1. Which of the following nominal rates does not apply to a C corporation? a. 10% b. 15% c. 25% d. 35% 2. Which of the following is never included in gross income? a. Loss on stock sale b. Social security benefits c. Gifts d.Unemployment benefits 3. What is George’s gross income if he has the following: Salary = $78,000; Dividends = $4,000; interest on city of San Francisco bonds = $2,000; a gain of $14,000 on a stock sale and a $4,000 loss on a small sole proprietorship that he owns. a. $78,000 b. $84,000 c. $92,000 d. $96,000 4. Azure Corporation (a C corporation) sold $100,000 of merchandise for which it paid $40,000. It also paid $35,000 of other expenses. All transactions were in cash. What is Azure’s Corporation’s after-tax net cash inflow? a. $21,250 b. $25,000 c. $60,000 d. $100,000 5. Koral Corporation can invest in a project that costs $400,000. The projectisexpectedtohaveanafter-taxreturnof$250,000ineachof years 1 and 2. Koral normally uses a 10 percent discount rate to evaluate projects but feels it should use 12 percent to compensate for inflation.Howmuchdifferencedoestheratemakeintheafter-taxnet present value of the project? a. $50,000 b. $22,500 c. $20,000 d. $11,250 6. A decision in the small case division of the Tax Court can be appealed only to a. Court of Appeals b. Supreme Court c. Regular Tax Court d. Federal District Court e. None of the above 7. Bob sold 100 shares of ABC stock for $2,100 and 300 shares of XYZ stock for $8,900. He purchased the ABC stock four years ago for $1,200 and the XYZ stock two years ago for $9,100. What is the net effect of these sales on Bob’s income? a. $200 net gain b. $700 net gain c. $900 net gain d. $1,100 net gain 8. Belding Corporation received permission to change its tax yearsend from December 31 to August 31 in 2017. Its income from January 1 through August 31 is $278,000. What is Belding’s tax liability? a. $141,780 b. $91,670 c. $94,520 d. $108,420 9. John owns 6,000 shares of KLM stock, 2,000 shares of BBT Mutual fund, and 10,000 shares of Centex Corporation. Her 1099-DIV forms from these investments showed the following: KLM: $3 per share distribution all reinvested in KLM BBT Mutual fund: $5 per share distribution, $1 of which represents a capital gain distribution; none of this is reinvested. Centex: $2 per share distribution, all of which represents a return of capital. How much must John include in his income in the current year? a. $40,000 b. $28,000 c. $48,000 d. $19,000 10. RonisCEOofandowns100percentof WTEnterprises,acash- basis, calendar-year corporation. The company has always been profitable but over the last five years Ron’s salary has increased from over $400,000 per year to over $1,000,000 and it has failed to pay dividends. Which of the following will not occur if the IRS determines that $500,000 of his salary is unreasonable? a. Ron will pay an additional tax on the $500,000 re-characterized as dividend. b. Ron will be eligible for a refund of Medicare taxes. c. WT will lose a $500,000 deduction for the recharacterized dividend. d. WT will be eligible for a refund of a portion of FICA taxes paid. 11. What are Kris’s deductible moving expenses for 2017 if he spends $4,000 for packing and moving household goods, $1,200 to break the lease on his apartment, and $1,500 to store the household goods for 45 days? In April he drove his car 1,400 miles to his new home and spent $250 for motels and $80 for meals while traveling to the new home. a. $6,596 b. $6,516 c. $5,596 d. $5,516 12. Fred, age 44, wants to contribute the maximum allowed to a Roth IRA in 2017. He is single and his AGI is $121,000. How much can he contribute to the Roth IRA? a. $3,300 b. $4,400 c. $5,500 d. $6,500 13. In April 2016, Ginny was assigned to a job in the next county for the day. She drove 75 miles each way to the job, paid $4 in tolls, $7 for parking and $9 for lunch. What is her allowable business expense deduction? a. $101 b. $92 c. $85 d. $81 14. How much may Purple Corporation, a calendar-year accrual-basis corporation, deduct if it paid $3,000 on April 1 for an insurance policy for the next three years, prepaid six months interest of $450 on November 1, and paid $2,000 rent for December and January on December 1. a. $1,900 b. $2,450 c. $2,600 d. $5,450
