DeVry ACCT 324 Final Exam Latest

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DeVry ACCT 324 Final Exam Latest

 

Question 1.1. (TCOs 2 and 3) Evelyn sold her personal residence to Drew on March 1 for $300,000. Before the sale, Evelyn paid the real estate taxes of $3,000 for the calendar year. For income tax purposes, the real estate tax deduction is apportioned as follows: $750 to Evelyn and $2,250 to Drew. Drew’s basis in the residence is _____.(Points : 5)

$297,750

$299,250

$300,750

$302,250

None of the above

Question 2.2. (TCOs 3, 4, 5, and 7) Which of the following is a deduction for AGI? (Points : 5)

Casualty losses

Charitable contributions

Real estate tax on personal residence

Qualified tuition expense

None of the above

Question 3.3. (TCOs 3, 4, 5, and 7) Lilly made the following gifts during the year.

To Lola, a key client ($10 of the amount listed was for gift wrapping) $40

To Jonelle, Lilly’s secretary, on Jonelle’s birthday $40

To Gerard, Lilly’s boss, at Christmas $80

Presuming proper substantiation, Lilly’s deduction is _____. (Points : 5)

$60

$85

$80

$160

None of the above

Question 4.4. (TCOs 3, 4, 5, and 7) Aileen made a gift to Aretha of a passive activity with an adjusted basis of $40,000, suspended losses of $35,000, and a fair market value of $120,000. Which of the following statements is true? (Points : 5)

Aretha’s adjusted basis is $120,000.

Aretha’s adjusted basis is $40,000 and Aileen can deduct the $35,000 of suspended losses in the future.

Aretha’s adjusted basis is $40,000 and the $35,000 of suspended losses are lost.

Aretha’s adjusted basis is $75,000.

None of the above

Question 5.5. (TCOs 3, 4, 5, and 7) Which of the following types of allowable deductions can be claimed as deductions from AGI? (Points : 5)

Moving expenses

Alimony expenses

Home mortgage interest expenses

Student loan interest expenses

All of the above

Question 6.6. (TCOs 3, 4, 5, and 7) Which of the following is not an itemized deduction allowed for AMT purposes? (Points : 5)

Casualty losses

Gambling losses

State income taxes

Medical expenses in excess of 10% of AGI

None of the above

Question 7.7. (TCOs 3, 4, 5, and 7) Kobe, age 19, is a full-time student at State College and a candidate for a bachelor’s degree. During 20X2, he received the following payments.

Wages $3,000

State scholarship for 10 months (tuition and books) $5,000

Loan from college financial aid office $2,750

Cash support from parents $2,500

Cash dividends $1,500

Cash prize awarded in contest $1,250

$16,000

What is Kobe’s adjusted gross income for 20X2? (Points : 5)

$5,500

$5,750

$7,000

$9,750

None of the above

Question 8.8. (TCOs 3, 4, 5, and 7) Cornelia incurred the following expenses for her dependent son during the current year.

Payment of principal on son’s mortgage loan $5,500

Interest on son’s mortgage loan $4,500

Payment of son’s medical expenses $2,500

Payment of son’s property taxes $2,750

How much may Cornelia consider in computing her itemized deductions? (Points : 5)

$2,750

$2,500

$4,500

$9,750

$15,250 v

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Question 1.1. (TCOs 7, 8, and 9) Orlando and Katelyn were divorced. Their only marital property was a personal residence with a value of $250,000 and cost of $100,000. Under the terms of the divorce agreement, Katelyn would receive the house and Katelyn would pay Orlando $25,000 each year for 5 years, or until Orlando’s death, whichever should occur first. Orlando and Katelyn lived apart when the payments were made to Orlando. The divorce agreement did not contain the word alimony. Katelyn paid the $125,000 to Orlando over the 5-year period. Then, Katelyn sold the residence for $300,000. Katelyn’s recognized gain is _____. (Points : 5)

$0

$50,000 ($300,000 – $250,000)

$125,000 ($300,000 – $125,000 – $50,000)

$200,000 ($300,000 – $100,000)

None of the above

Question 2.2. (TCOs 2, 8, and 9) Trigger Inc. provides group-term life insurance only to the officers of the corporation.Carlota, a vice president, received $250,000 of coverage for the year at a cost to Trigger Inc. of $1,600. The uniform premiums (based on Carlota’s age) are $6 a year for $1,000 of protection (i.e., $1,500 for Carlota). How much must Carlota include in gross income this year? (Points : 5)

$0

$1,200

$1,500

$1,600

None of the above

Question 3.3. (TCOs 2, 8, and 9) If a vacation home is used primarily for personal use (rented for fewer than 15 days per year), which of the following is true? (Points : 5)

All expenses are deductible from AGI.

Expenses must be allocated between rental and personal use.

Depreciation is allowed as a deduction.

