Basic Taxation MCQ

Dick is the sole shareholder of CB Enterprises, Inc. He received a $100 dividend distribution from his corporation in 2007. The current earnings of the corporation were $1,000. What reporting requirements  apply to this distribution?

Noika Corporation, a calendar year accrual basis corporation, made cash charitable contributions totaling $40,000 during 2007. Prior to determining its charitable contribution deduction, Noika Corporation had a taxable income of $300,000 after a dividends-received deduction of $42,000. What is the amount of Noika‘s current year Charitable contribution deduction for 2007?

A owns a 3-unit apartment building for which he receives $300 per month per unit. Two of them were rented for the entire year. The 3rd unit was occupied from January1 to April 30. 2007. On vacating the unit, the tenant was not refunded his security deposit of $500 due to necessary repairs. The unit was subsequently rented for one year beginning August 1, 2007. On August 1, 2007, the new tenant paid the first and last month's rent and a refundable security of $500. What is A's rental income?

Mark purchased the following business equipment:
Pick-up truck (< 6000 Gross Weight) $12,500
Cellular Phones $340
Desks $3,250
Chairs $275
Total $16365
What would be the value of his purchases considered listed property for depreciation purposes?

In December 2006, Mr. Smith purchased a manufacturing plant for $85,400. The cost was allocated as follows:
Land (20%) - $17,080. Building (80%) - $68,320
The following items relating To The property occurred before the property was placed in service on January 1, 2007:
Building remodeling expenses $10,000
Storm damage (caSualty loSS) to the building $8,000
EasEmEnt grantEd for right-of—way $2,500
LegaL fees paid for perfecting the titLe $3,600
What is the adjusted basis of the building and land on January 1. 2007?

George is a full time student at a local college. During the fall semester, he received a $4,250 scholarship from a local foundation. He spent the entire $3,000 student loan and another $1,850 during this semester. He made the following expenses: tuition $2000, books $750, board and lodging $2,000. How much of the $4,250 scholarship should George report as income?

A, B, 8: C of Dutch LLC, a calendar year partnership company, share profits and losses in the ratio of 4:323. respectively. All three materially participate in the partnership business. Each partner‘s adjusted basis in the partnership before distribution at the year end is as follows:
A - $10000 B - $8000 C - $12000
The partnership incurred an operating loss of $30,000 in the CY. Calculate each one's share of loss to be reported on their individual tax returns.

In the Current year, Richard makes the following donations. What is the amount he can deduct in Schedule A?
- $300 to a local Church (no written acknowledgment)
- $600 by payroll deduction to the Salvation Army
- an old radio with an FMV of $499 to the Red Cross with the receipt dated Jan 2008

Mosh's basis in S Corporation stock was $100,000 before adjusting for the current year activity. After consideration of each of the items below, what is Mosh's basis in his S Corporation stock?

John along with his spouse Nancy started a new consulting business in partnership. They share profits and losses in the ratio 6:4 respectively. They file a joint return as a married couple at the end of the year. Which of the following is true when they need to report the income and expenses of the consulting business?

Maggi and Philip are web developers. They went into business together and decided that the corporation structure would be in their best interest. On Jan. 1. 2007. they formed the M & P Corp. They did not file Form 2553. They filed an 11208 return at the end of the year and paid self-employment tax on their respective shares of the income. All of the following statements are true except .

A and 8 f‌ile a joint return. They have sold securities in the year 2007 and the sale has resulted in a capital loss of $5792.60. Their taxable income for the year is $58000. How much can they deduct from their income in their joint return?

The following data pertains to the sales and collections made by EJH corporation, a cash basis taxpayer, during 2007:
Sales Uncollected $ 32,500
Sales Collected $1,000,000
Total Sales - 2007 $1,032,500
CoIIections of bad debt for 2006 $15,200
What is the income to be reported for the CY?

Mr.Terrero let out his basement apartment for 10 days to Mike and he personally used it for 20 days. The basement apartment was not used for the rest of the year. He earned a rental income of $1000 and paid maintenance charges of $600. He should report these activities in Schedule E as .

Klein has taken care of his married daughter for more 9 months in this tax year and has also paid more than half of her expenses. At the end of the year, she f‌iles a joint return with her husband as a married person. Klein can also claim her as his dependent.

