This pack of ACCT 324 Week 4 Deductions, Losses, and Passive Activities – Midterm covers:
1. Question : (TCO 9) In terms of probability, which of the following taxpayers would least likely be audited by the IRS? 2. Question : (TCO 9) A characteristic of fraud penalties is: 3. Question : (TCO 1) Federal tax legislation generally originates in what body? 4. Question : (TCO 1) Subchapter S covers which specific area of tax law? 5. Question : (TCO 11) Kyle, whose wife died in December 2009, filed a joint tax return for 2009. He did NOT remarry, but has continued to maintain his home in which his two dependent children live. What is Kyle’s filing status regarding 2012? 6. Question : (TCO 11) Arnold is married to Sybil, who abandoned him in 2008. He has NOT seen or communicated with her since April of that year. He maintains a household in which their son, Evans, lives. Evans is age 25 and earns over $20,000 each year. For tax year 2011, Arnold’s filing status is: 7. Question : (TCO 7) Orange Cable TV Company, an accrual basis taxpayer, allows its customers to pay by the year in advance ($350 per year), or two years in advance ($680). In September 2011, the company collected the following amounts applicable to future services:As a result of the above, Orange Cable should report as gross income: 8. Question : (TCO 7) With respect to the prepaid income from services, which of the following is true? 9. Question : (TCO 3) Section 119 excludes the value of meals from the employees’ gross income: 10. Question : (TCO 3) Adam repairs power lines for the Egret Utilities Company. He is generally working on a power line during the lunch hour. He must eat when and where he can and still get his work done. He usually purchases something at a convenience store and eats in his truck. Egret reimburses Adam for the cost of his meals. 11. Question : (TCO 10) On June 1, 2010, Irene places in service a new automobile that cost $21,000. The car is used 70% for business and 30% for personal use (Assume that this percentage is maintained for the life of the car.). She does NOT elect to take additional first-year depreciation. Determine the cost recovery deduction for 2011. 12. Question : (TCO 10) Which of the following is correct? 13. Question : (TCO 10) On May 2, 2011, Karen places in service a new sports utility vehicle that costs $70,000 and has a gross vehicle weight of 6,300 lbs. The vehicle is used 40% for business and 60% for personal use. Determine the cost recovery deduction for 2011. 14. Question : (TCO 10) Danielle owns a vacation cottage. During the current year, she rented it for $1,500 for 48 days, and lived in it for 12 days. How would any expenses be accounted for? 15. Question : (TCO 3) During the year, Rick had the following insured personal casualty losses (arising from one casualty). Rick also had $18,000 AGI for the year. 16. Question : (TCO 3) John had adjusted gross income of $60,000. During the year, his personal use summer home was damaged by a fire. Pertinent data with respect to the home follows:Cost basis $250,000Value before the fire $400,000Value after the fire $100,000Insurance recovery $270,000John had an accident with his personal use car. As a result of the accident, John was cited with reckless driving and willful negligence. Pertinent data with respect to the car follows:Cost basis $80,000Value before the accident $6,000Value after the accident $20,000Insurance recovery $0What is John’s deductible casualty loss? 17. Question : (TCO 3) Jim purchases a ticket for $80 for a special concert by the symphony (a qualified charity). If the price of a ticket is normally $25, what is the amount allowed as a charitable deduction? 18. Question : (TCO 3) Karen, a calendar year taxpayer, made the following donations to qualified charitable organizations in the current year:Cash donation to Midwest State University $30,000 $ 30,000Unimproved land to the city of Terre Haute, Indiana $70,000 $210,000The land had been held as an investment and was acquired 4 years ago. Shortly after receipt, the city of Terre Haute sold the land for $210,000. Karen’s AGI is $450,000.The allowable charitable contribution deduction is: 19. Question : (TCO 3) This year, Ralph made the following contributions to the University of the Northwest (a qualified charitable organization): Cash: $63,000 Stock in Raptor, Inc. (a publicly traded corporation): $94,500Ralph acquired the stock in Raptor, Inc. as an investment 14 months ago at a cost of $42,000. Ralph’s current AGI is $189,000.What is Ralph’s charitable contribution deduction for this year? 20. Question : (TCO 3) Several years ago, Joy acquired a passive activity. Until 2008, the activity was profitable. Joy’s at-risk amount at the beginning of 2008 was $250,000. The activity produced losses of $100,000 in 2008, $80,000 in 2009, and $90,000 in 2010. During the same period, no passive income was recognized. How much is suspended under the at-risk rules and the passive loss rules at the beginning of 2011? 21. Question : (TCO 3) Wes’ at-risk amount in a passive activity is $25,000 at the beginning of the current year. His current loss from the activity is $35,000, and he has no passive activity income. At the end of the current year, which of the following statements is incorrect? 22. Question : (TCO 2) The installment method applies to which of the following sales with payments being made in the year following the year of sale? 23. Question : (TCO 2) In 2010, Helen sold property and reported her gain by the installment method. Her basis in the property was $150,000 ($250,000 cost less $100,000 of depreciation). Helen sold the property for $375,000, with $75,000 due on the date of the sale and $300,000 (plus interest at the federal rate) due in 2011. Helen’s recognized installment sale gain in 2011 is: 24. Question : (TCO 2) Todd, a CPA, sold land for $200,000 plus a note for $400,000. The interest rate on the note was equal to the federal rate. The fair market value of the note was $360,000. Todd’s basis in the land was $75,000. 25. Question : (TCO 2) Both economic and social considerations can be used to justify: 1. Question : (TCO 3) Joe’s automobile, which was used only for business purposes, was damaged in an accident. At the date of the accident, the fair market value of the automobile was $13,000 and its adjusted basis was $7,000. After the accident, the automobile was appraised at $4,000. Calculate Joe’s loss. Is it a for or from AGI deduction? 2. Question : (TCO 1) In 2010, David had the following transactions:Salary $75,000Capital loss from a stock investment ($6,000)Moving expense to change jobs ($12,500)Received repayment of $9,000 loan he made to a friend in 2007 (also interest of $900) $9,900Property taxes on personal residence $1,500Based on the information given above, determine David’s AGI. Be sure to show your work.