Tax Final Exam Questions With Solutions
Which of the following statements regarding a partner's tax basis in a partnership interest is true?
Partnership tax basis is reduced by the partner's share of nondeductible partnership
expenses.
Mrs. Brinkley transferred business property (FMV $340,200; adjusted tax basis $111,700) to
M&W Incorporated in exchange for 4,200 shares of M&W stock. Immediately after the
exchange, M&W had 7,800 shares of outstanding stock. Compute M&W's recognized gain on its
exchange of stock for property and determine M&W's tax basis in the property received from
Mrs. Brinkley. No gain recognized; $340,200 tax basis in property
Gavin owns a 50% interest in London Partnership. His tax basis in his partnership interest at the
beginning of the year was $20,000. His partnership Schedule K-1 showed the following:
Ordinary business income$ 60,000Share of partnership debt, beginning of year10,000Share of
partnership debt, end of year15,000
Calculate Gavin's tax basis in his partnership interest at the end of the year? $85,000
In June, a fire completely destroyed office furniture owned by W&S Incorporated W&S's
adjusted tax basis in the furniture was $17,040. W&S received a $15,000 reimbursement from its
property insurance company, and on August 8, it paid $16,000 to replace the furniture. Compute
, Tax Final Exam Questions With Solutions
W&S's recognized gain on loss on the involuntary conversion and its tax basis in the new
furniture. $2,040 recognized loss; $16,000 basis in the furniture
A business generates profit of $100,000. The owner has a 37% marginal tax rate. What amount
of corporate and individual income tax will be paid on this profit if the business is a regular
corporation and no income is distributed? Corporate tax, $21,000; individual tax, $0
Honu, Incorporated has book income of $1,200,000. Book income includes $380,000 income tax
expense, $10,000 of municipal bond interest income, and $150,000 of business meals expense.
Based only on these items, compute Honu's taxable income. $1,645,000
Mr. and Mrs. Harvey's tax liability before credits was $1,675. Their income tax withholding was
$1,050, and they are entitled to a $1,189 earned income credit. Which of the following
statements is true? The Harveys are entitled to a $564 tax refund.
Rebecca has a qualifying home office. The room is 600 square feet and the entire house is 3,000
square feet. Use the following information to determine her allowable home office deduction:
Revenue from legal practice$ 160,500Expenses from legal practice157,000Expenses from home
(100%)Home mortgage interest10,000Property taxes3,300Homeowner's
, Tax Final Exam Questions With Solutions
insurance2,000Utilities1,200Cost to convert patio into a sunroom5,000Depreciation on office
portion of home800 $3,500 home office deduction.
Which of the following statements regarding the personal holding company tax is false?
The personal holding company tax is assessed on a qualifying corporation's undistributed
personal holding company income.
Tamara and Todd Goble, ages 66 and 67, file a joint return. Todd is legally blind. Compute their
standard deduction. None of theses
Rydell Company exchanged business realty (initial cost $55,250; accumulated depreciation
$25,450) for like-kind realty worth $44,000 and $2,000 cash. Assume that depreciation on the
realty exchanged was computed using the straight-line method and that Rydell Company is not a
corporation. As a result, Rydell must recognize: $2,000 Section 1231 gain
Which of the following statements regarding a qualifying child is false? The child must
have been alive at least 180 days during the tax year.
Cramer Corporation and Mr. Chips formed a partnership in which Cramer is the general partner
and Mr. Chips is a limited partner. Cramer contributed $500,000 cash, and Mr. Chips contributed
, Tax Final Exam Questions With Solutions
a building with a $500,000 FMV and $300,000 tax basis. The partnership immediately borrowed
$700,000 of recourse debt. What is Cramer's tax basis in its partnership interest?
$1,200,000
Three years ago, ChaGo Incorporated sold a business asset with a $39,400 adjusted tax basis for
$130,000. The purchaser paid $50,000 cash and gave ChaGo a note for the $80,000 balance of
the price. ChaGo is using the installment sale method to recognize its gain on sale. This year,
ChaGo sold the note to a financial institution for the note's $55,000 face value (ChaGo had
received a total of $25,000 principal payments on the note.) Compute ChaGo's gain recognized
on sale of the installment note. $38,332
Kelly operates a sole proprietorship with qualified business income of $920,000. Her business
paid W-2 wages of $250,000 and owns depreciable tangible property with an unadjusted basis of
$410,000. Compute Kelly's allowable QBI deduction before the taxable income limitation.
$125,000
Martha Pim is a general partner in PLF Partnership. This year, Martha received a $48,000
guaranteed payment from PLF, and her distributive share of PLF's ordinary business income was
$93,200. Which of the following is accurate? Martha must pay both income tax and self-
employment tax on $141,200.
