1. In 2015, Carolina invested $20,000 in a cattle-feeding partnership that used
ID: 2478432 • Letter: 1
Question
1. In 2015, Carolina invested $20,000 in a cattle-feeding partnership that used nonrecourse notes to purchase $50,000 of feed, which was used to feed the cattle and expensed. If Carolina’s share of the expense was $25,000, what is the most that Carolina can deduct in 2015? a. $25,000 b. $20,000 c. $15,000 d. $5,000
2. Mara, a corporate executive, exercised an incentive stock option (“ISO”) granted by Mara’s employer to purchase 10,000 shares of the corporation’s stock at the option price of $1 per share (i.e., the exercise price was $1 per share). The stock is freely transferable. At the time the option was exercised, the stock was selling for $11 per share. What is the AMT adjustment that results from Mara exercising the ISO (assume that Mara will NOT dispose of any of the stock during the year)? a. $0 b. $1,000 c. $100,000 d. $101,000
3. Shantal, a single parent, lives in an apartment with Shantal’s TWO minor children (Heena and Osmar) each under age 10, whom Shantal supports. For 2015, Shantal will have AGI and earned income of $24,000. Calculate the amount, if any, of Shantal’s earned income credit. a. $6,000 b. $5,548 c. $4,308 d. $2,000
4. Jorge and Betsy are married and file a joint return. In 2015, Betsy worked fulltime and earned $22,000, while Jorge worked fulltime and earned $20,000. Assume their 2015 AGI equaled $42,000. Assume they incurred $9,000 of child care expenses during 2015 for their THREE dependent children Patricia, Keila and Helen (who are 2, 4 and 6 years old, respectively). What is their child and dependent care CREDIT amount? a. $1,260 b. $3,000 c. $6,000 d. $9,000
5. In 2007, Leticia received stock from Osmar worth $20,000 at the time of the GIFT. At the time of the gift, Osmar’s adjusted basis in the stock was $35,000. What is the gain or loss that Leticia should report for 2015 if she sold the stock to Joshua in 2015 for $40,000 (ignore any gift tax that may have been paid on the transfer from Osmar to Leticia)? a. There is no gain or loss b. $40,000 gain c. $20,000 gain d. $5,000 gain
6. Now, assume that in the previous question Leticia sold the stock to Joshua for $25,000 (instead of $40,000). What is the gain or loss that Leticia should report (again, ignore any gift tax that may have been paid on the transfer from Osmar to Leticia)? a. There is no gain or loss b. $5,000 gain c. $25,000 gain d. $10,000 loss
7. Now, assume that in Question 5 Leticia sold the stock to Joshua for $12,000 (instead of $40,000). What is the gain or loss that Leticia realized on the sale to Joshua (again, ignore any gift tax that may have been paid on the transfer from Osmar to Leticia)? a. There is no gain or loss b. $12,000 gain c. $8,000 loss d. $23,000 loss
8. Alan traded in office equipment with an adjusted basis of $25,000 (and value of $30,000) for other (like-kind) office equipment then valued at $20,000. Alan also received $10,000 in cash as part of the deal. What was Alan’s recognized gain on the exchange, if any? a. $30,000 b. $10,000 c. $5,000 d. $0
9. Tashan traded in computer equipment with an adjusted basis of $20,000 (and a value of $20,000) for other (like-kind) computer equipment then valued at $17,000. Tashan also received $3,000 in cash as part of the deal. What was Tashan’s realized gain on the exchange, if any? a. $0 b. $3,000 c. $17,000 d. $20,000
10. In 2015, Charity and Jon sold a house to Akiko for $800,000. Prior the 2015 sale, neither Charity nor Jon had ever excluded a gain from the sale of a personal residence. Charity and Jon had lived in the house for the last six years and used it exclusively for personal purposes. Charity and Jon had purchased the house for $200,000. Charity and Jon started living in the house immediately after purchasing it and never made any capital improvements to the house or took any depreciation (or other deductions) against it. Assume there were no selling expenses. How much of a gain did Charity and Jon realize on the sale to Akiko (assume that Charity and Jon are married and file a joint return)? a. $800,000 b. $600,000 c. $100,000 d. $0
11. Assume the facts stated in the previous question. How much of a gain must Charity and Jon recognize on the sale to Akiko? a. $800,000 b. $600,000 c. $100,000 d. $0
12. In 2015, Monica will have taxable income of approximately $50,000. In 2015, Monica will also have a long-term capital loss of $12,000. Monica has no other capital gains or losses (in 2015 or prior years). For 2015, what is the maximum capital loss amount that Monica may use to offset her other income? a. $12,000 b. $9,000 c. $3,000 d. $0
