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2.

MC

1.

(TCO E) For federal tax purposes, the gain form the sale row
of stocks and bonds is classified as
Points :
5

active income.
portfolio income.

CORRECT ANSWER

passive income.
None of the above
Instructor Explanation:
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Question3.

MC

1.

Chapter 7, Section 7205

Delete

(TCO E) For federal tax purposes, income attributable to row


the direct efforts of the tax payer, such as salary, is
classified as
Points :
5

portfolio income.
active income.

CORRECT ANSWER

passive income.
None of the above
Instructor Explanation:
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Question4.

MC

1.

Chapter 7, Section 7205

Delete

(TCO E) For federal tax purposes, passive income is


income derived from a(n)

row

Points :
5

ordinary course of a
business.
passive activity.

CORRECT
ANSWER

activity with material


participation.
None of the above
Instructor Explanation:
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Chapter 7, Section 7205

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Question7.

MC

2.

(TCO D) Which of the following is not an example of a


nontaxable like-kind exchange?

row

Points :
5

Inventory for a locomotive

CORRECT
ANSWER

A printer for a computer


Land for an office building
The trade of an apartment
building for a store building
Instructor
Chapter 11, Section 11,215:
Explanation:
Inventory does not qualify for likekind exchange treatment.
Edit
Question8.

MC

2.

Delete

(TCO D) How does the code define a capital asset?

row

Points :
5

As inventory carried by the


taxpayer's business
As property used by the taxpayer
in his or her business, which is
depreciable
As intangible property owned by
the taxpayer, regardless of
whether used in his or her
business or not
The code does not define what
CORRECT
a capital asset is, only what it is
ANSWER
not.
Instructor Explanation: Chapter 11, Section 11,215
Edit
Question9.

MC

2.

Delete

(TCO D) Which of the following is an example of a


nontaxable like-kind exchange?
@ Chapter 11, Section
11,215
Points :
5

An ice cream making machine


for inventory of Rocky Road ice
cream
Land for an office building
Office equipment for a computer

CORRECT
ANSWER

row

All of the above


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Question12.

MC

3.

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(TCO H) Alex and Amy file a joint return for the 2012 tax
year. Their adjusted gross income is $90,000. They had
net investment income of $8,000. In 2012, they had the
following interest expenses.

row

Personal credit card interest: $5,000


Home mortgage interest: $10,000
Interest paid on qualified education loans:
$2,000
Investment interest (on loans used to buy
stocks): $10,000
What is the interest deduction for Alex and Amy for the
2012 tax year?
Points :
5

$8,000
$12,000
$20,000

CORRECT ANSWER

$18,000
Instructor
Chapter 8, IRC Sec. 163(d): Investment
Explanation: interest is deducted to the extent of net

investment income ($8,000). Personal


interest is not deductible. Therefore,
$8,000 mortgage interest + $10,000
investment interest + $2,000 interest on
qualified education loan = $20,000.
$2,000 of the $10,000 investment
interest expense is carried forward.
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Question13.

MC

3.

Delete

(TCO H) Bob filed a single return for the 2012 tax year.
His adjusted gross income is $80,000. He had net
investment income of $9,000. In 2012, he had the

row

following interest expenses.


Personal credit card interest: $4,000
Home mortgage interest: $8,000
Qualified mortgage insurance premiums:
$1,500
Investment interest (on loans used to buy
stocks): $10,000
What is the interest deduction for Bob for the 2012 tax
year?
Points :
5

$17,000
$18,500

CORRECT ANSWER

$12,000
$18,000
Instructor
Chapter 8, IRC Sec. 163(d); Investment
Explanation: interest is deducted to the extent of net

investment income ($9,000). Personal


interest is not deductible. Therefore,
$8,000 mortgage interest + $9,000
investment interest + $1,500 qualified
mortgage insurance premium =
$18,500. $1,000 of the $10,000
investment interest expense is carried
forward.
Edit
Question14.

MC

3.

Delete

(TCO H) Gary and Tracy file a joint return for the 2012
row
tax year. Their adjusted gross income is $65,000. They
had net investment income of $9,000. In 2012, they had
the following interest expenses.
Personal credit card interest: $3,000
Home mortgage interest: $8,000
Interest paid on qualified education loans:
$2,000
Investment interest (on loans used to buy
stocks): $10,000
What is the interest deduction for Gary
and Tracy for the 2012 tax year?
Points :
5

$19,000
$8,000
$12,000
$18,000

CORRECT ANSWER

Instructor
Chapter 8, IRC Sec. 163(d): Investment
Explanation: interest is deducted to the extent of net

investment income ($9,000). Personal


interest is not deductible. Therefore,
$8,000 mortgage interest + $9,000
investment interest + $2,000 interest on
qualified education loan = $19,000.
$1,000 of the $10,000 investment
interest expense is carried forward.
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Question17.

MC

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(TCO B) Stock in the ABC Corporation was contributed row


to a public charitable organization. The basis in the stock
was $1,000, but its fair market value was $1,500 at the
time of the donation. Indicate the correct income tax
treatment as a result of the donation. The stock was held
long-term.
Points :
5

Contribution of $1,000 (no gain


recognized)
Contribution of $1,500 (no
gain recognized)

CORRECT
ANSWER

Contribution of $1,500 (capital


gain recognized $300)
Contribution of $1,000 (capital
gain recognized $500)
Instructor
Chapter 8, Section 8325: In general,
Explanation:
long-term capital gain assets are
deductible at fair market value.
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Question18.

MC

4.

Delete

(TCO B) Unreimbursed expenses of employees are


considered to be deductions
Points :
5

row

for AGI.
CORRECT
ANSWER

from AGI.
for or from AGI, depending on
the type of expense.
None of the above
Instructor
Explanation:
Edit
Question19.

MC

4.

Chapter 8, Section 8325:


Unreimbursed expenses of
employees are deductible from AGI.

Delete

(TCO B) A business machine valued at $800 was


row
contributed to a charitable organization during the year.
The machine cost $1,000 but was depreciated down to
$600 before the donation was made. Indicate the correct
income tax treatment with respect to the donation.
Points :
5

Contribution of $600 (no income


recognized)
Contribution of $1,000 (income
of $200 recognized)
Contribution of $800 (income of
$200 recognized)
Contribution of $800 (no
CORRECT
income recognized
ANSWER

Instructor
Explanation:

Edit

Chapter 8, Section 8301; An ordinary


income property charitable deduction
is limited to basis. There is no income
recognition when making a charitable
donation.

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Question22.