All rental income is excluded from AGI.

None of the above

Question 4.4. (TCOs 2 and 11) Nicholas loaned Lyle (a friend) $30,000 in 20X1 with the agreement that the loan would be repaid in 2 years. In 20X2, Lyle filed for bankruptcy and Nicholas learned that he could expect to receive $0.50 on the dollar. In 20X2, final settlement was made and Nicholas received $16,000. Assuming the loan is a nonbusiness bad debt, how should Nicholas account for the bad debt? (Points : 5)

$14,000 ordinary loss in 20X2

$15,000 ordinary loss in 20X0, and $9,000 ordinary loss in 20X2

$14,000 short-term capital loss in 20X2

$15,000 short-term capital loss in 20X0, and $9,000 short-term capital loss in 20X2

None of the above

Question 5.5. (TCOs 2 and 11) In December 20X2, Mitch died. His wife was the beneficiary of his $650,000 life insurance policy. Mitch had paid $25,000 in premiums. His wife elected to collect the proceeds in 10 equal installments of $75,000 ($65,000 on the face amount of the policy and $10,000 interest). Of the $75,000 she collected in 20X2, the taxable amount is _____. (Points : 5)

$0

$10,000

$65,000

$75,000

None of the above

Question 6.6. (TCOs 2 and 11) Upon the recommendation of a physician, Roberto has a therapeutic pool installed in his personal residence. He suffers from severe muscular degeneration disease. If Roberto does not use the pool on a regular basis, his muscles will deteriorate to the point that he will be unable to walk. In connection with this pool, Roberto incurs and pays the following amounts during the current year.

Therapeutic pool and cost of installation $11,000

Increase in utility bills due to the pool $400

Cost of certified appraisal $500

The pool has an estimated useful life of 5 years. The appraisal was to determine the value of Roberto’s residence with and without the pool. The appraisal states that the pool increased the value of Roberto’s residence by $4,000.Disregarding percentage limitations, how much of the above expenditures qualify for the medical expense deduction in the current year? (Points : 5)

$11,900

$11,400

$7,500

$7,400

None of the above

Question 7.7. (TCOs 2 and 11) In January, Charlie sold stock with a cost basis of $40,000 to his brother Allen for $30,000, the fair market value of the stock on the date of sale. Five months later, Allen sold the same stock through his broker for $45,000. What is the tax effect of these transactions? (Points : 5)

Disallowed loss to Allen of $10,000; recognized gain to Charlie of $5,000

Disallowed loss to Charlie of $10,000; recognized gain to Allen of $15,000

Deductible loss to Charlie of $10,000; recognized gain to Allen of $15,000

Disallowed loss to Charlie of $10,000; recognized gain to Allen of $5,000

None of the above

Question 8.8. (TCO 1) Social considerations can be used to justify _____. (Points : 5)

allowing accelerated amortization for the cost of installing pollution control facilities

allowing a federal income tax deduction for state and local income taxes paid on the same income

allowing a carryback and carryover of net operating losses

disallowing a deduction for fines and penalties

B and C

Question 9.9. (TCOs 2, 3, 6, 8, 9, and 10) An office audit _____. (Points : 5)

can often be resolved by correspondence between the IRS and the taxpayer

involves numerous items reported on the return and is conducted in the office of the taxpayer’s representative

usually is restricted in scope and is conducted in the IRS office

involves complex issues that are broad in scope

All of the above

Question 10.10. (TCOs 2, 3, 6, 8, 9, and 10) Which of the following is not a primary source of the tax law? (Points : 5)

Constitution

Legislative history materials

Judicial decisions

Legal opinions

All of above

Question 11.11. (TCOs 2, 3, 6, 8, 9, and 10) Raquel operates a hardware store as a sole proprietorship. Which of the following items are capital assets in the hands of Raquel? (Points : 5)

Sixteen light fixtures that have been in inventory for over a year

Stock in which Raquel invested some of the store’s excess cash

A note receivable that was given to her by a customer in payment of the balance due on the customer’s account at the store

The vacant lot next to her store used as a parking lot for customers

None of the above

Question 12.12. (TCOs 2, 3, 6, 8, 9, and 10) Rosie purchased for $9,250 a $10,000 bond when it was issued 2 years ago. Rosie amortized $250 of the original issue discount and then sold the bond for $9,750. Which of the following statements is correct ? (Points : 5)

Rosie has $500 of long-term capital gain.

Rosie has $250 of long-term capital gain.

Rosie has $250 of long-term capital loss.

Rosie has $500 long-term capital loss.

