Practice Questions Solution Exam 1

Practice Questions Solution Exam 1 - Practice Questions...

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Practice Questions Exam 1 Solutions 1. A 2. \$100,000 in Year 1 and the remaining \$1,740,000 would be recognized in Year 2. 3. if Home Cable were a cash-basis taxpayer, all \$1,840,000 of the income would be taxable in Year 1, when received. 4. D (after tax return for the \$1.70 is \$1.02) The after tax-return for the other options are: a) . 84, b) .60, c) .90. 5. \$50,000 (amount in excess of proceeds treated as taxable interest) 6. a) \$150 = (1000 * .15 + 5,000 * .0). b) \$1,030 = (1000 * .28 + 5,000 * .15) 7. Gross Income = 100,000 – (10,000 + 12,000 +4,000 + 5,000) = 69,000. Taxable Income = 69,000 – 5,700 – 3,650 = 59,650. 8. Year 1: Jack \$2,000 REALIZED loss, \$0 recognized because of related party rules. Year 3: Zeta REALIZES \$3,000 gain, RECOGNIZES \$1,000 gain because can offset gain with Jack’s disallowed loss. No effect on Zeta in Year 1 (its basis in asset is \$24,000) and no effect on Jack in Year 3. 9. a. \$13,500 = (4200 + 5500 + 3800) note: clothing to goodwill meets the requirements of section 170(e)(3) – therefore gold can deduction basis + ½ the difference between basis and FMV. b. TI = 100,000 + 10,000 = 110,000 – 11,000 (allowed CC is 10% of TI before the CC) = 99,000. The remaining \$2,500 of CC and the LTCL will be carried over to another tax year. The municipal bond interest is not taxable. 10. \$30,720 = [80,000 – [(80,000 * .20) + (80000 * .32) + (80,000 * .192 * 1/2)] 11. Year 1: 10-year property: \$200,000 * .10 = \$20,000.
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• Spring '10
• Taxation in the United States, Generally Accepted Accounting Principles, Jack, Suspended Loss

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