TAX 4001 Final 2024/2025 Exam
Questions and Answers 100%
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Which of the following amounts are not subject to self-employment tax? -
🧠ANSWER ✔✔Limited partner's share of partnership income
Mrs. Brinkley transferred business property (FMV $340,200; adjusted tax
basis $111,700) to M&W Incorporated in exchange for a 36% interest in
M&W Partnership. Determine Mrs. Brinkley's realized and recognized gain
on the exchange and the tax basis in her partnership interest. - 🧠ANSWER
✔✔No gain recognized; $111,700 basis in property
"Little Magician" is the name of a painting created by artist Lion-o Messy.
The owner recently recognized a $43,500 gain on sale of the figurine.
Which of the following statements is false? - 🧠ANSWER ✔✔If a
commercial art gallery that had held Little Magician in its inventory was the
seller, the gain is ordinary.
If a private collector who purchased Little Magician from an art gallery was
the seller, the gain is capital gain.
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
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PRIVACY STATEMENT. ALL RIGHTS RESERVED
,None of these choices are false.
If Lion-o was the seller, the gain is ordinary.
Answer: none of these choices are false
Sandy, Sue, and Shane plan to open Friends, an upscale restaurant. They
project that the business will incur a $90,000 operating loss in Year 1, and
$75,000 of profit in Year 2. Which of the following statements is true? -
🧠ANSWER ✔✔If the business is a C corporation, it will owe income tax in
Year 2.
Which of the following is a capital asset? - 🧠ANSWER ✔✔Supplies used in
a business
None of these choices are correct
Business inventory
Land used in a business
Answer is none of these are correct
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
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PRIVACY STATEMENT. ALL RIGHTS RESERVED
,Fleet, Incorporated owns 85% of the stock of Pete, Incorporated and 35%
of the stock of Zete, Incorporated and 90% of the stock of Bete,
Incorporated Bete owns 5% of the stock of Pete and 5% of the stock of
Zete. Zete owns 10% of the stock of Bete. The remaining stock of Pete and
Zete is owned by unrelated individuals. Which of the following statements is
correct? - 🧠ANSWER ✔✔Fleet, Pete, and Bete are an affiliated group.
Cactus Company is a calendar year S corporation with the following current
year information:
Operating loss$ (120,000)
Liabilities:
Notes payable, City Bank20,000
Notes payable, Jake Crow20,000
On January 1, John James bought 50% of Cactus Company stock for
$30,000. How much of the operating loss may John deduct on his Form
1040? Assume the excess business loss limitation does not apply. -
🧠ANSWER ✔✔$30,000
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
3
PRIVACY STATEMENT. ALL RIGHTS RESERVED
, In its first taxable year, Platform, Incorporated generated a $100,000 net
operating loss and made a $10,000 cash donation to a local charity. In its
second year, Platform generated $350,000 operating income and made a
$20,000 donation to the same charity. Compute Platform's taxable income
for its second year. Assume neither year is 2020. - 🧠ANSWER
✔✔$225,000
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 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? -
🧠ANSWER ✔✔$1,200,000
Mr. and Mrs. Anderson file a joint return. They provide more than 50% of
the financial support for their two children, Dana, age 26, and John, age 17.
Both children live in the Andersons' home. Dana earned $7,100 from a
part-time job, while John earned no income this year. Which of the
following statements is true? - 🧠ANSWER ✔✔Dana is neither a qualifying
child nor a qualifying relative of the Andersons.
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
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PRIVACY STATEMENT. ALL RIGHTS RESERVED
Questions and Answers 100%
Guaranteed Success | Already Rated A+
Which of the following amounts are not subject to self-employment tax? -
🧠ANSWER ✔✔Limited partner's share of partnership income
Mrs. Brinkley transferred business property (FMV $340,200; adjusted tax
basis $111,700) to M&W Incorporated in exchange for a 36% interest in
M&W Partnership. Determine Mrs. Brinkley's realized and recognized gain
on the exchange and the tax basis in her partnership interest. - 🧠ANSWER
✔✔No gain recognized; $111,700 basis in property
"Little Magician" is the name of a painting created by artist Lion-o Messy.
The owner recently recognized a $43,500 gain on sale of the figurine.
Which of the following statements is false? - 🧠ANSWER ✔✔If a
commercial art gallery that had held Little Magician in its inventory was the
seller, the gain is ordinary.
If a private collector who purchased Little Magician from an art gallery was
the seller, the gain is capital gain.
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
1
PRIVACY STATEMENT. ALL RIGHTS RESERVED
,None of these choices are false.
If Lion-o was the seller, the gain is ordinary.
Answer: none of these choices are false
Sandy, Sue, and Shane plan to open Friends, an upscale restaurant. They
project that the business will incur a $90,000 operating loss in Year 1, and
$75,000 of profit in Year 2. Which of the following statements is true? -
🧠ANSWER ✔✔If the business is a C corporation, it will owe income tax in
Year 2.
Which of the following is a capital asset? - 🧠ANSWER ✔✔Supplies used in
a business
None of these choices are correct
Business inventory
Land used in a business
Answer is none of these are correct
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
2
PRIVACY STATEMENT. ALL RIGHTS RESERVED
,Fleet, Incorporated owns 85% of the stock of Pete, Incorporated and 35%
of the stock of Zete, Incorporated and 90% of the stock of Bete,
Incorporated Bete owns 5% of the stock of Pete and 5% of the stock of
Zete. Zete owns 10% of the stock of Bete. The remaining stock of Pete and
Zete is owned by unrelated individuals. Which of the following statements is
correct? - 🧠ANSWER ✔✔Fleet, Pete, and Bete are an affiliated group.
Cactus Company is a calendar year S corporation with the following current
year information:
Operating loss$ (120,000)
Liabilities:
Notes payable, City Bank20,000
Notes payable, Jake Crow20,000
On January 1, John James bought 50% of Cactus Company stock for
$30,000. How much of the operating loss may John deduct on his Form
1040? Assume the excess business loss limitation does not apply. -
🧠ANSWER ✔✔$30,000
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
3
PRIVACY STATEMENT. ALL RIGHTS RESERVED
, In its first taxable year, Platform, Incorporated generated a $100,000 net
operating loss and made a $10,000 cash donation to a local charity. In its
second year, Platform generated $350,000 operating income and made a
$20,000 donation to the same charity. Compute Platform's taxable income
for its second year. Assume neither year is 2020. - 🧠ANSWER
✔✔$225,000
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 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? -
🧠ANSWER ✔✔$1,200,000
Mr. and Mrs. Anderson file a joint return. They provide more than 50% of
the financial support for their two children, Dana, age 26, and John, age 17.
Both children live in the Andersons' home. Dana earned $7,100 from a
part-time job, while John earned no income this year. Which of the
following statements is true? - 🧠ANSWER ✔✔Dana is neither a qualifying
child nor a qualifying relative of the Andersons.
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
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PRIVACY STATEMENT. ALL RIGHTS RESERVED
