1. (TCO 9) Which of the following is NOT a characteristic of the audit process?\t2. (TCO 9) A characteristic of fraud penalties is:\t3. (TCO 1) The Internal Revenue Code was codified for the first time in what year?\t4. (TCO 1) Subchapter S covers which specific area of tax law?\t5. (TCO 11) Which of the following taxpayers may file as a head of household in 2008?\t6. (TCO 11) Arnold is married to Sybil, who abandoned him in 2008. He has NOT seen or communicated with her since April of that year. He maintains a household in which their son, Evans, lives. Evans is age 25 and earns over $20,000 each year. For tax year 2010, Arnold’s filing status is:\t7. (TCO 7) Kathy operates a gym. She sells memberships that entitle the member to use the facilities at any time. A one-year membership costs $360 ($360\/12 = $30 per month); a two-year membership costs $600 ($600\/24 = $25 per month). Cash payment is required at the beginning of the membership period. On July 1, 2009, Kathy sold a one-year membership and a two-year membership\t8. (TCO 7) With respect to income from services, which of the following is true?\t9. (TCO 3) Ridge is the manager of a motel. As a condition of his employment, Ridge is required to live in a room on the premises so that he would be there in case of emergencies. Ridge considered this a fringe benefit, since he would otherwise be required to pay $600 per month for rent. The room that Ridge occupied normally rented for $60 per night, or $1,500 per month. On the average, 90% of the motel rooms were occupied. As a result of this rent-free use of a room, Ridge is required to include in gross income:\t10. (TCO 3) Adam repairs power lines for the Egret Utilities Company. He is generally working on a power line during the lunch hour. He must eat when and where he can and still get his work done. He usually purchases something at a convenience store and eats in his truck. Egret reimburses Adam for the cost of his meals\t11. (TCO 10) Hans purchased a new passenger automobile on August 17, 2010 for $40,000. During the year, the car was used 40% for business and 60% for personal use. Determine his cost recovery deduction for the car for 2010.\t12. (TCO 10) Cory incurred and paid the following expenses:\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tTax return preparation fee\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$600\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tMoving expenses\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$2,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tInvestment expenses\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$500\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tExpenses associated with rental property\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$1,500\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tInterest expense associated with loan to finance tax-exempt bonds\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$400\t\t\t\t\t\t\t13. (TCO 10) Sarah incurred the following expenses for her dependent son during the current year:\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tPayment of principal on son’s automobile loan\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$5,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tInterest on above loan\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$2,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tPayment of son’s property taxes\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$1,200\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tPayment of principal on son’s personal residence loan\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$1,500\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tPayment of interest on son’s personal residence loan\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$8,000\t\t\t\t\t\t\tHow much may Sarah deduct in computing her itemized deductions?\t14. (TCO 10) Danielle owns a vacation cottage. During the current year, she rented it for $1,500 for 48 days, and lived in it for 12 days. How would any expenses be accounted for?\t15. (TCO 3) During the year, Rick had the following insured personal casualty losses (arising from one casualty). Rick also had $18,000 AGI for the year.\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tAsset\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tAdjusted\u00a0\t\t\t\t\tBasis\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tFair Market\u00a0\t\t\t\t\tValue (Before)\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tFair Market\u00a0\t\t\t\t\tValue (After)\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tInsurance\u00a0\t\t\t\t\tRecovery\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tA\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$500\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$700\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$300\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$150\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tB\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t3,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t2,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t-0-\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t500\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tC\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t700\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t900\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t-0-\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t200\t\t\t\t\t\t\tRick’s casualty loss deduction is:\t16. (TCO 3) John had adjusted gross income of $60,000. During the year, his personal use summer home was damaged by a fire. Pertinent data with respect to the home follows:\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tCost basis\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$250,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tValue before the fire\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$400,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tValue after the fire\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$100,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tInsurance recovery\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$270,000\t\t\t\t\t\t\t\tJohn had an accident with his personal use car. As a result of the accident, John was cited with reckless driving and willful negligence. Pertinent data with respect to the car follows:\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tCost basis\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$80,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tValue before the accident\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$6,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tValue after the accident\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$20,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tInsurance recovery\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$0\t\t\t\t\t\t\tWhat is John’s deductible casualty loss?