13. Assume the facts stated in the prior question. Assume further that for 2015 Monica offset her wages (with her capital loss) to the maximum extent permitted by law. What is the amount of Monica’s capital loss carryover to 2016? a. $12,000 b. $9,000 c. $3,000 d. $0
14. Janeen is a single taxpayer in the 35% tax bracket. Janeen wants to minimize her 2015 tax liability. Which of the following provides the LARGEST tax benefit to Janeen (assume that she may legally take advantage of each item in its entirety for 2015)? a. A $2,100 deduction from gross income b. A $2,000 deduction from adjusted gross income c. A $1,000 tax credit d. Each of the above options would provide the same amount of tax benefit
15. What was the MAXIMUM EARNED INCOME CREDIT amount that Vanessa and John could possibly take for 2015? Assume they are U.S. taxpayers filing a joint return with FOUR qualifying children (Charles, Elysia, Julian, and Meran)? a. $6,242 b. $6,000 c. $4,000 d. $0
16. Which item MOST resembles an interest free loan from the U.S. government? a. First-time homebuyer credit for a closing that occurred in June of 2008 b. The American Opportunity tax credit c. The earned income credit d. The child tax credit
17. In early 2015, Celsa sold her personal residence to Emine for $500,000. At the time of the sale, Celsa’s adjusted basis was $100,000. Within three months of the sale, Celsa moved into a new residence she purchased for $400,000. What is Celsa’s basis in her new residence? a. $500,000 b. $400,000 c. $150,000 d. $0
18. Which of the following is TRUE? a. When compared to exclusions, deferrals are more permanent in nature b. When compared to exclusions, deferrals are more temporary in nature c. Section 1031 provides for an elective deferral upon certain exchanges d. All of the above
19. Michele’s business property (located in Selinaville USA) was condemned by the proper local authorities. Immediately before the condemnation, the property had a fair market value of $300,000 and Michele’s adjusted basis in the property was $100,000. The local authorities replaced Michele’s condemned property with similar Selinaville property having a fair market value of $150,000. What is Michele’s realized gain or loss relating to these matters? a. Gain of $150,000 b. Gain of $50,000 c. Loss of $150,000 d. $0
20. Assume the facts stated in the prior question. What is Michele’s recognized gain or loss relating to such matters? a. Gain of $150,000 b. Gain of $50,000 c. Loss of $150,000 d. $0
21. Assume the facts stated in the prior two questions. What is Michele’s basis in the Selinaville property she received as a result of the condemnation (i.e., what is Michele’s basis in the newly acquired property)? a. $100,000 b. $150,000 c. $300,000 d. $0
22. In 2015, Eric sold a house to Shayla for $500,000. Eric had purchased the house for $800,000 in 2004 (during the real estate boom). Eric started living in the house immediately after purchasing it and never made any capital improvements to it or took any depreciation (or other deductions) against it. Assume there were no selling expenses. How much of a LOSS may Eric recognize on the sale to Shayla (assume that Eric will itemize deductions)? a. $300,000 b. $300,000 less 10% of Eric’s AGI c. $299,900 less 10% of Eric’s AGI d. $0
23. Raymond purchased land for $100,000 in 1989. The land was valued at $900,000 on June 1, 2015, when Raymond died. Raymond’s relative Alex inherited the land. What basis would Alex have in the land as a result of the inheritance? a. $100,00 b. $900,000 c. Raymond’s adjusted basis on June 1, 2015 (if different than $100,000) d. $0
24. Assume the same facts stated in the previous question. Which of the following is most likely TRUE, if Alex sold the land in September 2015 for $950,000? a. In 2015, Alex should “recapture” any depreciation previously taken by Raymond on the land b. In 2015, Alex will be taxed on the appreciation that occurred while Raymond held the land (provided that such appreciation was previously not taxed) c. Alex’s 2015 gain is long-term d. Alex’s 2015 gain is short-term
Explanation / Answer
1) answer is option b = 20000
at most amount invested in partnership can be deducted, as if we deduct more than 20000 our basis in partnership will be negative which is not possible.
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