University of Wisconsin Parkside School of Business and Technology

Dr. R. Zameeruddin

I DI!IDU"# T"$"TI% & "''T ()* '%RR+'T ,I "# +$"-

ame .......................

-U#TIP#+ '/%I'+0 '/"PT+R 1) 1. Roger is employed as an actuary. For calendar year 2007, he had AGI of $1 0,000 and paid the follo!ing medical e"penses# $edical insurance premiums &octor and dentist 'ills for &erric( and )ane *Roger+s parents, &octor and dentist 'ills for Roger .rescri'ed medicines for Roger 0onprescri'ed insulin for Roger $%, 00 7,-00 %,100 / 0 -10

&erric( and )ane !ould 2ualify as Roger+s dependents e"cept that they file a 3oint return. Roger+s medical insurance policy does not co4er them. Roger filed a claim for $5,/00 of his o!n e"penses !ith his insurance company in 0o4em'er 2007 and recei4ed the reim'ursement in )anuary 200/. 6hat is Roger+s ma"imum allo!a'le medical e"pense deduction for 20077 a. $-,7%0. '. $10, 50. c. $1-,1 0. d. $20,0-0. e. 0one of the a'o4e. 2. 8om is ad4ised 'y his family physician that he needs 'ac( surgery to correct a pro'lem from his last 'ac( surgery. 9ince 8om is in a !heel chair, he needs his !ife, )ean, to accompany him on his trip to Rochester, $innesota, for in:patient treatment at the $ayo ;linic !hich speciali<es in this type of surgery. 8om incurred the follo!ing costs# Round:trip airfare *$ %0 each, )ean+s hotel in Rochester for four nights *$-% per night, )ean+s meals !hile in Rochester 8om+s medical treatment 8om+s prescription medicine $ 700 /0 10% ,%00 100

;ompute 8om+s medical e"penses for the trip *su'3ect to the 7.%= floor,. a. $5,000. '. $%,000. c. $%,1/0. d. $%,2/%. e. 0one of the a'o4e. . &uring 2007, 0ancy paid the follo!ing ta"es# 8a"es on residence *for the period from $arch 1 through August 1, 2007, 9tate motor 4ehicle ta" *'ased on the 4alue of the personal use automo'ile, 9tate sales ta" 9tate income ta" $%,2%0 5 0 ,%00 ,0%0

0ancy sold her personal residence on )une 0, 2007, under an agreement in !hich the real estate ta"es !ere not prorated 'et!een the 'uyer and the seller. 6hat amount 2ualifies as a deduction from AGI for 2007 for 0ancy7 a. $-,1/0. '. $-,1 0. c. $7, /2. d. $%, /2. e. 0one of the a'o4e. 5. In >a!rence ;ounty, the real property ta" year is the calendar year. 8he real property ta" 'ecomes a personal lia'ility of the o!ner of real property on )anuary 1 in the current real property ta" year, 2007 *!hich is not a leap year,. 8he ta" is paya'le on )une 1, 2007. ?n $ay 1, 2007, Reggie sells his house to &ana for $2%0,000. ?n )une 1, 2007, &ana pays the entire real estate ta" of $7,-%0 for the year ending &ecem'er 1, 2007. @o! much of the property ta"es may Reggie deduct7 a. $0. '. $2,115. c. $2,12%. d. $7,-%0. e. 0one of the a'o4e. ;ecil incurred $%0,100 of interest e"pense related to his in4estments in 2007. @is in4estment income included $2-,%00 of interest and a $2 ,%00 net capital gain on the sale of securities. ;ecil has as(ed you to compute the amount of his deduction for in4estment interest, ta(ing into consideration any options he might ha4e. 6hat is the ma"imum amount of ;ecil+s in4estment interest e"pense deduction in 20077 a. $2 ,%00. '. $2-,%00. c. $% ,000. d. $%%,100. e. 0one of the a'o4e. In 2007, 8erry pays $/,000 to 'ecome a charter mem'er of $ammoth Ani4ersity+s Athletic ;ouncil. 8he mem'ership ensures that 8erry !ill recei4e choice seating at all of $ammoth+s home 'as(et'all games. Also in 2007, 8erry pays $2,200 *the regular retail price, for season tic(ets for himself and his !ife. For these items, ho! much 2ualifies as a charita'le contri'ution7 a. $1,200. '. $1,500. c. $/,000. d. $10,200. e. 0one of the a'o4e.

%.

1.

7.

