Project/Test One TXX 5769

Project/Test One

TXX 5769

September 14, 2015

There are 33 multiple choice questions below. Please use the posted answer sheet for your answers.Your answers are due by September 20 at 11 p.m. Please do not upload the entire test.Please note that this is an extended due date.

The multiple choice questions are worth 1 point each for a total of 33 points.

1.Which, if any,ofthefollowingstatementsisnot accurate?

a. Every Codesectionhas a treasury regulation.

b. The current Code is the 1986 Code, as amended.

c. Codesectionsinsertedbetweenconsecutive existingsectionnumbersareindicatedbyaddingacapitallettertotheSectionnumber(for exampleSection 2032A).

d. None of the statements is accurate.

2. IfanydifferencesexistbetweentheHouse of RepresentativesandtheSenate passedversionsofataxbill, then

a. neither version of the tax billcan receive further consideration by Congress.

b. the House version is sent to the President since all tax legislation must originate in the House.

c. both versions of the tax bill are referred to theJointConferenceCommittee

d. None of the statements is accurate.

3. Bob contributed to AlphaBeta Partnership, a general partnership, a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for a 50 percent interest in the AlphaBeta Partnership. The AlphaBeta Partnership will assume the mortgage on the building. At the same time, Al contributed to AlphaBeta Partnership cash of $30,000 in exchange for the other 50 percent interest in the AlphaBeta Partnership. Which of the following Sections of the Code is relevant to the determination of whether or not Bob recognizes gain or loss on this transaction?

a. Only Code Section 722.

b. Only Code Sections1 and 721(a).

c. Code Section 723 and Code Section 1001(a).

d. Code Section 1001(c) and Code Section 721(a).

4. Bob contributed to the AlphaBeta Partnership, a general partnership, a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for a 50 percent interest in the AlphaBeta Partnership. The AlphaBeta Partnership will assume the mortgage on the building. At the same time, Al contributed to AlphaBeta Partnership cash of $30,000 in exchange for the other 50 percent interest in the AlphaBeta Partnership. In addition to the section or sections that are relevant under question 3, above, which of the following Code Sections is or are also relevant tothe determination of whether or not Bob recognizes any gain or loss on this transaction?

a. Only Code Section 751(b).

b. Only Code Sections 751(b), 733, and 705(a).

c. Code Sections 751(b), 733, 705(a) and 731(a).

d. None of the above.

5. Bob contributed to the AlphaBeta Partnership, a general partnership, a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for a 50 percent interest in the Alpha Partnership. Alpha will assume the mortgage on the building.At the same time, Al contributed to AlphaBeta Partnership cash of $30,000 in exchange for the other 50 percent interest in the AlphaBeta Partnership.How much gain or loss, if any, does Bob recognize with respect to this transaction?

a. $0.

b. $10,000.

c. $70,000.

d. $100,000.

6. Bob contributed to the AlphaBeta Partnership, a general partnership, a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for a 50 percent interest in the Alpha Partnership. Alpha will assume the mortgage on the building. At the same time, Al contributed to AlphaBeta Partnership cash of $30,000 in exchange for the other 50 percent interest in the AlphaBeta Partnership. Which of the following Code Sections is or are relevant to the determination of Bob’s basis in his partnership interest upon completion of this transaction?

a. Only CodeSection 722.

b. Only Code Section 1012(a).

c. Only Code Sections 1012(a) and 722.

d. Code Sections 1012(a), 722, and 705(a).

7. Al contributed to the AlphaBeta Partnership, a general partnership, cash of $30,000 in exchange for a 50 percent interest in the Alpha Partnership. At the same time,Bob contributed to the AlphaBeta Partnership a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for a 50 percent interest in the AlphaBeta Partnership. The AlphaBeta Partnership will assume the mortgage on the building. Which of the following Code Sections is or are relevant to the determination of whether or not Al recognizes gain or loss on this transaction?

a. Only Code Section 722.

b. Only Code Section 1001(c).

c. Code Section 723 and Code Section 1001(a).

d. Code Section 1001(c) and Code Section 721(a).

