IN-12-Chp-00-Tst-2-Exm-Prb-Summer-2012-night. Page 1 of 4
Advanced Individual Income Tax Test No. 2. NIGHT Test No. ______
Summer, 2012. The University of North Carolina at Charlotte.
Name______Row In Class______
INSTRUCTIONS: You may use your Code Book, (but not your textbook) during the test. You may also use up to 10 pages of notes-front and back, or 20 pages printed on one side only. A question may cover material from more than one chapter. Avoid all appearances of impropriety. If you see any sign of impropriety, please prepare an anonymous note and slide it under the instructor's office door.
This test contains 30 Multiple-choice questions. Test score is100 Points, less 3 for each incorrect answer.
1. Use a soft-lead pencil
2. Enter name in appropriate space above. Write clearly.
3. Enter above the row number for your seat in class.
On the Opscan Sheet
4. Enter name (last name first) in the area for “NAME.”
6. Enter test number (found in upper right hand corner of this page) in the special codes area.
7. Blacken the area in the circle containing the appropriate letter for each question.
8. Do not enter student ID number.
1.What is the market rate of interest for a bond issue which sells for More than its par value?
a. / Less than rate stated on the bond.b. / Equal to rate stated on the bonds
c. / Higher than rate stated on the bond.
d. / Rate is independent of rate stated on the bonds.
2. On January 1, 2010, UNCC Corporation purchased Big Corp. 9% bonds with a face amount of $400,000 for $375,422, to yield 10%. The bonds are dated January 1, 2010, mature on December 31, 2019, and pay interest annually on December 31. UNCC uses the interest method of amortizing discount.
What is UNCC’s interest revenue for2011?
3.George bought the following amounts of Stock A over the years:
Basic information / Mo/Day/Year / No of Shares / Unit Basis / Total BasisBought:
Stock A / 11/21/1986 / 1,000 / $24 / $24,000
Stock A / 3/18/1992 / 500 / $18 / 9,000
Stock A / 5/22/2001 / 750 / $36 / 27,000
On October 12, 2011, he sold 1,000 of his shares of Stock A for $38 per share.
He instructed the broker to sell all of the 750 shares bought in 2001 and 250 of the shares bought in 1992.
How much gain/loss will George have to recognize?
a. / $7,800 / b. / $18,000 / c. / $6,500 / d. / $10,500 / e. / Other4.John operates an unincorporated retail store. He purchased equipment for $200,000 in 2004.
In 2011, John sold that equipment for $180,000, when accumulated depreciation was $30,000.
John should report the sale as:
a. / Ordinary income of $10,000. / c. / Sec. 1231 gain of $10,000.b. / Capital gain of $10,000. / d. / Ordinary income of $30,000.
5.An individual had taxable income of $100,000 for the current year, before considering the following gains:
Long-term capital gain / $10,000Short-term capital gain / $20,000
Taxpayer is single, with no dependent. What is the amount of her federal income tax before credits for 2011?
a. / $26,000 / b. / $25,717 / c. / $28,717 / d. / $27,000 / e. / $24,0056.Ann invests in stock. Each stock is a capital asset. None of the companies is a section 1244 corporation.
Ann (single, no dependent). Annual salary / $ 133,700Itemized deductions -Charity / $10,000
Itemized deductions-Mortgage Interest / $20,000
Exemption / $3,700
Taxable Income, before items below. / $100,000
Date / Date / Total / Total
Asset / Acquired / Sold / Cost / Selling Price
ABC Stock / 2011 / 2011 / $10,000 / $19,000
DEF Stock / 2011 / 2011 / $10,000 / $5,000
GHI Stock / 2007 / 2011 / $10,000 / $14,000
KLM Stock / 2007 / 2011 / $10,000 / $12,000
NOP Stock / 2007 / 2011 / $10,000 / $6,000
As shown above, Ann is single and has no dependent. She has a salary of $133,700.
She claims one exemption for herself, and total itemized deductions of $30,000.
This results in taxable income of $100,000, before considering gains and losses from sales of stock.
When you take into account the stock sales shown above, what is her taxable income for 2011?