Be(e made the follo!ing donations to 2ualified charita'le organi<ations during 2007# Ased clothing *all ac2uired 'efore 2001, of ta"payer and his family 9toc( in AC;, Inc., held as an in4estment for fifteen months 9toc( in $0?, Inc., held as an in4estment for ele4en months Real estate held as an in4estment for t!o years Casis $ 2, %0 1%,000 12,000 20,000 Fair $ar(et Dalue $ 17% 12,/7% 20,000 %,000

8he used clothing !as donated to the 9al4ation ArmyE the other items of property !ere donated to Fastern 9tate Ani4ersity. Coth are 2ualified charita'le organi<ations. &isregarding percentage limitations, Be(e+s charita'le contri'ution deduction for 2007 is# a. $%%,22%. '. $10,%%0. c. $70,02%. d. $72,1 0. e. 0one of the a'o4e.

/.

&uring 2007, Ralph made the follo!ing contri'utions to the Ani4ersity of ?regon *a 2ualified charita'le organi<ation,# ;ash 9toc( in Raptor, Inc. *a pu'licly traded corporation, $1 ,000 -5,%00

Ralph ac2uired the stoc( in Raptor, Inc., as an in4estment fourteen months ago at a cost of $52,000. Ralph+s AGI for 2007 is $1/-,000. 6hat is Ralph+s charita'le contri'ution deduction for 20077 a. $%1,700. '. $1 ,000. c. $-5,%00. d. $1%7,%00. e. 0one of the a'o4e. ;ash Raptor, Inc., stoc( Go4erall limitation of $-5,%00 *%0= of $1/-,000 AGI, H $1 ,000 *cash,I -. $1 ,000 1,%00 $-5,%00

6hich of the follo!ing items !ould 'e an itemi<ed deduction on 9chedule A of Form 1050 subject to the 2= of AGI floor7 a. .rofessional dues to mem'ership organi<ations. '. 6or( uniforms that cannot 'e used for normal !ear. c. )o':hunting costs. d. @o''y losses up to the amount of ho''y income. e. All of the a'o4e.

10. )ac(son, a calendar year married ta"payer, files a 3oint return for 2007. Information for 2007 includes the follo!ing# AGI 9tate income ta"es 9tate sales ta" ;harita'le contri'utions Gam'ling losses *gam'ling gains !ere $1 ,%00, )ac(son+s allo!a'le itemi<ed deductions for 2007 are# a. $2%,-00. '. $ 1,100. c. $ 5,/00. d. $52,200. e. 0one of the a'o4e. $271,500 11,700 ,/00 1/, 00 7,200

'/"PT+R 1( 2 P"RT I 11. Al'ert purchased a tract of land for $150,000 in 200 !hen he heard that a ne! high!ay !as going to 'e constructed through the property and that the land !ould soon 'e !orth $200,000. @igh!ay engineers sur4eyed the property and indicated that he !ould pro'a'ly get $1/0,000. 8he high!ay pro3ect !as a'andoned in 2007 and the 4alue of the land fell to $100,000. 6hat is the amount of loss Al'ert can claim in 20077 a. $50,000. '. $10,000. c. $/0,000. d. $100,000. e. 0one of the a'o4e. 12. Jate sells property for $120,000. 8he 'uyer pays $2,000 in property ta"es that had accrued during the year !hile the property !as still legally o!ned 'y Jate. In addition, Jate pays $1,000 in commissions and $2,000 in legal fees in connection !ith the sale. @o! much does Jate reali<e from the sale of her property7 a. $112,000. '. $115,000. c. $111,000. d. $120,000. e. 0one of the a'o4e. 1 . Alice o!ns land !ith an ad3usted 'asis of $ 0%,000, su'3ect to a mortgage of $17%,000. Real estate ta"es are $5,%00 per calendar year and are paya'le on &ecem'er 1. ?n April 1, 2007, Alice sells her land su'3ect to the mortgage for $ 2%,000 in cash, a note for $ 00,000, and property !ith a fair mar(et 4alue of $10,000. 6hat is the amount reali<ed7 a. $1/%,000. '. $1/1,110. c. $/10,000. d. $/11,110. e. 0one of the a'o4e. 15. .edro 'orro!ed $5%,000 to purchase a machine. @e later 'orro!ed $1%,000 using the machine as collateral. Coth notes are nonrecourse. Fight years later, the machine has an ad3usted 'asis of <ero and t!o outstanding note 'alances of $ 0,000 and $1,000. .edro sells the machine su'3ect to the t!o lia'ilities for $21,000. 6hat is his reali<ed gain or loss7 a. $0. '. $21,000. c. $%1,000. d. $%7,000. e. 0one of the a'o4e.

