Question 1  

To be a nontaxable, like-kind exchange, all of the following conditions must be met except:

a. The property must be business or investment property.

b. The property must be (un)encumbered by mortgages or other liabilities.

c. The exchange must meet the completed transaction requirement (180-day requirement).

d. The property must be tangible property.
Question 2
1. Corresponds to CLO 7(d)

Billy Ray owns several parcels of rental real estate, and he actively participates in managing the properties. His total loss from these activities in 2011 is $30,000 and his AGI for 2011 is $110,000. For how many years may the disallowed loss be carried forward?

a. The disallowed loss may be carried forward indefinitely.

b. The disallowed loss may be carried forward for 15 years, but only after it has been carried back for 3 years.

c. The disallowed loss may be carried forward for 15 years.

d. The disallowed loss may not be carried forward.
Question 3
1. Corresponds to CLO 8(b)

The minimum tax credit:

a. All of the above

b. May be carried forward indefinitely as an offset against regular tax liability

c. May not be used to offset any future AMT tax liability

d. Provides that the amount of AMT paid by a corporation in one year differences can be used to offset the
regular tax liability of a subsequent year
Question 4
1. Corresponds to CLO 7(a)

Jim owns four separate activities. He elects not to group them together as a single activity under the “appropriate economic unit” standard. Jim participates for 140 hours in Activity A, 130 hours in Activity B, 140 hours in Activity C, and 100 hours in Activity D. He has one employee who works 135 hours in Activity D. Which of the following statements is correct?

a. Losses from all of the activities can be used to offset Jim’s active income.

b. Jim is a material participant with respect to Activities A, B and C.

c. Jim is a material participant with respect to Activities A, B, C and D.

d. Activities A, B, C, and D are all significant participation activities.
Question 5
1. Corresponds to CLO 6(d)

Jennifer Judd gives her son, Jim, Section 1245 property. The property has an adjusted basis of $11,000 to Jennifer, who has taken $2,000 in depreciation expense. Jim uses the property for three years, takes depreciation of $3,000 and then sells it for $14,000. What amount of gain must Jennifer recognize and what amount of gain must Jim recognize?

a. $0; $3,000 ordinary income and $3,000 Section 1231 gain

b. $2,000 ordinary income; $6,000 Section 1231 gain

c. $0; $5,000 ordinary income and $1,000 Section 1231 gain

d. $2,000 Section 1231 gain; $3,000 Section 1231 gain
Question 6
1. Corresponds to CLO 4(c)

John Baker, a cash basis calendar year taxpayer, paid the following during the year:
Social security tax (withheld from wages) $4,500
Real estate taxes $3,200
State income tax $3,400
Special assessment for installation of sidewalks $1,140
Penalty on tax underpayment $300
Flat fee for automobile registration $90
What itemized deduction may John claim for taxes on his return?

a. None of the above

b. $6,600

c. $11,190

d. $8,000

e. $7,700
Question 7
1. Corresponds to CLO 8(a)

Which of the following is not a tax preference item for purposes of the alternative minimum tax?

a. All of the above are tax preference items

b. Tax-exempt interest on certain private activity bonds

c. Excess intangible drilling costs

d. Amortized circulation costs

e. Percentage depletion in excess of the adjusted basis in property
Question 8
1. Corresponds to CLO 6(d)

During 2011, Norman Newhouse sold equipment used in his business for $11,000. The equipment cost $10,000 and Norman had properly claimed MACRS deductions totaling $4,000. Straight-line depreciation, if it had been used, would have been $2,500. What is the amount of gain that should be reported under Sections 1231 and 1245?

a. None of the above

b. Section 1231: $0; Section 1245: $5,000

c. Section 1231: $1,000; Section 1245: $4,000

d. Section 1231: $3,500; Section 1245: $1,500

e. Section 1231: $5,000; Section 1245: $0
Question 9
1. Corresponds to CLO 7(d)

Billy Ray owns several parcels of rental real estate, and he actively participates in managing the properties. His total loss from these activities in 2011 is $30,000 and his AGI for 2011 is $110,000. How much of the disallowed loss from rental real estate activities may be carried over to future years?

a. 100%

b. 50%

c. 10%

d. 0%
Question 10
1. Corresponds to CLO 4(b)

Which of the following statements is correct?

a. Hobby expenses that are deductible without reference to whether they are incurred in an activity designed to produce income, such as certain taxes, remain fully deductible.

b. The deduction for the allowed hobby expenses is an itemized deduction, but not subject to the 2 percent floor.

c. The financial status of the taxpayer is not considered in determining whether activities are engaged in for profit.

d. Hobby expenses are always fully deductible.
Question 11
1. Corresponds to CLO 8(d)

What is the “alternative minimum tax” that must be paid by a taxpayer fi ling a joint return, if the taxpayer has taxable income of $95,450, adjustments to taxable income of $29,000, tax preferences of $50,000, and an income tax before the alternative minimum tax of $6,000?

a. None of the above

b. $0

c. $19,685

d. $28,685

e. $21,000
Question 12
1. Corresponds to CLO 4(d)

