512 Pointsscott Provides Accounting Assist In Ans

June 30, 2022

Question 1 of 51

2 Points

Scott provides accounting services worth $40,000 to the ABC Partnership in exchange for a 20% interest in the capital and profits of the partnership. The tax result to Scott is

A. a partnership interest with a zero basis and no gain or loss.
B. a partnership interest with a $40,000 basis and $40,000 ordinary income.
C. a partnership interest with a $40,000 basis and $40,000 capital gain.
D. a partnership interest with a zero basis and $40,000 of ordinary income.

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Question 2 of 51

2 Points

Emma contributes property having a $24,000 FMV and a $15,000 adjusted basis and also renders legal services valued at $22,000 in exchange for a 30% interest in the capital and profits of the ABC partnership. The tax results to Emma will be

A. ordinary income of $22,000 and a partnership basis of $37,000.
B. ordinary income of $22,000 and a partnership basis of $46,000.
C. no income is recognized and a partnership basis of $46,000.
D. no income is recognized and a partnership basis of $37,000.

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Question 3 of 51

2 Points

Hunter contributes property having a $75,000 FMV and a $65,000 adjusted basis which is subject to a $36,000 mortgage in exchange for a one-fourth interest in the ABC Partnership. The partnership owes no other debts, but does assume this mortgage. Profits and losses are shared equally and each partner has a one-fourth interest in partnership capital. Hunter’s basis in the partnership is

A. $38,000.
B. $84,000.
C. $74,000.
D. $48,000.

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Question 4 of 51

2 Points

Duo Partnership reports the following items for the year:

Sales	$750,000
Wage expense	300,000
Rent expense	50,000
Charitable contributions	10,000
Short-term capital gain	20,000
Sec. 179 expense	100,000

In addition to reporting separately stated items on the Form 1065, Duo will report ordinary income of

A. $300,000.
B. $420,000.
C. $400,000.
D. $310,000.

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Question 5 of 51

2 Points

All of the following are separately stated items that pass through from the partnership to the partners except

A. 1231 gains or losses.
B. charitable contributions.
C. 1245 and 1250 recapture.
D. capital gains and losses.

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Question 6 of 51

2 Points

David and Joycelyn form an equal partnership in the current year. No special allocation is provided for in the partnership agreement. During the year David contributes land having a $90,000 basis and a $100,000 FMV in exchange for the initial partnership interest. In addition, the partnership earns $50,000 of ordinary income while partnership liabilities increase from zero to $30,000 by the end of the tax year. The partnership earns $20,000 of tax-exempt interest during the year. David’s basis at the end of the current year is

A. $125,000.
B. $115,000.
C. $130,000.
D. $140,000.

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Question 7 of 51

2 Points

A taxpayer has various businesses which operate in different legal and tax forms. The qualified business income deduction will apply to the business income earned from all of the following businesses except

A. the sole proprietorship.
B. the partnership.
C. the S corporation.
D. the C corporation.

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Question 8 of 51

2 Points

Evie, a single taxpayer, is a 50% partner in a partnership. The partnership reports $100,000 of ordinary business income and no separately stated items. Evie also has $30,000 of taxable interest income and takes a $12,000 standard deduction. Evie will be allowed a qualified business income deduction of

A. $13,600.
B. $50,000.
C. $20,000.
D. $10,000.

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Question 9 of 51

2 Points

Richard has a 50% interest in a partnership, and he materially participates in the partnership’s business. Richard’s adjusted basis in the partnership was $60,000 at the beginning of the year, including his share of partnership liabilities. There were no distributions to Richard during the year. During the current year, the partnership borrowed $160,000 from a local bank to purchase equipment needed in the business. All of the partners are personally liable for all partnership debts. The partnership incurred a $320,000 loss this year. What amount can Richard claim as a loss from the partnership on his individual tax return this year?

A. $160,000
B. $60,000
C. $140,000
D. $80,000

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Question 10 of 51

2 Points

Mia is a 50% partner in a partnership with a beginning of the year adjusted basis in her partnership interest of $50,000. For the current year, no distributions are made to partners, and there is no change in partnership liabilities. The partnership incurred a $140,000 ordinary loss for the year. How does Mia treat her loss in excess of basis?

A. She will recognize $3,000 this year and carry forward the balance.
B. She will first carry back the excess loss three years and then carry forward the balance up to five years.
C. She will first carry back the excess loss for two years and then carry forward the balance up to 20 years.
D. She will carry over the excess loss indefinitely until a subsequent year when she again has a positive basis in her partnership interest.