1%. 8he 'an( forecloses on >isa+s apartment comple". 8he property had 'een pledged as security on a nonrecourse mortgage, !hose principal amount at the date of foreclosure is $7%0,000. 8he ad3usted 'asis of the property is $5/0,000, and the fair mar(et 4alue is $7%0,000. 6hat is >isa+s recogni<ed gain or loss7 a. $270,000. '. *$7%0,000,. c. $0. d. *$5/0,000,. e. 0one of the a'o4e. 11. ;arlton purchases land for $ 00,000. @e incurs legal fees of $%,000 associated !ith the purchase. @e su'se2uently incurs additional legal fees of $20,000 in ha4ing the land re<oned from agricultural to residential. @e su'di4ides the land and installs streets and se!ers at a cost of $100,000. 6hat is ;arlton+s 'asis for the land and the impro4ements7 a. $ 00,000. '. $-00,000. c. $-0%,000. d. $-2%,000. e. 0one of the a'o4e. 17. ?n &ecem'er 1, 2007, F4an purchases an office 'uilding from 8ed for $100,000. F4an pays $5/,000 to replace the roof, and on &ecem'er 1%, he pays the property ta"es for 2007 of $1,000. 6hat is the amount reali<ed 'y 8ed and the ad3usted 'asis of the 'uilding *ignore the effect of depreciation, to F4an7 a. $%--,5-0 and $157,5-0. '. $100,000 and $15/,000. c. $100,%10 and $15/,%10. d. $10%,5-0 and $1% ,5-0. e. 0one of the a'o4e. 1/. Alicia 'uys a 'each house for $ 2%,000 !hich she uses as her personal 4acation home. 9he 'uilds an additional room on the house for $5%,000. 9he sells the property for $5%0,000 and pays $22,000 in commissions and $5,000 in legal fees in connection !ith the sale. 6hat is the recogni<ed gain or loss on the sale of the house7 a. $0. '. $%5,000. c. $/0,000. d. $--,000. e. 0one of the a'o4e.

1-. 6hich of the follo!ing decreases ad3usted 'asis7 a. Amorti<ation of 'ond premium. '. A corporate distri'ution to a shareholder treated as a return of capital in !hich gain is recogni<ed to the shareholder. c. &i4idends recei4ed. d. ?nly a. and '. e. All of the a'o4e. 20. 9te4e purchased his home for $%00,000. As a sole proprietor, he operates a certified pu'lic accounting practice in his home. For this 'usiness, he uses one room e"clusi4ely and regularly as a home office. In Kear 1, $ ,052 of depreciation e"pense on the home office !as deducted on his income ta" return. In Kear 2, 9te4e sustained losses in his 'usinessE therefore, no depreciation !as ta(en on the home office. @ad he 'een allo!ed to deduct depreciation e"pense, his depreciation e"pense !ould ha4e 'een $ ,17%. 6hat is the ad3usted 'asis in the home7 a. $5- ,7/ . '. $5-1,/2%. c. $5-1,-%/. d. $%00,000. e. 0one of the a'o4e.

'/"PT+R 13 21. 6hich of the statements 'elo! is correct concerning capital losses of an indi4idual ta"payer7 a. A 2007 net capital loss is deducti'le only up to $ ,000 per year. '. F"cess capital losses carry 'ac( and may 'e deducted in a prior year. c. A net capital loss may e"ist !hen capital gains e"ceed capital losses. d. ;apital gains and losses need not 'e matched !ith one another. e. 0one of the a'o4e. 22. 6hich of the follo!ing is a capital asset7 a. 8he 'icycle of a 10:year old child. 8he child purchased the 'icycle !ith money inherited from an aunt. '. 8he tools used 'y a self:employed carpenter. c. 8he lots o!ned 'y a company that is in the 'usiness of 'uying and reselling residential 'uilding lots. d. A LmintM set of 1-/% coins o!ned 'y a coin dealer and that is for sale on his !e'site. e. 0one of the a'o4e.

