acct 553 quiz 2
1. Question: (TCO E) For federal tax purposes, royalty income not derived in the ordinary course of a business is classified as:
Active income
Passive income
Portfolio income
None of the above
2. Question: (TCO D) Which of the following is not an example of a nontaxable like-kind exchange?
An ice cream making machine for inventory of Rocky Road ice cream.
Land for an office building.
A printer for a computer.
The trade of an apartment building for a store building.
3. Question: (TCO H) Al and Amy file a joint return for the 2007 tax year. Their adjusted gross income is $80,000. They had net investment income of $8,000. In 2007, they had the following interest expenses:
Personal credit card interest $4,000;
Home mortgage interest $8,000; and
Investment interest (on loans used to buy stocks) $10,000.
What is the interest deduction for Al and Amy for the 2007 tax year?
$8,000
$12,000
$16,000
$18,000
4. Question: (TCO B) Charitable contribution deductions for cash donations made by individuals to public charities are limited to:
50% of AGI
40% of AGI
30% of AGI
20% of AGI
5. Question: (TCO A) The following taxes were paid by Tim: Real estate taxes on his home: $1,000; State income taxes: $900; and State gasoline tax (personal use of automobile): $150.
In itemizing his deductions, what is the amount that Tim may claim as a deduction for taxes?
$2,000
$3,050
$0
$1,900
6. Question: (TCO E) Josh sold a piece of business equipment that had an adjusted basis to him of $50,000. In return for the equipment, Josh received $80,000 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?
$90,000
$125,000
$80,000
$70,000
7. Question: (TCO I) Ben’s property, which has an adjusted basis of $45,000, is condemned by the state government. The authorities replace his property with other qualified property which cost them $120,000. What is Ben’s recognized gain?
$35,000
$85,000
$0
$120,000
8. Question: (TCO D) Sean, a calendar year taxpayer, purchased stock on June 18, 2006, for $17,000. The stock became worthless on June 4, 2007. What is Sean’s loss in 2007?
$17,000 short-term capital loss
No loss
$17,000 itemized deduction for investments
$17,000 long-term capital loss
9. Question: (TCO F) Briefly explain and discuss the following:
a. How is the assumption of liability by the transferee from property given by the transferor treated by the transferor in a like-kind exchange. Also explain wether the transferor assumes liability on property received.
b. What requirements must be met for property to qualify for like-kind exchange treatment?
c. How are like-kind exchanges treated under the federal income tax laws?
10. Question: (TCO G) Briefly (1) define and (2) discuss the purpose and impact of each of the following:
a. Passive Activity Loss Rules
b. Net Operating Loss
c. At Risk Rules
