Income exam 4

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1. 

Difference between corporate vs. U.S Treasury bond?

 
Treasury bond always pay periodically
 
2. 

In 20x8 Erin had the following Capital Gain/Loss, $2,000 LTCG, $25,000 STCG, ($9,000) LTCL, ($15,000) STCL.

 

$3,000 NSTCG

 
3. 

1. Ms. Fresh bought 1,000 of stock for $5,000 on 1-15-09 and sold all 1,000 shares on 12-31-11 for $4,500 and then bought 1,000 stocks on 1-23-12 for 3,000.

What is recognized loss on 2011 of 1,000 shares?

 

$0 LTCL and $3,500 basis

 
4. 

1. Bill would like some tax benefit for his expenses incurred this yr. His AGI= $190,000 currently his expenses consist of (1) $1,000 advisement fees, (2) $1,500 unreimbursed employee business (miscellaneous itemized) and (3) $600 tax return preparation fees.

How much more, if any, must Bill spend on investment expenses before he receives any tax benefit?

 
More than $700
 
5. 
What are the correct Loss limitation rules?
 

Tax basis, @ risk amount, passive loss limits

 
6. 

1. Sue Invested 5,000 in ABC limited partnership and received 10% interest in partnership. Partnership had 20,000 of qualified non recoverage debt so 20,000 not responsible to repay.

 

$2,000 disallowed because of her @risk amount

 
7. 

1. Which taxpayer would not be material participant?

 

Taxpayer who participated 995 hours last year

 
8. 

1. Which W-4 related answer is incorrect?

 

(A) Form can only be adjusted @ beginning or start of employment only

 
9. 

1. Jim owns 4 separate activities and elects not to group them as single, Jim participates 140 hrs in activity A, 130 hrs in activity B, 240 hrs in activity C, 100 hrs in activity D. He also has one employee who works 130 hrs in activity D. Which is correct?

 
Jim is material participant of only activities A B and C.
 
10. 

1. Maren received 10 NQ’s which each had 10 shares for $8. When she started working price was $6

 

(A) 700

 
11. 

1. Which is date when stock options are awarded to employee?

 

Grant date

 
12. 

1. Tom recently received 2,000 shares of restricted stock from his employer, independence corp., when the share price was $10/share. Ricks restricted shares vested 3 years later when the market price was $14. Rick held the shares for a little more than a year and sold them when the market price was $20. What is the amount of Tom’s income or loss on the vesting date?

 

$28,000

 
13. 

1. Which of the following is “false” regarding a section 83(b) election?

 

If an employee leaves before the vesting date any loss is limited to $3,000

 
14. 

1. Which of the following is not an example of a taxable fringe benefit?

 
$200 Of employer provided parking
 
15. 

Which of the following does not qualify as a “for the convenience of the employer” nontaxable fringe benefit?

 
A company picnic
 
16. 

Which of the following benefits cannot be excluded as a no additional cost service fringe benefit?

 
Tax return preparation from a client
 
17. 

with a 30% marginal tax rate, desires health insurance would cost Lara $5,000 to purchase if she pays for it herself ( Lara’s to receive any tax deduction for the insurance as a medical expense). Lara’s 40% marginal tax rate. Ignoring payroll taxes, what is the maximum amount salary Lara would give up to receive health insurance?

 

$7,143

 
18. 

Which of the following describes a defined benefit plan?

 

Provides fixed income to the plan participants based on a formula

 
19. 

. Dean has earned $70,000 annually for the past 5 years working as an inc. Under MWC’s defined benefit plan (which uses a 7yr graded vesting employees earn a benefit equal to 3.5% of the average of their 3 highest every full yr of service with MWC. Dean has worked for 5 full years vesting % is 60%. What is Deans vested benefit (or annual retirement earned so far)?

 

7,350

 
20. 
Which of the following statements regarding defined contribution plan
 
Employers bare investment risk relating to the plan
 
21. 
Which of the following best describes distribution from a traditional plan?
 

Distributions from defined contribution plans are fully taxable as a ordinary income

 
22. 

