HELP ME TO GET UNDERSTAND

1.
In 2014,
KAKA invested $40,000 in a cattle-feeding partnership that used nonrecourse
notes to purchase $30,000 of feed, which was used to feed the cattle and
expensed.
If KAKA’s share of the expense was $50,000,
what is the most that KAKA can deduct in 2014?

a. $10,000
b. $30,000
c. $40,000
d. $50,000

2.
DJ, a
corporate executive, exercised an incentive stock option (“ISO”) granted by DJ’s
employer to purchase 10,000 shares of the corporation’s stock at the option
price of $1 per share (i.e., the exercise price was $1 per share).

The stock is freely transferable. At the time the option was exercised, the
stock was selling for $51 per share.

What is the AMT adjustment that results from
DJs exercising the ISO (assume that DJ will NOT dispose of any of the stock
during the year)?

a. $0
b. $10,000
c. $500,000
d. $510,000

3.
JENNY, a
single parent, lives in an apartment with JENNY’s TWO minor children each under
age 11, whom JENNY supports.
For 2014, JENNY will have AGI and earned
income of $19,000. Calculate the amount, if any, of JENNY’s earned income
credit.

a. $5,460
b. $5,214
c. $2,000
d. $0

4.
James and
Analeyda are married and file a joint return.
In 2014, Analeyda worked fulltime and earned $19,000, while James worked
fulltime and earned $21,000. Assume
their 2014 AGI equaled $40,000.
Assume they incurred $11,000 of child care
expenses during 2014 for their THREE dependent children Catherine, Mairovis and
Maidelin (who are 2, 4 and 6 years old, respectively). What is their child and
dependent care CREDIT amount?

a. $1,320
b. $3,000
c. $6,000
d. $11,000

5.
In 2007, Freda
received stock from Eva worth $20,000 at the time of the GIFT. At the time of the gift, Eva’s adjusted basis
in the stock was $30,000
What is the gain or loss that Freda should
report for 2014 if she sold the stock to Valerie in 2014 for $45,000 (ignore
any gift tax that may have been paid on the transfer from Eva to Freda)?

a. There is no
gain or loss
b. $45,000 gain

c. $25,000 gain

d. $15,000 gain

6.
Now, assume
that in the previous question Freda sold the stock to Valerie for $5,000
(instead of $45,000). What is the gain
or loss that Freda should report (again, ignore any gift tax that may have been
paid on the transfer from Eva to Freda)?

a. There is no
gain or loss
b. $5,000 gain
c. $15,000 loss

d. $25,000 loss

7.
Now, assume
that in Question 5 Freda sold the stock to Valerie for $25,000 (instead of
$45,000). What is the gain or loss that
Freda realized on the sale to Valerie (again, ignore any gift tax that may have
been paid on the transfer from Eva to Freda)?

a. There is no
gain or loss
b. $5,000 loss
c. $5,000 gain
d. $25,000 gain

8.
KAKA traded
in office equipment with an adjusted basis of $10,000 (and value of $25,000)
for other (like-kind) office equipment then valued at $15,000. KAKA also received
$10,000 in cash as part of the deal.
What was KAKA
recognized
gain on the exchange, if any?

a.
$0
b.
$10,000
c.
$15,000
d.
$25,000

9.
KAKA traded
in computer equipment with an adjusted basis of $22,000 (and a value of
$22,000) for other (like-kind) computer equipment then valued at $12,000. KAKA also received
$10,000 in cash as part of the deal.
What was KAKA realizedgain on the exchange, if any?

a.
$0
b.
$10,000
c.
$12,000
d.
$22,000

10.
In 2014,
Tana and Danny sold a house to Babajide for $850,000. Prior the 2014 sale, neither Tana nor Danny
had ever excluded a gain from the sale of a personal residence. Tana and Danny had lived in the house for the
last five years and used it exclusively for
personal purposes. Tana and Danny had
purchased the house for $250,000. Tana
and Danny started living in the house immediately after purchasing it and never
made any capital improvements to the house or took any depreciation (or other
deductions) against it. Assume there
were no selling expenses. How much of a
gain did Tana and Danny realize on the sale to Babajide (assume
that Tana and Danny are married and file a joint return)?

a.
$850,000
b.
$600,000
c.
$50,000
d.
$0

11.
Assume the
facts stated in the previous question.
How much of a gain must Tana and Danny recognize on the sale to
Babajide?

a.
$850,000
b.
$600,000
c.
$50,000
d.
$0
12.
In 2014,
Estela will have taxable income of approximately $40,000. In 2014, Estela will also have a long-term
capital loss of $14,000. Estela has no
other capital gains or losses (in 2014 or prior years). For 2014, what is the maximum capital loss
amount that Estela may use to offset her other income?

