Spring 2007 Final Econ 138B
1. The tax law is not neutral if a taxpayer receives 80% ownership in a corporation in exchange for
C. a patent purchased 5 years ago.
D. personal services.
2. On January 21, 2005, Ron purchased 100 shares of Bad Company common stock for $54,500. Ron sold all of
the Bad Company stock on May 18, 2006 for $24,250. On June 30, 2006, Ron repurchased 100 shares of Bad
Company stock for $5,000. The new shares are sold on July 31, 2007 for $15,500. How much gain/loss does
Andy recognize in 2006 with respect to the Bad Company stock?
A. $ 9,750 loss
B. $ 11,250 loss
C. $ 10,500 gain
D. $ 30,250 loss
E. No gain or loss
3. Randolph Scott operates as a sole proprietorship. This year his net profit was $10,570. For tax purposes this
amount should be reported on
A. a Form 4797, Sales of Business Property.
B. Schedule C, Statement of Profit or Loss From Business.
C. the first page of Form 1040 as other income.
D. a separate tax return prepared for the business operations.
E. Schedule E, Statement of Rent and Royalty Income.
4. Sue's net or "take-home" pay was $23,205. Her only payroll deductions were for payroll taxes. Federal
income tax withholdings totaled $4,500. What was the amount of her gross wages for the year?
A. $ 25,736
B. $ 30,000
C. $ 29,536