8. Al contributed to the AlphaBeta Partnership, a general partnership, cash of $30,000 in exchange for a 50 percent interest in the AlphaBeta Partnership. At the same time, Bob contributed to the AlphaBeta Partnership a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for a 50 percent interest in the AlphaBeta Partnership. The AlphaBeta Partnership will assume the mortgage on the building. Which of the following Code Sections is or are relevant to the determination of Bob’s basis in his partnership interest upon completion of this transaction?

a. Only Code Section 722.

b. Only Code Section 1012(a).

c. Only Code Sections 1012(a) and 722.

d. Code Sections 1012(a), 722, and 752(a).

9. Al contributed to the AlphaBeta Partnership cash of $30,000 in exchange for a 50 percent interest in the AlphaBeta Partnership. At the same time, Bob contributed to the AlphaBeta Partnership a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for a 50 percent interest in the AlphaBeta Partnership. The AlphaBeta Partnership will assume the mortgage on the building. What is the Partnership’s basis in the building contributed by Bob, and which of the following phrases is included in the governing provision under the Internal Revenue Code?

a. 0; “The basis of property contributed to a partnership by a partner…”

b. $50,000; “The basis of property contributed to a partnership by a partner…”

c. $120,000; “…then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain recognized to the transferor on such transfer.”

d. $150,000; The basis of property shall be the cost of such property,…”

10. SubtitleBoftheInternalRevenueCodedealswith what type of taxes and includes what section of the Internal Revenue Code?

a.Subtitle B deals with estateandgifttaxesand includes Code Section 1015.

b.Subtitle B deals with business taxes and includes Code Section 351.

c. Subtitle B deals with estate and gift taxes and includes Code Section 2040.

d. Subtitle B deals with tax procedure, and includes Code Section 2518.

11 .WhichofthefollowingsectionsoftheInternalRevenueCodedealwith multi-member limited liability companies that have not elected to be taxed as corporations?

a. the700s.

b. the300s.

c. the 400s.

d. None of the above.

12. Douglas, who resided in Florida, received in December 2014 from his Mom, a summer cottage located in Maine. The fair market value of the cottage at the time of the gift was $90,000, and his Mom’s adjusted basis in the cottage was $45,000. On April 15, 2015 Mom paid the gift tax imposed with respect to transaction, $5,000 ofthe gift tax payable being attributable to the appreciation. How much gain did Douglas recognize when he sold the property in May 2015 for $110,000, and what Code section or sectionsis or are applicable with respect to the income tax consequences to Douglas?

a. $15,000 gain: Code Sections 1011 and 1014.

b. $65,000 gain; Only Code Section 1011.

c. $45,000 gain; Code Sections 1011, 1015, and 1001.

d. No gain is recognized; Code Section 121.

e. None of the above answers is correct.

13. Wally gave his daughter, Holly, a gift of passive activity real property. Suspended losses amounted to $30,000 and the property had an adjusted basis of $40,000. Also, the property had a fair market value of $75,000 at the time of the transfer and no gift tax was payable with respect to the gift. What is Holly's basis in the property and which section or sections of the Internal Revenue Code is or are applicable to the determination of Holly’s basis in the property?

a. $40,000; Code Section 1014 .

b. $30,000; Code Sections 1015 and 469(j)(6).

c. $70,000; Code Section 469(j)(6) only.

d. $70,000; Code Section 1015(a) and Code Section 469(j)(6).

e. None of the above answers is correct.

14. A taxpayer is considered to be at risk under the at risk rules for which of the following and under what section of the Code?

a. money borrowed by another for which payment is guaranteed by the taxpayer; Code Section 469(a).

b. money borrowed by the taxpayer from another who has an equity interest in the taxpayer’s business; Code Section 61.

c. qualified nonrecourse financing; Code Section 469.

d. qualified nonrecourse financing; Code Section _____(if you conclude none of a, b, or c is correct, write in the citation for the correct section of the Internal Revenue Code, including the subsection and paragraph, if applicable).

15. Taxpayer owns a parcel of undeveloped real estate that has a basis to taxpayer of $200,000. Taxpayer purchased the real estate in 2003 for investment. Taxpayer sold the property to his nephew on January 10, 2015 for $80,000. Is the loss deductible by the taxpayer, and what Code sections are applicable to the transaction? Assume taxpayer has no other capital gains or losses for the year.

a.No amount of the loss is not deductible because the sale is to a related party; Code Section 1001(a) and Code Section 267(a) and (d).

b.The loss is deductible; Code Section 469(c)(7).

c. $3,000 of the loss is deductible in the current year; Code Sections 1001(a) and 1211(b).

d. None of the above answers is correct.