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Question 11 of 51

2 Points

Jamahl has a 65% interest in a partnership. Jamahl sells land to the partnership for $70,000. Prior to the sale, the land had a FMV of $70,000 and an adjusted basis of $90,000 to Jamahl. Due to the sale, Jamahl will recognize

A. $0, and he will not have any carryover loss.
B. a gain of $20,000.
C. $0, but he will have a carryover loss of $20,000.
D. a loss of $20,000.

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Question 12 of 51

2 Points

Jamahl has a 65% interest in a partnership. Jamahl sells land to the JK partnership for $70,000. Prior to the sale, the land had a FMV of $70,000 and an adjusted basis of $90,000 to Jamahl. Two years later, the partnership sells the land for $123,000. Due to the sale, the partnership will recognize

A. a loss of $20,000.
B. a gain of $33,000.
C. a gain of $13,000.
D. a loss of $53,000.

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Question 13 of 51

2 Points

Ben is a 30% partner in a partnership. The partnership guarantees Ben payments of $25,000 for the year. If the partnership has ordinary income of $15,000 before adjustment for the guaranteed payment, Ben must report

A. ordinary income of $25,000 and a partnership loss of $3,000.
B. ordinary income of $25,000 and a partnership income of $4,500.
C. ordinary income of $22,000.
D. an ordinary loss of $3,000.

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Question 14 of 51

2 Points

All of the following statements are true regarding nonliquidating distributions of a partnership except

A. in no circumstances may the partner’s basis in the partnership interest be reduced below zero as a result of a nonliquidating distribution.
B. if, after money distributions reduce the partnership basis, the adjusted basis of distributed property does not exceed the partner’s basis in the partnership interest, the basis of the distributed property carries over to the partner.
C. in no circumstances will the partner or the partnership recognize gain or loss from a nonliquidating distribution.
D. if money is distributed in excess of the partnership interest, the partner receiving the distribution has capital gain.

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Question 15 of 51

2 Points

Brittany receives a nonliquidating distribution of $48,000 cash from her partnership. Brittany’s basis in her partnership interest prior to the distribution is $25,000. What are the tax consequences of the distribution?

A. $48,000 ordinary income; $25,000 partnership basis
B. $25,000 nontaxable return of capital, capital gain of $23,000, $0 partnership basis
C. $48,000 nontaxable return of capital, ($23,000) partnership basis
D. $25,000 nontaxable return of capital, ordinary income of $23,000, $0 partnership basis

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Question 16 of 51

2 Points

Atiqa receives a nonliquidating distribution of land from her partnership. The partnership purchased the land five years ago for $20,000. At the time of the distribution, it is worth $28,000. Prior to the distribution, Atiqa’s basis in her partnership interest is $37,000. Due to the distribution, Atiqa and the partnership will recognize income of

A.

Atiqa Partnership

$0 $0
B.

Atiqa Partnership

$8,000 $0
C.

Atiqa Partnership

$0 $8,000
D.

Atiqa Partnership

$28,000 $8,000

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Question 17 of 51

2 Points

Atiqa receives a nonliquidating distribution of land from her partnership. The partnership purchased the land five years ago for $20,000. At the time of the distribution, it is worth $28,000. Prior to the distribution, Atiqa’s basis in her partnership interest is $37,000. Atiqa’s basis in the distributed land and her post-distribution basis in her partnership interest are

A.

Land Partnership Interest

$20,000 $17,000
B.

Land Partnership Interest

$20,000 $9,000
C.

Land Partnership Interest

$28,000 $9,000
D.

Land Partnership Interest

$28,000 $17,000

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Question 18 of 51

2 Points

Which of the following assets may cause a partner to recognize ordinary income rather than capital gain on the sale of a partnership interest?

A. inventory
B. land
C. marketable securities
D. buildings which have been placed in service after 1986

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Question 19 of 51

2 Points

Lars has a basis in his partnership interest in XXL of $100,000. He sells the partnership interest in XXL for $160,000. XXL is a cash-basis partnership which has accounts receivable with a $30,000 fair market value and a zero adjusted basis. Lars’s share of these receivables is $10,000. What is the amount and character of the gain that Lars recognizes on the sale of his partnership interest?

