15. In 2016, Tom loaned his friend Janelle $5,000 to invest in various stocks. Janelle signed a note to repay the principal with interest. In 2017, the stock market plunged and Janelle incurred large losses. In late 2017, Janelle declared personal bankruptcy and Tom was unable to collect any of the loan. Tom had no other gains or losses in 2016 or 2017. His income from wages in both 2016 and 2017 was $50,000. The result is: a. Tom deducts a business bad debt of $5,000 in 2016. b. Tom deducts a $5,000 capital loss in 2016. c. Tom deducts a business bad debt of $3,000 in 2016 and carries $2,000 over to subsequent years. d. Tom deducts a $3,000 capital loss in 2016 and carries $2,000 over to subsequent years. e. Tom must amend her 2015 tax return to deduct the loss. 16. Agnes gives an asset valued at $12,000 with a basis of $10,000 to Mary; Agnes dies six-months later leaving an asset valued at $10,000 with a basis of $12,000 to Larry. What are Mary’s’ and Larry’s bases in these assets? a. Mary = $10,000; Larry = $10,000 b. Mary = $12,000; Larry = $10,000 c. Mary = $10,000; Larry = $12,000 d. Mary = $12,000; Larry = $12,000 17. The first andlast yearsofMACRSdepreciationdeductions for a 5-year asset costing $10,000 using the half-year convention are: a. $2,000 and $576 b. $2,000 and $1,000 c. $2,000 and $1,152 d. $2,000 and $2,000 18. Brandon purchased a new car on August 1, 2016 for $14,500. His records indicate that he uses the car 45 percent for business and 55 percent for personal use. What are his cost recovery deductions for 2016 and 2017? a. $653; $1,305 b. $1,377; $2,205 c. $1,305; $2,088 d. $798; $1,595 19. Orange Corporation had income from operations of $29,000. What is the corporation’s taxable income including the following property transactions: Gain on investment stock = $8,000; loss on machinery held three years = $6,000; $4,000 loss on equipment held 10 months; $4,000 gain on land used for six years for storage of trucks. What is Orange’s Corporation's taxable income? a. $33,000 b. $27,000 c. $31,000 d. $25,000 20. Alma sells the following depreciable assets from her sole proprietorship: Asset Cost Office furniture $10,000 Age Gain/Loss 4 years ($2,400) Truck $2,000 5 years 3,100 Bakery equipment $25,000 9 months (4,500) What should Alma report on her income tax return relative to these property transactions? a. $3,800 capital loss b. $3,100 Section 1245 recapture; $2,400 Section 1231 loss; $4,500 ordinary loss c. $3,800 ordinary loss d. $700 Section 1231 gain; $4,500 ordinary loss e. None of the above 21. Sue has a $10,000 loss on some collectibles, a $5,000 Sec. 1202 gain, and an $11,000 gain on some securities. If all gains and losses arelong-termandSueisinthe25percenttaxbracket,howisher net gain taxed? a. $5,000 at 25%; $1,000 at 15% b. $6,000 at 28% c. $5,000 at 28%; $1,000 at 15% d. $6,000 at 15% e. None of the above 22. Owl corporation exchanges a building (fair market value = $800,000, adjusted basis = $600,000) that has a $100,000 mortgage for another building owned by Dan Corporation (fair market value = $1,100,000, adjusted basis = $600,000) that is encumbered by a $400,000 mortgage. Each party assumed the mortgage on the building received. What are Owl’s and Dan’s realized gains on this exchange, respectively? a. $500,000, $500,000 b. $200,000, $600,000 c. $500,000, $600,000 d. $200,000, $500,000 e. None of the above 23. Pat’s investment real estate was condemned on November 14, 2016. On February 14, 2017, he received $250,000 for the property that had a basis of $210,000. What is the last date that Pat can acquire replacement property to avoid gain recognition? a. November 14, 2019 b. February 14, 2020 c. December 31, 2019 d. December 31, 2020 e. None of the above 24. Dan owned a small rental property, which was condemned by the county to expand a local park. His adjusted basis in the property was $40,000 and he received a payment of $75,000 from the county. A year later he purchased a similar piece of real estate for $70,000. What is Dan’s recognized gain on the involuntary conversion of his rental property? a. 0 b. $35,000 c. $30,000 d. $10,000 e. $5,000 25. Corporation Parent (P)owns 85 percent of Corporation A1; Corporation A1 owns 60 percent of Corporation A2; Corporation A2 owns 90 percent of A3; Corporation A3 owns 60 percent of Corporation A4 and 15 percent of Corporation A2; Corporation A4 owns 100 percent of Corporation A5. Identify the consolidated group(s) of corporations. a. P---A1---A2---A3---A4---A5 b. P---A1 only c. P---A1and A2---A3---A4---A5 d. P---A1; A2---A3; and A4---A5 e.P---A1andA2---A3