7. Continue preceding question. Assume the ABC stock was sold for $8,000 (not $19,000).
What is her taxable income for 2011, under this revised assumption?
8.Mary Jane is single and earns a salary of $200,000 per year.
Sue claims the standard deduction and one personal exemption for 2011.
She has no other income, except for her capital gains.
She had a Short-term capital gain of $10,000 and a Long-term capital loss of $8,000.
What tax rate will apply to her capital gain net income?
9.Barbara had these Section 1231 gains and losses:
Section 1231 / Year 1 / Year 2 / Year 3 / Year 4gain (loss) / $60,000 / (45,000) / $40,000 / $15,000
How will Barbara treat the $15,000 gain in year 4?
Ordinary Income / Capital Gain / Ordinary Income / Capital Gaina. / $5,000 / $0 / c. / $5,000 / $10,000
b. / $0 / $15,000 / d. / $10,000 / $5,000
10. Sam and Sue file a joint income tax return. Sam received wages of $165,000. Sue actively participated in a rental real estate activity in which she had a $30,000 loss. They are not realtors.
They had no other income and no other deductions in arriving at AGI.
How much of the rental loss may they deduct on their income tax return for the year?
11.Which one of these types of itemized deductions is included in the category of expenses deductible only if the aggregate of such expenses exceeds 2% of the taxpayer's adjusted gross income?
a. / Mortgage Interest expense / b. / Deduction for amortization of bond premiumc. / Employee moving expenses / d. / Wall Street Journal Cost for a stock investor
12.Jane's residence was partially destroyed by fire. The property had an adjusted basis of $150,000 and a FMV of $200,000 before the fire. Jane spent $40,000 for repairs which restored the residence to its value immediately before the fire. Jane had no casualty gains during the year. Jane's adjusted gross income was $70,000.
What amount of the fire loss was Jane entitled to claim as an itemized deduction on her tax return?
a. / $ 32,900 / b. / $ 33,000 / c. / $ 40,000 / d. / Other13.Georgia sells stock she purchased for $20,000 to her brother Billy for $12,000. Two years later, Billy sells the stock to Allie, an unrelated individual, for $18,000. What is Billy's recognized gain or loss?
a. / $ 0 / b. / $ 2,000 gain / c. / $10,000 gain / d. / $ 8,000 loss / e. / $ 6,000 loss14.Joan is single with no dependent. Joan moved from Seattle to Charlotte on January 15, 2012.
Joan paid the following costs.
Cost for trip to Charlotte to buy a house two weeks before the move. / $2,000Cost to have moving company transport furniture and appliances to Charlotte / $12,000
Airline ticket for Joan to fly from Seattle to Charlotte. / $1,500
Her new employer (Charlotte Corp.) paid Joan a salary of $100,000 in 2012, and provided a moving expense reimbursement of $10,000, which is the corporate limit on such reimbursements. Joan had no income in 2012, other than the income from Charlotte Company. What is her adjusted gross income?
a. / $86,500 / b. / $88,500 / c. / $96,500 / d. / $100,000 / e. / Other15.The localBoy Scouts organization (which is a qualified charity) asked the community for assistance to cover costs to send neighborhood kids to summer camp. The owner of a local gasoline station gave 300 gallons of gas to the Boy Scouts for their bus. The gas had cost the company $3.00 per gallon, and had a retail price of $3.50 per gallon. What is the charitable contribution deduction for the owner of the gasoline station?
a. / $0 / b. / $900 / c. / $1,050 / d. / Other16.Jan (who is single with no dependent) owns and operates a CPA firm in Charlotte. Her gross income from the practice was $250,000. She incurred total expenses of $150,000 for salaries, rent, supplies, etc. (not considering self-employment tax and her health insurance premiums). She had no other income during the year.
Ignore the temporary 2% reduction in the tax rate. What is her deduction for self-employment tax for 2011 (rounded to nearest dollar)?
17.Continue the preceding question about Jan. She paid health insurance premiums of $5,000.