a.
$0
b.
$3,000
c.
$11,000
d.
$14,000

13.
Assume the
facts stated in the prior question.
Assume further that for 2014 Estela offset her wages (with her capital
loss) to the maximum extent permitted by law.
What is the amount of Estela’s capital loss carryover to 2015?

a.
$0
b.
$3,000
c.
$11,000
d.
$14,000

14.
JAVA is a
single taxpayer in the 35% tax bracket.
JAVA wants to minimize her 2014 tax liability. Which of the following provides the LARGEST
tax benefit to JAVA (assume that she may legally take advantage of each item in
its entirety for 2014)?

a.
A $5,000 deduction from adjusted gross income
b.
A $10,000 deduction from gross income
c.
A $1,000 tax credit
d.
Options “b” and “c” would provide the same amount of tax
benefit

15.
What was the
MAXIMUM EARNED INCOME CREDIT amount that Christopher
and
Ellice could possibly take for 2014?
Assume they are U.S. taxpayers filing a joint return with ONE qualifying
child.

a.
$0
b.
$1,000
c.
$3,000
d.
$3,305

16.
Which item
MOST resembles an interest free loan
from the U.S. government?

a.
The American Opportunity tax credit
b.
The earned income credit

c.
The child tax credit
d.
First-time homebuyer credit for a closing that occurred in
June of 2008

17.
In early
2014, ANN sold her personal residence to Myrtho for $500,000. At the time of the sale, ANN’s adjusted basis
was $200,000. Within three months of the
sale, Amy moved into a new residence she purchased for $600,000. What is ANN basis in her new residence?

a.
$200,000
b.
$300,000
c.
$550,000
d.
$600,000

18.
Which of the
following is TRUE?

a.
When compared to deferrals, exclusions are more permanent in
nature
b.
Section 1031 provides for an elective deferral upon certain
exchanges
c.
When compared to exclusions, deferrals are more permanent in
nature
d.
All of the above

19.
GANDOO business
property (located in JAWA County) was condemned by the proper local
authorities. Immediately before the
condemnation, the property had a fair market value of $400,000 and GANDOO
adjusted basis in the property was $200,000.
The local authorities replaced GANDOO condemned property with similar
JAWA County property having a fair market value of $300,000. What is GANDOOs realized gain or loss relating
to these matters?

a.
$0
b.
Gain of $300,000
c.
Gain of $100,000
d.
Loss of $100,000

20.
Assume the
facts stated in the prior question. What
is GANDOO recognized
gain or loss relating to such matters?

a.
$0
b.
Gain of $300,000
c.
Gain of $100,000
d.
Loss of $100,000

21.
Assume the
facts stated in the prior two questions.
What is GANDOO basis in the JAWA County property she received as a
result of the condemnation (i.e.,
what is Catherine’s basis in the newly
acquiredproperty)?

a.
$0
b.
$200,000
c.
$300,000
d.
$400,000

22.
In 2014,
Mairovis and Kevin sold a house to Jose for $700,000. Mairovis and Kevin had purchased the house
for $800,000 in 2005 (during the real estate boom). Mairovis and Kevin started living in the
house immediately after purchasing it and never made any capital improvements
to it or took any depreciation (or other deductions) against it. Assume there were no selling expenses. How much of a LOSS may Mairovis and Kevin recognize
on the sale to Jose (assume that Mairovis and Kevin are married and file a
joint return and itemize deductions)?

a.
$100,000
b.
$100,000 less 10% of their AGI
c.
$99,900 less 10% of their AGI
d.
$0

23.
Santosh
purchased land for $70,000 in 1988. The
land was valued at $1,000,000 on June 1, 2014, when Santosh died. Santosh’s relative Jean inherited the land. What basis would Jean have in the land as a
result of the inheritance?
a.
$0
b.
$70,000
c.
$1,000,000
d.
Santosh’s adjusted basis on June 1, 2014 (if different than
$70,000)

24.
Assume the
same facts stated in the previous question.
Which of the following is most likely TRUE, if Jean sold the land in
September 2014 for $1,200,000?

a.
Jean’s 2014 gain is short-term
b.
Jean’s 2014 gain is long-term
c.
In 2014, Jean should “recapture” any depreciation previously
taken by Santosh on the land
d.
In 2014, Jean will be taxed on the appreciation that
occurred while Santosh held the land (provided that such appreciation was
previously not taxed)