MC

5.

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(TCO A) Which of the following expenditures is always


an itemized deduction for individual taxpayers? @
Chapter 8, Section 8325

row

Points :
5

Charitable contributions
State and local income
taxes
Moving expenses
All of the above
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Question23.

MC

5.

CORRECT
ANSWER

Delete

(TCO A) Miscellaneous itemized deductions are


deductible only

row

Points :
5

to the extent that in aggregate, CORRECT


ANSWER
they exceed 2% of AGI.
if the taxpayer takes the
standard deduction.
if they fall below the limit on
standard itemized deductions.
None of the above
Instructor Explanation:
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Question24.

MC

5.

Chapter 8, Section 8325

Delete

(TCO A) Frank Fox won $10,000 in a state lottery. He


also lost $3,000 at the horse races. On his income tax
return, he should report

row

Points :
5

$10,000 gross income.


$7,000 gross income.
$10,000 gross income and
$3,000 deduction for adjusted
gross income.
$10,000 gross income and
$3,000 itemized deduction.
Instructor
Explanation:

Edit

CORRECT
ANSWER

Chapter 8, Section 8325: Gambling


winnings are reported as gross
income, and gambling losses are
deductible to the extent of winnings as
itemized deductions.

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Question27.

MC

6.

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(TCO E) Adam sold a piece of business equipment that row


had an adjusted basis to him of $50,000. In return for the
equipment, Adam received $80,000 cash and a painting
with a fair market value of $20,000 from the buyer. The
buyer also assumed Adam's $25,000 loan on the
equipment. Adam paid $5,000 in selling expenses. What
is the amount of Adam's gain on the sale?
Points :
5

$90,000
$125,000
$80,000
$70,000
Instructor
Explanation:

Edit
Question28.

MC

6.

CORRECT ANSWER

Chapter 10: The amount realized is


$70,000: ($80,000 cash + $20,000 art
+ $25,000 loan assumption) minus
$50,000 adjusted basis and $5,000
selling expense = $70,000; or, 125,000
- 5,000 = 120,000 - 50,000 = 70,000.

Delete

(TCO E) Josh sold a piece of business property that had row


an adjusted basis to him of $50,000. In return for the
property, Josh received $90,000 cash and a truck with a
fair market value of $10,000 from the buyer. The buyer
also assumed Josh's $25,000 loan on the property. Josh
paid $5,000 in selling expenses. What is the amount of
Josh's gain on the sale?
Points :
5

$90,000
$135,000
$70,000

CORRECT ANSWER

$80,000
Instructor
Explanation:

Chapter 10: The amount realized is


$70,000: ($90,000 cash + $10,000

truck + $25,000 loan assumption)


minus $50,000 adjusted basis and
$5,000 selling expense = $70,000.
Edit
Question29.

MC

6.

Delete

(TCO E) Josh sold a piece of business equipment that


row
had an adjusted basis to him of $50,000. In return for the
equipment, Josh received $60,000 cash and a painting
with a fair market value of $20,000 from the buyer. The
buyer also assumed Josh's $25,000 loan on the
equipment. Josh paid $5,000 in selling expenses. What
is the amount of Josh's gain on the sale?
Points :
5

$50,000

CORRECT ANSWER

$105,000
$75,000
$60,000
Instructor
Explanation:

Edit

Chapter 10: Amount realized is


$50,000: ($60,000 cash + $20,000 art
+ $25,000 loan assumption) minus
$50,000 adjusted basis and $5,000
selling expense = $50,000.

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Question32.

MC

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(TCO I) Gary and Gerdy Gray purchased a home for


$125,000 on September 15, 2010. On October 7, 2011
they were divorced, and as part of the divorce
agreement, the home was transferred to Gerda, who
sold the home on October 18, 2012 for $350,000. How
much can Gerda exclude?
Points :
5

$350,000
$250,000

row

$225,000

CORRECT ANSWER

$0
Instructor
Explanation:

Edit
Question33.

MC

7.

Chapter 11: Gerda can exclude the


$225,000 gain because she can count
the time that Gary owned the
residence, which makes the ownership
and use more than two years.

Delete

(TCO I) Peter Paulson purchased a residence on


row
February 19, 2010 for $180,000. On September 7, 2012,
a tornado completely destroyed his home. The home
was insured for its replacement value and homes in
Peter's area had appreciated greatly. He received
proceeds of $420,000. How much does Peter include?
Points :
5

$250,000
$240,000
$0

CORRECT ANSWER

$420,000
Instructor
Explanation:

Edit
Question34.

MC

7.

Chapter 11: Peter does not recognize


any of the $240,000 realized gain on
the involuntary conversion of his home
by the tornado because it is less than
the $250,000 exclusion allowed for an
individual.

Delete

(TCO I) Which of the following statements concerning


property qualifying for like-kind exchange treatment is
incorrect?
Points :
5

The property must be held for


productive use in a trade or
business or for investment.
The transfer of partnership
interests qualify for like-kind
exchange treatment.
The exchange of inventory for a
business automobile does not
qualify for like-kind exchange
treatment.
The exchange of unimproved
property for improved property

CORRECT
ANSWER

row

qualifies for like-kind exchange


treatment.
Instructor
Chapter 11: The transfer of the
Explanation:
partnership interest does not qualify
for like-kind exchange treatment.
Edit
Question35.

MC

7.

Delete

(TCO I) Under the accrual method of accounting,


expenses are generally accrued when

row

Points :
5

the expenses are actually


CORRECT
ANSWER
incurred.
the taxpayer elects to take the
deduction.
payment is made.
None of the above
Instructor
Explanation:
Edit
Question36.

MC

7.

Chapter 13: Under the accrual basis,


expenses are accrued when the
expenses are incurred.

Delete

(TCO I) Under the cash method of tax accounting,


income is generally recognized when

row

Points :
5

CORRECT
ANSWER

cash is received.
the liability arises.
there is net income to absorb
the expense.
revenue is earned.

Instructor Explanation: Chapter 13, Section 13,215


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Question39.

MC

8.

(TCO D) Sean, a calendar year taxpayer, purchased


stock on October 18, 2011 for $7,000. The stock
became worthless on March 10, 2012. What is Sean's
loss in 2012?

row

Points :
5

$7,000 long-term capital loss

CORRECT
ANSWER

$7,000 short-term capital loss


No loss
$7,000 itemized deduction for
investments
Instructor
Chapter 12, Section 12,515: The
Explanation:
holding period for worthless stock is
extended to the last day of the taxable
year in which the securities became
worthless.
Edit
Question40.

