Exam 3: Taxable Entities, Tax Formula, Introduction to Property Transactions

W sold a parcel of land that he had owned for three years for $4,000 cash, and the buyer assumed a note secured by the property in the amount of $6,000.W originally paid $7,500 for the land.What is his gain (or loss) realized on the sale?

Last year, Ben and Jeri (unrelated) formed a partnership to operate a restaurant.Ben contributed all of the money, $2,000,000, to the venture for a 50% interest while Jeri agreed to work for the partnership for five years without pay for her 50% interest.According to the agreement, Jeri would receive 50% of the profits (or losses) of the business.During the year, Jeri worked tirelessly, often 80 hours per week.On the other hand, Ben did little, sitting back and watching the fruits of Jeri's efforts.For the year, the partnership reported a $900,000 loss (revenues $600,000, deductible expenses $1,500,000).Ben and Jeri are both married and their spouses have salaries from their jobs.Neither Ben nor Jeri have any other investments.Which of the following statements is true?

G had income and expenses as follows for the current taxable year: Total income $\quad$$\$ 32,400$ Exclusions (municipal bond interest) $\quad$ 2,000 Deductions for A.G.I. $\quad$$\quad$$\quad 1,200$ Total itemized deductions $\quad$$\quad$ 9,920 Standard deduction $\quad$$\quad$ 5,150 Exemption deductions $\quad 6,600$ What are G's adjusted gross income and her taxable income, respectively? Assume all amounts are correct.

Which of the following is not a correct observation related to the comparison between a deduction and a credit?

H and W are married with twins, eight years of age.H and W can elect to claim either exemption deductions for each of their dependents or a child tax credit for each child but not both exemptions and credits.

Each of the following individual taxpayers is planning on making a deductible $500 payment (e.g., a fully deductible charitable contribution) either in December 20X1 or in January 20X2.Assume the standard deduction for both years for joint filers is $10,000 and for single filers is $4,000.Ignore the time value of money. Assuming that between years there are no changes in tax rates and other items (e.g., standard deduction, personal exemption, etc.) and ignoring the time value of money, who would gain the greatest tax savings by making the payment in 20X2 instead of 20X1?

An S corporation's tax treatment is most similar to the

A sold 100 shares of F corporation stock for $32,500.A had to pay a sales commission of $940.F had originally paid $14,750 for the shares and a purchase commission of $420.How much are A's amount realized and gain realized, respectively?

All employee business deductions of an individual are deductions for adjusted gross income.

F operates his computer repair business as a sole proprietorship.His sole proprietorship's taxable income is subject to tax using the corporate tax rates since it is a business.

Which of the following is not true of capital gains and losses?

The amount realized on the sale of property is reduced by any related selling costs.

Deductions for adjusted gross income (A.G.I.) can only be deducted if they exceed the standard deduction.

Citizens and residents of the United States generally are taxed on income earned in a foreign country.

Gross income is total income before subtracting exclusions.

A taxpayer who itemizes receives no special tax break for being 65 years of age or older.

J sold the following capital assets during the current year: 100 shares of X Corp. held 14 months $\$ ( 500 )$ loss 50 shares of $\mathrm { T }$ Corp. held four months (240) loss City lot held seven years for speculation $\quad$$\quad 900$ gain How much is J's overall net capital gain, if any?

A single taxpayer will pay the same amount of tax (or less) as a head of household when their taxable incomes are equal.

The following represent elements of the tax formula for individual taxpayers: A.Income from any source B.Personal and dependency exemptions C.Itemized deductions D.Deductions for A.G.I. E.Exclusions from gross income F.Standard deduction amount Which of the above are subtracted from A.G.I, in the computation of taxable income?

T sold the family car at a $400 loss.T can claim the $400 loss as an itemized deduction.