ACC 547 Final Exam (54 Questions)

1) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of

A. $67,000
B. $45,000
C. $22,000
D. $23,000

2) A budget deficit would result when a person's or family's
A. assets exceed liabilities
B. net worth decreases
C. actual expenses are greater than planned expenses
D. actual expenses are less than planned expenses

3) The payment items that should be budgeted first are
A. unplanned living expenses
B. fixed expenses
C. investment funds
D. variable expenses

4) Which of the following statements regarding tax credits is true?
A. None of the answer choices are correct.
B. Tax credits reduce taxable income dollar for dollar.
C. Tax credits reduce taxes payable dollar for dollar.
D. Tax credits provide a greater tax benefit the greater the taxpayer's marginal tax rate.


5) The tax base for an individual tax return is
A. adjusted gross income minus from AGI deductions
B. realized income from whatever source derived
C. adjusted gross income
D. gross income


6) Which of the following statements regarding exemptions is correct?
A. Taxpayers subtract exemption deductions from adjusted gross income to determine taxable income.
B. Personal exemptions are more valuable than dependency exemptions.
C. Exemption amounts are considered to be for AGI deductions.
D. Taxpayers filing a married filing jointly return are limited to two exemptions on their tax returns.


7) Which of the following has the lowest authoritative weight?
A. Interpretive regulation
B. Legislative regulation
C. Revenue ruling
D. Private letter ruling


8) Which of the following has the highest authoritative weight?
A. Tax article
B. Text book
C. Revenue ruling
D. Private letter ruling


9) Jaime recently found a "favorable" trial level court opinion directly on point for her tax question. Which trial level court would he prefer to have issued the opinion?
A. Divorce Court
B. District Court
C. Tax Court
D. Circuit Court


10) Sam saved diligently for his college education by putting part of his pay into U.S. Series EE saving bonds. Sam purchased the bonds for $6,500, and this year he redeemed the bonds for $7,200. He has no other income this year. What amount must Sam include in his gross income?
A. $700 unless Sam uses the proceeds to pay for his college tuition and fees
B. $6,500
C. $7,200
D. A maximum of $350 if Sam uses the proceeds to pay for his college tuition and fees


11) Jill currently lives in the suburbs and commutes 25 miles to her office in downtown Freeport. She is considering quitting her current job to look for new employment in the downtown. Which of the following statements best describes how Jill can satisfy the distance test for deducting moving expenses if she accepts a new job in downtown Freeport?
A. Jill cannot satisfy the distance test if she accepts a job in downtown Freeport.
B. Jill must move 25 miles east from downtown Freeport.
C. Jill must move at least 25 miles further away from downtown Freeport.
D. Jill need not move her residence because she is starting a new job.


12) Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because
A. health insurance premiums cannot be deducted otherwise
B. self-employed taxpayers need an alternate mechanism for reducing the cost of health care
C. employers are allowed to deduct social security (FICA) taxes as a business expense
D. this deduction provides a measure of equity between employees and the self-employed


13) Jim was in an auto accident this year. Jim paid $2,450 to repair his car after the accident, and his insurance only reimbursed him $400. Jim bought his car several years ago for $15,000. What casualty loss deduction from this accident can Jim combine with his other casualty losses in computing his itemized deductions?
A. $12,550
B. $2,050
C. $2,450
D. $1,550


14) Rhianna and Jay are married filing jointly in 2009. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2009 tax return?
A. $4,000
B. $6,000
C. $5,300
D. $12,000


15) Which of the following is a miscellaneous itemized deduction that is not subject to the 2 percent of AGI floor?
A. Tax preparation fees
B. Fees for investment advice
C. Gambling losses to the extent of gambling winnings
D. Employee business expenses


16) Beth's business purchased only one asset during the current year. It placed in service machinery (7-year property) on December 1 with a basis of $50,000. Calculate the maximum depreciation expense (ignoring Section 179 or bonus expensing):
A. $10,000
B. $2,500
C. $1,785
D. $7,145


17) Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss? 
A. $400,000 capital gain
B. $200,000 ordinary and $200,000 Section 1231 gain
C. $40,000 ordinary and $360,000 Section 1231 gain
D. $400,000 ordinary gain


18) Foreaker LLC sold a piece of land that it uses in its business for $52,000. Foreaker bought the land two years ago for $42,500. What is the character of Foreaker's gain?
A. $9,500 Section 1250
B. $9,500 Section 1231
C. $9,500 Section 1221
D. $9,500 Section 1245


19) Which of the following would be considered passive income?
A. Capital gains from sale of mutual funds
B. Salary for part-time job
C. Rental real estate income
D. Dividends


20) Generally, which of the following does not correctly categorize the type of income?
A. Capital losses passive income/loss
B. Dividends portfolio income/loss
C. Rental real estate passive income/loss
D. Salary active income/loss


21) A taxpayer would not be considered a material participant if he met which one of these tests?
A. Participates in the activity for at least 500 hours a year
B. Participates more than 50 hours a year and participation is not less than any other participants for the year
C. Materially participates in the activity for any five of the preceding ten years
D. Participates on a regular, continuous, and substantial basis


22) What is the correct order of the loss limitation rules?
A. Tax basis, passive loss limits, at-risk amount
B. Passive loss limits, at-risk amount, tax basis
C. Tax basis, at-risk amount, passive loss limits
D. at-risk amount, tax basis, passive loss limits


23) Dan recently purchased a partnership interest in XYZ, Limited Partnership for $6,000. His share of debt in the partnership is $2,500, but he is not personally responsible for paying back the debt if the partnership cannot pay. Dan's share of XYZ, LP's loss for the year is $3,000. In addition, Dan reported $5,000 in long-term capital gains from the sale of a stock and $3,000 of income from another real estate partnership. What is Dan's tax basis in XYZ, LP?
A. $16,500
B. $11,500
C. $6,000
D. $8,500

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