1. In 2013, Rocio invested $30,000 in a cattle-feeding partnership that used nonrecourse notes to purchase $100,000 of feed, which was used to feed the cattle and expensed. If Rocio's share of the expense was $50,000, what is the most that Rocio can deduct in 2013?
a. $100,000
b. $50,000
c. $30,000
d. $20,000
2. Gema, a corporate executive, exercised an incentive stock option ("ISO") granted by Gema's employer to purchase 1,000 shares of the corporation's stock at the option price of $1 per share (i.e., the exercise price was $1 per share). The stock is freely transferable. At the time the option was exercised, the stock was selling for $11 per share. What is the AMT adjustment that results from Gema exercising the ISO (assume that Gema will NOT dispose of any of the stock during the year)?
a. $0
b. $10,000
c. $11,000
d. $12,000
3. Wilny, a single parent, lives in an apartment with Wilny's THREE minor children all under age 12, whom Wilny supports. For 2013, Wilny will have AGI and earned income of $20,000. Calculate the amount, if any, of Wilny's earned income credit.
a. $0
b. $3,000
c. $5,523
d. $6,044
4. Pedro and Tamella are married and file a joint return. In 2013, Tamella worked fulltime and earned $15,000, while Pedro worked fulltime and earned $19,000. Assume their 2013 AGI equaled $34,000. Assume they incurred $5,000 of child care expenses during 2013 for their ONE dependent child, Melissa (who is 5 years old). What is their child and dependent care CREDIT amount?
a. $5,000
b. $3,000
c. $1,000
d. $750
5. In 2006, Dy received stock from Parbat worth $50,000 at the time of the GIFT. At the time of the gift, Parbat's adjusted basis in the stock was $75,000. What is the gain or loss that Dy should report for 2013 if she sold the stock to Tanzina in 2013 for $70,000 (ignore any gift tax that may have been paid on the transfer from Parbat to Dy)?
a. There is no gain or loss
b. $70,000 gain
c. $20,000 gain
d. $5,000 loss
6. Now, assume that in the previous question Dy sold the stock to Tanzina for $100,000 (instead of $70,000). What is the gain or loss that Dy should report (again, ignore any gift tax that may have been paid on the transfer from Parbat to Dy)?
a. There is no gain or loss
b. $100,000 gain
c. $50,000 gain
d. $25,000 gain
7. Now, assume that in Question 5 Dy sold the stock to Tanzina for $20,000 (instead of $70,000). What is the gain or loss that Dy realized on the sale to Tanzina (again, ignore any gift tax that may have been paid on the transfer from Parbat to Dy)?
a. There is no gain or loss
b. $55,000 loss
c. $30,000 loss
d. $20,000 gain
8. Jeff traded in office equipment with an adjusted basis of $40,000 (and value of $70,000) for other (like-kind) office equipment then valued at $50,000. Jeff also received $20,000 in cash as part of the deal. What was Jeff's recognized gain on the exchange, if any?
a. $70,000
b. $30,000
c. $20,000
d. $0
9. Moses traded in computer equipment with an adjusted basis of $30,000 (and a value of $40,000) for other (like-kind) computer equipment then valued at $35,000. Moses also received $5,000 in cash as part of the deal. What was Moses's realized gain on the exchange, if any?
a. $40,000
b. $10,000
c. $5,000
d. $0
10. In 2013, Alisha and Gabriel sold a house to Yenisey for $1,000,000. Prior the 2013 sale, neither Alisha nor Gabriel had ever excluded a gain from the sale of a personal residence. Alisha and Gabriel had lived in the house for the last five years and used it exclusively for personal purposes. Alisha and Gabriel had purchased the house for $200,000. Alisha and Gabriel started living in the house immediately after purchasing it and never made any capital improvements to the house or took any depreciation (or other deductions) against it. Assume there were no selling expenses. How much of a gain did Alisha and Gabriel realize on the sale to Yenisey (assume that Alisha and Gabriel are married and file a joint return)?
a. $300,000
b. $500,000
c. $800,000
d. $1,000,000
11. Assume the facts stated in the previous question. How much of a gain must Alisha and Gabriel recognize on the sale to Yenisey?