MC

8.

Delete

(TCO D) Sean, a calendar year taxpayer, purchased


row
stock on June 18, 2011 for $8,000. The stock became
worthless on June 4, 2012. What is Sean's loss in 2012?
Points :
5

$8,000 short-term capital loss


No loss
$8,000 long-term capital loss

CORRECT
ANSWER

$8,000 itemized deduction for


investments
Instructor
Chapter 12, Section 12,515: The
Explanation:
holding period for worthless stock is
extended to the last day of the taxable
year in which the securities became
worthless.
Edit
Question41.

MC

8.

Delete

(TCO D) Steve, a calendar year taxpayer, purchased


stock on November 18, 2011 for $17,000. The stock
became worthless on January 4, 2012. What is Steve's
loss in 2012?
Points :
5

$17,000 short-term capital loss


No loss

row

$17,000 itemized deduction for


investments
$17,000 long-term capital
CORRECT
ANSWER
loss
Instructor
Chapter 12, Section 12,515: The
Explanation:
holding period for worthless stock is
extended to the last day of the taxable
year in which the securities became
worthless.
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Question44.

MC

9.

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(TCO A) Which of the following is not permitted


to practice before the IRS?

row

Points :
5

Attorney
CPA
Bookkeeping service

CORRECT ANSWER

Enrolled agent
Instructor
Explanation:

Edit
Question45.

MC

9.

Chapter 2: Attorneys, CPAs, and


enrolled agents specifically are
permitted to represent clients
or practice before the IRS.

Delete

(TCO A) In addition to regulations, the IRS issues which


of the following that interpret and apply the tax laws to a
specific set of facts?
Points :
5

Case law annotations


Rulings and
pronouncements
Executive summaries and
outlines

CORRECT
ANSWER

row

Public laws
Instructor
Explanation:

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Question46.

MC

9.

Chapter 2: In addition to regulations,


the IRS issues rulings and
pronouncements that interpret and
apply the tax laws to a specific set of
facts.

Delete

(TCO A) Which of the following is a primary source of tax row


authority?
Points :
5

Revenue ruling
Tax court case
Temporary regulation
All of the above
Instructor
Explanation:
Edit

CORRECT ANSWER

Chapter 2: All of the items listed


are primary sources of authority.

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Question49.

MC

10.

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(TCO F) Trade or business expenses are only deductible row


if they are
Points :
5

necessary and ordinary.


reasonable in amount.
not capital in nature.
All of the above
Instructor
Explanation:

CORRECT ANSWER

Chapter 6, IRC Sec. 166: Business


capital expenditures must be
recovered through depreciation.
Business noncapital expenditures are

deductible if they are ordinary,


necessary, and reasonable in amount.
Edit
Question50.

MC

10.

Delete

(TCO F) A deduction for salaries and wages can include

row

Points :
5

bonus payments.
payments for services performed
in prior years.
advance payments for services to
be performed in future years.
both bonus payments and
CORRECT
payments for services
ANSWER
performed in prior years.
Instructor
Chapter 6: A deduction for salaries
Explanation:
and wages can include both bonus
payments and payments for services
performed in prior years.
Edit
Question51.

MC

10.

Delete

(TCO F) A nonbusiness bad debt is deductible for tax


purposes as a(n)

row

Points :
5

short-term capital loss.

CORRECT
ANSWER

itemized deduction.
long-term capital loss.
ordinary business
deduction.
Instructor
Chapter 6: A nonbusiness bad debt
Explanation:
is deductible for tax purposes as a
short-term capital loss.
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Question54.

MC

11.

(TCO A) What is the applicable length of time for the


statute of limitations on assessment of taxes if the
taxpayer willfully evades taxes?

row

Points :
5

No limitation

CORRECT ANSWER

18 months
3 years
6 years
Instructor
Explanation:
Edit
Question55.

MC

11.

Chapter 2: There is no limitation on


the statute of limitations if the
taxpayer willfully evades taxes.

Delete

(TCO A) The IRS levies penalties for which of the


following?

row

Points :
5

Bouncing checks
Fraud
Late filing
All of the above
Instructor
Explanation:
Edit

CORRECT ANSWER

Chapter 1: All items listed would


have the IRS impose penalties.

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Question58.

MC

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(TCO C) During 2012, Milton Hanover was granted a


divorce from his wife. The divorce decree stipulated that
he was to pay both alimony and child support for a
specified period of time. In examining his records for
2012, the following information is available.
Salary: $50,000
Interest received on bank deposits:

row

$2,000
Interest received on municipal
obligations: $1,000
Alimony paid: $3,600
Child support: $4,800
What is Hanover's adjusted gross income for 2012?
Points :
5

$44,600
$48,400

CORRECT ANSWER

$49,400
$52,000
Instructor
Explanation:

Edit
Question59.

MC

12.

Chapter 4: Hanover's adjusted gross


income for 2011 is $48,400. Interest
on municipal bonds is excluded.
Therefore, he had $52,000 in income
less $3,600 of alimony payments.

Delete

(TCO C) Which of the following items is not taxable?

row

Points :
5

Interest on U.S. Treasury bills,


notes, and bonds issued by an
agency of the United States
Interest on federal income tax
refund
Interest on New York State
CORRECT
ANSWER
bonds
Discount income in installment
payments received on notes
bought at a discount
Instructor
Chapter 4, IRC Sec. 61(a): Interest on
Explanation: New York State bonds is not taxable.
Section 103 specifically excludes from
gross income interest received on
municipal or state obligations.
Edit
Question60.

MC

12.

Delete

(TCO C) In return for $1,000, Mr. Hand cancels Mr.


row
Sandwich's debt of $4,000. The cancellation is not a gift,
and Mr. Sandwich is neither insolvent nor bankrupt.
Which of the following statements is correct?
Points :
5

Mr. Hand has $1,000 taxable


income.
Mr. Sandwich has $3,000 of
CORRECT
ANSWER
taxable income.
Mr. Sandwich has $4,000 of
taxable income.
Neither Mr. Hand nor Mr.
Sandwich has any taxable income
from this transaction.
Instructor
Chapter 4: Mr. Sandwich is neither
Explanation:
insolvent nor bankrupt.
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Question63.