Miscellaneous itemized deductions are deductible only:

a. None of the above.

b. if they fall below the limit on standard itemized deductions.

c. if the taxpayer takes the standard deduction.

d. to the extent that in aggregate they exceed two percent of AGI.
Question 13
1. Corresponds to CLO 9(d)

Dexter Davenport had an adjusted basis of $230,000 in real estate which he held for investment. He exchanged it for other real estate to be held for investment with a fair market value of $210,000, a boat with a fair market value of $45,000 and $15,000 cash. What is Dexter’s basis in the real estate and the boat received?

a. Real Estate: $230,000; Boat: $40,000

b. Real Estate: $225,500; Boat: $45,000

c. Real Estate: $210,000; Boat: $45,000

d. Real Estate: $210,000; Boat: $30,000
Question 14
1. Corresponds to CLO 1(c)

Which of the following is not a requirement to qualify as a surviving spouse?

a. Husband or wife must have died within the two preceding tax years

b. Own your home

c. Have been entitled to fi le a joint return with your spouse for the year of death

d. Have a child or stepchild who qualifies as a dependent

e. Have not remarried
Question 15
1. Corresponds to CLO 1(a)
John Jergens, a 45-year-old, is the sole support of his aged parents. His father is 72 and is in good health. His mother is 70 and is blind. What are the total exemptions that John should claim?

a. None of the above

b. 4

c. 3

d. 2

e. 1
Question 16
1. Corresponds to CLO 5(c)

A developer primarily involved in long-term construction may in whole or in part use any one of the following accounting methods, except:

a. Modified percentage-of-completion method

b. Completed-contract method

c. Percentage-of-completion method

d. Cash method
Question 17
1. Corresponds to CLO 9(a)

Johnny, a cash basis taxpayer, owns two rental properties. Based on the following information, compute the amount that he must include in his 2011 gross rental income.
Property #1, security deposit on one-year lease received 2/1/11.All of deposit returned at lease end
$ 500
Property #1, payment received 2/1/11 for last month of lease (1/12) 700
Property #1, rental income received in 2011 2/11-12/11 7,700
Property #2, rental income received in 2011 1/11-12/11 9,000
Property #2, security deposit received 1/1/11 to be used for last month’s rent 750
Property #2, rent 1/12 received 12/28/11 800

a. $18,950

b. $18,200

c. $17,500

d. $16,700
Question 18
1. Corresponds to CLO 1(d)
Which relative does not have to live in the same household as the taxpayer claiming head of household filing
status?

a. Brother

b. Father

c. Granddaughter

d. Son

e. Aunt
Question 19
1. Corresponds to CLO 3(c)
Unreimbursed expenses of employees are considered to be deductions:

a. None of the above

b. For or from AGI depending on the type of expense

c. From AGI

d. For AGI
Question 20
1. Corresponds to CLO 6(a)

Leonard London sold a building used in his business to Michelle Martinson. He had purchased the property several years previously for $340,000, $300,000 of which was the mortgage. Major improvements in the amount of $240,000 had been made. At the time of the sale, Leonard had taken $220,000 in straight-line depreciation. Leonard paid $104,000 in selling expenses. Michelle gave Leonard $400,000 in cash and unlike property with a fair market value of $240,000, assumed a delinquent real estate bill of $105,000 and assumed Leonard’s mortgage on the property in the amount of $234,000. What is Leonard’s gain on the sale?

a. $515,000

b. $503,000

c. $410,000

d. $385,000

e. $191,000
Question 21
1. Corresponds to CLO 3(a)
Deductions for AGI are:

a. Never deductible

b. A fl at allowance given to all taxpayers

c. Deductible if they exceed the taxpayer’s standard deduction

d. Always deductible
Question 22
1. Corresponds to CLO 5(a)

When taxpayers sell property in an installment sale and realize gain, they generally recognize the gain:

a. none of the above.

b. at the time of the sale.

c. over the tax years in which they collect the proceeds from the sale.

d. in the first year in which an installment payment is received.
Question 23
1. Corresponds to CLO 3(d)
What is the amount of interest deduction allowed for the current year, assuming Marge Meyer incurred the following:
Interest on loan used to purchase land for investment (assume no net investment income) $18,000
Interest on loan used to purchase personal residence $6,000
Interest on loan used to purchase boat $500
Interest on loan to purchase 100 shares of General Auto (no dividends received during the year) $3,000

a. None of the above

b. $21,000

c. $27,500

d. $6,000

e. $27,000
Question 24
1. Corresponds to CLO 2(b)
Starting in 2011, Mr. West must pay his former spouse $20,000 annually under a divorce decree in the following amounts:
$1,000 a month for mortgage payments (including principal and interest) on a jointly owned home until she dies
$200 a month for tuition fees paid to a private school until their son attains the age of 18 or leaves the school prior to age 18
$5,000 a year cash payment to former Mrs. West until she dies
In addition to the above amounts, the former Mrs. West also received in 2011 a lump-sum amount of $150,000 from the sale of their other marital assets.
Assume the parties did not fi le a joint return and were not members of the same household. Also, assume that there were no written statements between the parties as to how the amounts should be treated. What is the amount of Mr. West’s 2011 alimony deductions?

