1. Risky, Inc., an S corporation, borrows $100,000 from The Last Rational Bank for use in the real estate business. The $100,000 borrowed
a. increases the shareholders' basis in their shares pro rata
b. does not increase the shareholders' basis in their shares
c. 25% of the borrowed amount can be allocated to the shareholders' basis
d. is treated as an immediate distribution from the corporation to its shareholders
Answer: _______
2. Upon creation of X Corporation, John transfers a parcel of real estate with a basis of $100,000 and a fair market value on the date of transfer of $500,000 that was subject to a mortgage of $200,000 solely in exchange for all of the stock of X Corporation. X Corporation's basis in the real estate is
a. $500,000
b. $100,000
c. $300,000
d. $200,000
e. none of the above
Answer: _______
3. A mortgagor who pays a penalty for the privilege of prepaying a mortgage treats the prepayment as:
a. additional interest
b. an item to be capitalized and added to the mortgagor's basis in the property
c. a nondeductible expense
d. an item to be deducted from gain (or added to loss) if an when the property is sold
4. Section 7872 does not apply to a gift loan if:
a. The gift loan is $5,000 or less
b. The gift loan is made to a person unrelated to the lender/donor as defined in Section 267 of the Code
c. The gift loan is $10,000 or less
d. The gift loan is a demand loan
5. If seller financing or other debt subject to the imputed interest or original issue discount rates does not exceed $2,800,000, the maximum rate under the imputed interest or OID rates is
a. The rate published by the IRS under Section 7872 of the Code
b. 8%
c. The long-term US Treasury Bond rate in the month of the transaction
d. 9%
6. A taxpayer is considered to be at risk under the at risk rules for
a. Money borrowed by another for which payment is guaranteed by the taxpayer
b. Money borrowed by the taxpayer from another who has an equity interest in the taxpayer's business
c. Qualified nonrecourse financing
d. Money borrowed by the taxpayer from an enterprise that owns an equity interest in the business