2 . ?n August 10, 2007, Clac(, Inc. ac2uired an office 'uilding as a result of a li(e:(ind e"change. Clac( had gi4en up a factory 'uilding that it had o!ned for 1/ months as part of the li(e:(ind e"change. 6hich of the statements 'elo! is correct7 a. 8he holding period of the office 'uilding does not include the holding period of the factory 'uilding. '. 8he holding period of the factory 'uilding starts on August 11, 2007. c. 8he holding period of the factory 'uilding starts on August 10, 2007. d. 8he holding period of the office 'uilding includes the holding period of the factory 'uilding. e. 0one of the a'o4e. 25. Ryan has the follo!ing capital gains and losses for 2007# $ ,000 98;>, $ ,000 2/= gain, $2,000 2%= gain, and $1,000 %=N1%= gain. 6hich of the follo!ing is correct# a. 8he net capital gain is composed of $2,000 2%= gain and $1,000 %=N1%= gain. '. 8he net capital gain is composed of $2,000 2/= gain and $1,000 %=N1%= gain. c. 8he net capital gain is composed of $ ,000 2/= gain, $2,000 2%= gain, and $ ,000 %=N1%= gain. d. 8he net capital gain is composed of $1,000 2%= gain and $7,000 %=N1%= gain. e. 0one of the a'o4e. 2%. Ro'in ;orporation has ordinary income from operations of $ 0,000, net long:term capital gain of $10,000, and net short:term capital loss of $1%,000. 6hat is the ta"a'le income for 20077 a. $2%,000. '. $27,000. c. $2/,%00. d. $ 0,000. e. 0one of the a'o4e. 21. 6hich of the follo!ing would be included in the netting of O 12 1 gains and losses7 a. 0onpersonal use property net casualty gain. '. 9ection 12 1 loss. c. 9ection 12 1 gain. d. All of the a'o4e. e. ' and c 27. 6hich of the follo!ing is correct7 a. Improperly classifying a O 12 1 loss as a capital loss might affect ad3usted gross income. '. Improperly classifying a capital loss as a O 12 1 loss might affect ad3usted gross income. c. $isclassifying a O 12 1 gain as a short:term capital gain might affect ad3usted gross income. d. $isclassifying a short:term capital gain as a O 12 1 gain might affect ad3usted gross income. e. All of the a'o4e.

2/. 6hich of the follo!ing creates potential O 125% depreciation recapture7 a. Amorti<ation of purchased good!ill. '. 9ection 17- immediate e"pense deduction. c. An increase in the 4alue of the property. d. A decrease in the 4alue of the property. e. a and ' 2-. 9ection 12%0 rarely applies 'ecause# a. ?nly the amount of straight:line depreciation is su'3ect to recapture. '. ?nly the amount of additional depreciation is su'3ect to recapture. c. It only applies to depreciation of land. d. It only applies to depreciation of tangi'le personal property. e. 0one of the a'o4e. 0. An indi4idual has the follo!ing recogni<ed gains and losses from disposition of O 12 1 assets *all the assets !ere 4acant land,# $1%,000 gain, $10,000 loss, $2%,000 gain, and $2,000 loss. 8he indi4idual has a $%,%00 O 12 1 loo('ac( loss. 8he indi4idual also has a $11,000 net short:term capital loss from the disposition of stoc(. 6hich of the follo!ing statements is correct7 a. 8he ta"payer has $%,%00 ordinary gain and $1,%00 net long:term capital gain. '. 8he ta"payer has $12,000 net long:term capital gain. c. 8he ta"payer has $2/,000 ordinary gain and $11,000 net short:term capital loss. d. 8he ta"payer has $%,%00 ordinary loss and $1,%00 net long:term capital gain. e. 0one of the a'o4e.

10

'/"PT+R 1( 2 P"RT II 1. 0oelle o!ns an automo'ile !hich she uses for personal use. @er ad3usted 'asis is $22,000 *i.e., the original cost,. 8he car is !orth $1%,000. 6hich of the follo!ing statements is correct7 a. If 0oelle sells the car for $1%,000, her reali<ed loss of $7,000 is not recogni<ed. '. If 0oelle e"changes the car for another car !orth $1%,000, her reali<ed loss of $7,000 is not recogni<ed. c. If the car is stolen and it is uninsured, 0oelle may 'e a'le to recogni<e part of her reali<ed loss of $1%,000. d. ?nly a. and '. are correct. e. a., '., and c. are correct. 2. 0at is a real estate salesman. @is employer, a real estate de4eloper, permits him to purchase a lot for $7%,000. 8he employer+s ad3usted 'asis for the lot is $5%,000, and its normal selling price is $-0,000. 6hat is 0at+s recogni<ed gain and his 'asis for the lot7 a. '. c. d. e. Recogni<ed gain $ :0: $ :0: $1%,000 $1%,000 $ 0,000 Casis $ 7%,000 $ -0,000 $ 7%,000 $ -0,000 $10%,000