MC

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(TCO B) Mark Mayer, a cash basis taxpayer, leased


row
property on June 1, 2012 to Perry Purly at $325 a
month. Perry paid Mark $325 as a security deposit,
which will be returned at the end of the lease. In
addition, Perry paid $650 in advance rent, which is to be
applied as rent to the last two months in the lease term.
The lease is to run for a two-year period. What is Mark's
rental income for 2012?
Points :
5

$1,950
$2,275
$2,600
$2,925
Instructor
Explanation:

CORRECT ANSWER

Chapter 4: Mark's rental income for


2012 is $2,925, computed as
follows.
Advance rental payments: $650
Rental payments for 2012 (7
months $325): $2,275
Total rental income for 2012:
$2,925
Security deposits are not
considered rental income and are

not taxable.
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Question64.

MC

13.

Delete

(TCO B) Which of the following is not considered


constructive receipt of income?

row

Points :
5

Ms. K was informed her check for


services rendered was available on
December 16, 2011, but she waited
until January 16, 2012 to pick up
the check.
Earned income of Mr. D was
received by his agent on December
30, 2011, but not received by D
until January 3, 2012.
Mr. W received a check on
December 30, 2011 for services
rendered, but was unable to make
a deposit until January 3, 2012.
A payment on a sale of real
property was placed in escrow
on December 16, 2011 but not
CORRECT
received by Ms. B until January ANSWER
10, 2012, when the transaction
was closed.
Instructor
Chapter 4: Ms. B did not have a right
Explanation: to the funds until escrow closed on
January 10. In all the previous
examples, the taxpayer had a right to
the funds immediately.
Edit
Question65.

MC

13.

Delete

(TCO B) Under the terms of their divorce agreement


row
executed in October 2011, Keith transferred Corporation
M stock to his former wife, Karen, as a property
settlement. At the time of the transfer, the stock had a
basis to Keith of $20,000 and a fair market value of
$50,000. What is the tax consequence of this transaction
to Keith, and what is Karen's basis in the Corporation M
stock?
Points :
5

Keith has a gain of $30,000;


Karen's basis is $20,000.
Keith has a gain of $30,000;
Karen's basis is $50,000.
Keith has no gain or loss;
Karen's basis is $20,000.

CORRECT
ANSWER

Keith has no gain or loss;


Karen's basis is $50,000.
Instructor
Chapter 4: No gain or loss is
Explanation:
recognized on the transfer of
property as part of a divorce
settlement.
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Question68.

MC

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(TCO G) During 2012, Edward East had wages of


row
$10,000 and received unemployment compensation of
$6,200 from the state. Edward is single and 45 years
old. What is the amount of unemployment compensation
to be included in his gross income?
Points :
5

$0
$2,100
$4,200
$6,200
Instructor
Explanation:

Edit
Question69.

MC

14.

CORRECT ANSWER

Chapter 5: The first $2,400 of


unemployment compensation is no
longer excluded from gross income.
Therefore, Mr. East must include
$6,200 in gross income.

Delete

(TCO G) On June 3, 2012, Leon Wren, an electrician,


was injured in an accident during the course of his
employment. As a result of injuries sustained, he
received the following payments during 2012.

Damages for personal injuries: $8,000

Worker's compensation: $3,000

Reimbursement from his employer's accident

row

and health plan for medical expenses paid by


Wren: $1,200

The amount to be included in Wren's 2012 gross income


should be
Points :
5

$0.

CORRECT ANSWER

$1,200.
$3,000.
$12,200.
Instructor
Chapter 5: Compensation received
Explanation: under a worker's compensation act for

personal injuries or sickness, damages


received under a suit or settlement of a
claim on account of personal injuries or
sickness, and amounts received for
medical care payments under an
employer's accident and healthcare
plan are excludable from gross income.
Edit
Question70.

MC

14.

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(TCO G) On February 10, 2012, Rose was in an


automobile accident while she was going to work. The
doctor advised her to stay home for six months due to
her injuries. On February 25, 2012, she filed a lawsuit.
On July 20, 2012, Rose returned to work. On December
15, 2012, the lawsuit was settled and she received the
following amounts.
Points :
5

$0
$25,000

CORRECT ANSWER

$40,000
$65,000
Instructor
Explanation:

Chapter 5: Compensation for lost


wages must be included in income.
Compensation for lost
wages: $25,000
Personal injury
damages awarded (none of which was
for punitive damages): $40,000
How much of the settlement must

row

Rose include in ordinary income on


her 2012 tax return?
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Question73.

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15.

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TCO F) For individual taxpayers, deductible losses for


tax purposes do not include

row

Points :
5

business losses.
investment losses.
personal losses.

CORRECT
ANSWER

personal casualty or theft


losses.
Instructor
Chapter 6: Personal losses other
Explanation:
than casualty and theft losses are
not deductible for tax purposes.
Edit
Question74.

MC

15.

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(TCO F) Job-seeking expenses are deductible if incurred row


by an individual who is presently employed and looking
for work in the same trade or business
Points :
5

only if the individual actually


finds a new job.
regardless of whether or not
CORRECT
the individual finds a new job. ANSWER
if the expenses relate to the
individual's first job.
Both A and B
Instructor
Explanation:

Chapter 6: Job-seeking expenses are


deductible by an individual who is
presently employed and looking for
work in the same trade or business,
regardless of whether the individual

finds a new job.


Edit
Question75.

MC

15.

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(TCO F) Hobby expenditures are deductible to the


extent of

row

Points :
5

total individual gross income.


CORRECT
ANSWER

hobby gross income.


trade or business gross
income.
nonbusiness gross income.
Instructor
Explanation:
Edit

Chapter 6: Hobby expenditures are


deductible only to the extent of
hobby gross income.

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(TCO E) In 2012, Uriah Stone received the following


payments.

Interest on refund of federal income tax for


2011: $400

Interest on award for personal injuries in 2009


automobile accident: $300

Interest on municipal bonds: $1,500

United States savings bonds interest (Series


H): $1,000

What amount, if any, should Mr. Stone report as interest


income on his 2012 tax return?
Points :
15

row

Instructor
Explanation:

Edit
Question79.

SA

16.

Chapter 4: Mr. Stone should report


$1,700 as interest income on his 2012
tax return. Interest on municipal bonds
is not taxable. All other interest is
taxable income.

Delete

(TCO E) Art Aubrey owns and operates an apartment


building. During 2012, he received the following.
Payment on 6/1/12 for 12 months of advance rent:
$4,800

Monthly rent payments: $43,200

Security deposits to be returned to tenants at


end of lease: $3,000

Payments for cancelling a lease: $400

Deductible maintenance rental expenses paid


by tenants: $600

row

What is Art's gross rental income?


Points :
15

Instructor
Explanation:

Edit
Question80.

SA

16.

