Review Mods 23-37

Question 1

A blank endorsement converts…

Answer 1

Order paper to bearer paper

Question 2

Use of special endorsement converts…

Answer 2

Bearer paper into order paper

Question 3

A qualified endorsement that does not specify any payee converts…

Answer 3

Order paper into bearer paper

Question 4

To qualify as a holder in due course, an individual most be…3

Answer 4

1 holder of properly negotiated negotiable instrument

2 give value for instrument

3 take instrument in good faith without problems

Question 5

How do you calculate the gain realized, in a like kind exchange? 5 steps

Answer 5

FMV prop received
\+ boot received
= amount realized
- basis of property exchanged
= gain realized

Question 6

Recognized gain in a like-kind is the lesser of…2

Answer 6

Boot received or amount realized

Question 7

A corporation’s net capital loss…

Answer 7

Cannot be offset against ordinary income

Question 8

Net capital loss is generally carried back…

2) And carried forward…

Answer 8

3 years

2) 5 years

Question 9

Tax basis on involuntary conversion where $10,000 is destroyed and $13,000 is received with $11,000 reinvested?

Answer 9

$10,000 ($11,000 cost - $1,000 deferred gain)

Question 10

With an involuntary conversion, if $10,000 of property is destroyed and $14,000 is received by the county. And $16,000 is reinvested what is the realized gain? How much is recognized?

Answer 10

Realized gain = $4,000

Recognized gain = $0

Question 11

Fees received for jury duty represent compensation for services and must…

Answer 11

Be included in gross income

Question 12

Jury duty fees are taxable as…

Answer 12

Other income on page 1 of Form 1040

Question 13

Accounts receivable resulting from services rendered by a cash basis tax payer have…

Answer 13

Zero tax basis

Question 14

A loss sustained from a Nonbusiness bad debt is always…

Answer 14

Classified as a short term capital loss

Question 15

Non business bad debt is deductible on…

Answer 15

Schedule D

Question 16

Rental property including parking lots is reported on…

Answer 16

Schedule E

Question 17

Schedule E- Supplemental Income and Loss is used to report on income and loss from…5

Answer 17

1 royalties
2 partnerships
3 S-corporations
4 estates
5 trusts

Question 18

Loss resulting from sale of personal residence is…

Why?

Answer 18

Not deductible

Because property held for personal use

Question 19

When alimony payments of $2,000 are reduced by $300/month due to divorce decree, when a child reaches age 21. What is the tax treatment of these payments?

Answer 19

$300 of the $2,000 per month will be treated as child support

Question 20

What is the installment method formula for the amount reported each year?

Answer 20

Gain from sale =

(Gross profit/total contract price) x Amount received in year

Question 21

How do you calculate contract price for the installment method formula?

Answer 21

Contract price = selling price - mortgage assumed

Question 22

How do you calculate gross profit for the installment method formula?

Answer 22

Gross profit = selling price - basis

Question 23

For farm income, soil and water conservation expenditures are $20,000 for the year and gross income from 2 farms is $40,000, the deduction is limited to…

Answer 23

$10,000 = ($40,000 x 25%)

Gross income x 25%

Question 24

Feed and planting seed expenses can be deducted up to…

Answer 24

50% x other expenses

Question 25

A retiree's pension contribution is...

Answer 25

Excluded from income on a pro rata basis

Question 26

For a two-family rental apartment, where one is lived in and one is rented out, depreciation would be...

Answer 26

Subtracted by 50% against rental income

Question 27

Passive activity loss calculation

Answer 27

Passive activity loss = (Ownership %) x operating loss

Question 28

When the midquarter convention is used in the last quarter, you should...

Answer 28

Multiply by 1/8

Question 29

Emergency room fee cannot be deducted for a family member that...

Answer 29

Provides more than half their support

Question 30

2 expenses that are not deductible relating to adoption of a child?

Answer 30

1 legal expenses 2 agency fee

Question 31

Delinquency taxes not paid by the seller and paid by the buyer are...

Answer 31

Not deductible

Question 32

2013 property taxes, for property bought on July 1st, 2013 and paid in full by the buyer are...

Answer 32

Deductible on a pro rata basis

Question 33

For a deduction for a qualified residence, what are 2 examples of Nondeductible personal expenses?

Answer 33

1 utilities expense 2 insurance expense

Question 34

All unreimbursed business expenses of an outside salesman are deducted as...

Answer 34

Miscellaneous itemized deductions subject to a 2% floor

Question 35

In determining net self-employment income, estimated income taxes on self-employment income are...

