1. (TCO 9) Trent files his tax return 35 days after the due date. Along with the return, Trent remits a check for $8,000, which is the balance of the tax owed.
Disregarding the interest element, Trent's total failure to file and to pay penalties are:
2. (TCO 9) A characteristic of fraud penalties is:
3. (TCO 1) Federal tax legislation generally originates in what body?
4. (TCO 1) In § 212(1), the number (1) stands for the:
5. (TCO 11) Kyle, whose wife died in December 2009, filed a joint tax return for 2009. He did NOT remarry, but has continued to maintain his home in which his two dependent children live. What is Kyle's filing status regarding 2012?
6. (TCO 11) Wilma is married to Herb, who abandoned her in 2009. She has NOT seen or communicated with him since June of that year. She maintains a household in which she and her two dependent children live. Which of the following statements about Wilma's filing status in 2012 is correct?
7. (TCO 7) Home Office, Inc. leased a copying machine to a new customer on December 27, 2012. The machine was to rent for $500 per month for a period of 36 months beginning January 1, 2013. The customer was required to pay the first and last month's rent at the time the lease was signed. The customer also was required to pay an $800 damage deposit. Home Office must recognize as income for the lease:
8. (TCO 7) With respect to income from services, which of the following is true?
9. (TCO 3) Ridge is the manager of a motel. As a condition of his employment, Ridge is required to live in a room on the premises so that he would be there in case of emergencies. Ridge considered this a fringe benefit, since he would otherwise be required to pay $600 per month for rent. The room that Ridge occupied normally rented for $60 per night, or $1,500 per month. On the average, 90% of the motel rooms were occupied. As a result of this rent-free use of a room, Ridge is required to include in gross income:
10. (TCO 3) Adam repairs power lines for the Egret Utilities Company. He is generally working on a power line during the lunch hour. He must eat when and where he can and still get his work done. He usually purchases something at a convenience store and eats in his truck. Egret reimburses Adam for the cost of his meals.
11. (TCO 10) Hans purchased a new passenger automobile on August 17, 2012 for $40,000. During the year, the car was used 40% for business and 60% for personal use. Determine his cost recovery deduction for the car for 2012.
12. (TCO 10) Bob and April own a house at the beach. The house was rented to unrelated parties for 8 weeks during the year. April and the children used the house 12 days for their vacation during the year. After properly dividing the expenses between rental and personal use, it was determined that a loss was incurred as follows:
Gross rental income
| |
$4,000
|
Less: Mortgage interest and property taxes
|
$3,500
| |
Other allocated expenses
|
2,000
|
(5,500)
|
Net rental loss
| |
($1,500)
|
What is the correct treatment of the rental income and expenses on Bob and April's joint income tax return for the current year, assuming the IRS approach is used, if applicable?
13. (TCO 10) On May 2, 2012, Karen places in service a new sports utility vehicle that costs $70,000 and has a gross vehicle weight of 6,300 lbs. The vehicle is used 40% for business and 60% for personal use. Determine the cost recovery deduction for 2012.
14. (TCO 10) Which of the following must be capitalized by a business?
15. (TCO 3) During the year, Rick had the following insured personal casualty losses (arising from one casualty). Rick also had $18,000 AGI for the year.
Asset
|
Adjusted
Basis
|
Fair Market
Value (Before)
|
Fair Market
Value (After)
|
Insurance
Recovery
|
A
|
$500
|
$700
|
$300
|
$150
|
B
|
3,000
|
2,000
|
-0-
|
500
|
C
|
700
|
900
|
-0-
|
200
|
Rick's casualty loss deduction is:
16. (TCO 3) During the year, Grant's personal residence was damaged by fire. Grant was insured for 90% of his actual loss, and he received the insurance settlement. Grant had adjusted gross income, before considering the casualty item, of $30,000. Pertinent data with respect to the residence follows:
Cost basis
|
$170,000
|
Value before casualty
|
$250,000
|
Value after casualty
|
$150,000
|
What is Grant's allowable casualty loss deduction?
17. (TCO 3) Jim purchases a ticket for $80 for a special concert by the symphony (a qualified charity). If the price of a ticket is normally $25, what is the amount allowed as a charitable deduction?
18. (TCO 3) Zeke made the following donations to qualified charitable organizations during the year:
|
Basis
|
Fair Market
Value
|
Used clothing (all acquired at least 18 months ago) of taxpayer and his family
|
$2,350
|
$675
|
Stock in ABC, Inc., held as an investment for 15 months
|
$15,000
|
$12,875
|
Stock in MNO, Inc., held as an investment for 11 months
|
$12,000
|
$20,000
|
Real estate held as an investment for 2 years
|
$20,000
|
$35,000
|
The used clothing was donated to the Salvation Army; the other items of property were donated to Eastern State University. Both are qualified charitable organizations.
Disregarding percentage limitations, Zeke's current charitable contribution deduction is:
19. (TCO 3) Josh has investments in two passive activities. Activity A, acquired 3 years ago, produces income in the current year of $60,000. Activity B, acquired last year, produces a loss of $100,000 in the current year. At the beginning of this year, Josh's at-risk amounts in Activities A and B are $10,000 and $100,000, respectively. What is the amount of Josh's suspended passive loss with respect to these activities at the end of the current year?
20. (TCO 3) Art's at-risk amount in a passive activity was $60,000 at the beginning of 2011. His loss from the activity in 2011 is $80,000, and he had no passive activity income during the year. Art had $20,000 of passive income from the activity in 2012. Under the passive loss rules, Art's suspended loss at the end of 2012 is:
21. (TCO 3) Jon owns both an apartment building in which he is a material participant and a computer consulting business. Of the 2,000 hours he spends on these activities during the year, 55% of the time is spent operating the apartment building and 45% of the time is spent in the computer consulting business. Which of the following statements is correct?
22. (TCO 2) The accrual basis taxpayer sold land for $100,000 on December 31, 2011. He did NOT collect the $100,000 until January 2, 2012. The land was held as an investment
23. (TCO 2) In 2011, Helen sold property and reported her gain by the installment method. Her basis in the property was $150,000 ($250,000 cost less $100,000 of depreciation). Helen sold the property for $375,000, with $75,000 due on the date of the sale and $300,000 (plus interest at the federal rate) due in 2012. Helen's recognized installment sale gain in 2012 is:
24. (TCO 2) Juan, NOT a dealer in real property, sold land that he owned with an adjusted basis of $400,000 that was encumbered by a mortgage for $200,000. The terms of the sale required the buyer to pay Juan $150,000 on the date of the sale. The buyer assumed Juan's mortgage and gave Juan a note for $450,000 (plus interest at the federal rate) due in the following year. What is the gross profit percentage?
25. (TCO 2) Social considerations can be used to justify:
1. (TCO 3) Marge's auto, which is used for business purposes only, is totally destroyed by a fire. The fair market value of the auto was $8,000 at the time of the fire and the adjusted basis was $10,000. Calculate the loss, and determine whether it is a deduction for or a deduction from AGI
2. (TCO 1) In 2010, David had the following transactions:
Salary
|
$75,000
|
Capital loss from a stock investment
|
($6,000)
|
Moving expense to change jobs
|
($12,500)
|
Received repayment of $9,000 loan he made to a friend in 2007 (also interest of $900)
|
$9,900
|
Property taxes on personal residence
|
$1,500
|
Based on the information given above, determine David's AGI. Be sure to show your work.