When employees contribute to a Roth 401k plan they _______able to deduct contributions and they ____________taxed on distributions.

 
are not, are not
 
23. 

Heidi has contributed $20,000 in total to her Roth 401k plan 2011, when her account was worth $50,000 and received a $30,000 nonqualified distribution from be subject to income tax and 10% penalty?

 
$18,000
 
24. 

Which of the following statements comparing nonqualified deferred compensation plans is false?

 

In terms of tax consequences to the employer are deferred until distributed to the employee b taxable.

 
25. 

Tyson (48 years old) owns a traditional IRA

consists of $30,000 of deductible contributions

marginal tax rate is 25%. Convinced that his marginal tax rate will

receives a distribution of the entire $50,000 balance of his traditional

pay tax on the distribution and he contributes $37,500 to a Roth IRA

How much tax and penalty must Tyson pay on this series of transactions?
 

$12,500 income tax; $1,250 penalty.

 
26. 
Which of the following is not a self-employed retirement account?
 
SEM 403 (c)
 
27. 

Kathy is 60 years of age and self-employed. During 2011 she reported $100,000 of revenue and $40,000 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to a simplified employee pension (SEP) IRA for 2011?

 

$11,082

 
28. 

Shantel owned and lived in a home for five years before marrying Daron. Shantel and Daron lived in the home for two years before selling it at a $700,000 gain. Shantel was the sole owner of the residence until it was sold. How much of the gain may Shantel and Daron exclude?

 

$ 500,000

 
29. 

On November 1, 2011, Jaime (who is single) purchased and moved into her principal residence. In early 2012, Jaime was laid off from her job. On February 1, 2012, Jamie sold the home as a $35,000 gain. She sold the home because she found a new job in a different state. How much of the gain, if any, may Jamie exclude from her gross income in 2012?

 

$31,250

 
30. 

Patrick purchased a home on January 1, 2011 for $500,000 by making a down payment $100,000 and financing the remaining $400,000 with a 30-year loan, secured by the 6 percent. During 2011 Patrick made interest-only payments on the loan 2011, when his home was worth $500,000 Patrick borrowed an additional the home at an interest rate of 8 percent. During 2011, he made interest-on loan in the amount of $3,000. What amount of the $33,000 interest expense 2011 may he deduct as an itemized deduction?

 

$33,000

 
31. 
On March 31, 2011, Mary borrowed $200,000 to buy her principal residence points to reduce her interest rate from 6 percent to 5 percent. The loan is for What is Mary’s 2011 deduction for her points paid?
 

$6,000

 
32. 

Which of the following statements regarding the tax deductibility of points related to a home mortgage is correct?

 

Points paid in the form of prepaid interest on a refinance are deductible over the life of the loan.

 
33. 

Which of the following statements best describes the deductibility of real property taxes when a taxpayer sells real property during a year?

 
Taxpayers are allowed to deduct the property taxes allocated to the portionof the year that they owned the property.
 
34. 

Kenneth lived in his home for the entire year except for when he rented his home (near a very nice ski resort) to a married couple for 14 days in December. The couple paid Kenneth $14,000 in rent for the two weeks. Kenneth incurred $1,000 in expenses relating to the home for the 14 days. Which of the following statements accurately describes the manner in which Kenneth should report his rental receipts and expenses for tax purposes?

 
Kenneth would exclude the rental receipts and he would not deduct the rental expenses.
 
35. 

Harvey rents his second home. During 2011, Harvey reported a net loss $35,000 from the rental. If Harvey is an active participant in the rental and his AGI is $80,000, how much of the loss can be deduct against ordinary income in 2011?

 

$25,000

 
36. 

Jamison is self-employed and he works out of an office in his home. After allocating the home-related expenses between the business office and the rest of the home, which of the following statements regarding the sequence of deductibility of the expenses allocated to the home office business use is correct?

 
None of the above statements is correct
 
37. 
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