General Taxation MCQs

1. Which of the following is not allowed as a deductible moving expense?

2. 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?

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

4. Which of the following is correct with respect to depreciation recapture when a property is used for trade or business?

5. 228 shares are bought on Jan 3, 2007. What is the earliest date on which the stock can be sold and the gain or loss qualifies as long term?

6. Under a partnership agreement, Abhi, a partner, is to receive 40% of the partnership's income. but not less than $15,000. The partnership's net income for 2007 was $30,000 before considering theminimum guaranteed amount. What amount can the partnership deduct as a guaranteed payment and what amount of income is Abhi required to report in her individual tax return?

7. Gary's car caught fire and was totally destroyed. The car was appraised for $36,500. Gary only had it insured for $20,000. Since this was more than enough to cover his adjusted basis of $12,000, he decided not to get the car replaced. What should Gary report on his tax return?

8. What is Drake's taxable income?

9. Which of the following statements is NOT true regarding corporate capital losses?

10. You must pay estimated taxes if .

11. Which of the following is not eligible to be a shareholder of S Corporation?

12. Which of the following statements regarding extensions of time to file a tax return is correct?

13. A has supported his brother ‘C' for the entire year to claim C as a dependent on form 1040. Which of the following countries must C be a resident of to claim this benefit?

14. Which of the following is not a requirement to claim to be the head of a household?

15. With respect to Simple Trusts, all the following statements are true except.

16. What are the total moving expenses that can be deducted from his total income to arrive at the adjusted gross income?

17. All of the following events except would cause an S Corporation to be disqualified from being an S corporation.

18. Taxes deducted as an itemized deduction include all of the following except .

19. What is the amount of partnership income or loss that Andrew will show in his 2007 individual return in Form 1040?

20. Which of the following cash basis items of the partnership must be prorated on a daily basis to determine each partner's share of partnership income or loss if any partner's interest in a partnership firm changes during the year?

21. What is their maximum taxable gain?

22. In 2007, ABC Inc. had gross receipts of $45,300from the sale of videos, dividends of $32,500 from a domestic corporation in which ABC, Inc. owned 50% of the stock. and operating expenses of $75,000. What is the net operating loss of the ABC Inc. in 2007?

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

24. ABC Corporation is preparing Schedule M-1 of its Form 1120, US. Corporate Income Tax Return. Which of the following statements is incorrect with regard to the preparation of Schedule M-1?

25. Which of the following need not be met for a child to qualify as a dependent?

26. What amount of taxable income must be reported in the 2007 Income Tax Return for Estate and Trusts (Form 1041)?

27. Which of the following accounting changes does not require the f‌iling of Form 3115 to request a change in the accounting method?

28. George could not f‌ile his tax return on April 15th as he was out of the country on an assignment. He can request for an extension of time to pay his taxes within 6 months of the due date by f‌iling Form 4868.

29. Which of the following is income from passive activity?

30. Mr.Brain died on July 18, 2007. His taxable estate is worth $900,000. By which date is the filing of Form 706. United States Estate Tax Return, due?

31. Which of the following incomes is not subject to self-employment tax?

32. You operate a business and file your tax return on a calendar-year basis. You bought a f‌ire insurance policy on your building effective September 1, 2007, and paid a premium of $6000 for 2 years of coverage. How much can you deduct in your 2007 return?

33. 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:

34. Bruce has received the following from his employer during the year: $25,000 as regular wages, $5,000 as cash bonus. $1.000 as traveling allowance, and $100 per month as parking allowance for parking at a lot adjacent to the off‌ice building. The employer has also contributed $200 per month to a 401(k) plan for him. He chose not to set aside any part of his income for the retirement plan. How much income should he report?

35. In July 2007, Clara acquired and operated for profit a running business with the following assets basis:

36. Which of the following would be considered a f‌iscal tax year?

37. All of the following credits are part of the General Business Credit except .

38. Which of the following must you show to meet the directly related test for entertainment expenses?

39. Which of the following may be considered as alimony?

40. All of the following(assuming that they are all under the age of 65) need to file a tax return except .

41. In 2007, ACD Corporation. a clothing retailer, showed the following expenses:

42. Which of the following is deductible as Medical Expenses?

43. Which of the following determines the basis of property received in exchange of services?

44. The fringe benefits are not taxable except .

45. Which of the following are organizational costs?

46. 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?

47. 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 ____________.

48. If a tax payer has capital gain distributions and no other capital gain, which one Of the following statements is correct?

49. 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.

50. Mr.Terrero let out his basement apartment for 10 days to Mike and he personally used it for 20 days.

51. The following data pertains to the sales and collections made by EJH corporation, a cash basis taxpayer, during 2007:

52. Jasco Corporation ends its tax year on 31st March. When must they file their income tax return for the year ending March 31st, 2007?

53. 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?

54. Susan runs a consulting business. The gross receipts for the tax year are $60,000 and the net profit is $45,000. In addition, Susan received $25,000 as wages. She also received stock dividends of $2,000, Municipal Bond interest Of $4,000 and savings account interest of $1,000. What is her adjusted gross income?

55. Maggi and Philip are web developers. They went into business together and decided that the corporation structure would be in their best interest.

56. 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?

57. Which of the following is not a credit against gross estate tax in determining net estate tax?

58. Wash sale occurs when you sell or trade stocks at a loss and

59. 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?

60. Which of the following items is not separately stated in Form 1120 by the shareholders?

61. Which of the following is not a section 1245 property?

62. Which of the following is not a true statement regarding bad business debts?

63. In the Current year, Richard makes the following donations. What is the amount he can deduct in Schedule A?

64. Which one of the following is not a timing difference?

65. Under the terms of the partnership agreement, Joyce is entitled to a fixed annual payment of $25000and her partner $30,000 without regard to the income of the partnership. Joyce's distributive share ofthe partnership income is 25%. The partnership's income is $75,000 of the ordinary income afterdeducting the guaranteed payments. How much ordinary income from the partnership will be included in Joyce's individual income tax return?

66. 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:

67. 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?

68. Which of the following is not rental income in the year in which it is received?

69. A common kind/ common kinds of distributions by a corporation to its shareholders is / are

70. Which of the following is not reduced by the 2% limitation on miscellaneous deductions?

71. Which of the following will decrease the basis of the property?

72. Which of the following activity would subject a taxpayer to the uniform capitalization rules?

73. Your AGI is $35400; you can deduct your medical expenses if they are more than

74. 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:

75. 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?

76. 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?

77. 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?

78. 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?

79. ____ is also called a corporate portal.