. 8ony o!ned the follo!ing lots of ?range ;orporation stoc(. .urchase date ?cto'er 1, 2001 Fe'ruary /, 2007 9eptem'er %, 2007 0o. of shares %0 %0 100 Casis $ 5,%00 %,%00 11,000

?n ?cto'er 12, 2007, 100 shares of stoc( !ere sold for $15,000. 8ony did not specifically identify the shares of stoc( sold. 6hat is the recogni<ed gain or loss7 a. $0. '. $ ,000. c. $ ,%00. d. $5,000. e. 0one of the a'o4e. 5. 0onta"a'le stoc( di4idends result in# a. A higher cost per share for all shares than 'efore the stoc( di4idend. '. A lo!er cost per share for all shares than 'efore the stoc( di4idend. c. An increase in the total cost of the old and ne! stoc( com'ined. d. A decrease in the total cost of the old and ne! stoc( com'ined. e. 0one of the a'o4e.

11

%. Gift property *disregarding any ad3ustment for gift ta" paid 'y the donor,# a. @as no 'asis to the donee 'ecause he or she did not pay anything for the property. '. @as the same 'asis to the donee as the donor+s ad3usted 'asis if the donee disposes of the property at a gain. c. @as the same 'asis to the donee as the donor+s ad3usted 'asis if the donee disposes of the property at a loss, and the fair mar(et 4alue on the date of gift !as less than the donor+s ad3usted 'asis. d. @as no 'asis to the donee if the fair mar(et 4alue on the date of gift is less than the donor+s ad3usted 'asis. e. 0one of the a'o4e. 1. Ro' !as gi4en a residence in 2007. At the time of the gift, the residence had a fair mar(et 4alue of $200,000, and its ad3usted 'asis to the donor !as $150,000. 8he donor paid a ta" of $10,000 on the ta"a'le gift of $1//,000. 6hat is Ro'+s 'asis for gain7 a. $150,000. '. $15 ,200. c. $1%0,000. d. $200,000. e. 0one of the a'o4e. 7. 8he holding period of property ac2uired 'y gift may 'egin on# a. 8he date the property !as ac2uired 'y the donor only. '. 8he date of gift only. c. Fither the date the property !as ac2uired 'y the donor or the date of gift. d. 8he date si" months after the date of gift. e. c and d are correct. /. 8o'in inherited 100 acres of land on the death of his father in 2007. A Federal estate ta" return !as filed and the land !as 4alued at $ 00,000 *its fair mar(et 4alue at the date of the death,. 8he father had originally ac2uired the land in 1-15 for $1-,000 and prior to his death had made permanent impro4ements of $1,000. 6hat is 8o'in+s 'asis in the land7 a. $1-,000. '. $2%,000. c. $ 00,000. d. $ 2%,000. e. 0one of the a'o4e. -. $artha gi4es 100 shares of Green, Inc. stoc( to her niece, )ennifer. $artha+s ad3usted 'asis for the stoc( is $ ,000 and the fair mar(et 4alue is $7,000. Four months after the gift, )ennifer is (illed in an automo'ile accident. $artha inherits the stoc( !hich then is !orth $-,000. 6hat is the ad3usted 'asis of the inherited stoc( to $artha7 a. $ ,000. '. $7,000. c. $-,000. d. $10,000. e. 0one of the a'o4e.

12

50. 8aylor inherited 100 acres of land on the death of his father in 2007. A Federal estate ta" return !as filed and this land !as 4alued therein at $1%,000, its fair mar(et 4alue at the date of the father+s death. 8he father had originally ac2uired the land in 1-50 for $2,000 and prior to his death he had e"pended $1,000 on permanent impro4ements. &etermine 8aylor+s holding period for the land. a. 6ill 'egin !ith the date his father ac2uired the property. '. 6ill automatically 'e long:term. c. 6ill 'egin !ith the date of his father+s death. d. 6ill 'egin !ith the date the property is distri'uted to him. e. 0one of the a'o4e.

