BUSINESS

Question 38

  1. For this year, Wilma is a single individual whose taxable income puts her into the 33% bracket. Wilma’s taxable income includes so much long-term capital gain that her ordinary taxable income is not large enough to get her out of the 15% bracket.
    a.a.       All of Wilma’s long-term capital gain will be taxed at 15%.
    b.
    b.       Some of Wilma’s long-term capital gain will be taxed at 33%.
    c.
    c.       Some of Wilma’s long-term capital gain will be taxed at 0% as long as the gain is not taxed at the special rates for certain 1250 real estate or collectibles.

    d.
    d.       Wilma is not eligible for the alternative tax on long-term capital gains.

    e.
    e.       None of the above.

1 points  

Question 39

  1. Orange, Inc. buys a sandwich-making machine for $35,000 on April 1, this year.  The machine is used in Orange’s business.  As of December 31, this year, the machine is classified as:
    a.a.       A capital asset.

    b.
    b.       A Section 1231 asset.

    c.
    c.       A casualty asset.

    d.
    d.       An ordinary asset.

    e.
    e.       None of the above.

1 points  

Question 40

  1. Alice owns nonresidential rental real estate which was purchased in 1985.  Straight-line depreciation was used on the asset. The property is sold at a $150,000 gain this year. The initial characterization of the gain is:
    a.a.       Section 1245 gain.

    b.
    b.       Section 1250 gain.

    c.
    c.       Section 1231 gain.

    d.
    d.       Section 179 gain.

    e.
    e.       None of the above.

1 points  

Question 41

  1. MACRS means modified accelerated cost recovery system.

    True
    False

0.5 points (Extra Credit)  

Question 42

  1. A professor living in San Diego (with a home there) and with a one-year contract at CSU-SB could most likely, under IRS rules, regard the appointment as temporary and deduct expenses of staying overnight in San Bernardino.

    True
    False

0.5 points (Extra Credit)  

Question 43

  1. A medical doctor at a continuing medical education seminar in Orlando from his Anchorage home could most likely deduct the cost of the seminar and the travel to and from it and lodging.

    True
    False

0.5 points (Extra Credit)  

Question 44

  1. The threshold for cutback of itemized deductions (the phaseout) is based on AGI but is not adjusted for inflation.

    True
    False

0.5 points (Extra Credit)  

Question 45

  1. Code section 1231 often (barring non-recaptured 1231 losses) gives the best of both worlds: capital gain and ordinary loss.

    True
    False

0.5 points (Extra Credit)  

Question 46

  1. The Soliman case, regarding home offices, was repealed by legislative changes to I.R.C. 280A.

    True
    False

0.5 points (Extra Credit)  

Question 47

  1. Under the current tax law, the self-employed health insurance premium deduction:

    a.a.       Is deductible above-the-line.

    b.
    b.       Is 100% deductible.

    c.
    c.       Was only deductible on Schedule A if not fully deductible above-the-line.

    d.
    d.       All of the above.
    e.
    e.       None of the above.

1 points (Extra Credit)  

Question 48

  1. The Taxpayer Relief Act of 1997 (changing treatment of the sale of principal residences)

    a.a.       Changed the Section 121 exclusion.
    b.
    b.       Repealed the Residential Rollover (Section 1034).

    c.
    c.       Both of the above.

    d.
    d.       Neither A nor B.

1 points (Extra Credit)  

Question 49

  1. The taxpayer was permanently transferred from Denver to New York City and incurred the following expenses:
    House-hunting trip (including $400 for meals)                               $1,000
    Temporary living expenses for 20 days
    (including $500 for meals)                                                          1,000
    Travel expense during move
    (including $300 for meals                                                            1,000
    Moving company’s charges                                                           4,000
    Brokers fee on sale of home                                                          4,000
    $11,000
    49.     If the above move occurred this year, the deduction would be:
    a.a.       Zero
    b.
    b.       $4,700

    c.
    c.       $7,940

    d.
    d.       $5,000

    e.
    e.       None of the above

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