Chapter 4: Art's gross rental income


is $49,000, computed as follows.
Advance rent payments on
6/1/12: $4,800
Monthly rent payments: $43,200
Lease cancellation payments:
$400
Maintenance rental expenses:
$600
Total rental income for 2012:
$49,000

Delete

(TCO E) Betty Brewster received the following interest.

Luggage gift for purchasing a four-year


certificate of deposit (fair market value): $50

Interest on passbook savings account: $15

Interest on certificate of deposit: $200

row

Dividends on share account savings in credit


union: $150

Interest on State of Mississippi bonds issued to


finance state highway construction: $300

What is the amount of interest income to


be included in income?
Points :
15

Instructor
Explanation:

Edit

Chapter 4: Betty's income must include


$365 of interest income, computed as
follows.
Passbook savings account interest
($15) + certificate of deposit interest
($200) + credit union share account
dividend ($150) = $365.
Distributions on savings accounts in
credit unions are treated as interest
income. The luggage premium for
opening a new account is income but
not interest income. Interest on state or
municipal bonds is tax exempt.

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(TCO G) Are any of the following items deductible on an


individual's income tax return? If so, would the item be
deductible for or from
AGI? Explain each item.
(a) Loss on sale of car used for personal purposes
(b) Payment of a speeding fine relating to personal
activity
(c) Uninsured storm damage on personal residence
Points :
15

Instructor

(a) The loss on sale of personal car is

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Explanation:

Edit
Question84.

SA

17.

not deductible. Personal losses are


not deductible for tax purposes.
(b) The payment of a personal
speeding fine is not deductible.
Personal losses are not deductible for
tax purposes.
(c) Uninsured storm damage on
personal residence is deductible as a
personal casualty loss subject to
applicable limitations. Personal
casualty losses are deductible from
AGI.

Delete

(TCO G) Would any of the following items be deductible


on an individual's income tax return? If so, would the
item be deductible for
or from AGI? Explain each item.
(a) Hobby expenditures of $2,000 in excess of hobby
gross income
(b) $3,000 loss on the sale of a personal sailboat
(c) Interest of $8,000 on money borrowed to purchase
tax-exempt securities

row

Points :
15

Instructor
Explanation:

Edit
Question85.

SA

17.

(a) Hobby expenditures in excess of


hobby gross income are not
deductible. Hobby expenditures are
only deductible to the extent of hobby
gross income.
(b) The loss on the sale of a personal
sailboat is not deductible. Personal
losses are not deductible for tax
purposes.
(c) Interest on money borrowed to
purchase tax-exempt securities is not
deductible for tax purposes because
the related tax-exempt income is not
included in taxable income.

Delete

(TCO G) Are any of the following items deductible on an row


individual's income tax return? If so, is the item
deductible for or from AGI? Explain each item.
(a) Payment of a $100 speeding fine related to a trade or
business
(b) A cost of $145 for having a federal income tax return
prepared by an accountant
(c) Interest of $8,000 on money borrowed to purchase
tax-exempt securities

Points :
15

Instructor
(a) The payment of a speeding fine
Explanation: related to a trade or business is not

deductible because fines and penalties


paid to the government for the violation
of a law are not deductible for tax
purposes.
(b) The cost of having a federal income
tax return prepared by an accountant is
deductible from AGI for tax purposes
because it is a nonbusiness expense
incurred in connection with the
determination, collection, or refund of
any tax.
(c) Interest on money borrowed to
purchase tax-exempt securities is not
deductible for tax purposes because
the related tax-exempt income is not
included in taxable income.
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Question88.

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(TCO F) Michael and Mary Mason sold their house for


$380,000 in November of 2012 their residence that they
had purchased in 2002 for $75,000. They made major
capital improvements during their 10-year ownership
totaling $25,000. What is their excluded gain? How
much must they recognize? Suppose, instead, that the
Masons sold their home for $720,000. They moved into
a smaller house costing $220,000. What is their
excluded gain? How much must they recognize?
Points :
15

Instructor
The Masons have a realized gain of
Explanation: $620,000 ($720,000 less $100,000).

They may exclude $500,000 and must


recognize $120,000. The fact that they
moved into another home is irrelevant,
and there is no opportunity to defer the
$120,000 gain through an adjustment in

row

the basis of the new residence as was


the case under the old law.
The Masons' basis of the residence at
the time of the sale is $100,000 and
their realized gain is $280,000
($380,000 less $100,000). They may
exclude the total $280,000 realized
gain, and therefore, they may have no
recognized gain.
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Question89.

SA

18.

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(TCO F) Mathew Murphy, single, sold his home that he


row
had owned for 20 years for $670,000. He purchased it
for $110,000 and made $40,000 of capital improvements
on the home during his time of ownership.
(a) How much gain is excluded? How much is
recognized?
(b) If Mathew purchased another home for $420,000,
how much is excluded and recognized?
Points :
15

Instructor
Explanation:

Edit
Question90.

SA

18.

(a) Mathew has a realized gain of


$520,000 ($670,000 less $150,000),
but as a single individual, he can only
exclude $250,000, and he must
recognize $270,000.
(b) Mathew's exclusion is still
$250,000, and he must still recognize
$270,000. The fact that he moved into
another home is irrelevant, and there is
no opportunity to defer the $270,000
gain through an adjustment in the basis
of the new residence, as was the case
under the old law.

Delete

(TCO F) Paul and Paula Parker purchased a home in


Washington, D.C. for $340,000 on November 4, 2011.
Paul obtained a job in Roanoke, Virginia, and on
December 4, 2012, the Parkers sold their home in
Washington for $570,000.
(a) How much gain can the Parkers exclude, and how
much is recognized?
(b) Assume that the Parkers, instead, sold their home on
December 4, 2012 for $760,000. How much gain can the
Parkers exclude, and how much is recognized?

row

Points :
15

Instructor
(a) The Parkers have owned and used
Explanation: the home for less than two years, but

because they are selling for a jobrelated reason, they may prorate the
exclusion. The amount of exclusion is
$270,833 ($500,000 13 months
divided by 24 months = $270,833).
Because the realized gain is only
$230,000 ($570,000 less $340,000),
they can exclude the whole $230,000
and need not recognize any gain.
(b) The Parkers have a realized gain of
$420,000, of which $270,833 is
excluded and the remaining $149,167
is recognized.

