Quiz 2 answers Essay Example for Free

Quiz 2 answers EssayCHAPTER 11In the current stratum, Rich has a $40,000 discharge from a business he owns. His at-risk amount at the end of the year, prior to considering the current year loss, is $24,000. He give be allowed to deduct the $40,000 loss this year if he is a material participant in the business remedy Answer FalseJudy owns a 20% interest in a partnership in which her at-risk amount was $35,000 at the beginning of the year. The partnership borrowed $50,000 on a recourse note and made a $40,000 profit during the year. Her at-risk amount at the end of the year is $53,000 Correct Answer sureKelly, who earns a yearly salary of $120,000, sold an activity with a suspended passive loss of $44,000. The activity was sold at a loss and Kelly has no other passive activities. The suspended loss is not deductibleCorrect Answer FalseDuring the year, Bear Company incurs a $25,000 loss on a passive activity, has active income of $17,000, and portfolio income of $12,000. If Bea r is a person-to-person service corporation, it may deduct all of the $25,000 passive loss.Correct Answer FalseNathan owns Activity A, which produces income distributively year. He also owns Activity B, which produces passive losses each year. From a tax planning perspective, Nathan will be better off if Activity A is passive.Correct Answer adjustJoe participates 95 hours in an activity, while an employee participates 5 hours. Joe has materially participated in the activity.Correct Answer TrueJoyce owns an activity (not real soil) in which she participates for 100 hours a year her husband participates for 450 hours. Joyce qualifies as a material participant. Correct Answer TrueIn the current year, Abby has AGI of $95,000 and a $40,000 loss from a real estate rental activity in which she is a 15% owner. If she is an active participant, she can deduct $25,000 of the loss Correct Answer TrueCHAPTER 13Realized chance upon or loss is measured by the difference between the amount rea lized from the sale or other disposition of property and the propertys adjusted basis at the pick up of disposition. Correct Answer TrueIf the buyer assumes the sellers liability on the property acquired, the sellers amount realized is decreased by the amount of the liability assumed. Correct Answer FalseExpenditures made for normal repairs and maintenance of property are not added to the original basis in the determination of the propertys adjusted basis whereas capital expenditures are added to the original basis. Correct Answer TrueA realized increase on the sale or exchange of a personal use asset is recognized, but a realized loss on the sale or exchange of a personal use asset is not recognized. Correct answer trueWhen a taxpayer has purchased several oodles of rip on different dates at different purchase prices and cannot identify the lot of stock that is being sold, he may choose which lot of stock is deemed to be sold. Correct Answer False Property received as a gift can be sold by a donee and resolving power in neither recognized gain nor loss. Correct Answer TrueThe basis for depreciation on gift property that is depreciable by the donee, is the donors adjusted basis of the property at the date of the gift. Correct Answer TrueProperty that has been converted from personal use to business use will be dual basis property (a different basis for determining gain vs. loss) if the adjusted basis exceeds the fair market value at the date of conversion.Correct Answer TrueA class of depreciable tangible personal property can be exchanged for another class of depreciable tangible personal property and qualify as like-kind propertyCorrect Answer FalseCHAPTER 14A university professor writes a mystery novel and publishes it at his own expense. Several days later, a national publishing company buys the copyright to the book for $345,000. The professor has no tax basis for the copyright. The professor has a long-term capital gain of $345,000. Correct Answe r FalseReal property subdivided for resale into lots, even if no substantial physical improvements fill been made to the property, always causes the gain from sale of the lots to be treated as general income. Correct Answer FalseOriginal issue discount is amortized over the life of the bond. Correct Answer TrueAs a general rule, the sale or exchange of an natural selection to buy or sell property results in capital gain or loss if the property subject to the option is a capital asset in the hands of the option holder. Correct TrueThe only things that the grantee of an option may do with the option are exercise it or let it expire. Correct Answer FalseTo compute the holding period, start counting on the day the property was acquired and include the day of sale or exchange.Correct Answer FalseA 1231 asset is usually also a capital asset. Correct Answer FalseSection 1231 property includes certain purchased intangible assets (such aspatents and goodwill) that are eligible for amorti zation and held for more than one year. Correct Answer TrueNonrecaptured 1231 losses from the seven prior tax years may cause current year net 1231 gain to be treated as ordinary income.Correct Answer FalseThe Code contains two major depreciation recapture provisions 1245 and 1250. Correct TrueFor 1245 recapture to apply, accelerated depreciation must have been taken on the property = FalseSection 1231 lookback losses may convert some or all of potential unrecaptured 1245 or 1250 gain into ordinary income. Correct Answer True