Midterm Exam 2

Navigation » List of Schools » West Los Angeles College » Accounting » Accounting 015 – Tax Accounting I » Spring 2021 » Midterm Exam 2

Need help with your exam preparation?

Existing Quiz Clients Login here

Below are the questions for the exam with the choices of answers:

Try The Exam

Question #1

The earned income credit is available only to taxpayers with qualifying children.

A TRUE

B FALSE

Question #2

Arun paid the following taxes this year: Real estate taxes on rental property he owns $4,000
Real estate taxes on his own residence 3,600
Federal income taxes 8,000
State income taxes 3,400
Local city income taxes 500, What amount can Arun deduct as an itemized deduction on his tax return?

A $19,500

B $15,000

C $15,500

D $7,500

Question #3

A net operating loss (NOL) occurs when taxable income for any year is negative because itemized deductions and total exemptions exceed business income.

A TRUE

B FALSE

Question #4

Jason owns a warehouse that is used in business. The FMV of the warehouse is $200,000 (basis $120,000), and the warehouse is subject to a mortgage of $40,000. Jason exchanges the warehouse for land valued at $150,000. The other party also pays him $10,000 cash and assumes the mortgage on the warehouse. Jason’s basis in the land received will be

A $180,000

B $200,000

C $150,000

D $120,000

Question #5

Van pays the following medical expenses this year, $500 for doctor bills for Van’s son who is claimed as a dependent by Van’s former spouse.
$300 for Van’s eyeglasses.
$900 for Van’s dental work.
$800 for Van’s face lift. Van, a newscaster, is worried about the wrinkles around his eyes. How much can Van include on his return as qualified medical expenses before limitation?

A $2,500

B $1,400

C $1,700

D $1,200

Question #6

Hugh contributes a painting to a local museum for display. His AGI is $35,000. Hugh paid $16,000 for the painting in 1990, but its market value at the date of the contribution is $22,000. If Hugh makes the election to reduce the contribution by certain gains, his deductible contribution for this year will be

A $17,500

B $22,000

C $10,500

D $16,000

Question #7

On November 3, this year, Kerry acquired and placed into service 7-year business equipment costing $80,000. In addition, on May 5th of this year, Kerry had also placed in business use 5-year recovery property costing $15,000. Kerry did not elect Sec. 179 immediate expensing. No other assets were purchased during the year. The depreciation for this year is

A $14,432

B $3,606

C $13,576

D $6,606

Question #8

An individual is considered to materially participate in an activity if any of the following tests are met with the exception of

A the individual participates in the activity for more than 500 hours during the year.

B the individual participates in the activity for 75 hours during the year, and that participation is more than any other individual’s participation for the year.

C the individual’s participation in the activity for the year constitutes substantially all of the participation in the activity by all individuals.

D the individual has materially participated in the activity in any five years during the immediate preceding 10 taxable years.

Question #9

Joan bought a business machine for $15,000. In a later year, she sold the machine for $12,800 when the total allowable depreciation is $8,500. The depreciation actually taken on the tax returns totaled $8,000. Joan must recognize a gain (or loss) of

A no gain or loss.

B $6,800

C (3,200).

D $6,300

Question #10

Pierce sold his home this year. He had owned and lived in the house for 10 years. Pierce signed a contract on March 4 to sell his home. Sold May 3 for $600,000
Selling expenses $15,000
Replaced and paid for a broken window on March 2 $800
Basis of old home before repairs and improvements $310,000
Purchased new home $500,000 Based on these facts, what is the amount of his recognized gain?

A $25,000

B $40,000

C $275,000

D $-0-

Question #11

MACRS requires the use of the mid-year convention in the year of acquisition and the mid- quarter convention in the year of disposition.

A TRUE

B FALSE

Question #12

The purpose of Sec. 1245 is to eliminate the advantage taxpayers would have if they were able to reduce ordinary income by depreciation deductions and also receive favorable Sec. 1231 treatment when the asset was sold.

A FALSE

B TRUE

Question #13

If an individual is liable for self employment tax, one half of the self employment tax is

A a For AGI deduction.

B an itemized deduction.

C a Schedule C business expense.

D self-employment tax is nondeductible.

Question #14

Daniella exchanges business land with a $100,000 adjusted basis for $10,000 cash and business land with a $96,000 FMV. What is the amount of gain recognized on the exchange?

A $6,000

B $0

C $4,000

D $10,000

Question #15

Points incurred in connection with which of the following transactions involving a taxpayer’s principal residence are not deductible when paid?

A purchase

C refinance

D improvement

Question #16

In May of this year, Cassie acquired a machine for $20,000 to use in her business. The machine is classified as 5-year property. Cassie does not expense the property under Sec. 179. Cassie’s depreciation on the machine this year is

A $20,000

B $4,000

C $2,000

D $8,000

Question #17

For a business, Sec. 1231 property does not include

A land used in the business that was purchased two years ago.

B inventory purchased 24 months ago.

C timber, coal, or domestic iron ore.

D an office building purchased five years ago.

Question #18

For purposes of determining like-kind property for nontaxable exchanges, which of the following items held for business or investment purposes will NOT qualify?

A A machine

B Common stock

C A ranch

D Improved real estate

Question #19

A fiscal year is a 12 month period that ends on the last day of any month other than December.

A FALSE

B TRUE

Question #20

Section 1250 does not apply to assets sold or exchanged at a loss.

A FALSE

B TRUE

Question #21

A farmer sells his land while the corn crop is still growing. The farmer will be allowed Sec 1231 treatment on the unharvested corn inventory.

A TRUE

B FALSE

Question #22

Linda had a swimming pool constructed at her house. Her physician advised and prescribed to her that the pool would slow the effects of her degenerative disease. The pool was not suitable for recreational use. Prior to the construction of the pool, the fair market value of her house was $172,000. After the construction of the pool, the appraised fair market value of the house was $181,000. The cost of the pool was $13,000. What is the amount of Linda’s qualified medical expense (before considering limits based on AGI)?

A $0

B $4,000

C $9,000

D $13,000

Question #23

A landscaper landscaped his church grounds at no charge. The work took him 10 hours. He normally charges $40 per hour for his services. The landscaper can take a $400 charitable contribution on his tax return.

A TRUE

B FALSE

Question #24

The building used in Tim’s business was condemned by the city of Lafayette. Tim received a condemnation award of $125,000. He paid $1,200 in lawyer’s fees and $800 for an appraisal of the property. Tim’s adjusted basis in the building was $60,000. Tim reinvests in similar property costing $110,000, and Tim makes the proper election regarding the property. What is the amount of Tim’s realized (not recognized) gain on the condemnation?

A $ -0-

B $65,000

C $50,000

D $63,000

Question #25

Jarrett owns a mountain chalet that he purchased in 2008 for $175,000. This year, the home appraised at $300,000. Shortly after the appraisal, a severe blizzard hit the area in spring of the current year, destroying trees and severely damaging several homes, including Jarrett’s chalet. The blizzard was declared a federal disaster. The chalet’s value was reduced to $135,000. Jarrett does not have insurance. Jarrett’s AGI is $200,000. Jarrett’s deductible loss after limitations is

A $164,900

B $144,900

C $165,000

D $135,000

Try The Exam

Fresh Grad Lands Job as Real Estate Agent With Help from Professional Writers

Need help with your exam preparation?

Below are the questions for the exam with the choices of answers:

Christian S.

Tyra

Linda

Manush

We accept payment