Other taxation

Question 1

FUTA tax is paid when at least one employee works at least how many weeks in the year?

Answer 1

20 weeks

Question 2

What is the general carryback and carry forward period of an NOL for years beginning after August 5, 1997?

Answer 2

Carryback 2 years, carry forward 20 years

Question 3

When Section 1244 stock is sold at a loss, what kind of loss is reported on the tax return?

Answer 3

ordinary loss

Question 4

What is the maximum loss allowed on Section 1244 stock?

Answer 4

$50,000 for individual, $100,000 for MFJ

Question 5

How do you calculate Self-Employment Tax?

Answer 5

Net Profit from Sch C
X 92.35%
X lesser of $113,700 or line 1 by 15.3%
X line 3 by 50%

Question 6

Which of the following costs are includible in inventory under the uniform capitalization rules for merchandise manufactured by a company for sale to its customers?
Engineering, advertising, selling expense, general legal fees

Answer 6

Engineering

Question 7

The uniform capitalization rule of IRC Sec 263A apply to retailers whose average gross income receipts for the previous 3 years exceed what amount?

Answer 7

$10,000,000

Question 8

A corporation sold a building for $600,000. They received a down payment of $120,000 and $120,000 as annual installment payments for the next 4 years. The building was purchased for $500,000 and had depreciation of $80,000. What amount of gain should be reported in the year of the sale under the installment method?

Answer 8

$36,000
Sale price $600,000
Net book value ($500,000-$80,000) $420,000
Profit ($600,000 - $420,000) $180,000
Profit ratio $180,000/$600,000 .3 or 30%
30% x $120,000 = $36,000

Question 9

Uniform capitalization rules apply to which of the following:

1. real property produced by the taxpayer
2. tangible personal property produced by the taxpayer

Answer 9

both

Question 10

The uniform capitalization rules requires manufacturer to capitalize which kind of costs?

1. all direct costs
2. all indirect costs

Answer 10

all direct costs

Question 11

A corporation would be subject to the uniform capitalization rules if their activities included any of the following EXCEPT:

1. expenditures for research and experimentation deductible under Section 174
2. acquired property for resale
3. produce real or tangible personal property for the use in the business activity
4. produce real or tangible personal property for sale to customers

Answer 11

1. expenditures for research and experimentation deductible under Section 174

Question 12

Joe Dock placed into service Section 179 property that cost $2,500,000. What is the maximum amount he can expense in 2013?

Answer 12

$0
Maximum dollar amount for 2013 is $500,000
Threshold amount for 2013 is $2,000,000
Total costs exceeding threshold $2,500,000-$2,000,000 = $500,000
Expenses $500,000 - $500,000 = 0

Question 13

Permanent differences between taxable income and pre-tax accounting income affect what:

1. intraperiod income tax allocation
2. interperiod income tax allocation
3. both
4. neither

Answer 13

neither

Question 14

Dole, the sole owner of Enson Corp, transferred a building to Enson. The building had an adjusted tax basis of $35,000 and a FMV of $100,000. In exchange for the building, Dole gave $40,000 cash and stock in Enson with a FMV of $60,000. What amount of gain did Dole recognize?

Answer 14

$40,000
Under IRC Sec 351, appreciated property to a controlled corporation (80%) are tax-free to the extent they are exchanged for stock in the corporation.
- If cash or other property is received, gain is recognized equal to the cash received or the FMV of other property received limited by the amount of appreciation in the property transferred to the corporation.

Question 15

Jim gave a parcel of land to his niece, Jane. Jim paid $15,000 and the value on the date of the gift had a FMV of $12,000. Jim paid a gift tax of $1,000. Subsequently, Jane sold the land for $10,000. What is Jane’s basis for computing loss?

Answer 15

$12,000
When property is sold at a loss, the basis is the lesser of 1)the donor’s basis or 2) value at the time of the gift.
- Since the value declined, no gift tax is added to the basis

Question 16

Small independent gas and oil producers can still use the percentage depletion method. What is the rate for calculating percentage depletion for domestic oil and gas production?

