ACC 307 FINAL EXAM PART 1 & PART

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1.

Amy works as an auditor for a large major CPA firm. During the months of September
through November of each year, she is permanently assigned to the team auditing Garnet
Corporation. As a result, every day she drives from her home to Garnet and returns home after
work. Mileage is as follows:

Home to
office
Home to
Garnet
Office to
Garnet

Miles
10
30
35

2.
3.
4.
5.
6.

One of the tax advantages of being self-employed (rather than being an employee) is:
Under the actual cost method, which of the following expenses will not be allowed?
The 222 deduction for tuition and related expenses is available:
Which of the following is subject to a cutback adjustment?
Byron owned stock in Blossom Corporation that he donated to a museum (a qualified
charitable organization) on June 8 this year. What is the amount of Byrons deduction assuming
that he had purchased the stock for $10,500 last year on August 7, and the stock had a fair
market value of $13,800 when he made the donation?
7.
In Lawrence County, the real property tax year is the calendar year. The real property tax
becomes a personal liability of the owner of real property on January 1 in the current real
property tax year (assume this year is not a leap year). The tax is payable on June 1. On May 1,
Reggie sells his house to Dana for $350,000. On June 1, Dana pays the entire real estate tax of
$7,950 for the year ending December 31. How much of the property taxes may Reggie deduct?
8.
Sandra is single and does a lot of business entertaining at home. Because Arthur, Sandras
80-year old dependent grandfather who lived with Sandra, needs medical and nursing care, he
moved to Twilight Nursing Home. During the year, Sandra made the following payments on
behalf of Arthur:

Room at Twilight
$4,500
Meals for Arthur at Twilight 850
Doctor and nurse fees
700
Cable TV service for
107
Arthurs room

Total
9.
10.

11.
12.

13.

14.

15.

1.

$6,157

Which of the following items would be an itemized deduction on Schedule A of Form 1040
not subject to the 2%-of-AGI floor?
Rick and Carol Ryan, married taxpayers, took out a mortgage of $160,000 when purchasing
their home ten years ago. In October of the current year, when the home had a fair market value
of $200,000 and they owed $125,000 on the mortgage, the Ryans took out a home equity loan
for $110,000. They used the funds to purchase a sailboat to be used for recreational purposes.
The sailboat does not qualify as a residence. What is the maximum amount of debt on which
the Ryans can deduct home equity interest?
Rick, a computer consultant, owns a separate business (not real estate) in which he
participates. He has one employee who works part-time in the business.
Identify from the list below the type of disposition of a passive activity where the taxpayer
keeps the suspended losses of the disposed activity and utilizes them on a subsequent taxable
disposition.
Vics at-risk amount in a passive activity is $200,000 at the beginning of the current year. His
current loss from the activity is $80,000. Vic had no passive activity income during the year. At
the end of the current year:
White Corporation, a closely held personal service corporation, has $150,000 of passive
losses, $120,000 of active business income, and $30,000 of portfolio income. How much of the
passive loss can White Corporation deduct?
Tara owns a shoe store and a bookstore. Both businesses are operated in a mall. She also
owns a restaurant across the street and a jewelry store several blocks away.

Black Company paid wages of $180,000, of which $40,000 was qualified wages for the work
opportunity tax credit under the general rules. Black Companys deduction for wages for the
year is:

2.
Several years ago, Sarah purchased a structure for $150,000 that was originally placed in
service in 1929. In the current year, she incurred qualifying rehabilitation expenditures of
$200,000. The amount of the tax credit for rehabilitation expenditures, and the amount by which
the buildings basis for cost recovery would increase as a result of the rehabilitation
expenditures are the following amounts:
3.

4.

Realizing that providing for a comfortable retirement is up to them, Jim and Julie commit to
making regular contributions to their IRAs, beginning this year. Consequently, they each make a
$2,000 contribution to their traditional IRA. If their AGI is $35,000 on their joint return, what is
the amount of their credit for certain retirement plan contributions?

The ceiling amount and percentage for 2013 for the Social Security portion of the selfemployment tax are:
5.

6.

7.

8.

9.

10.

11.

12.

13.

In terms of the withholding procedures, which statement does not reflect current rules?

Evelyn, a calendar year taxpayer, lists her principal residence with a realtor on February 7,
2013, enters into a contract to sell on July 12, 2013, and sells (i.e., the closing date) the
residence on August 1, 2013. The realized gain on the sale is $225,000. Which date is the
appropriate ending date in determining if the residence has been owned and used by the Evelyn
as the principal residence for at least two years during the prior five-year period?

Arthur owns a tract of undeveloped land (adjusted basis of $145,000) which he sells to his son,
Ned, for its fair market value of $105,000. What is Arthurs recognized gain or loss and Neds
basis in the land?

Lynn purchases a house for $52,000. She converts the property to rental property when the fair
market value is $115,000. After deducting depreciation (cost recovery) expense of $1,130, she
sells the house for $120,000. What is her recognized gain or loss?

Ralph gives his daughter, Angela, stock (basis of $8,000; fair market value of $6,000). No gift
tax results. If Angela subsequently sells the stock for $10,000, what is her recognized gain or
loss?

A strip along the boundary of Joys land is condemned for a utility easement. She receives a
payment of $7,500 from the utility company. Her basis in the land is $80,000. Which of the
following is correct?

Which of the following is correct concerning short sales of stock?

Which of the following real property could be subject to 1250 depreciation recapture?

Stanley operates a restaurant as a sole proprietorship. Which of the following items are capital
assets in the hands of Stanley?
14.

15.

On June 1, 2013, Brady purchased an option to buy 1,000 shares of General, Inc. at $40 per
share. He purchased the option for $3,000. It was to remain in effect for five months. The
market experienced a decline during the latter part of the year, so Brady decided to let the
option lapse as of December 1, 2013. On his 2013 tax return, what should Brady report?

Virgil was leasing an apartment from Marple, Inc. Marple paid Virgil $1,000 to cancel his lease
and move out so that Marple could demolish the building. As a result:

16.