Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000. Given just this information, what is her alternative minimum tax liability for the year?

[removed] $0
[removed] $2,000
[removed] $15,000
[removed] $17,000






If an employer withholds taxes from an employee, in general, when are these taxes treated as paid to the IRS?

[removed] As withheld
[removed] As the employee requests on his/her W – 4 form
[removed] Evenly throughout the year
[removed] On April 15







Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2012, Hestia received $1,000 of interest income from a bond that she owns. In addition, she has earned income of $200. What is her taxable income for 2012?

[removed] $0
[removed] $250
[removed] $700
[removed] $1,200





Which of the following is a true statement about impermissible accounting methods?

[removed] An impermissible method is adopted by using the method to report results for two consecutive years.
[removed] An impermissible method may never be used by a taxpayer.
[removed] Cash method accounting is an impermissible method for partnerships and Subchapter S electing corporations.
[removed] There is no accounting method that is impermissible.
[removed] None of these is true.






Jim operates his business on the accrual method and this year he received $4,000 for services that he intends to provide to his clients next year. Under what circumstances can Jim defer the recognition of the $4,000 of income until next year?

[removed] Jim can defer the recognition of the income if he absolutely promises not to provide the services until next year.
[removed] Jim must defer the recognition of the income until the income is earned.
[removed] Jim can defer the recognition of the income if he has requested that the client not pay for the services until the services are provided.
[removed] Jim can elect to defer the recognition of the income if the income is not recognized for financial accounting purposes.
[removed] Jim can never defer the recognition of the prepayments of income.







Which of the following is a true statement?

[removed] Meals are never deductible as a business expense.
[removed] An employer can only deduct half of any meals provided to employees.
[removed] The cost of business meals must be reasonable.
[removed] A taxpayer can only deduct a meal for a client if business is discussed during the meal.
[removed] None of these is true.



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Kip started a wholesale store this year selling bulk peanut butter. In January of this year Kip purchased an initial five tubs of peanut butter for a total cost of $5,000. In July Kip purchased three tubs for a total cost of $6,000. Finally, in November Kip bought two tubs for a total cost of $1,000. Kip sold six tubs by year end. What is Kip’s ending inventory under the FIFO cost-flow method?

[removed] $12,000
[removed] $6,000
[removed] $5,000
[removed] $2,500
[removed] $1,000







Which of the allowable methods allows the most accelerated depreciation?

[removed] 150 percent declining balance
[removed] 200 percent declining balance
[removed] Straight line
[removed] Sum of the years digits
[removed] None of these allow accelerated depreciation






Bonnie Jo purchased a used computer (5-year property) for use in her sole proprietorship. The basis of the computer was $2,400. Bonnie Jo used the computer in her business 60 percent of the time and used it for personal purposes the rest of the time during the first year. Calculate Bonnie Jo’s depreciation expense during the first year assuming the sole proprietorship had a loss during the year (Bonnie did not place the property in service in the last quarter):

[removed] $240
[removed] $288
[removed] $480
[removed] $2,400
[removed] None of these






Sairra, LLC purchased only one asset during the current year. It placed in service furniture (7-year property) on April 16 with a basis of $25,000. Calculate the maximum depreciation expense for the current year, rounding to a whole number (ignoring §179 and bonus depreciation):

[removed] $1,786
[removed] $3,573
[removed] $4,463
[removed] $5,000
[removed] None of these






Assume that Brittany acquires a competitor’s assets on September 30th of the prior year. The purchase price was $350,000. Of that amount, $300,000 is allocated to tangible assets and $50,000 is allocated equally to two §197 intangible assets (goodwill and a 1-year non-compete agreement). Given, that the non-compete agreement expires on September 30th of year 2, what is Brittany’s amortization expense for the second year, rounded to the nearest whole number?

[removed] $0
[removed] $1,667
[removed] $2,917
[removed] $3,333
[removed] None of these






Bozeman sold equipment that it uses in its business for $80,000. Bozeman bought the equipment two years ago for $75,000 and has claimed $20,000 of depreciation expense. What is the amount and character of Bozeman’s gain or loss?