A. $50,000 capital gain
B. $10,000 ordinary income and $60,000 capital gain
C. $10,000 ordinary income and $50,000 capital gain
D. $60,000 capital gain

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Question 20 of 51

2 Points

All of the following are requirements to qualify as an S corporation with the exception of

A. the corporation must be a domestic corporation.
B. the corporation may issue only one class of stock (disregarding voting rights).
C. the corporation may not have more than 100 shareholders.
D. the corporation shareholders may consist of only individuals, estates, trusts, and partnerships.

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Question 21 of 51

2 Points

A new corporation is formed on January 2, 2018. In order to have the S election effective as of the first day of the first tax year, the Form 2553 must be filed no later than

A. January 2, 2018.
B. the original due date for the 2018 tax return.
C. the properly extended due date for the 2018 tax return.
D. March 15, 2018.

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Question 22 of 51

2 Points

Which of the following statements regarding voluntary revocation of the S election is incorrect?

A. The corporation cannot reelect S corporation status for five years.
B. In order for the revocation to be effective retroactively to the first day of the tax year, the revocation must be filed by March 15 of the affected year.
C. The revocation can provide a specified effective date to occur mid-year, requiring two tax returns to be filed for the year.
D. All of the shareholders must consent to the revocation.

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Question 23 of 51

2 Points

All of the following would reduce the basis of a shareholder’s stock in an S corporation, except

A. a shareholder’s share of all loss and deduction items of the S corporation that are separately stated and passed through to the shareholder.
B. a shareholder’s pro rata share of loan repayments made by the S corporation.
C. a shareholder’s pro rata share of nontaxable distributions by the S corporation to its shareholders.
D. a shareholder’s pro rata share of any nondeductible expenses of the S corporation.

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Question 24 of 51

2 Points

Bryan Corporation, an S corporation since its organization, is owned entirely by Mr. Bryan. The corporation uses a calendar year as its taxable year. Mr. Bryan paid $120,000 for his Bryan stock when the corporation was formed on January 1 of this year. For this year, Bryan Corporation reported the following results:

Ordinary Income	$65,000
Dividend Income	20,000
Short-term capital loss	( 2,000)

Distributions of $40,000 were made during the year. What is the basis of Mr. Bryan’s stock on December 31?

A. $203,000
B. $165,000
C. $163,000
D. $205,000

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Question 25 of 51

2 Points

Raina owns 100% of Tribo Inc., an S corporation. She started the business this year with a $100,000 capital contribution. In addition, the business borrowed $50,000 from the bank which she had to guarantee. Tribo incurred a first year operating loss of $170,000. Raina will deduct an ordinary loss this year of

A. $100,000.
B. $150,000.
C. $170,000.
D. $0.

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Question 26 of 51

2 Points

Tony is the 100% shareholder of a corporation established five years ago. It has always been an S corporation. After adjustment for this year’s corporate income, but before taking distributions into account, Tony has a $50,000 stock basis. The corporation pays Tony a $40,000 cash distribution. As a result of this distribution, Tony will have an ending stock basis and recognized income of

A.

Income recognized Stock basis

$40,000 $10,000
B.

Income recognized Stock basis

$0 $10,000
C.

Income recognized Stock basis

$0 $40,000
D.

Income recognized Stock basis

$40,000 $50,000

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Question 27 of 51

2 Points

An S corporation distributes land with a basis of $60,000 and a FMV of $90,000 to its shareholder. The tax results of the distribution will be

A. $30,000 of gain recognized by the S corporation which is passed through to the shareholder.
B. no gain recognized by the corporation but $30,000 of gain recognized by the shareholder.
C. no gain to the corporation or to the shareholder.
D. $30,000 of gain recognized by the S corporation and no pass-through to the shareholder.

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Question 28 of 51

2 Points

An S corporation distributes land to its shareholders. The land has a $60,000 basis and a $90,000 FMV. The basis of the land to the shareholder is

A. $90,000.
B. $0.
C. $30,000.
D. $60,000.

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Question 29 of 51

2 Points

In the current year, Cesar, who is single, gives $26,000 to each of his 20 nieces and nephews for a total property transfer of $520,000. Cesar’s taxable gifts total

A. $520,000.
B. $220,000.
C. $300,000.
D. $260,000.

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Question 30 of 51

2 Points

Identify which of the following statements is true.

A. If the annual exclusion for gifts is not used in the current year, the unused portion can be carried forward to subsequent years.
B. For transfer tax purposes, both the charitable contribution deduction and the marital deduction are unlimited.
C. Individuals may not give more than $15,000 per person in gifts each year before being taxed on the transfer.
D. All of the above are false.