16. Bob contributed to AlphaBeta Corporation a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for 50 percent of the voting common stock (the only class of stock) of the AlphaBeta Corporation. The AlphaBeta Corporation will assume the mortgage on the building. As part of the same transaction, Al contributed to AlphaBeta Corporation cash of $30,000 in exchange for the other 50 percent of the voting common stock of AlphaBeta Corporation. Which of the following Code Sections is or are relevant to the determination of whether or not Bob recognizes gain or loss on this transaction?

a. Code Section 721.

b. Code Sections 1031 and 1001.

c. Only Code Section 1001.

d. Code Sections351 and 1001.

17. Bob contributed to AlphaBeta Corporation a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for 50 percent of the voting common stock (the only class of stock) of the AlphaBeta Corporation. The AlphaBeta Corporation will assume the mortgage on the building. As part of the same transaction, Al contributed to AlphaBeta Corporation cash of $30,000 in exchange for the other 50 percent of the voting common stock of AlphaBeta Corporation. In addition to the section or sections that is or are relevant under question 16, above, which of the following Code Sections, if any, is also relevant to the determination of whether or not Bob recognizes any gain or loss on this transaction?

a. Only Code Section 752(b).

b. Code Section 362.

c. Code Section 357(c).

d. None of the above.

18. Bob contributed to AlphaBeta Corporation a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for 50 percent of the voting common stock (the only class of stock) of the AlphaBeta Corporation. The AlphaBeta Corporation will assume the mortgage on the building. As part of the same transaction, Al contributed to AlphaBeta Corporation cash of $30,000 in exchange for the other 50 percent of the voting common stock of AlphaBeta Corporation. How much gain or loss, if any, does Bob recognize with respect to this transaction?

a. $0.

b. $10,000.

c. $70,000.

d. $100,000.

19. Bob contributed to AlphaBeta Corporation a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for 50 percent of the voting common stock (the only class of stock) of the AlphaBeta Corporation. The AlphaBeta Corporation will assume the mortgage on the building. As part of the same transaction, Al contributed to AlphaBeta Corporation cash of $30,000 in exchange for the other 50 percent of the voting common stock of AlphaBeta Corporation. Which of the following Code Sections is or are relevant to the determination of Bob’s basis in his AlphaBeta Corporation stock as the result of this transaction?

a. Only Code Section 722.

b. Only Code Section 1012(a).

c. Code Sections 1012(a) and 358(a).

d. Code Sections 1012(a) and 362.

20. Bob contributed to AlphaBeta Corporation a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for 50 percent of the voting common stock (the only class of stock) of the AlphaBeta Corporation. The AlphaBeta Corporation will assume the mortgage on the building. As part of the same transaction, Al contributed to AlphaBeta Corporation cash of $30,000 in exchange for the other 50 percent of the voting common stock of AlphaBeta Corporation. Which of the following Code Sections is or are relevant to the determination of whether or not Al recognizes gain or loss on this transaction?

a. Only Code Section 752.

b. Only Code Section 351.

c. Code Sections 351 and 368(c).

d. All of the above.

21. Bob contributed to the AlphaBeta Corporation a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for 50 percent of the common voting stock of AlphaBeta Corporation. The AlphaBeta Corporation will assume the mortgage on the building. Al contributed to the AlphaBeta Corporation cash of $30,000 in exchange for the other 50 percent of the stock in the AlphaBeta Corporation. Which of the following Code Sections is or are relevant to the determination of Bob’s basis in his stock in the AlpahBeta Corporation upon completion of this transaction?

a. Only Code Section 722.

b. Only Code Section 1012(a).

c. Code Sections 1012(a) and 358(a).

d. Code Sections 1012(a) and 362.

22. Bob contributed to the AlphaBeta Partnership a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for a 50 percent interest in the AlphaBeta Partnership. The AlphaBeta Partnership will assume the mortgage on the building. Al contributed to the AlphaBeta Partnership cash of $30,000 in exchange for the other 50 percent interest in the AlphaBeta Partnership. What is the Corporation’s basis in the building contributed by Bob, and which of the following phrases is included in the governing provision under the Internal Revenue Code?

a. $50,000; “The basis of property contributed to a partnership by a partner…”

b. $120,000; “…then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain recognized to the transferor on such transfer.”

c. $120,000;”increased by…the amount of gain to the taxpayer which was recognized on such exchange…”

d. $150,000; The basis of property shall be the cost of such property,…”

23. Whichofthefollowingstatementsis accurateregardingthedefinitionoftermsintheInternalRevenueCode?

a. Alldefinitionscontained in the CodeareincludedinCodeSection7701.

b. Definitionsmust beincludedwithintheCodesectiontowhichtheyapply.

c. Not all terms used in the Code are defined in the Code.

d. Definitions within a particular section of the Code may not be made applicable to other sections of the Code.