Which of the following statements regarding a partner's tax basis in a partnership interest is true?
Partnership tax basis is reduced by the partner's share of nondeductible partnership
expenses.
Mrs. Brinkley transferred business property (FMV $340,200; adjusted tax basis $111,700) to
M&W Incorporated in exchange for 4,200 shares of M&W stock. Immediately after the
exchange, M&W had 7,800 shares of outstanding stock. Compute M&W's recognized gain on its
exchange of stock for property and determine M&W's tax basis in the property received from
Mrs. Brinkley. No gain recognized; $340,200 tax basis in property
Gavin owns a 50% interest in London Partnership. His tax basis in his partnership interest at the
beginning of the year was $20,000. His partnership Schedule K-1 showed the following:
Ordinary business income$ 60,000Share of partnership debt, beginning of year10,000Share of
partnership debt, end of year15,000
Calculate Gavin's tax basis in his partnership interest at the end of the year? $85,000
In June, a fire completely destroyed office furniture owned by W&S Incorporated W&S's
adjusted tax basis in the furniture was $17,040. W&S received a $15,000 reimbursement from its
property insurance company, and on August 8, it paid $16,000 to replace the furniture. Compute
, Tax Final Exam Questions With Solutions
W&S's recognized gain on loss on the involuntary conversion and its tax basis in the new
furniture. $2,040 recognized loss; $16,000 basis in the furniture
A business generates profit of $100,000. The owner has a 37% marginal tax rate. What amount
of corporate and individual income tax will be paid on this profit if the business is a regular
corporation and no income is distributed? Corporate tax, $21,000; individual tax, $0
Honu, Incorporated has book income of $1,200,000. Book income includes $380,000 income tax
expense, $10,000 of municipal bond interest income, and $150,000 of business meals expense.
Based only on these items, compute Honu's taxable income. $1,645,000
Mr. and Mrs. Harvey's tax liability before credits was $1,675. Their income tax withholding was
$1,050, and they are entitled to a $1,189 earned income credit. Which of the following
statements is true? The Harveys are entitled to a $564 tax refund.
Rebecca has a qualifying home office. The room is 600 square feet and the entire house is 3,000
square feet. Use the following information to determine her allowable home office deduction:
Revenue from legal practice$ 160,500Expenses from legal practice157,000Expenses from home
(100%)Home mortgage interest10,000Property taxes3,300Homeowner's
, Tax Final Exam Questions With Solutions
insurance2,000Utilities1,200Cost to convert patio into a sunroom5,000Depreciation on office
portion of home800 $3,500 home office deduction.
Which of the following statements regarding the personal holding company tax is false?
The personal holding company tax is assessed on a qualifying corporation's undistributed
personal holding company income.
Tamara and Todd Goble, ages 66 and 67, file a joint return. Todd is legally blind. Compute their
standard deduction. None of theses
Rydell Company exchanged business realty (initial cost $55,250; accumulated depreciation
$25,450) for like-kind realty worth $44,000 and $2,000 cash. Assume that depreciation on the
realty exchanged was computed using the straight-line method and that Rydell Company is not a
corporation. As a result, Rydell must recognize: $2,000 Section 1231 gain
Which of the following statements regarding a qualifying child is false? The child must
have been alive at least 180 days during the tax year.
Cramer Corporation and Mr. Chips formed a partnership in which Cramer is the general partner
and Mr. Chips is a limited partner. Cramer contributed $500,000 cash, and Mr. Chips contributed
, Tax Final Exam Questions With Solutions
a building with a $500,000 FMV and $300,000 tax basis. The partnership immediately borrowed
$700,000 of recourse debt. What is Cramer's tax basis in its partnership interest?
$1,200,000
Three years ago, ChaGo Incorporated sold a business asset with a $39,400 adjusted tax basis for
$130,000. The purchaser paid $50,000 cash and gave ChaGo a note for the $80,000 balance of
the price. ChaGo is using the installment sale method to recognize its gain on sale. This year,
ChaGo sold the note to a financial institution for the note's $55,000 face value (ChaGo had
received a total of $25,000 principal payments on the note.) Compute ChaGo's gain recognized
on sale of the installment note. $38,332
Kelly operates a sole proprietorship with qualified business income of $920,000. Her business
paid W-2 wages of $250,000 and owns depreciable tangible property with an unadjusted basis of
$410,000. Compute Kelly's allowable QBI deduction before the taxable income limitation.
$125,000
Martha Pim is a general partner in PLF Partnership. This year, Martha received a $48,000
guaranteed payment from PLF, and her distributive share of PLF's ordinary business income was
$93,200. Which of the following is accurate? Martha must pay both income tax and self-
employment tax on $141,200.