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(TCO G) John Baron, a professional baseball player,


raises Black Angus cattle under circumstances that
would indicate that the activity is a hobby. His adjusted
gross income for the year is $50,000, and he has $500
of other miscellaneous itemized deductions, all of which
are subject to the 2% floor. During the taxable year, the
feed for the cattle costs $1,500. The income from the
sale of cattle was $1,400.
(a) Under the hobby loss rule, to what extent is the
expense of $1,500 deductible?
(b) Under the 2%-of-adjusted-gross-income limitation,
how much is the overall deductible amount of his
itemized deductions?
Points :
15

Instructor
Explanation:

(a) Under the hobby loss rule, the


expense of $1,500 is deductible only to
the extent of $1,400 (gross income).
(b) Under the 2%-of-adjusted-gross-

row

income limitation, the $1,400 hobby


loss deduction is aggregated with the
other miscellaneous itemized
deductions ($500), and the deductible
amount becomes $600 ($50,000 2%
= $1,000; $1,400 + $500 - $1,000 =
$900).

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Question94.

SA

19.

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(TCO G) Bob Smith, a professional basketball player,


row
raises Black Angus cattle under circumstances that
would indicate that the activity is a hobby. His adjusted
gross income for the year is $80,000, and he has $1,000
of other miscellaneous itemized deductions, all of which
are subject to the 2% floor. During the taxable year, the
feed for the cattle costs $3,000. The income from the
sale of cattle was $2,800.
(a) Under the hobby loss rule, to what extent is the
expense of $3,000 deductible?
(b) Under the 2%-of-adjusted-gross-income limitation,
how much is the overall deductible amount of his
itemized deductions?
Points :
15

Instructor
Explanation:

Edit
Question95.

SA

19.

(a) Under the hobby loss rule, the


expense of $3,000 is deductible only to
the extent of $2,800 (gross income).
(b) Under the 2%-of-adjusted-grossincome limitation, the $2,800 hobby
loss deduction is aggregated with the
other miscellaneous itemized
deductions ($1,000), and the deductible
amount becomes $1,200 ($80,000
2% = $1,600; $2,800 + $1,000 - $1,600
= $2,200).

Delete

(TCO G) John Davis, a professional dentist, raises


horses under circumstances that would indicate that the
activity is a hobby. His adjusted gross income for the
year is $100,000, and he has $2,000 of other
miscellaneous itemized deductions, all of which are
subject to the 2% floor. During the taxable year, the cost
for feeding horses was $3,000. The income from the
sale of horses was $2,800.
(a) Under the hobby loss rule, to what extent is the
expense of $3,000 deductible?
(b) Under the 2%-of-adjusted-gross-income limitation,

row

how much is the overall deductible amount of his


itemized deductions?
Points :
15

Instructor
Explanation:

Edit

(a) Under the hobby loss rule, the


expense of $3,000 is deductible only to
the extent of $2,800 (gross income).
(b) Under the 2%-of-adjusted-grossincome limitation, the $2,800 hobby
loss deduction is aggregated with the
other miscellaneous itemized
deductions ($2,000), and the deductible
amount becomes $600 ($100,000 2%
= $2,000; $2,800 + $2,000 - $2,000 =
$2,800).

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(TCO I) Jake, a single individual with a salary of


$40,000, paid the following expenses during the year.
Alimony: $8,000
Charitable contributions: $2,000
Casualty loss (after $100 floor): $1,000
Mortgage interest on personal residence: $3,000
Moving expenses: $1,500
Student loan interest: $1,000
Contribution to a traditional IRA: $2,000
Analyze the above expenses, and determine which ones
are deductible for AGI. Please support your position.
Points :
15

Instructor
Explanation:

Chapter 3: Only the following expenses


are deductible for AGI: alimony, moving
expenses, student loan interest, and
contribution to traditional IRA. The
other expenses, after applying any
statutory floors, are deductions from
AGI.

row

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Question99.

SA

20.

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(TCO I) Amos, a single individual with a salary of


$50,000, incurred and paid the following expenses
during the year.

row

Medical expenses: $5,000


Alimony: $14,000
Casualty loss (after $100 floor): $1,000
State income taxes: $4,000
Moving expenses: $1,500
Contribution to a traditional IRA: $2,000
Student loan interest: $1,200
Analyze the above expenses, and determine which ones
are deductible for AGI. Please support your position.
Points :
15

Instructor
Explanation:

Edit
Question100.

SA

20.

Chapter 3: Only the following expenses


are deductible for AGI: alimony, moving
expenses, student loan interest, and
contribution to traditional IRA. The
other expenses, after applying any
statutory floors, are deductions from
AGI.

Delete

(TCO I) Rick, a single individual with a salary of $45,000, row


incurred and paid the following expenses during the
year.
Student loan interest: $800
Medical expenses: $5,000
Alimony: $11,000
Mortgage interest on personal residence: $3,000
State income taxes: $4,000
Moving expenses: $1,500
Contribution to a traditional IRA: $2,000
Analyze the above expenses, and determine which ones
are deductible for AGI. Please support your position.
Points :
15

Instructor
Explanation:

Chapter 3: Only the following expenses


are deductible for AGI: alimony, moving
expenses, student loan interest, and
contribution to traditional IRA. The
other expenses, after applying any
statutory floors, are deductions from
AGI.

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21.

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(TCO I) A review of Bearing's Year 2 records disclosed


the following tax information.
Wages

$ 18,000

Taxable interest and qualifying dividends

Schedule C trucking business net income


Rental (loss) from residential property

Limited partnership (loss)

4,000

32,000

(35,000)
(5,000)

Bearing actively participated in the rental property and


was a limited partner in the partnership. Bearing had
sufficient amounts at risk for the rental property and the
partnership. What is Bearing's Year 2 adjusted gross
income?
Points :
30

Instructor
Bearings AGI is $29,000. Passive
Explanation: activity losses (PALs) can only be

deducted up to passive activity income.


There is no passive activity income
indicated. Therefore, the passive loss
from the partnership is not deductible.
$25,000 of the $35,000 rental real
estate loss is deductible under
the mom and pop
exception because Bearing actively
participates in the rental property, and
the AGI is below the phase-out

row

amounts. [Becker CPA Review Course


Reg. 1] The AGI is calculated as
follows.
Wages
Taxable interest and qualifying dividends
Schedule C trucking business net income
Rental (loss) from residential property
Limited partnership (loss)

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Question104.

EQ

21.