25.
Which of the
following statements is most likely TRUE for Joel (a typical individual
taxpayer in the 35% tax bracket)?

a. Joel usually
prefers ordinary losses to capital losses
b. Joel usually
prefers ordinary income to long-term capital gains
c. Joel usually
prefers a $200 credit to a $1,000 deduction

d. Both “a” and
“b” are correct

26.
JOHN, who
owns and operates an ICE CREAM SHOP as a sole proprietor, has the following
property:

•
STOCKS held for Matthew’s investment

•
Elaborate ice cream making EQUIPMENT
that was inherited from Maidelin
(Matthew’s grandmother) (it is used
exclusively in the ICE CREAM SHOP)
•
CHAIRS that are used exclusively in
Matthew’s home
•
a COMPUTER used exclusively in the
ICE CREAM SHOP

Considering
the above items, which option below lists the capital asset(s) under Section
1221?

a.
Only the STOCKS
b.
Only the STOCKS & CHAIRS
c.
Only the EQUIPMENT, CHAIRS & COMPUTER
d.
Each of the above assets is a capital asset under Section
1221

27.
JANA
recently purchased a piece of land, a building and a truck for a lump sum of
$1,000,000. The fair market value of the
land was $500,000, the fair market value of the building was $650,000, and the
fair market value of the truck was $50,000.
What is Obaku’s basis in the TRUCK?

a. $0
b. $41,667
c. $50,000
d. $333,333

28.
On September
1, 2001, Jose paid $550 for 1,000 shares of TXX-5761 Inc. common stock. On August 13, 2014, Jose received a nontaxable10% common stock dividend (i.e., 100 additional shares of identical
common stock). On August 13, 2014,
TXX5761 Inc. the common stock was trading on the market for $10 a share. On October 15, 2014, Jose sold the 100 shares
he received on August 13, 2014 to Joel.
What is the basis of the 100 shares
Jose sold to Joel?

a.
$1,000
b.
$55
c.
$50
d.
$0

29.
Refer to the
facts stated in the prior question. Any
gain resulting from the October 15, 2014 sale to Joel will most likely be:

a.
Short-term
b.
Long-term
c.
Both short-term and long-term
d.
Neither short-term nor long-term
30.
In 2014,
SANA sold a piece of equipment from SANAS business for $400,000. The equipment was purchased in 2010 for $240,000. Assume total of $168,000 depreciation was
taken (prior to the sale). What is SANAS’s
recognized
gain on the sale?

a.
$400,000
b.
$328,000
c.
$168,000
d.
$160,000

31.
Refer to the
facts stated in the prior question. What
amount of the gain (at least) will be recaptured at SANAS’s ordinary income
rate?

a.
$400,000
b.
$328,000
c.
$168,000
d.
$160,000

32.
Refer to the
facts stated in the prior two questions.
What amount of the gain will be treated as Section 1231 gain and
(possibly) taxed at the long-term capital gain rate?

a.
$400,000
b.
$328,000
c.
$168,000
d.
$160,000

33.
Which of the
following is most likely Section 1245 property (assume that each item has been
held long-term and is used in a trade or business)?

a.
Office Equipment
b.
Inventory
c.
Office Building
d.
Land

34.
Which of the
following would MOST LIKELY require an adjustment for the alternative minimum
tax?

a.
A gambling loss
b.
A charitable contribution deduction
c.
A deduction for state income taxes
d.
Each of the above items requires an adjustment for the
alternative minimum tax

35.
Which of the
following is most likely Section 1231 property (assume that each item has been
held long-term and is used in a trade or business)?

a.
Section 1250 property
b.
Section 1245 property
c.
Land
d.
Each of the above items is Section 1231 property

36.
Danny was at
risk for $40,000 in Partnership X and $30,000 in Partnership Z on
January 1,
2014. Both partnerships are passive
activities to Danny (these are
Danny’s only
passive activities). Danny’s share of
net income from Partnership X during 2014 is $10,000. Danny’s share of losses from Partnership Z
during 2014 is $50,000. How much is
Danny at risk for Partnership X on January
1, 2015?

a. $50,000
b. $40,000
c. $10,000
d. $0

37.
Refer to the
facts in the previous question. How much
is Danny at risk for Partnership Z on
January 1, 2015a.$80,000
b.
$50,000
c.
$20,000
d.
$0

38.
Refer to the
facts in the previous questions. What is
Danny’s carryover under the at-risk rules for Partnership Z in 2014?