How is that reported?
b. / Deducted for AGI / d. / Deducted from AGI, subject to the 2% floor
18. This fall Millie finally repaid her student loan. She originally borrowed the money to pay tuition several years ago when she attended at State University (a qualified educational institution). This year Millie paid a total of $2,400 of interest on the loan. If Millie files single and reports $65,000 of income and no other items of income or expense how much of the interest can she deduct?
a. / Deduct $2,400 for AGI. / d. / Deduct $2,000 as an itemized deduction.b. / Deduct $1,667 for AGI. / e. / None - the tuition is not deductible.
c. / Deduct $2,400 as an itemized deduction.
19.Michelle paid these medical expenses in the current tax year:
Surgeon's fees / $1,200Medical insurance premiums / 4,000
Hospital fees / 800
Prescription drugs / 310
The fees to surgeon and all of the hospital fees were for cosmetic surgery, undertaken solely to improve her appearance. She had no medical insurance at the time of the surgery. She purchased medical insurance after her surgery. Therefore, she received no reimbursement from her health insurance company. Her adjusted gross income for the year is $20,000. Determine the amount of her medical expense deduction for the current year.
a. / $ - 0 - / b. / $ 4,610 / c. / $4,810 / d. / $2,810 / e. / Other20.Julie and Fred are married and both are retired. Both are 67 years old and in good health. They file a joint return. Their only income was $30,000 from interest on a saving account. They do not itemize their deductions. What is the amount of their taxable income for 2011?
a. / $1,200 / b. / $1,800. / c. / $7,700. / d. / $8,700. / e. / Other21.Mary Sue is 15 years old and qualifies as a dependent on her parents' tax return. She earned $3,000 from a part-time job and received $1,000 of dividend income. What is Mary Sue’s federal taxable income?
a. / $1,200 / b. / $700 / c. / $500 / d. / $0 / e. / Other22.During 2011, Robert (age 12) received interest income of $3,500 from a corporate bond.
Robert lives with his parents and he is their dependent.
His parents' marginal tax rate is 28%. What is Robert's gross tax liability?
23. Which of the following items is added back to regular taxable income in computing alternative minimum taxable income?
a. / Home mortgage interest expense. / c. / Employee moving expenses.b. / Charitable contributions. / d. / Real property taxes.
24.In 2011, Jose (who files as a head of household) reported regular taxable income of $120,000.
He itemized his deductions, deducting: (1)charitable contributions of $8,000, (2)state income taxes $3,000, and (3) miscellaneous itemized deductions of $400 (after considering the 2% floor).
He claimed exemptions for himself and daughter, Maria, ($3,700 each).
What is Jose's alternative minimum taxable income?
25.A single (head of household) taxpayer reports followingfederal individual income tax information for 2011.
Regular taxable income / $100,000Regular income tax before credits
Alternative minimum taxable income / $200,000
How much AMT is owed by this taxpayer?
a. / $26,575 / b. / $25,323 / c. / $10,280 / d. / $45,909 / e. / Other26.Allan and Anne are married and have two children ages 12 and 10.
Their adjusted gross income for the current year is $130,000.
What amount can they claim for the child tax credit?
a. / $ 500 / b. / $ 800 / c. / $1,000 / d. / $1,500 / e. / $2,00027.Barbara had wages of $34,000 and her husband Ben’s wages were $27,000.
They have five children ages 3, 6, 7, 8 and 9.
They paid a total of $8,000 for child care expenses.
Assuming a 20% credit rate, what will be their child and dependent care credit?
28.Which of the following tax credits is fully refundable?
a. / American opportunity credit / c. / Dependent care creditb. / Earned income credit / d. / None of the above
29.Sheryl's AGI is $200,000 in 2011. Her AGI was also $200,000 in 2010. Her tax liability for 2011 is $50,000. Last year, her tax liability was $40,000. She makes all required payments each quarter. She will not owe underpayment penalties if her total estimated tax payments are at least which of these (rounded) amounts?
a. / $40,000 / b. / $44,000 / c. / $45,000 / d. / $50,00030.Warren filed 2010 tax return on July 5, 2011, without requesting an extension.
His total tax was $10,000 He had no withholding tax and he made no estimated tax payments.
He paid $10,000 with return filed on July 5, 2011?
What is the total amount of his failure to file and failure to pay penalties?
a. / $500 / b. / $550 / c. / $1,000 / d. / $1,500 / e. / Other