'/"PT+R 1* 51. In 2007, Glenn had a $10/,000 loss on a passi4e acti4ity. 0one of the loss is attri'uta'le to A$8 ad3ustments or preferences. 9he has no other passi4e acti4ities. 6hich of the follo!ing statements is correct7

15

a. In 2007, Glenn can deduct $10/,000 for regular income ta" purposes and for A$8 purposes. '. Glenn !ill ha4e a $10/,000 ta" preference in 2007 as a result of the passi4e acti4ity. c. For regular income ta" purposes, none of the loss is allo!ed in 2007. d. In 2007, Glenn !ill ha4e a positi4e ad3ustment of $100,000 as a result of the passi4e loss.

1%

e. 0one of the a'o4e.

11

52. In 2007, Fred has a $7%,000 loss on a passi4e acti4ity for regular income ta" purposes. For A$8 purposes, his loss is $1%,000. 8he amount of the A$8 ad3ustment resulting from the passi4e acti4ity loss is#

17

a. '. c. d.

$0. $10,000 negati4e ad3ustment. $10,000 positi4e ad3ustment. $1%,000.

1/

e. 0one of the a'o4e.

1-

5 . Jonrad+s AGI is $220,000. @e contri'uted $1/0,000 in cash to a pu'lic charity. 6hat is Jonrad+s charita'le contri'ution deduction for A$8 purposes7

20

a. '. c. d.

$22,000. $11,000. $110,000. $1/0,000.

21

e. 0one of the a'o4e.

22

55. 6hich of the follo!ing are permitted deductions for purposes of the A$8 for an indi4idual ta"payer7

a. '. c. d.

$edical e"penses to the e"tent that they e"ceed 7.%= of AGI. @ome mortgage interest on a principal residence and t!o other residences. ;harita'le contri'utions to the e"tent they e"ceed 10= of AGI. $iscellaneous itemi<ed deductions to the e"tent they e"ceed 2= of AGI.

25

e. 0one of the a'o4e.

2%

5%. Frin o!ns a mineral property that had a 'asis of $10,000 at the 'eginning of the year. 8he property 2ualifies for a 1%= depletion rate. Gross income from the property !as $120,000 and net income 'efore the percentage depletion deduction !as $%0,000. 6hat is Frin+s ta" preference for e"cess depletion7

21

a. '. c. d.

$/,000 $10,000. $1/,000. $0.

27

e. 0one of the a'o4e.

2/

51. 6hich of the follo!ing can produce an A$8 preference rather than an A$8 ad3ustment7

2-

a. '. c. d.

;irculation e"penditures. Research and e"perimental e"penditures. .ercentage depletion. Incenti4e stoc( options *I9?s,.

e. 0one of the a'o4e.

57. 9ara is single, has no dependents and does not itemi<e, pro4ides you !ith the follo!ing information#

9hort:term capital loss >ong:term capital gain $unicipal 'ond interest recei4ed on pri4ate acti4ity 'onds ac2uired in 2002 &i4idends from General $otors F"cess of F$D o4er cost of incenti4e stoc( options *the rights 'ecame freely transfera'le in the current year,

$ %,000 2%,000 -,000 1,%00 %,000

6hat is the amount of 9ara+s ta" preference items and A$8 ad3ustments for the current year7 a. $-,000. '. $55,000. c. $5-, %0. d. $%2,7%0. e. 0one of the a'o4e. 5/. Ro'in, !ho is a head of household and age 52, pro4ides you !ith the follo!ing information from his financial records for 2007. Regular income ta" lia'ility A$8 ad3ustments A$8 preferences 8a"a'le income ;alculate his A$8 for 2007. a. $1 ,5%7. '. $15,-70. c. $%/,-7%. d. $11,100. e. 0one of the a'o4e. 5-. 6hich of the follo!ing statements is correct regarding the A;F ad3ustment7 a. 8he A;F ad3ustment can 'e either positi4e or negati4e. '. A positi4e A$8 ad3ustment occurs if the A;F amount e"ceeds the unad3usted A$8I. c. A negati4e A$8 ad3ustment for A;F in the current year is not affected 'y prior year A;F ad3ustments. d. ?nly a. and '. are correct. e. a., '., and c. are correct. %0. 6hich of the follo!ing statements is correct regarding the A;F ad3ustment7 a. 8he A;F ad3ustment can 'e either positi4e or negati4e. '. A positi4e A$8 ad3ustment occurs if the A;F amount e"ceeds the unad3usted A$8I. c. A negati4e A$8 ad3ustment for A;F in the current year is not affected 'y prior year A;F ad3ustments. d. ?nly a. and '. are correct. e. a., '., and c. are correct. $ 55,00% 0,000 20,000 1/%,000