1. Chloe owns 200 shares of TPP stock that she purchased 10 years ago for $1,500. Five years ago, there was a 3 for 2 stock split and she received 100 additional shares. This year, there was another 3 for 2 stock split and she received 150 additional shares. If the stock is currently selling for $10 per share, what is her income and what is her basis in these last 150 shares?
a. $3,000 income; $3,000 basis
b. $3,000 income, $1,125 basis
c. 0 income; $1,125 basis
d. 0 income; $500 basis
2. How much tax can be saved if John shifts $1,900 of income to his 18 year old dependent son? John is in the 25 percent tax bracket and his son has no other taxable income in 2012.
a. $950
b. $475
c. $380
d. $95
3. Which of the following are characteristics of a traditional IRA?
a. Most distributions made before age 59½ are subject to a 10 percent penalty tax.
b. A taxpayer must begin taking distributions from the IRA by age 75½.
c. Neither is a characteristic.
d. Both are characteristics
4. Momee Corporation, a calendar-year corporation, bought only one asset in 2007, a crane it purchased for $700,000 on November 24. It disposed of the asset in April, 2012. What is its depreciation deduction for this asset in 2012 if cost recovery was determined using only regular MACRS?
a. $62,510
b. $61,110
c. $31,255
d. $22,916
5. Cliff owned investment stock purchased three years ago for $16,000 and bonds purchased six months ago for $9,800. When he needed money recently, he sold the stock for $13,800 and the bonds for $10,100. What is the amount and type of net gain or loss that Cliff will include in computing his taxable income?
a. $2,200 long-term capital loss
b. $1,900 long-term capital gain
c. $1,900 long-term capital loss
d. $300 short-term capital gain
6. Shawn, a single taxpayer, sold the house he has lived in for seven years for $700,000. He purchased the house for $285,000. He made improvements at a cost of $125,000 and paid a $30,000 commission on the sale. What are Shawn's realized and recognized gains on the sale?
a. $260,000 realized and recognized
b. $290,000 realized and recognized
c. $260,000 realized and $10,000 recognized
d. $260,000 realized and no gain recognized
e. None of the above
7. Cal exchanges office furniture (fair market value = $100,000; adjusted basis = $90,000) and a business auto (fair market value = $10,000; adjusted basis = $6,000) for fire retardant filing cabinets (fair market value = $110,000; adjusted basis = $80,000). How much gain or loss does Cal recognize on the exchange?
a. 0
b. $4,000 gain on auto
c. $10,000 gain on furniture
d. $14,000 total gain
e. None of the above
8. Cal contributes property valued at $50,000 (adjusted basis = $30,000) to a partnership in exchange for a partnership interest valued at $40,000 and $10,000 cash. What is Cal's recognized gain or loss on these transfers?
a. 0
b. $4,000
c. $10,000
d. $20,000
9. Soho is a personal service corporation that has $1,100,000 of gross revenue and $1,021,000 of deductible expenses? What is its income tax liability?
a. $79,000
b. $30,494
c. $27,650
d. $26,860
e. $15,110
10. What is JJ Corporation's balance in accumulated earnings and profits at the beginning of year 2 if in year 1 it made a $40,000 distribution to its shareholders, its current earnings and profits was $35,000, and its accumulated earnings and profits was $25,000 at the beginning of year 1?
a. $65,000
b. $30,000
c. $25,000
d. $20,000