Answered: Question 29 of 75. Which of the…

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter12: Alternative Minimum Tax

Section: Chapter Questions

Problem 12DQ

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Question 29 of 75.

Which of the following is an advantage of selling property using the installment sale method?

Spreading the gain over the years of payment may help lower the taxpayer's capital gain tax.

The seller is shielded from losses in the event the buyer fails to make all the payments.

The seller has immediate access to the funds.

Accounting for the sale is generally easy and efficient.

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Question 30 of 75.

In June 2020, Patrice purchased and placed into service a $12,000 piece of equipment for exclusive use in her business. She claimed the special depreciation allowance that year. In December 2022, Patrice sold the equipment for $15,000. How is her income from the sale of this property treated for tax purposes?

$3,000 capital gain; $0 ordinary income.

$0 capital gain; $15,000 ordinary income.

$3,000 capital gain; $12,000 ordinary income.

$15,000 capital gain, $0 ordinary income.

Question 31 of 75

Warren is a home builder who is subject to the uniform capitalization rules. During the year, he incurred the following costs. All of these expenses must be capitalized EXCEPT:

×$60,000 spent for advertising on social media.

$600,000 wages and salaries, paid to job site supervisors.

$2,500,000 spent to hire construction contractors.

$6,500,000 spent on building materials.

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Question 32 of 75

Which of the following statements about shareholders of a C corporation is TRUE?

All of a C corporation's income, deductions, and credits are passed through directly to the shareholders.

The amount of losses shareholders may have to sustain is unlimited.

Shareholders of a C corporation are taxed only when the corporation distributes earnings and profits.

Shareholders of a C corporation pay a flat tax rate of 21% on all profits distributed to them.

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Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

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