Question: The sale of machinery, used in a trade or business and held for more than one-year, at a loss results in which of the following types of losses?
Answer Choices:\n\n• a. Long-Term Capital Loss • b. §1245 ordinary loss • c. §291 ordinary loss • d. §1231 ordinary loss
Answer:\nd. §1231 ordinary loss
Question: Which of the following assets is not eligible for §179 expensing?
Answer Choices:\n\n• a. Qualified improvement property • b. Used equipment • c. Residential rental building • d. New equipment
Answer:\nc. Residential rental building
Question: Each of the following is a characteristic of deductible business expenses except:
Answer Choices:\n\n• a. They must be ordinary. • b. They must be necessary. • c. They must be reasonable. • d. They can be for personal pursuits.
Answer:\nd. They can be for personal pursuits.
Question: Felco Inc. began business operations on November 1, incurring start-up costs totaling $51,000. Which of the following is correct (round final calculations to whole dollar)?
Answer Choices:\n\n• a. Felco can immediately expense $5,000 and deduct $261 of amortization expense • b. Felco can immediately expense $4,000 and deduct $522 of amortization expense. • c. Felco can immediately expense $0 and deduct $567 of amortization expense • d. Felco can immediately expense $1,000 and deduct $556 of amortization expense
Answer:\nb. Felco can immediately expense $4,000 and deduct $522 of amortization expense.
Question: In the current year, Peterson Inc. sold land with a fair market value of $300,000 and adjusted basis of $246,000. Peterson received $100,000 in the current year, and $200,000 the next year. For this installment sale, how much gain with Peterson recognize in the current year and next year, respectively?
Answer Choices:\n\n• a. $18,000 and $36,000 respectively • b. $27,000 and $27,000 respectively • c. $0 and $54,000 respectively • d. $54,000 and $0 respectively
Answer:\na. $18,000 and $36,000 respectively
Question: Jasper decides to form a new business and contributes property used in his previous business. In exchange for this property, Jasper received stock in the new business. This exchange does NOT qualify as a tax-deferred exchange. The fair market value of the property was $132,000 on the date of the exchange. Jasper’s original basis in the property was $180,000, and the accumulated depreciation on the property was $100,000. What is the new business basis in the assets it received from Jasper?
Answer Choices:\n\n• a. $132,000 • b. $180,000 • c. $100,000 • d. $80,000
Answer:\na. $132,000
Question: Of the following expenses, which one is allowed as a business expense deduction?
Answer Choices:\n\n• a. Payment of payroll penalty. • b. Payment to the Mayor’s re-election campaign. • c. Payment interest on a loan used to purchase tax-exempt investments. • d. Payment of building utilities based on rental agreement with the City of Grand Forks.
Answer:\nd. Payment of building utilities based on rental agreement with the City of Grand Forks.
Question: The IRS has granted Helen’s request to switch from the cash method to the accrual method beginning next year. At the end of this year Helen’s business had $50,000 of accounts receivables and $40,000 of accounts payables. Determine the amount and timing of her §481 adjustment for next year assuming she follows the general recognition practice.
Answer Choices:\n\n• a. $10,000 included in taxable income next year. • b. $2,500 included in taxable income next year. • c. ($10,000) deducted from taxable income next year. • d. ($2,500) deducted from taxable income next year.
Answer:\na. $10,000 included in taxable income next year.
Question: In a transaction that qualifies for tax-deferred treatment, such as §351 where a shareholder contributes property to a corporation in exchange for stock resulting in 80% control of voting and total shares, which of the following statements is correct?
Answer Choices:\n\n• a. The Shareholder will get step-up in basis for the stock they receive. • b. The Corporation will get carryover basis from the shareholder in the property the Corporation receives. • c. The Corporation will get step-up basis from the shareholder in the property the Corporation receives. • d. The Shareholder will recognized any realized gains on the transaction.
Answer:\nb. The Corporation will get carryover basis from the shareholder in the property the Corporation receives.
Question: In the CY, Bosco Corporation sold its business building for $1,200,000. Bosco had paid $600,000 for the building 10 years ago and had taken straight-line depreciation of $200,000. What is the amount and character of Bosco’s gain or loss?
Answer Choices:\n\n• a. $760,000 of §1231 long-term capital gain and $40,000 §291 ordinary income. • b. $800,000 of §1231 long-term capital gain. • c. $720,000 of §1231 long-term capital gain and $80,000 §291 ordinary income. • d. $640,000 of §1231 long-term capital gain and $160,000 §291 ordinary income.
Answer:\na. $760,000 of §1231 long-term capital gain and $40,000 §291 ordinary income.
Question: If the primary purpose for a 4 day trip is business, but personal sightseeing will be conducted for 1 day of the trip, which of the following statements is Incorrect?
Answer Choices:\n\n• a. 50% of business meals will be deductible. • b. Airfare is 100% deductible • c. Lodging is 100% deductible • d. Business related expenses such as registration fees are 100% deductible.
Answer:\nc. Lodging is 100% deductible (this is the incorrect statement)
Question: Which of the following is how gain or loss realized is calculated?
Answer Choices:\n\n• a. Cash proceeds less selling costs • b. Amount realized less adjusted basis • c. Amount realized less cost basis • d. Cost basis less accumulated depreciation
Answer:\nb. Amount realized less adjusted basis
Question: Which of the following is not usually included in an asset’s tax basis?
Answer Choices:\n\n• a. Purchase price of the asset. • b. Installation costs to get the asset ready for use. • c. Maintenance costs after the asset is placed in service. • d. Shipping costs paid by the purchaser to get asset to its final location.
Answer:\nc. Maintenance costs after the asset is placed in service.