ACC 307 Federal Taxation Final Exam Solutions


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ACC 307 Federal Taxation Final Exam Solutions

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ACC 307 Federal Taxation Final Exam Solutions

 

 

 

ACC 307 Final Exam Solution Part 1

 

 

• Question 1
The § 222 deduction for tuition and related expenses is available:

 

• Question 2
A worker may prefer to be classified as an employee (rather than an independent contractor) for which of the following reasons:

 

• Question 3
Aaron is a self-employed practical nurse who works out of his home. He provides nursing care for disabled persons living in their residences. During the day he drives his car as follows.
Miles
Aaron’s home to patient Louise 12
Patient Louise to patient Carl 4
Patient Carl to patient Betty 6
Patient Betty to Aaron’s home 10
Aaron’s deductible mileage for each workday is:

 

• Question 4
Jordan performs services for Ryan. Which of the following factors indicate that Jordan is an independent contractor, rather than an employee?

 

• Question 5
Aiden performs services for Lucas. Which of the following factors indicate that Aiden is an employee, rather than an independent contractor?

 

• Question 6
Paul, a calendar year married taxpayer, files a joint return for 2013. Information for 2013 includes the following:
AGI $175,000
State income taxes 13,500
State sales tax 3,000
Real estate taxes 18,900
Gambling losses (gambling gains were $12,000) 6,800
Paul’s allowable itemized deductions for 2013 are:

 

• Question 7
Pedro’s child attends a school operated by the church the family attends. Pedro made a donation of $1,000 to the church in lieu of the normal registration fee of $200. In addition, Pedro paid the regular tuition of $6,000 to the school. Based on this information, what is Pedro’s charitable contribution?

 

• Question 8
Barry and Larry, who are brothers, are equal owners in Chickadee Corporation. On July 1, 2013, each loans the corporation $10,000 at an annual interest rate of 10%. Both shareholders are on the cash method of accounting, while Chickadee Corporation is on the accrual method. All parties use the calendar year for tax purposes. On June 30, 2014, Chickadee repays the loans of $20,000 together with the specified interest of $2,000. How much of the interest can Chickadee Corporation deduct in 2013?

 

• Question 9
Your friend Scotty informs you that he received a “tax-free” reimbursement in 2013 of some medical expenses he paid in 2012. Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?

 

• Question 10
Emily, who lives in Indiana, volunteered to travel to Louisiana in March to work on a home-building project for Habitat for Humanity (a qualified charitable organization). She was in Louisiana for three weeks. She normally makes $500 per week as a carpenter’s assistant and plans to deduct $1,500 as a charitable contribution. In addition, she incurred the following costs in connection with the trip: $600 for transportation, $1,200 for lodging, and $400 for meals. What is Emily’s deduction associated with this charitable activity?

 

• Question 11
Josh has investments in two passive activities. Activity A (acquired three years ago) produces income of $30,000 this year, while Activity B (acquired two years ago) produces a loss of $50,000. What is the amount of Josh’s suspended loss for the year?

 

• Question 12
Rick, a computer consultant, owns a separate business (not real estate) in which he participates. He has one employee who works part-time in the business.

 

• Question 13
Charles owns a business with two separate departments. Department A produces $100,000 of income and Department B incurs a $60,000 loss. Charles participates for 550 hours in Department A and 100 hours in Department B. He has full-time employees in both departments.

 

• Question 14
Sandra acquired a passive activity three years ago. Until last year, the activity was profitable and her at-risk amount was $300,000. Last year, the activity produced a loss of $100,000, and in the current year, the loss is $50,000. Assuming Sandra has received no passive income in the current or prior years, her suspended passive loss from the activity is:

 

• Question 15
Nell sells a passive activity with an adjusted basis of $45,000 for $105,000. Suspended losses attributable to this property total $45,000. The total gain and the taxable gain are:

 

 

ACC 307 Final Exam Solution Part 2

 

 

• Question 1
An employer calculates the amount of income tax withheld from salary or wages based on the information an employee provides on the following form:

 

• Question 2
Black Company paid wages of $180,000, of which $40,000 was qualified wages for the work opportunity tax credit under the general rules. Black Company’s deduction for wages for the year is:

 

• Question 3
Several years ago, Tom purchased a structure for $300,000 that was originally placed in service in 1929. Three and one-half years ago he incurred qualifying rehabilitation expenditures of $600,000. In the current year, Tom sold the property in a taxable transaction. Calculate the amount of the recapture of the tax credit for rehabilitation expenditures.

 

• Question 4
In terms of the withholding procedures, which statement does not reflect current rules?

 

• Question 5
The ceiling amount and percentage for 2013 for the Medicare portion of the self-employment tax are:

 

• Question 6
If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion), makes the appropriate election, and the amount reinvested in replacement property is less than the amount realized, realized gain is:

 

• Question 7
Mary sells her personal use automobile for $20,000. She purchased the car two years ago for $17,000. What is Mary’s recognized gain or loss? It increased in value due to its excellent mileage, yet safe design.

 

• Question 8
Neal and his wife Faye reside in Texas, a community property state. Their community property consists of real estate (adjusted basis of $800,000; fair market value of $6 million) and personal property (adjusted basis of $390,000; fair market value of $295,000). Neal dies first and leaves his estate to Faye. What is Faye’s basis in the property after Neal’s death?

 

• Question 9
Which of the following exchanges qualifies for nonrecognition treatment as a § 1031 like-kind exchange?

 

• Question 10
Lynn purchases a house for $52,000. She converts the property to rental property when the fair market value is $115,000. After deducting depreciation (cost recovery) expense of $1,130, she sells the house for $120,000. What is her recognized gain or loss?

 

• Question 11
Hiram is a computer engineer and, while unemployed, invents a switching device for computer networks. He patents the device, but does not reduce it to practice. Hiram has a zero tax basis for the patent. In consideration of $800,000 plus a $1 royalty per device sold, Hiram assigns the patent to a computer manufacturing company. Hiram assigned all substantial rights in the patent. Which of the following is correct?

 

• Question 12
Lynne owns depreciable residential rental real estate which has accumulated depreciation (all from straight-line) of $65,000. If Lynne sold the property, she would have a $53,000 gain. The initial characterization of the gain would be:

 

• Question 13
Which of the following creates potential § 1245 depreciation recapture and potential § 1231 gain?

 

• Question 14
A business taxpayer sells inventory for $80,000. The adjusted basis of the property is $58,000 at the time of the sale and the inventory had been held more than one year. The taxpayer has:

 

• Question 15
Section 1239 (relating to the sale of certain property between related taxpayers) does not apply unless the property:

 

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