Delete

(TCO I) A review of Bearing's Year 2 records disclosed


the following tax information.
Wages

$ 20,000

Taxable interest and qualifying dividends

4,000

Schedule C trucking business net income

32,000

Rental (loss) from residential property


Limited partnership (loss)

(35,000)

(5,000)

Bearing actively participated in the rental property and


was a limited partner in the partnership. Bearing had
sufficient amounts at risk for the rental property and the
partnership. What is Bearing's Year 2 adjusted gross
income?
Points :
30

Instructor
Bearings AGI is $31,000. Passive
Explanation: activity losses (PALs) can only be

deducted up to passive activity income.


There is no passive activity income
indicated. Therefore, the passive loss
from the partnership is not deductible.
$25,000 of the $35,000 rental real
estate loss is deductible under the mom
and popexception because Bearing
actively participates in the rental
property, and the AGI is below the
phase-out amounts. [Becker CPA
Review Course Reg. 1] The AGI is

row

calculated as follows.
Wages
Taxable interest and qualifying dividends
Schedule C trucking business net income
Rental (loss) from residential property
Limited partnership (loss)

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Question105.

EQ

21.

Delete

(TCO I) A review of Bearing's Year 2 records disclosed


the following tax information.
Wages

$ 30,000

Taxable interest and qualifying dividends

4,000

Schedule C trucking business net income

32,000

Rental (loss) from residential property

(35,000)

Limited partnership (loss)

(5,000)

Bearing actively participated in the rental property and


was a limited partner in the partnership. Bearing had
sufficient amounts at risk for the rental property and the
partnership. What is Bearing's Year 2 adjusted gross
income?
Points :
30

Instructor
Bearings AGI is $41,000. Passive
Explanation: activity losses (PALs) can only be

deducted up to passive activity income.


There is no passive activity income
indicated. Therefore, the passive loss
from the partnership is not deductible.
$25,000 of the$35,000 rental real
estate loss is deductible under
the mom and pop
exception because Bearing actively
participates in the rental property and
the AGI is below the phase-out
amounts. [Becker CPA Review Course
Reg. 1] The AGI is calculated as
follows.

row

Wages
Taxable interest and qualifying dividends
Schedule C trucking business net income
Rental (loss) from residential property
Limited partnership (loss)

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(TCO F) (Becker CPA Review Course, Reg. 1) Smith


row
has an adjusted gross income (AGI) of $120,000 without
taking into consideration $40,000 of losses from rental
real estate activities. Smith actively participates in the
rental real estate activities. What amount of the rental
losses may Smith deduct in determining taxable
income?
Points :
30

Instructor
Smith can deduct $15,000. Generally,
Explanation: none of the passive losses from real

estate are deductible against


nonpassive income. However, Smith
actively participates, which means that
the mom and pop exception of up to
$25,000 will apply. This exception is
phased out over AGI of $100,000
through $150,000. That is 50 cents on
the dollar. Smith's AGI is $120,000.
That is $20,000 into the phase-out
range. So $10,000 of the $25,000 is
phased out, and Smith may deduct
$15,000 of the $40,000 passive loss.
(Becker CPA Review Course, Reg. 1)

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Question109.

EQ

22.

Delete

(TCO F) (Becker CPA Review Course, Reg. 1) Smith


row
has an adjusted gross income (AGI) of $130,000 without
taking into consideration $40,000 of losses from rental
real estate activities. Smith actively participates in the
rental real estate activities. What amount of the rental
losses may Smith deduct in determining taxable
income?
Points :
30

Instructor
Smith can deduct $10,000. Generally,
Explanation: none of the passive losses from real

estate are deductible against


nonpassive income. However, Smith
actively participates, which means that
the mom and pop exception of up to
$25,000 will apply. This exception is
phased out over AGI of $100,000
through $150,000. That is, 50 cents on
the dollar. Smith's AGI is $130,000.
That is, $30,000 into the phase-out
range. So $15,000 of the $25,000 is
phased out, and Smith may deduct
$10,000 of the $40,000 passive loss.
(Becker CPA Review Course, Reg. 1)
Edit
Question110.

EQ

22.

Delete

(TCO F) (Becker CPA Review Course, Reg. 1) Smith


row
has an adjusted gross income (AGI) of $140,000 without
taking into consideration $40,000 of losses from rental
real estate activities. Smith actively participates in the
rental real estate activities. What amount of the rental
losses may Smith deduct in determining taxable
income?
Points :
30

Instructor
Smith can deduct $5,000. Generally,
Explanation: none of the passive losses from real

estate are deductible against


nonpassive income. However, Smith
actively participates, which means that
the mom and pop exception of up to
$25,000 will apply. This exception is
phased out over AGI of $100,000
through $150,000. That is, 50 cents on
the dollar. Smith's AGI is $140,000.
That is, $40,000 into the phase-out
range. So $20,000 of the $25,000 is
phased out, and Smith may deduct

$5,000 of the $40,000 passive loss.


(Becker CPA Review Course, Reg. 1)

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(TCO B) (Becker CPA Review Course Reg. 3) For the


row
year ended December 31, Year 6, Taylor Corp. had a net
operating loss of $200,000. Taxable income for the
earlier years of corporate existence, computed without
reference to the net operating loss, was as follows.
Taxable income:
Year 1
Year 2
Year 3
Year 4
Year 5

$ 5,000
10,000
20,000
30,000
40,000

What amount of net operating loss will be available to


Taylor for the year ended December 31, Year 7?
Points :
30

Instructor
$130,000 of the NOL is available for
Explanation: Taylor in Year 7. Taylor will carry its

NOL back two years and forward until it


is used (but not more than 20 years).
Carrying the NOL back to Year 4 to
Year 5 absorbs $70,000 of the
$200,000 NOL generated in Year 6
leaving $130,000 to be absorbed in
Year 7 and later years. (Becker CPA
Review Course Reg. 3)

Edit
Question114.

EQ

23.

Delete

(TCO B) (Becker CPA Review Course Reg. 3) For the


row
year ended December 31, Year 6, Taylor Corp. had a net
operating loss of $200,000. Taxable income for the

earlier years of corporate existence, computed without


reference to the net operating loss, was as follows.
Taxable income:
Year 1
Year 2
Year 3
Year 4
Year 5

$ 5,000
10,000
20,000
30,000
50,000

What amount of net operating loss will be available to


Taylor for the year ended December 31, Year 7?
Points :
30

Instructor
$120,000 of the NOL is available for
Explanation: Taylor in Year 7. Taylor will carry its

NOL back two years and forward until it


is used (but not more than 20 years).
Carrying the NOL back to Year 4 to
Year 5 absorbs $80,000 of the
$200,000 NOL generated in Year 6
leaving $120,000 to be absorbed in
Year 7 and later years. (Becker CPA
Review Course Reg. 3)

Edit
Question115.

