Capital losses in excess of 3,000. Up to $3,000 of capital losses may be recognized against forms of income other than capital gains in any one tax year. However, if a taxpayer has capital losses in excess of $3,000, these losses are not disallowed, but are carried over to future tax years.