Susan's husband died in the tax year 2007 and she didn't re-marry. She has two minor children living with her whom she has been supporting. The filing status with the lowest tax rate for which Susan Qualif‌ies is ____________.

You have received an acre of land as a gift. At the time of gifting, the land had an FMV of $6500. The donor's adjusted basis was $8200.“ the selling price is 510000, what is your gain or loss assuming that there has been no increase or decrease in the basis after you received the property?

In 2007, ACD Corporation. a clothing retailer, showed the following expenses:
Clothing purchased for resale $72,000
Freight-in $3.550
Freight out to customers $1,750
Opening inventory $55,650
Closing inventory $42,500
What is the cost of the goods sold by the ACD?

In July 2007, Clara acquired and operated for profit a running business with the following assets basis:
Goodwill $32,500
Land $28,200
Building $94,200
Equipment $63,400
Cash $7,850
What is the amortization deduction?

Raj uses 3/5th of his house for business purposes. The area of his house is 1000 Sqft. Calculate how much he can Claim as Home Off‌ice expenses if he has incurred the following expenditure during the year:

-Real estate taxes $1500

-lnsurance $500

-Painting the Off‌ice Space $200

-Interest on mortgage $2000

After Mary's death on August 1, 2007. her estate received the following:
 $50,000 as life insurance proceeds
 $1,000 as interest income from a certif‌icate of deposit that matured on August 5, 2007
 $2,000 as annual royalty on a patent
What amount of taxable income must be reported in the 2007 Income Tax Return for Estate and Trusts (Form 1041)?

John made several stock sales during 2007. Determine the net capital gain or loss for the following transactions:

Date Cost of Purchase Date of Selling Sale Price

1-1-07 $4,000 6-2-07 $6,000

7-6-06 $10,000 7-7-07 $14,000

7-6-06 $20,000 7—6-07 $17,000

4-3-06 $5.000 6-2-07 $4,000

Mr and Mrs. Smith bought a primary residence in July 1999 for $150,000. In the year 2004, they added an additional room at a cost of $175,000.They lived there until Aug 2005. In Sep 2007. they sold this residence for $800,000. From Aug 2005 onwards, the house remained unoccupied. They file a Married filing Joint return and they have not excluded any gain in the past 2 years. What is their maximum taxable gain?

Andrew and Brain each have a 50% interest in AB Partnership. The partnership and the partners f‌ile calendar year tax returns. During the 2006 tax year, the Partnership suffered a loss of $10,000. Andrew's adjusted basis in his partnership interest on January 1, 2007 was $4,500. The Partnership reported a gain of $18,000 in its 2007 tax year return. There are no other adjustments to Andrew's basis in the partnership for 2006 or 2007. There were no distributions to the partners in either year. What is the amount of partnership income or loss that Andrew will show in his 2007 individual return in Form 1040?

Philip incurred the following moving expenses:
Cost of packing and crating and transporting his household goods $3.500;
Lodging during travel between his old home and his new home $850;
Meals during the trip $250;
$550 to break the lease on his old home.
Philip had moved to take up a new job and met the distance and time tests. What are the total moving expenses that can be deducted from his total income to arrive at the adjusted gross income?

Drake Inc.. a calendar year cash basis corporation, made the following transactions during 2007:
Net income as per books (after tax estimates) $ 100.000
Federal income tax paid $ 22,250
Excess of capital losses over capital gains 3; 5.000
Interest from municipal bonds $11,000
Expenses related to municipal bond interest $ 500
What is Drake's taxable income?

Following the death of Clara's husband, the executor of his estate made the following payments:

1. Medical expenses of the deceased paid within six months of the date of death and not claimed in the deceased's f‌inal income tax return

2. Funeral expenses of the deceased

3. State inheritance taxes

4. Qualified charitable contributions as a bequest dictated by the Will of the deceased

Which of these expenses would generally be allowable as deductions in determining the taxable estate in the Federal Estate Income Tax Return (Form 706)?

A taxpayer purchased a rental property for $200,000. The taxpayer paid $50,000 as cash down payment and got it financed for $150,000. The closing costs were $10,000 and points were $8,000.

What is his basis in the property?