Answer 35

Excluded from its computation

Question 36

Guaranteed payments go on...

Answer 36

Line 4 of schedule K

Question 37

Net earnings from self employment on schedule K is calculated by...

Answer 37

Net earnings = ordinary business income + guaranteed payments

Question 38

Where is gross income reported on schedule K?

Answer 38

Line 14C gross nonfarm income

Question 39

How is ordinary business income on schedule K-1 calculated?

Answer 39

(Ordinary business income from line 1 schedule K) x partnership %

Question 40

How is self-employment earnings on line 14A of schedule K-1 calculated?

Answer 40

Self-employment earnings = | (ordinary business income on K-1) + guaranteed payment

Question 41

How is self-employment earnings on line 14C of schedule K-1 calculated?

Answer 41

Self employment income C = Guaranteed payment + (gross income - guaranteed payment) x partnership %

Question 42

What is the IRS center where the partnership filed the return?

Answer 42

Ogden, Utah

Question 43

For the partnership return SIM, was any capital contributed during the year?

Answer 43

No

Question 44

How do you calculate the current year increase in partner's capital account? 2 steps using items from schedule K-1

Answer 44

1 Add all income items (except guaranteed payments) 2 subtract all deductions and losses

Question 45

Tax exempt interest is included when calculating...

Answer 45

Current year increase in partner's capital account

Question 46

Guaranteed payments are deducted in computing...2

Answer 46

1 partnership book income 2 partnership ordinary income

Question 47

If an item is deductible in computing both partnership book income and partnership ordinary income, when computing partnership ordinary income from book income...

Answer 47

The item is not added back

Question 48

Charitable contributions are deducted in...

Answer 48

Arriving at partnership book income

Question 49

Charitable contributions must be separately passed through to partners on schedule K-1 and cannot...

Answer 49

Cannot be deducted in computing partnership ordinary income

Question 50

A deduction that is included in book income, but not ordinary income for a partnership is...

Answer 50

Added to book income

Question 51

When there is a guaranteed monthly payment and ordinary income for the fiscal year is given, in regards to ordinary income assume that...

Answer 51

Guaranteed payments have already been subtracted

Question 52

Although, the sale of a partnership interest generally results in a capital gain or loss, ordinary income must be recognized to the extent of selling partner's share of...2

Answer 52

1 unrealized receivables 2 appreciated inventory

Question 53

If there are $800,000 in unrealized receivables and the partner sells their 1/4 interest in the partnership, what is recognized?

Answer 53

$200,000 ordinary gain (800k/4)

Question 54

A current distribution is also known as...

Answer 54

A nonliquidating distribution

Question 55

No loss can be recognized as a result of a...

Answer 55

Current (nonliquidating) distribution

Question 56

In a nonliquidating distribution, a gain will be recognized only if...

Answer 56

Cash received exceeds the basis for the partner's partnership Interest

Question 57

If both cash and noncash property are received in a single distribution, the basis for the partner's interest is...

Answer 57

first reduced by the cash, before noncash property

Question 58

Since $30,000 cash does not exceed the $31,000 basis of Andrew's partnership interest...

Answer 58

No gain is recognized

Question 59

When there is a cash and noncash (land) nonliquidating distribution, where cash reduces the partner's interest basis to $20,000. Land distributed with a basis of $35,000 will...

Answer 59

Have its basis limited to $20,000 (partner's basis after reduction Of cash)

Question 60

In a complete liquidation of a partner's interest in a partnership, the property distributed will have a basis equal to...

Answer 60

Adjusted basis of partner's partnership interest - money received

Question 61

Generally, in a liquidating distribution, the basis for a partnership interest is first reduced by...

Answer 61

Amount of money received

Question 62

In a liquidating distribution, the basis for partnership interest is first reduced by amount of money received, it is then reduced by unrealized receivables and inventory...

Answer 62

Received

Question 63

A distributed partner can recognize loss only upon...

Answer 63

Complete liquidation of the partner's interest

Question 64

A distributed partner can recognize loss only upon complete liquidation of the partner's interest through receipt of...3

Answer 64

1 money 2 unrealized receivables 3 inventory

Question 65

If there is a basis of $20,000 and the partner received a liquidating distribution of $2,000 cash and inventory with a basis of $4,000 and FMV of $10,000, what is the gain or loss recognized? (Show calculation)

Answer 65

$14,000 loss ($20,000 - cash - basis of inventory)