None of the above

Question 13.13. (TCOs 2, 3, 6, 8, 9, and 10) Dale, age 16, is claimed as a dependent on his parents’ tax return. During 20X2, he had interest income of $3,750 from a savings account and $500 wages from a part-time job. Dale’s taxable income is _____. (Points : 5)

$4,250

$3,750

$3,700

$3,300

None of the above

Question 14.14. (TCO 6) During 20X2, taxpayers decided to sell their residence, which had a basis of $350,000. They had owned and occupied the residence for 8 years. To make it more attractive to prospective buyers, they had it painted in April at a cost of $5,000 and paid for the work immediately. They sold the house in May for $500,000.Broker’s commissions and other selling expenses amounted to $30,000. They purchased a new residence in June for $250,000. What is the recognized gain? (Points : 5)

$0

$115,000

$120,000

$150,000

None of the above

Question 15.15. (TCO 6) Tiffany gives her niece a machine to use in her business with a fair market value of $100,000 and a basis in Tiffany’s hands of $150,000. What is the niece’s basis for depreciation (cost recovery)? (Points : 5)

$0

$100,000

$125,000

$150,000

None of the above

Question 16.16. (TCO 6) Jamal sells equipment for $16,000, which had been purchased for $90,000 and on which $70,000 of depreciation had been taken. He had used the equipment in his business for several years. Jamal has _____. (Points : 5)

a $4,000 § 1245 loss

a $4,000 § 1231 loss

a $4,000 § 1250 loss

a $16,000 § 1231 gain

None of the above

Question 17.17. (TCO 6) Nigel elects to treat the cutting of timber as a sale or exchange under § 1231. Nigel purchased the land for $120,000 and the timber for $210,000 several years ago. On the first day of 20X2, the timber was appraised at $230,000, and in September 20X2, it was cut and sold for $238,750. What is Nigel’s Section 1231 gain from this transaction? (Points : 5)

$0

$8,750

$20,000

$28,750

None of the above

Question 18.18. (TCOs 2, 6, and 11) Payton purchased his home for $300,000. As a sole proprietor, he operates a certified public accounting practice in his home. For this business, he uses one room exclusively and regularly as a home office. In Year 1, $1,450 of depreciation expense on the home office was deducted on his income tax return. In Year 2, Payton sustained losses in his business, so no depreciation was taken on the home office. Had he been allowed to deduct depreciation expense, his depreciation expense would have been $1,700. What is the adjusted basis in the home? (Points : 5)

$295,000

$296,850

$298,550

$300,000

None of the above

 

 

 

 

Question 4. 4. (TCOs 1, 2, 3, and 11) DeWayne is a U.S. citizen and resident. He spends much of each year in the United Kingdom on business. He is married to Petula, a U.K. citizen and resident of London. DeWayne has heard that it is possible that he can file a joint income tax return for U.S. purposes. If this is so, what are the constraints he should consider in making any such decision? (Points : 10)

 

 

Question 3. 3. (TCOs 1, 2, 3, and 11) Travel status requires that the taxpayer be away from home overnight. (1) What does away from home overnight mean? (2) What tax advantages result from being in travel status? (Points : 10)

 

 

Question 2. 2. (TCOs 2, 3, and 11) Discuss the criteria used to determine whether a building is residential or nonresidential realty. Also explain the tax consequences resulting from this determination if the property is placed in service in 20X1. (Points : 15)

 

 

Question 1. 1. (TCOs 1, 6, 8, and 11) A large municipality is considering the enactment of an ad valorem tax on personal jewelry. What, if any, problem would you anticipate with such a tax?

 

 

Question 4. 4. (TCOs 1 and 5) Joe is 50 years old, unmarried, and without children. He has earnings during 20X2 of $8,000. He is not claimed as a dependent on another taxpayer’s return. Does he qualify for the earned income credit? If so, calculate the amount of credit that is available to him. (Points : 20)

 

 

Question 3. 3. (TCOs 9 and 12) Tom, a calendar-year taxpayer, filed his 2007 federal income tax return on April 1, 2008. In 20X2, the IRS audits this return and assesses an income tax deficiency against Tom. On the grounds that the statute of limitations has run out, Tom disputes the assessment. Is Tom correct? Why? (Points : 15)

 

 

Question 2. 2. (TCOs 1, 3, and 10) In 20X2, Walter had the following transactions.

Salary $80,000

Capital loss from a stock investment ($4,000)

Moving expense to change jobs ($10,000)

Received repayment of $10,000 loan he made to his brother in 2007 (includes interest of $1,000) $11,000

Property taxes on personal residence $2,000

Based on the information given above, determine Walter’s AGI. Be sure to show your work. (Points : 15)

 

 

Question 1. 1. (TCOs 1, 2, 4, and 7) Dabney and Nancy are married, both gainfully employed, and have two children who are 3 and 6 years old. Dabney’s salary is $35,000 and Nancy’s salary is $40,000. During the year, they spend $7,000 for child care expenses that are required so both of them can work outside of the home. Calculate the credit for child and dependent care expenses. (Points : 15)

 

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DeVry ACCT 324 Final Exam Latest