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Question 31 of 51

2 Points

Vincent makes the following property transfers in the current year:

• $5,000 tuition for a grandson paid directly to the school
• $1,000 medical expense for a child paid directly to a hospital
• $500 donation to the Democratic party
• $10,000 property settlement in conjunction with a divorce
• $3,000 room and board at college for a grandson paid directly to the school

Vincent’s gifts for the year before considering the annual gift tax exclusion total

A. $19,000.
B. $19,500.
C. $0.
D. $3,000.

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Question 32 of 51

2 Points

Which of the following transactions constitutes a completed gift made by Ellen, a widow, in the current year?

A. Ellen names Larry the beneficiary of a $100,000 life insurance policy on Ellen’s life. The beneficiary designation is revocable.
B. Ellen deposits $100,000 cash and Matt deposits $5,000 cash into a joint savings account. Matt does not withdraw anything during the current year.
C. Ellen transfers property to a revocable trust, naming the bank as trustee. The trustee must pay out all the income to Ed over Ed’s lifetime, beginning next year.
D. Ellen reimburses her granddaughter $15,000 for her tuition at medical school.

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Question 33 of 51

2 Points

Which of the following is a completed gift?

A. Greta transfers $50,000 to a revocable trust benefiting her children Hans and Julio.
B. Juan purchases a ski chalet using his own funds, but listing Penelope as a joint owner.
C. Mike changes the beneficiary of his policy to Meredith.
D. Horatio transfers $60,000 to a bank account with Hazel. Hazel does not contribute any money to the account.

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Question 34 of 51

2 Points

Steve gave stock with an adjusted basis of $7,000 and an FMV of $10,000 to Alice. No gift tax was paid. Later, Alice sold the stock for $12,000. The gain Alice will recognize on the sale is

A. $2,000.
B. $0.
C. $5,000.
D. none of the above

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Question 35 of 51

2 Points

Tracy gave stock with an adjusted basis of $18,000 and an FMV of $15,000 to her nephew Phil. No gift tax was paid. Phil sold the stock for $16,000. The gain or loss Phil will recognize on the sale is

A. $1,500 loss.
B. $1,000 gain.
C. $0.
D. none of the above

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Question 36 of 51

2 Points

Miguel gives Roberta land with an adjusted basis of $50,000 and an FMV of $40,000. No gift tax is paid. Roberta sells the land for $36,000. Roberta recognizes

A. a $4,000 loss.
B. no loss.
C. a $14,000 loss.
D. none of the above

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Question 37 of 51

2 Points

The alternate valuation date is generally

A. 6 months after the date of death.
B. 9 months after the date of death.
C. 12 months after the date of death.
D. 3 months after the date of death.

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Question 38 of 51

2 Points

Identify which of the following statements is true.

A. All trusts and estates must use a calendar year-end.
B. Trusts are required to make estimated tax payments.
C. All estates with gross income of at least $500 must file an income tax return.
D. All of the above are false.

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Question 39 of 51

2 Points

Charitable contributions made by a fiduciary

A. must be authorized in the trust instrument in order to be deductible.
B. are limited to 50% of fiduciary income.
C. are subject to the 2% floor.
D. flows through to be deducted on the beneficiary’s tax return.

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Question 40 of 51

2 Points

An estate is allowed an income tax exemption of:

A. $600.
B. $100.
C. $0.
D. $300.

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Question 41 of 51

2 Points

A simple trust

A. may accumulate income.
B. may make discretionary distributions of principal.
C. is required to distribute all of its income currently.
D. may make charitable distributions.

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Question 42 of 51

2 Points

Which one of the following special loss limitations applies to an S corporation?

A. passive activity limitation rules
B. hobby loss rules
C. at-risk rules
D. All of the above apply.

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Question 43 of 51

2 Points

Mashburn Corporation is an S corporation that uses a fiscal year ending June 30 as its tax year. When is Mashburn Corporation’s income tax return due?

A. September 15
B. July 15
C. October 15
D. March 15 of the next year

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Question 44 of 51

2 Points

The estate of a decedent paid all of the following expenses during the year.Which one of these expenses are NOT allowable on the estate’s Form 1041, U.S. Fiduciary Income Tax return?

A. Administrative expenses
B. Losses from sale of property
C. Medical expenses of the decedent
D. Alimony owed by the decedent and paid out of estate income

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Question 45 of 51

2 Points

Which of the following may be deducted in computing the taxable income of an estate on Form 1041?

A. Funeral expenses of decedent