24. CodeSection 162relatesto:

a. deductionsin arriving atadjustedgrossincome.

b. expenses of carrying on a trade or business.

c. capital losses.

d. expenses related to investment property.

25. Which Code sections involve the general rulesregarding recognition of gain or loss by shareholders and the corporation on liquidation of a corporation?

a. Code Sections 1001(a), 336(b), and Section 332(a).

b. Code Sections 1001(a) and 1031.

c. Code Sections1001(c), 331(a) and (c), and 336(a).

d. Code Sections 1001(a) and 331(b).

26. In which of the following would you find the information related to how much income tax is to be imposed?

a. Code Section 1.

b. Code Section 2001.

c. Code Section 2501.

d. The 16^th Amendment of the United States Constitution.

e. Code Sections 1, 2001, and 2501.

27. Whichofthefollowingstatementsis not accurateregardingeffectivedatesintheInternalRevenueCode?

a. Sectionsofanewtaxlaw may have different effective dates.

b. New provisions of the Internal Revenue Code do not alwaysgointoeffectimmediatelyupon signing of the law by the President.

c. Someeffectivedatescanprecedepassageoftheact.

d. All are accurate.

28. Better Pools, Inc. distributed land with a basis of $20,000, a fair market value of $75,000, subject to a liability of $35,000 to a noncorporate shareholder when the corporation’s earnings and profits were $300,000. As a result of the distribution, the amount of the dividend and the shareholder’s basis in the distributed property are as follows and the governing code sections are:

a. Dividend: $40,000; basis: $40,000; Code Section 1012 only.

b. Dividend: $20,000; basis: $20,000; Code Section 302 only.

c. Dividend: $40,000; basis: $40,000; Code Section 316 only.

d. Dividend: $40,000; basis: $75,000; Code Sections 301 and 316.

e. None of the above is correct.

29. ABC Corporation owns 80 percent of DEF Corporation’s stock and Linda owns the remaining 20 percent of DEF’s stock. ABC Corporation’s basis for its DEF stock is $300,000 and Linda’s basis in her DEF stock is $80,000. Pursuant to a plan of complete liquidation of DEF Corporation, ABC Corporation receives property with a $400,000 adjusted basis to DEF Corporation and a $480,000 fair market value, and Linda receives property with a $130,000 adjusted basis to DEF Corporation and a $120,000 fair market value. The basis of the properties to ABC Corporation and to Linda in the property distributed to them and the controlling Code Sections are:

a. ABC: $480,000 Linda: $120,000

b. ABC: $400,000; Linda: $130,000

c. ABC: $300,000; Linda: $80,000

d. ABC: $400,000;Linda: $120,000

30. What Code Sections govern the determination of basis to ABC Corp. and to Linda in question 29?

a. Code Section 332 as to ABC Corporation; Code Section 331 as to Linda.

b. Code Section 331 as to both ABC Corp. and Linda.

c. Code Section 334(a) as to ABC Corporation; Code Section 334(a) as to Linda.

d. None of the above is correct.

31. WhichofthefollowingstatementsbestdescribesCircular230?

a.Circular230hasbeenadoptedbytheAICPAasitssetofrulesofpracticeforCPAs.

b.Circular230isasetofTreasuryDepartmentethicalandlegalstandardsforthoseengaginginpracticebeforetheIRS.

c.Circular230isasetofinternalrulesattheIRSdesignedtoprotecttaxpractitionersfromunfairdisciplinebytheIRS.

d.Circular230isasetofethicalrulesfortaxpayers.

32. StandardsforTaxServicescontainadvisoryguidelinesfor:

a. CPAs.

b. enrolledagents.

c. attorneys.

d. IRSauthorities.

e. Alloftheabove.

33. SubtitleAoftheInternalRevenueCodedealswith:

a. estateandgifttaxes.

b. employmenttaxes.

c. incometaxes.

d. excisetaxes.