Answer 16

15%

Question 17

On December 1, 2013, Jim placed into service office furniture (7 year life) which cost $28,000. Jim did not elect Section 179 or bonus depreciation. This was the only asset purchase. What amount can Jim claim as depreciation under MACRS in 2013?

Answer 17

$1,000
$28,000 x 2/7 x 1.5/12
MACRS is based on double declining balance so the 2/7 is the double of 7 years. Since mid-quarter convention (purchased in December) is used and 1 1/2 mos of depreciation is recorded.

Question 18

Lobster, Inc incurs the following losses on disposition of business assets during the year:
Loss on the abandonment of office furniture $25,000
Loss on the sale of building (depreciation of $200,000) $250,000
Loss on the sale of delivery truck $15,000
What is the amount and type of loss to be reported on Lobster’s tax return?

Answer 18

$290,000 ($25,000+$250,000+$15,000)
Loss on LT assets can only be Section 1231 losses.
Section 1245 and 1250 only apply to gains

Question 19

On February 1, 2013, Pam purchased an $861,000 machine (5 yrs) for use in her business. Pam expensed $500,000 under Section 179 and elected the 50% bonus depreciation in addition to the regular 20% depreciation in 203 and 32% in 2014. Pam’s total deduction in 2013 is?

Answer 19

$716,600
Section 179         $500,000
50% x $361,000  $180,500
20% x ($861,000-$500,000-$180,500)   $36,100
$500,000+$180,500+$36,100 = $716.600

Question 20

Four years ago, a self-employed taxpayer purchased office furniture for $30,000. During the current tax year, he sold the furniture of $37,000. At the time of the sale, the depreciation deductions totaled $20,700. What part of the gain is LT capital gain?

Answer 20

$7,000
Sale price              $37,000
Net book value ($30,000-$20,700)  $9,300
Gain on the sale is  $27,700
$20,700 of the gain MUST be reported as ordinary gain (amount of depreciation take) and the rest is LT capital gain.

Question 21

What is percentage depletion rate allowed by the IRC for the recovery of capital invested in mining coal?

Answer 21

10%

Question 22

Gary, a farmer, exchanges a tractor with a basis of $40,000 and a value of $50,000 for a tractor with a value of $44,000 and $6,000 cash. What is the basis of the tractor acquired by Gary?

Answer 22

$40,000
In a like-kind exchange, the basis of property receive is the basis of the property given up + any gain recognized + boot paid (cash or non-like property) - any loss recognized - boot received
$40,000 + $6,000 gain - $6,000 boot received

Question 23

An individual had the following capital gains and (losses) for 2013:
STCL $70,000
LTCG at 25% rate $56,000
Collectibles gain 28% rate $10,000
LTCG at 15% rate $20,000
What is the net gain (loss) reported by the individual and at what applicable tax rate

Answer 23

$16,000 LTCG at 15% rate
Net STCL is used to offset LTCG in the following order 28%, 25% then 15%
($70,000) + $10,000 + $56,000 + $2000 = $16,000

Question 24

An individual had the following gains (losses) from the sale of stock:
STCG $6,000
LTCG $14,000
STCL $4,000
LTCL $8,000
-Company X stock was purchased for $5,000. formal notification of its worthlessness was receive on 7/5.
-Private company Section 1244 stock was purchased for $10,000 and was worthless in December

What is the net capital gain(loss) before any limitations?

Answer 24

$3,000 net capital gain

LTCG $14,000
LTCL ($8,000)
Co X ($5,000)
Net LTCG = $1000

STCG $6,000
STCL ($4,000)
Net STCG $2,000

Net $3,000 Section 1244 loss is excluded because it has a special treatment as an ordinary loss.

Question 25

IRC Section 267 has special rules for sales to a related party that are unpaid at the end of the year. In which of the following cases does the rule apply?

1. When a cash basis seller sells to a cash basis buyer
2. When a cash basis seller sells to a accrual basis buyer
3. When a accural basis seller sells to an accrual basis buyer.
4. When a accural basis seller sells to a cash basis buyer

Answer 25

2.When a cash basis seller sells to a accrual basis buyer