15. In 2016, Tom loaned his friend Janelle $5,000 to invest in various stocks. Janelle signed a note to repay the principal with interest. In 2017, the stock market plunged and Janelle incurred large losses. In late 2017, Janelle declared personal bankruptcy and Tom was unable to collect any of the loan. Tom had no other gains or losses in 2016 or 2017. His income from wages in both 2016 and 2017 was $50,000. The result is: a. Tom deducts a business
16. Agnes gives an asset valued at $12,000 with a basis of $10,000 to Mary; Agnes dies six-months later leaving an asset valued at $10,000 with a basis of $12,000 to Larry. What are Mary’s’ and Larry’s bases in these assets? a. Mary = $10,000; Larry = $10,000 b. Mary = $12,000; Larry = $10,000 c. Mary = $10,000; Larry = $12,000 d. Mary = $12,000; Larry = $12,000
17. The first andlast yearsofMACRSdepreciationdeductions for a 5-year asset costing $10,000 using the half-year convention are: a. $2,000 and $576 b. $2,000 and $1,000 c. $2,000 and $1,152 d. $2,000 and $2,000
18. Brandon purchased a new car on August 1, 2016 for $14,500. His records indicate that he uses the car 45 percent for business and 55 percent for personal use. What are his cost recovery deductions for 2016 and 2017? a. $653; $1,305 b. $1,377; $2,205 c. $1,305; $2,088 d. $798; $1,595
19. Orange Corporation had income from operations of $29,000. What is the corporation’s taxable income including the following property transactions: Gain on investment stock = $8,000; loss on machinery held three years = $6,000; $4,000 loss on equipment held 10 months; $4,000 gain on land used for six years for storage of trucks. What is Orange’s Corporation's taxable income? a. $33,000 b. $27,000 c. $31,000 d. $25,000
20. Alma sells the following
21. Sue has a $10,000 loss on some collectibles, a $5,000 Sec. 1202 gain, and an $11,000 gain on some securities. If all gains and losses arelong-termandSueisinthe25percenttaxbracket,howisher net gain taxed? a. $5,000 at 25%; $1,000 at 15% b. $6,000 at 28% c. $5,000 at 28%; $1,000 at 15% d. $6,000 at 15% e. None of the above 22. Owl corporation exchanges a building (fair market value = $800,000, adjusted basis = $600,000) that has a $100,000 mortgage for another building owned by Dan Corporation (fair market value = $1,100,000, adjusted basis = $600,000) that is encumbered by a $400,000 mortgage. Each party assumed the mortgage on the building received. What are Owl’s and Dan’s realized gains on this exchange, respectively? a. $500,000, $500,000 b. $200,000, $600,000 c. $500,000, $600,000 d. $200,000, $500,000 e. None of the above
23. Pat’s investment real estate was condemned on November 14, 2016. On February 14, 2017, he received $250,000 for the property that had a basis of $210,000. What is the last date that Pat can acquire replacement property to avoid gain recognition? a. November 14, 2019 b. February 14, 2020 c. December 31, 2019 d. December 31, 2020 e. None of the above
24. Dan owned a small rental property, which was condemned by the county to expand a local park. His adjusted basis in the property was $40,000 and he received a payment of $75,000 from the county. A year later he purchased a similar piece of real estate for $70,000. What is Dan’s recognized gain on the involuntary conversion of his rental property? a. 0 b. $35,000 c. $30,000 d. $10,000 e. $5,000
25. Corporation Parent (P)owns 85 percent of Corporation A1; Corporation A1 owns 60 percent of Corporation A2; Corporation A2 owns 90 percent of A3; Corporation A3 owns 60 percent of Corporation A4 and 15 percent of Corporation A2; Corporation A4 owns 100 percent of Corporation A5. Identify the consolidated group(s) of corporations. a. P---A1---A2---A3---A4---A5 b. P---A1 only c. P---A1and A2---A3---A4---A5 d. P---A1; A2---A3; and A4---A5 e.P---A1andA2---A3
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