Deck 1: Introduction to Taxation

Question 1

Janis purchased an asset for $40,000. During the five years she owned the asset she deducted $30,000 of depreciation expense and spent $5,000 on a major improvement. Determine Janis's gain or loss on the sale of the asset for: a. $19,000; b. $8,000

Answer 1

Adjusted basis = $40,000 - $30,000 + $5,000 = $15,000
a. $19,000 - $15,000 = $4,000 gain
b. $8,000 - $15,000 = $7,000 loss

Question 2

Susie is single, has salary income of $26,000, and $6,000 of itemized deductions. What is her taxable income? What is her income tax liability?

Answer 2

Taxable income = $26,000 - $3,700 - $6,000 = $16,300
Income tax = ($8,500 x .10) + [($16,300 - $8,500) x .15] = $850 + $1,170 = $2,020

Question 3

Darden Corporation has taxable income of $420,000. If it distributes all of its after-tax income to its sole shareholder who is in the 35 percent marginal tax bracket, what is the total tax burden on this $420,000 of income?

Answer 3

$400,000 x .34 = $136,000 corporate tax. ($400,000 - $136,000) x .15 = $39,600 individual tax. Total tax = $136,000 + $39,600 = $175,600.

Question 4

Below is a list of items that are found in the tax models. Use C to identify items only found in the corporate tax model; use I to identify those items only found in the individual tax model; use B to identify those items found in both models.

-Gross income tax liability

A) Corporate tax model(C)
B) Individual tax model(I)
C) Both models(B)

Question 5

Below is a list of items that are found in the tax models. Use C to identify items only found in the corporate tax model; use I to identify those items only found in the individual tax model; use B to identify those items found in both models.

-Tax credits

A) Corporate tax model(C)
B) Individual tax model(I)
C) Both models(B)

Question 6

Below is a list of items that are found in the tax models. Use C to identify items only found in the corporate tax model; use I to identify those items only found in the individual tax model; use B to identify those items found in both models.

-Taxable income

A) Corporate tax model(C)
B) Individual tax model(I)
C) Both models(B)

Question 7

Below is a list of items that are found in the tax models. Use C to identify items only found in the corporate tax model; use I to identify those items only found in the individual tax model; use B to identify those items found in both models.

-Standard deduction

A) Corporate tax model(C)
B) Individual tax model(I)
C) Both models(B)

Question 8

Below is a list of items that are found in the tax models. Use C to identify items only found in the corporate tax model; use I to identify those items only found in the individual tax model; use B to identify those items found in both models.

-Adjusted gross income

A) Corporate tax model(C)
B) Individual tax model(I)
C) Both models(B)

Question 9

Below is a list of items that are found in the tax models. Use C to identify items only found in the corporate tax model; use I to identify those items only found in the individual tax model; use B to identify those items found in both models.

-Gross income

A) Corporate tax model(C)
B) Individual tax model(I)
C) Both models(B)

Question 10

Below is a list of items that are found in the tax models. Use C to identify items only found in the corporate tax model; use I to identify those items only found in the individual tax model; use B to identify those items found in both models.

-Gross revenue

A) Corporate tax model(C)
B) Individual tax model(I)
C) Both models(B)

Question 11

Below is a list of items that are found in the tax models. Use C to identify items only found in the corporate tax model; use I to identify those items only found in the individual tax model; use B to identify those items found in both models.

-Personal exemption

A) Corporate tax model(C)
B) Individual tax model(I)
C) Both models(B)

Question 12

Below is a list of items that are found in the tax models. Use C to identify items only found in the corporate tax model; use I to identify those items only found in the individual tax model; use B to identify those items found in both models.

-Cost of goods sold

A) Corporate tax model(C)
B) Individual tax model(I)
C) Both models(B)

Question 13

Below is a list of items that are found in the tax models. Use C to identify items only found in the corporate tax model; use I to identify those items only found in the individual tax model; use B to identify those items found in both models.

-Total income

A) Corporate tax model(C)
B) Individual tax model(I)
C) Both models(B)

Question 14

Identify the following items with an R if it is a deduction For adjusted gross income. Identify with an M if it is a deduction From adjusted gross income.

-Moving expenses

A) deduction For adjusted gross income(R)
B) deduction From adjusted gross income(M)

Question 15

Identify the following items with an R if it is a deduction For adjusted gross income. Identify with an M if it is a deduction From adjusted gross income.

-Medical expense

A) deduction For adjusted gross income(R)
B) deduction From adjusted gross income(M)

Question 16

Identify the following items with an R if it is a deduction For adjusted gross income. Identify with an M if it is a deduction From adjusted gross income.

-Charitable contribution

A) deduction For adjusted gross income(R)
B) deduction From adjusted gross income(M)

Question 17

Identify the following items with an R if it is a deduction For adjusted gross income. Identify with an M if it is a deduction From adjusted gross income.

-Alimony paid

A) deduction For adjusted gross income(R)
B) deduction From adjusted gross income(M)

Question 18

Identify the following items with an R if it is a deduction For adjusted gross income. Identify with an M if it is a deduction From adjusted gross income.

-Student loan interest

A) deduction For adjusted gross income(R)
B) deduction From adjusted gross income(M)

Question 19

Identify the following items with an R if it is a deduction For adjusted gross income. Identify with an M if it is a deduction From adjusted gross income.

-State income taxes

A) deduction For adjusted gross income(R)
B) deduction From adjusted gross income(M)

Question 20

Identify the following items with an R if it is a deduction For adjusted gross income. Identify with an M if it is a deduction From adjusted gross income.

-Gambling losses

A) deduction For adjusted gross income(R)
B) deduction From adjusted gross income(M)

Question 21

Identify the following items with an R if it is a deduction For adjusted gross income. Identify with an M if it is a deduction From adjusted gross income.

-Health savings account contribution

A) deduction For adjusted gross income(R)
B) deduction From adjusted gross income(M)

Question 22

Identify the following items with an R if it is a deduction For adjusted gross income. Identify with an M if it is a deduction From adjusted gross income.

-Contribution to a pension plan

A) deduction For adjusted gross income(R)
B) deduction From adjusted gross income(M)

Question 23

Identify the following items with an R if it is a deduction For adjusted gross income. Identify with an M if it is a deduction From adjusted gross income.

-Theft loss

A) deduction For adjusted gross income(R)
B) deduction From adjusted gross income(M)

Question 24

What is the gain or loss on the sale of an asset for $68,000 if the asset cost $185,000, depreciation expense deducted was $124,000, and there was a $19,000 major addition to the asset?

A) $0
B) $12,000 loss
C) $7,000 gain
D) $117,000 loss

Question 25

Wilma and Barney are married and have 4 dependent children. What is the total amount of their personal and dependency exemptions for 2011?

A) $7,400
B) $14,800
C) $22,200
D) $33,300

Question 26

Sara is single and has no dependents. What is the total amount of her standard deduction and personal exemption for 2011?

A) 0
B) $3,700
C) $5,800
D) $9,500

Question 27

Hoku Corporation (a C corporation) had the following history of income and loss:
$$\begin{array} { c c } \text { Year } & \text { Income (Loss) } \\2009 & \$ 40,000 \\2010 & \$ 70,000 \\2011 & ( \$ 10,000 )\end{array}$$
How much of a tax refund can Hoku Corporation receive by carrying back its 2011 loss?

A) $1,500
B) $2,500
C) $3,500
D) None; it cannot carry its loss back