1. Which of the following nominal rates does not apply to a C corporation? a. 10% b. 15% c. 25% d. 35%
2. Which of the following is never included in gross income? a. Loss on stock sale b. Social security benefits c. Gifts d.Unemployment benefits
3. What is George’s gross income if he has the following: Salary = $78,000; Dividends = $4,000; interest on city of San Francisco bonds = $2,000; a gain of $14,000 on a stock sale and a $4,000 loss on a small sole proprietorship that he owns. a. $78,000 b. $84,000 c. $92,000 d. $96,000
4. Azure Corporation (a C corporation) sold $100,000 of merchandise for which it paid $40,000. It also paid $35,000 of other expenses. All transactions were in cash. What is Azure’s Corporation’s after-tax net
5. Koral Corporation can invest in a project that costs $400,000. The projectisexpectedtohaveanafter-taxreturnof$250,000ineachof years 1 and 2. Koral normally uses a 10 percent discount rate to evaluate projects but feels it should use 12 percent to compensate for inflation.Howmuchdifferencedoestheratemakeintheafter-taxnet present value of the project? a. $50,000 b. $22,500 c. $20,000 d. $11,250
6. A decision in the small case division of the Tax Court can be appealed only to a. Court of Appeals b. Supreme Court c. Regular Tax Court d. Federal District Court e. None of the above
7. Bob sold 100 shares of ABC stock for $2,100 and 300 shares of XYZ stock for $8,900. He purchased the ABC stock four years ago for $1,200 and the XYZ stock two years ago for $9,100. What is the net effect of these sales on Bob’s income? a. $200 net gain b. $700 net gain c. $900 net gain d. $1,100 net gain
8. Belding Corporation received permission to change its tax yearsend from December 31 to August 31 in 2017. Its income from January 1 through August 31 is $278,000. What is Belding’s tax liability? a. $141,780 b. $91,670 c. $94,520 d. $108,420
9. John owns 6,000 shares of KLM stock, 2,000 shares of BBT Mutual fund, and 10,000 shares of Centex Corporation. Her 1099-DIV forms from these investments showed the following: KLM: $3 per share distribution all reinvested in KLM BBT Mutual fund: $5 per share distribution, $1 of which represents a
10. RonisCEOofandowns100percentof WTEnterprises,acash- basis, calendar-year corporation. The company has always been profitable but over the last five years Ron’s salary has increased from over $400,000 per year to over $1,000,000 and it has failed to pay dividends. Which of the following will not occur if the IRS determines that $500,000 of his salary is unreasonable? a. Ron will pay an additional tax on the $500,000 re-characterized as dividend. b. Ron will be eligible for a refund of Medicare taxes. c. WT will lose a $500,000 deduction for the recharacterized dividend. d. WT will be eligible for a refund of a portion of FICA taxes paid.
11. What are Kris’s deductible moving expenses for 2017 if he spends $4,000 for packing and moving household goods, $1,200 to break the lease on his apartment, and $1,500 to store the household goods for 45 days? In April he drove his car 1,400 miles to his new home and spent $250 for motels and $80 for meals while traveling to the new home. a. $6,596 b. $6,516 c. $5,596 d. $5,516
12. Fred, age 44, wants to contribute the maximum allowed to a Roth IRA in 2017. He is single and his AGI is $121,000. How much can he contribute to the Roth IRA? a. $3,300 b. $4,400 c. $5,500 d. $6,500
13. In April 2016, Ginny was assigned to a job in the next county for the day. She drove 75 miles each way to the job, paid $4 in tolls, $7 for parking and $9 for lunch. What is her allowable business expense deduction? a. $101 b. $92 c. $85 d. $81
14. How much may Purple Corporation, a calendar-year accrual-basis corporation, deduct if it paid $3,000 on April 1 for an insurance policy for the next three years, prepaid six months interest of $450 on November 1, and paid $2,000 rent for December and January on December 1. a. $1,900 b. $2,450 c. $2,600 d. $5,450
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