a. $11,000

b. $17,600

c. $155,000

d. $20,000
Question 25
1. Corresponds to CLO 7(b)

Fred’s at-risk amount in a passive activity is $50,000 at the beginning of the current year. His current loss from the activity is $60,000. He had no passive activity income during the year. At the end of the year, which of the following statements is incorrect?

a. Fred has a loss of $60,000 suspended under the passive loss rules.

b. Fred has a loss of $10,000 suspended under the at-risk rules.

c. Fred has an at-risk amount in the activity of $0.

d. Fred has a loss of $50,000 suspended under the passive loss rules.
Question 26
1. Corresponds to CLO 6(c)

Which of the following is not a capital asset as defined by the Code?

a. Inventory held p;rimarily for resale in the ordinary course of business

b. Supplies used in the ordinary course of business.

c. Depreciable property and land used in a trade or business.

d. Both a. and b.

e. All of the above.
Question 27
1. Corresponds to CLO 4(a)
Ann Jones uses a dry cleaning machine in her business, and it was completely destroyed by fire. At the time of the fire, the adjusted basis was $20,000 and its fair market value was $18,000. How much is Ann’s loss?

a. None of the above

b. $20,000

c. $2,000

d. $18,000
Question 28
1. Corresponds to CLO 9(b)

Mr. W. is 66 years old and single. His income for 2011 consisted of the following:
Taxable pension $10,000
Taxable interest 2,000
Taxable dividends 5,000
Social security payments 5,000
Tax-exempt interest 7,000
He did not have any adjustments to income. What amount of W’s social security benefi ts is taxable?

a. $2,000

b. $1,500

c. $750

d. $0
Question 29
1. Corresponds to CLO 3(d)
Which of the following expenditures is always an itemized deduction for individual taxpayers?

All of the above

Both a. and b.*

moving expenses.

state and local income taxes.

charitable contributions.
*Looks like options were re-arranged. The answer is the last two but I’m assuming these are a and b.

Question 30
1. Corresponds to CLO 8(d)

The tax structure of the individual AMT is a two-tier progressive tax where:

a. None of the above

b. The first $179,500 of AMT base is taxed at a 25 percent rate and any excess over that amount is taxed at 35 percent

c. The first $179,500 of AMT base is taxed at a 26 percent rate and any excess over that amount is taxed at 28 percent

d. The first $179,500 of AMT base is taxed at a 15 percent rate and any excess over that amount is taxed at 25 percent
Question 31
1. Corresponds to CLO 2(d)
Sherwood received disability income of $6,000 for 2011. All premiums on the health and accident policy were paid by his employer and included in Sherwood’s income. In addition, he received compensatory damages of $10,000 as a result of inadvertent poisoning at a local restaurant. He received no other income this year. How much income must Sherwood include on his 2011 tax return?

a. $0

b. $6,000

c. $10,000

d. $16,000
Question 32
1. Corresponds to CLO 6(b)

Which of the following statements are correct?
(1.) A sale is generally a transfer of property for money only or for a promise to pay money.
(2.) An exchange is a transfer of property in return for other property or services.
(3.) Recognized gain is always the excess of the amount realized over the adjusted basis of the property.
(4.) Realized loss is always the excess of the adjusted basis of the property over the amount realized.
(5.) The adjusted basis of the property is always the original cost adjusted for such items as casualty losses, improvements, and depreciation.

a. 2, 3, and 4

b. 1, 4, and 5

c. 1, 3, and 4

d. 1, 2, and 4

e. 1, 2, and 3
Question 33
1. Corresponds to CLO 2(d)
Frank Clarke, an employee of Smithson Company, was covered under a noncontributory pension plan. Frank
died on April 15, 2011, at age 64 and pursuant to the plan, his widow received monthly pension payments of $500 beginning May 1, 2011. In addition, Mrs. Clarke received an employee death payment of $10,000 in May 2011. This non-forfeitable death benefit was part of a group plan. What is the total amount of the above receipts that the widow should exclude from her gross income for 2011?

a. $14,000

b. $9,000

c. $5,000

d. $0
Question 34
1. Corresponds to CLO 8(a)

An alternative minimum tax applies to items that are considered to be of a tax preference nature. Which of the following items is not considered to be a tax preference item?

a. Depletion

b. Gain on the sale of certain small business stock

c. Mining exploration and development costs

d. Accelerated depreciation on real property acquired before 1987

e. Tax-exempt bond interest issued by a school system
Question 35
1. Corresponds to CLO 2(c)
All of the following would be excluded from income as a qualified scholarship by an individual who is a candidate for a degree at a qualified educational institution, except:

a. Course books

b. Student fees

c. Tuition

d. Room and board
Question 36
1. Corresponds to CLO 2(b)
To pay both alimony and child support for a specified period of time. In examining his records for 2011, the following information is available:
Salary $50,000
Interest received on bank deposits 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 2011?

a. $52,000

b. $49,400

c. $48,400

d. $44,600