a.
$80,000
b.
$50,000
c.
$20,000
d.
$0

39.
Refer to the
facts in the previous question. What is
Danny’s deductible loss for Partnership Z
in 2014?

a.
$50,000
b.
$30,000
c.
$10,000
d.
$0

40.
Refer to the
facts in the previous question. What is
Danny’s suspended loss under the passive
loss rules for Partnership Z in 2014?

a.
$50,000
b.
$30,000
c.
$20,000
d.
$0

41.
In 2014,
Jeanette invested in the ANALEYDA Limited Partnership (“ANALEYDA L.P.”) by
paying $70,000 cash and contributing additional assets worth $10,000 (and
having a basis equal to $5,000 on the date of the contribution). What amount did
Jeanette
have at risk in ANALEYDA L.P. as of January 1, 2015, if ANALEYDA
L.P. broke
even in 2014 (i.e., if ANALEYDA L.P.
had no income or loss in 2014)?

a.
$5,000
b.
$70,000
c.
$75,000
d.
$80,000

42.
Refer to the
facts stated in the prior question. But,
for this question, assume that
ANALEYDA
L.P. allocated to Jeanette net income of $20,000 from operations in 2014. What
amount does Jeanette have at risk in ANALEYDA L.P. as of January 1, 2015?

a.
$25,000
b.
$55,000
c.
$95,000
d.
$100,000

43.
In 2014,
Tana and Kevin (who file a joint return) had an interest expense of $6,000 on a
loan that was used to purchase a variety of stock and bonds (all producing
taxable income). Assume further that, in
2014, Tana and Kevin had net investment income of $4,000. Assume they itemize deductions, what is their
maximum interest expense deduction in 2014?

a.
$6,000
b.
$4,000
c.
$3,000
d.
$0

44.
Assume that
Christopher and Eva file a joint return and have the following items for 2014:

Taxable
income: $75,000
Positive
adjustments: $30,000
Preferences:
$45,000

Regular tax
ability: $10,463

What was
their 2014 AMT?

a. $17,654
b. $10,463
c. $7,191
d. $0

45.
Assume that
a couple that filed a joint return had 2014 AMTI of $375,000. What was the amount of their actual 2014
exemption for the AMT?

a. $0
b. $7,900
(i.e., $3,950 x 2)
c. $27,475
d. $82,100

46.
GANDOO is
negotiating to buy land from JAVA. What
will GANDOO basis be in the land, if GANDOO gives JAVA $100,000 and GANDOO
assumes JAVA mortgage on the land of $30,000?

a. $130,000
b. $100,000
c. $70,000
d. $30,000

47.
Which of the
following is LEAST likely to qualify as a like-kind exchange under Section 1031
(assume all of the assets are used for business)?

a. Improved
real estate for computer equipment
b. Improved
real estate for unimproved real estate
c. Office
building for a warehouse
d. Office
furniture for office equipment

48.
Valerie
exchanges undeveloped real estate for
developed real estate on July 30,
2014. On July 30, 2014, the fair market
value of each property is $500,000.
Valerie had purchased the undeveloped real estate on February 14, 2004,
for $300,000. Both properties are
considered investment property for Valerie. Which of the following is
FALSE?

a. Valerie will
realize a gain of $200,000 from the July 30, 2014 transaction
b. Valerie will
recognize a gain of $200,000 from the July 30, 2014 transaction
c. Valerie’s
basis in the developed real estate is $300,000

d. If Valerie
sells the developed real estate in June of 2015 for a gain, the gain will most
likely be treated as a long-term gain

49.
In October
2014, JAVA purchased a playground set at a garage sale for $100. JAVA is not in the business of buying and
selling anything. JAVA researched the playground set online and discovered it
was worth $700. In November 2014, JAVA
sold the playground set through an auction website for that amount (i.e.,
$700). Which of the following is TRUE
considering these transactions?

a. JAVA does
not have any income
b. Had JAVA
sold the playground set for $25, JAVA could have deducted a $75 ordinary loss
c. JAVA has a
$600 short-term capital gain
d. JAVA has a
$600 long-term capital gain

50.
JAVA had the
following net Section 1231 results for each of the years shown below.

Tax Year

Net Section 1231 LOSS

Net Section 1231 GAIN

2009

$0

$0

2010

$0

$0

2011

$0

$0

2012

$5,000

2013

$15,000

2014

$30,000

Which of the following is TRUE
regarding the net Section 1231 gain in 2014?

a. Only $10,000
of the $30,000 will be taxed at JAVA ordinary income rate
b. Only $20,000
of the $30,000 will be taxed at JAVA ordinary income rate
c. All $30,000
will all be taxed at JAVA ordinary income rate

d. All $30,000
will all be taxed at JAVA long-term capital gain rate