EQ

23.

Delete

(TCO B) (Becker CPA Review Course Reg. 3) For the


row
year ended December 31, Year 6, Taylor Corp. had a net
operating loss of $200,000. Taxable income for the
earlier years of corporate existence, computed without
reference to the net operating loss, was as follows.
Taxable Income:
Year 1
Year 2
Year 3
Year 4
Year 5

$ 5,000
10,000
20,000
50,000
50,000

What amount of net operating loss will be available to


Taylor for the year ended December 31, Year 7?
Points :
30

Instructor
$100,000 of the NOL is available for
Explanation: Taylor in Year 7. Taylor will carry its

NOL back two years and forward until it


is used (but not more than 20 years).
Carrying the NOL back to Year 4 to

Year 5 absorbs $100,000 of the


$200,000 NOL generated in Year 6,
leaving $100,000 to be absorbed in
Year 7 and later years. (Becker CPA
Review Course Reg. 3)
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Question118.

EQ

24.

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(TCO F) (Becker CPA Review Exam Reg. 1) Randolph is row


a single individual who always claims the standard
deduction. Randolph received the following in the
current year.

Wages

$ 22,000

Unemployment compensation

6,000

Pension distribution (100% taxable) 4,000


A state tax refund from the previous 425
year
What is Randolphs gross income?
Points :
30

Instructor
Randolphs gross income is $32,000.
Explanation: Each item listed here is included in

gross income except for the state tax


refund from a prior year. The taxpayer
always claims the standard deduction.
This means that the state tax was not
deducted in the year it was paid. Under
the tax benefit rule, the refund of that
tax is not taxable. (Becker CPA Review
Exam Reg. 1)

Wages

Unemployment compensation
Pension distribution (100%
taxable)
Total

Edit
Question119.

EQ

24.

Delete

(TCO F) (Becker CPA Review Exam Reg. 1) Randolph is row


a single individual who always claims the standard
deduction. Randolph received the following in the
current year.

Wages

$ 25,000

Unemployment compensation

6,000

Pension distribution (100% taxable) 4,000


A state tax refund from the previous 425
year
What is Randolphs gross income?
Points :
30

Instructor
Randolphs gross income is $35,000.
Explanation: Each item listed here is included in

gross income except for the state tax


refund from a prior year. The taxpayer
always claims the standard deduction.
This means that the state tax was not
deducted in the year it was paid. Under
the tax benefit rule, the refund of that
tax is not taxable. (Becker CPA Review
Exam Reg. 1)

Wages
Unemployment compensation
Pension distribution (100%
taxable)
Total

Edit
Question120.

EQ

24.

Delete

(TCO F) (Becker CPA Review Exam Reg. 1) Randolph is row


a single individual who always claims the standard
deduction. Randolph received the following in the
current year.

Wages

$ 30,000

Unemployment compensation

6,000

Pension distribution (100% taxable) 4,000


A state tax refund from the previous
650
year
What is Randolphs gross income?
Points :
30

Instructor
Randolphs gross income is $40,000.
Explanation: Each item listed here is included in

gross income except for the state tax


refund from a prior year. The taxpayer
always claims the standard deduction.
This means that the state tax was not
deducted in the year it was paid. Under
the tax benefit rule, the refund of that
tax is not taxable. (Becker CPA Review
Exam Reg. 1)

Wages
Unemployment compensation
Pension distribution (100%
taxable)
Total

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Question123.

SA

25.

(TCO H) On April 18, 2012, Jane Smith purchased 30


row
shares of ABC stock for $210, and on September 29,
2012, she purchased 90 additional shares for $900. On
November 28, 2012, she sold 48 shares, which could
not be specifically identified, for $576, and on December
8, 2011, she sold another 25 shares for $100. What is
her recognized gain or loss?
Points :
30

Instructor
Explanation:

Edit
Question124.

EQ

25.

Chapter 10
Basis per share of stock purchased
on April 18, 2012: $7 ($210 30)
Basis per share of stock purchased
on September 29, 2012: $10 ($900
90)
Sale on November 28, 2012: 30
shares (all of 4-18-12 purchase):
$210
18 shares (18 of 9-29-12 purchase):
$180
Basis under FIFO: $390
Selling price: $576
Less: Basis $390
Gain: $186
Sale on December 8, 2012: Selling
price $100
Less: Basis (25 $10) $250
Loss: ($150)
Combining the two sales: Gain
$186
Loss: ($150)
Net gain: $36

Delete

(TCO H) Bob Smith purchased 30 shares of XYZ stock


row
on April 30, 2010 for $210, and on September 1, 2010,
he purchased 90 additional shares for $900. On
November 8, 2010, he sold 48 shares, which could not
be specifically identified, for $576, and on December 15,
2010, he sold another 25 shares for $50. What is his
recognized gain or loss?
Points :
30

Instructor
Explanation:

Chapter 10
Basis per share of stock purchased
on April 30, 2012: $7 ($210 30)
Basis per share of stock purchased
on September 1, 2012: $10 ($900
90)
Sale on November 8, 2012: 30
shares (all of 4-30-12 purchase):
$210

18 shares (18 of 9-1-12 purchase):


$180
Basis under FIFO: $390
Selling price: $576
Less: Basis $390
Gain: $186
Sale on December 8, 2012: Selling
price $50
Less: Basis (25 $10) $250
Loss: ($200)
Combining the two sales: Gain
$186
Loss: ($200)
Net loss: ($14)
Edit
Question125.

EQ

25.

Delete

(TCO H) On May 18, 2012, Sara purchased 30 shares of


ABC stock for $210, and on October 29, 2012, she
purchased 90 additional shares for $900. On November
28, 2012, she sold 48 shares, which could not be
specifically identified, for $576, and on December 8,
2012, she sold another 25 shares for $150. What is her
recognized gain or loss?
Points :
30

Instructor
Explanation:

Edit

Delete

Chapter 10
Basis per share of stock purchased
on May 18, 2012: $7 ($210 30)
Basis per share of stock purchased
on October 29, 2012: $10 ($900
90)
Sale on November 28, 2012: 30
shares (all of 5-18-12 purchase):
$210
18 shares (18 of 10-29-12
purchase): $180
Basis under FIFO: $390
Selling price: $576
Less: Basis $390
Gain: $186
Sale on December 8, 2012: Selling
price $150
Less: Basis (25 $10) $250
Loss: ($100)
Combining the two sales: Gain
$186
Loss: ($100)
Net gain: $86

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