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.