Question 1

Additional depreciation deduction allowed for the year the asset is acquired.

Accepted Answer

The answer of Additional depreciation deduction allowed for the year...

Question 2

Indicate which,if any,statement is incorrect.State income taxes:

Accepted Answer

State income taxes can apply to both residents and nonresidents who work within the state's borders, but cannot apply to nonresident visitors who do not earn income within the state.

Question 3

Norma formed Hyacinth Enterprises,a proprietorship,in 2015.In its first year,Hyacinth had operating income of $400,000 and operating expenses of $240,000.In addition,Hyacinth had a long-term capital loss of $10,000.Norma,the proprietor of Hyacinth Enterprises,withdrew $75,000 from Hyacinth during the year.Assuming Norma has no other capital gains or losses,how does this information affect her adjusted gross income for 2015?

Accepted Answer

The answer of Norma formed Hyacinth Enterprises,a proprietorship,in 2015.In its...

Question 4

Rachel is the sole member of an LLC,and Jordan is the sole shareholder of a C corporation.Both businesses were started in the current year,and each business has a long-term capital gain of $10,000 for the year.Neither business made any distributions during the year.With respect to this information,which of the following statements is correct?

Accepted Answer

As an LLC, Rachel's business is treated as a pass-through entity, meaning that the profits and losses flow through to the owner's personal tax return. Therefore, Rachel must report the $10,000 LTCG on her personal tax return. On the other hand, the C corporation will pay corporate tax on the $10,000 LTCG at the regular corporate tax rate, as there is no preferential tax rate for C corporations on long-term capital gains. Jordan, as the sole shareholder of the C corporation, will not report the $10,000 LTCG on his personal tax return unless the corporation distributes the profits to him in the form of dividends. No information is provided regarding distributions for either business, so we cannot assume any preferential tax treatment for them.

Question 5

Which,if any,of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

Accepted Answer

The nonrecognition of gain allowed for involuntary conversions cannot be justified as mitigating the effect of the annual accounting period concept as it is a separate provision that allows for nonrecognition of gain in certain circumstances, such as when property is involuntarily converted. The remaining choices are provisions that allow for the deferral or carryover of certain deductions or losses, which can help mitigate the impact of the annual accounting period concept on taxpayers.

Question 6

Elk,a C corporation,has $370,000 operating income and $290,000 operating expenses during the year.In addition,Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss.Elk's taxable income is:

Accepted Answer

Operating income = $370,000
Operating expenses = $290,000
Net operating income (NOI) = Operating income - Operating expenses = $80,000
Long-term capital gain = $10,000
Short-term capital loss = $17,000

Taxable income = NOI + Long-term capital gain - Short-term capital loss
                = $80,000 + $10,000 - $17,000
                = $73,000

Therefore, the correct choice is C.

Question 7

Juanita owns 60% of the stock in a C corporation that had a profit of $200,000 in 2014.Carlos owns a 60% interest in a partnership that had a profit of $200,000 during the year.The corporation distributed $45,000 to Juanita,and the partnership distributed $45,000 to Carlos.Which of the following statements relating to 2014 is incorrect?

Accepted Answer

The answer of Juanita owns 60% of the stock in...

Question 8

Bjorn owns a 60% interest in an S corporation that earned $150,000 in 2014.He also owns 60% of the stock in a C corporation that earned $150,000 during the year.The S corporation distributed $30,000 to Bjorn and the C corporation paid dividends of $30,000 to Bjorn.How much income must Bjorn report from these businesses?

Accepted Answer

Bjorn must report his share of the income from the S corporation, which is 60% of $150,000, or $90,000. He must also report the dividend income of $30,000 from the C corporation, for a total of $120,000 in income.

Question 9

Lucinda is a 60% shareholder in Rhea Corporation,a calendar year S corporation.During the year,Rhea Corporation had gross income of $550,000 and operating expenses of $380,000.In addition,the corporation sold land that had been held for investment purposes for a short-term capital gain of $30,000.During the year,Rhea Corporation distributed $50,000 to Lucinda.With respect to this information,which of the following statements is correct?

Accepted Answer

As a 60% shareholder, Lucinda's share of Rhea Corporation's taxable income is $200,000 ($550,000 - $380,000 = $170,000 taxable income x 60% ownership = $102,000). In addition, she received a distribution of $50,000, which is tax-free because it is not in excess of her share of Rhea Corporation's accumulated earnings and profits. Finally, she has a short-term capital gain of $30,000 x 60% ownership = $18,000. Therefore, Lucinda reports ordinary income of $102,000 and a short-term capital gain of $18,000.

Question 10

Which,if any,of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS)?

Accepted Answer

The answer of Which,if any,of the following provisions of the...

Question 11

Allowing a domestic production activities deduction for certain manufacturing income can be justified:

Accepted Answer

The domestic production activities deduction for certain manufacturing income can be justified by economic considerations as it encourages domestic manufacturing and production, which in turn supports job creation and economic growth.

Question 12

Provisions in the tax law that promote energy conservation and more use of alternative (non-fossil)fuels can be justified by:

Accepted Answer

Provisions in the tax law that promote energy conservation and use of alternative fuels can be justified on economic and social grounds as they can help reduce dependence on fossil fuels, which can have negative environmental impacts and contribute to climate change. Additionally, promoting alternative energy sources can help create jobs in the renewable energy sector and provide opportunities for innovation and new business models.

Question 13

A tax credit for amounts spent to furnish care for children while the parent is at work.

Accepted Answer

The answer of A tax credit for amounts spent to...

Question 14

State income taxes generally can be characterized by:

Accepted Answer

The answer of State income taxes generally can be characterized...

Question 15

Tax brackets are increased for inflation.

Accepted Answer

The answer of Tax brackets are increased for inflation....

Question 16

Flycatcher Corporation,a C corporation,has two equal individual shareholders,Nancy and Pasqual.In the current year,Flycatcher earned $100,000 net profit and paid a dividend of $10,000 to each shareholder.Regardless of any tax consequences resulting from their interests in Flycatcher,Nancy is in the 33% marginal tax bracket and Pasqual is in the 15% marginal tax bracket.With respect to the current year,which of the following statements is incorrect?

Accepted Answer

The answer of Flycatcher Corporation,a C corporation,has two equal individual...

Question 17

A landlord leases property upon which the tenant makes improvements.The improvements are significant and are not made in lieu of rent.At the end of the lease,the value of the improvements are not income to the landlord.This rule is an example of:

Accepted Answer

The answer of A landlord leases property upon which the...

Question 18

Social considerations can be used to justify:

Accepted Answer

Allowing a credit for child care expenses is a social consideration as it recognizes the financial burden of working families who need to pay for child care and encourages them to continue working. It also supports the economy by providing child care providers with an incentive to offer their services. The other choices listed do not have a clear social justification.

Question 19

Both economic and social considerations can be used to justify:

Accepted Answer

The answer of Both economic and social considerations can be...

Question 20

Pablo,a sole proprietor,sold stock held as an investment for a $40,000 long-term capital gain.Pablo's marginal tax rate is 33%.Loon Corporation,a C corporation,sold stock held as an investment for a $40,000 long-term capital gain.Loon's marginal tax rate is 35%.What tax rates are applicable to these capital gains?

Accepted Answer

The answer of Pablo,a sole proprietor,sold stock held as an...

Quiz 1: Introduction to Taxation