\t17. (TCO 3) Hannah makes the following charitable donations in the current year:\t\t\t\t\t\t\t\t\t\t\u00a0\t\t\t\t\t\t\t\t\t\t\t\tBasis\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tFair Market\t\t\t\t\tValue\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tInventory held for resale in Hannah’s business\u00a0\t\t\t\t\t(a sole proprietorship)\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$8,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$7,200\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tStock in HBM, Inc., held as an investment\t\t\t\t\t(acquired four years ago)\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$16,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$40,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tBaseball card collection held as an investment\u00a0\t\t\t\t\t(acquired six years ago)\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$4,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$20,000\t\t\t\t\t\t\t\tThe HBM stock and the inventory were given to Hannah’s church, and the baseball card collection was given to the United Way. Both donees promptly sold the property for the stated fair market value.\tDisregarding percentage limitations, Hannah’s current charitable contribution deduction is:\t18. (TCO 3) Karen, a calendar year taxpayer, made the following donations to qualified charitable organizations in the current year:\t\t\t\t\t\t\t\t\t\t\u00a0\t\t\t\t\t\t\t\t\t\t\t\tBasis\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tFair Market Value\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tCash donation to Midwest State University\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$30,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$ 30,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tUnimproved land to the city of Terre Haute, Indiana\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$70,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$210,000\t\t\t\t\t\t\tThe land had been held as an investment and was acquired 4 years ago. Shortly after receipt, the city of Terre Haute sold the land for $210,000. Karen’s AGI is $450,000.\t19. (TCO 3) Josh has investments in two passive activities. Activity A, acquired three years ago, produces income in the current year of $60,000. Activity B, acquired last year, produces a loss of $100,000 in the current year. At the beginning of this year, Josh’s at-risk amounts in Activities A and B are $10,000 and $100,000, respectively. What is the amount of Josh’s suspended passive loss with respect to these activities at the end of the current year?\t20. (TCO 3) Sandra acquired a passive activity three years ago. Until last year, the activity was profitable and her at-risk amount was $300,000. Last year, the activity produced a loss of $100,000, and in the current year, the loss is $50,000. Assuming Sandra has received no passive income in the current or prior years, her suspended passive loss from the activity is:\t21. (TCO 3) Vic’s at-risk amount in a passive activity is $200,000 at the beginning of the current year. His current loss from the activity is $80,000. Vic had no passive activity income during the year. At the end of the current year:\t22. (TCO 2) The installment method applies to which of the following sales with payments being made in the year following the year of sale?\t23. (TCO 2) In 2009, Helen sold property and reported her gain by the installment method. Her basis in the property was $150,000 ($250,000 cost less $100,000 of depreciation). Helen sold the property for $375,000, with $75,000 due on the date of the sale and $300,000 (plus interest at the federal rate) due in 2010. Helen’s recognized installment sale gain in 2010 is:\t24. (TCO 2) Pedro, NOT a dealer, sold real property that he owned with an adjusted basis of $60,000 and encumbered by a mortgage for $28,000 to Pat in 2008. The terms of the sale required Pat to pay $14,000 cash, assume the $28,000 mortgage, and give Pedro eleven notes for $6,000 each (plus interest at the federal rate). The first note was payable two years from the date of sale, and each succeeding note became due at two-year intervals. Pedro did NOT elect out of the installment method for reporting the transaction. If Pat pays the 2011 note as promised, what is the recognized gain to Pedro in 2010 (exclusive of interest)?\t25. (TCO 2) Both economic and social considerations can be used to justify:\t1. (TCO 3) Marge’s auto, which is used for business purposes only, is totally destroyed by a fire. The fair market value of the auto was $8,000 at the time of the fire and the adjusted basis was $10,000. Calculate the loss, and determine whether it is a deduction\u00a0for\u00a0or a deduction\u00a0from\u00a0AGI.\t2. (TCO 1) In 2010, David had the following transactions:\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tSalary\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$75,000\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tCapital loss from a stock investment\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t($6,000)\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tMoving expense to change jobs\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t($12,500)\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tReceived repayment of $9,000 loan he made to a friend in 2007 (also interest of $900)\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$9,900\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tProperty taxes on personal residence\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$1,500\t\t\t\t\t\t\tBased on the information given above, determine David’s AGI. Be sure to show your work.<\/p>\n","protected":false},"excerpt":{"rendered":"
1. (TCO 9) Which of the following is NOT a characteristic of the audit process? 2. (TCO 9) A characteristic of fraud penalties is: 3. (TCO 1) The Internal Revenue Code was codified for the first time in what year? Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-200830","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/200830","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=200830"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/200830\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=200830"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=200830"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=200830"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}