a. $300,000
b. $500,000
c. $800,000
d. $1,000,000
12. In 2013, Lasheca will have taxable income of approximately $50,000. In 2013, Lasheca will also have a long-term capital loss of $22,000. Lasheca has no other capital gains or losses (in 2013 or prior years). For 2013, what is the maximum capital loss amount that Lasheca may use to offset her other income?
a. $22,000
b. $19,000
c. $3,000
d. $0
13. Assume the facts stated in the prior question. Assume further that for 2013 Lasheca offset her wages (with her capital loss) to the maximum extent permitted by law. What is the amount of Lasheca's capital loss carryover to 2014?
a. $22,000
b. $19,000
c. $3,000
d. $0
14. Yanela is a single taxpayer in the 35% tax bracket. Yanela wants to minimize her 2013 tax liability. Which of the following provides the LARGEST tax benefit to Yanela (assume that she may legally take advantage of each item in its entirety for 2013)?
a. A $5,000 exclusion from gross income.
b. A $1,000 deduction from gross income.
c. A $500 tax credit.
d. Options "a" and "b" would provide the largest tax benefits.
15. What was the MAXIMUM EARNED INCOME CREDIT amount that Jared and Janice could possibly take for 2013? Assume they are U.S. taxpayers filing a joint return with NO qualifying children.
a. $0
b. $487
c. $1,000
d. $3,000
16. Which item MOST resembles an interest free loan from the U.S. government?
a. First-time homebuyer credit for a closing that occurred in June of 2008
b. The earned income credit
c. The American Opportunity tax credit
d. The child tax credit
17. In early 2013, Kristen sold her personal residence to Jamie for $500,000. At the time of the sale, Kristen's adjusted basis was $300,000. Within three months of the sale, Kristen moved into a new residence she purchased for $450,000. What is Kristen's basis in her new residence?
a. $200,000
b. $250,000
c. $300,000
d. $450,000
18. Which of the following is TRUE?
a. When compared to exclusions, deferrals are more permanent in nature
b. When compared to deferrals, exclusions are more permanent in nature
c. Section 1031 provides for an elective deferral upon certain exchanges
d. All of the above
19. Kristen's business property (located in Yeniseyville USA) was condemned by the proper local authorities. Immediately before the condemnation, the property had a fair market value of $400,000 and Kristen's adjusted basis in the property was $100,000. The local authorities replaced Kristen's condemned property with similar Yeniseyville property having a fair market value of $300,000. What is Kristen's realized gain or loss relating to these matters?
a. $0
b. Loss of $100,000
c. Gain of $200,000
d. Gain of $300,000
20. Assume the facts stated in the prior question. What is Kristen's recognized gain or loss relating to such matters?
a. $0
b. Loss of $100,000
c. Gain of $200,000
d. Gain of $300,000
21. Assume the facts stated in the prior two questions. What is Kristen's basis in the Yeniseyville property she received as a result of the condemnation (i.e., what is Kristen's basis in the newly acquired property)?
a. $0
b. $100,000
c. $200,000
d. $300,000
22. In 2013, Janice and Jamie sold a house to Melissa for $500,000. Janice and Jamie had purchased the house for $900,000 in 2005 (during the real estate boom). Janice and Jamie started living in the house immediately after purchasing it and never made any capital improvements to it or took any depreciation (or other deductions) against it. Assume there were no selling expenses. How much of a LOSS may Janice and Jamie recognize on the sale to Melissa (assume that Janice and Jamie are married and file a joint return and itemize deductions)?
a. $0
b. $400,000 less 10% of their AGI
c. $399,900 less 10% of their AGI
d. $400,000
23. Inyam purchased land for $400,000 in 1988. The land was valued at $900,000 on July 1, 2013, when Inyam died. Inyam's son Johnathan inherited the land. What basis would Johnathan have in the land as a result of the inheritance?
a. $900,000
b. $400,000
c. Inyam's adjusted basis on July 1, 2013 (if different than $400,000)
d. $0
24. Assume the same facts stated in the previous question. Which of the following is most likely TRUE, if Johnathan sold the land in September 2013 for $1,000,000?
a. Johnathan's 2013 gain is short-term
b. In 2013, Johnathan should "recapture" any depreciation previously taken by Inyam on the land
c. In 2013, Johnathan will be taxed on the appreciation that occurred while Inyam held the land (provided that such appreciation was previously not taxed)
d. Johnathan's 2013 gain is long-term