[removed] $25,000 §1231 gain.
[removed] $20,000 ordinary gain, and $5,000 §1231 gain.
[removed] $5,000 ordinary gain, and $20,000 §1231 gain.
[removed] $25,000 capital gain.
[removed] None of these.






Leesburg sold a machine for $2,200 on November 10th of the current year. The machine was purchased for $2,600. Leesburg had taken $1,200 of depreciation deductions. What is Leesburg’s gain or loss realized on the machine?

[removed] $800 gain.
[removed] $1,000 gain.
[removed] $1,200 loss.
[removed] $1,400 loss.
[removed] None of these.






Which of the following is not true regarding §1239?

[removed] It only applies to related taxpayers.
[removed] It only applies to gains on sales of depreciable property.
[removed] It only applies to gains on sales of non-residential real property.
[removed] It does not apply to losses.
[removed] None of these.






Alpha sold machinery to Beta, a related entity, which it used in its business for $40,000. Beta used the machinery in its business. Alpha bought the equipment a few years ago for $50,000 and has claimed $30,000 of depreciation expense. What is the amount and character of Alpha’s gain?

[removed] $20,000 ordinary income under §1239.
[removed] $10,000 ordinary gain and $10,000 §1231 gain.
[removed] $20,000 ordinary gain.
[removed] $20,000 capital gain.
[removed] None of these.






Mary traded furniture used in her business to a furniture dealer for some new furniture. Mary originally purchased the furniture for $45,000 and it had an adjusted basis of $20,000 at the time of the exchange. The new furniture had a fair market value of $40,000. Mary also gave $4,000 to the dealer in the transaction. What is Mary’s adjusted basis in the new furniture after the exchange?

[removed] $20,000.
[removed] $24,000.
[removed] $36,000.
[removed] $40,000.
[removed] None of these.







If an individual forms a sole proprietorship, which nontax factor will be of greatest benefit to the sole proprietor?

[removed] Liability protection
[removed] Legal flexibility in defining rights and responsibilities of owners
[removed] Facilitates initial public offerings
[removed] Minimal time and cost to organize






Which of the following is most effective in mitigating the double tax?

[removed] Shift income from high tax rate shareholders to low tax rate corporations
[removed] Shift income from low tax rate shareholders to high tax rate corporations
[removed] Shift income from high tax rate corporations to low tax rate shareholders
[removed] Shift income from low tax rate corporations to high tax rate shareholders






From a tax perspective, which entity choice is preferred when a liquidating distribution occurs and the entity has appreciated assets?

[removed] Partnership
[removed] S corporation
[removed] LLC
[removed] Partnership and LLC
[removed] S corporation and LLC


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Logan, a 50 percent shareholder in Military Gear Inc., is comparing the tax consequences of losses from C corporations compared with losses from S corporations. Assume Military Gear Inc has a $100,000 loss for the year, Logan’s tax basis in his Military Gear Inc. stock was $150,000 at the beginning of the year, and he received $75,000 ordinary income from other sources during the year. Assuming Logan’s marginal income tax rate is 15%, how much more tax will Logan pay currently if Military Gear Inc. is a C corporation compared to the tax he would pay if it were an S corporation?

[removed] $0
[removed] $3,750
[removed] $7,500
[removed] $11,250






Roberto and Reagan are both 25 percent owner/managers for Bright Light Inc. Roberto runs the retail store in Sacramento, CA, and Reagan runs the retail store in San Francisco, CA. Bright Light Inc. generated a $125,000 profit companywide made up of a $75,000 profit from the Sacramento store, a ($25,000) loss from the San Francisco store, and a combined $75,000 profit from the remaining stores. If Bright Light Inc. is an S corporation, how much income will be allocated to Roberto?

[removed] $31,250
[removed] $62,500
[removed] $75,000
[removed] $125,000

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