For more classes visit www.snaptutorial.com 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:

1. ACC 307 Final Exam Part 1 & Part 2
For more classes visit
www.snaptutorial.com
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:
Miles
Home to office 10
Home to Garnet 30
Office to Garnet 35
2. One of the tax advantages of being self-employed (rather than
being an employee) is:
3. Under the actual cost method, which of the following expenses will
not be allowed?
4. The § 222 deduction for tuition and related expenses is available:
5. Which of the following is subject to a cutback adjustment?

2. 6. 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 Byron’s 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, Sandra’s 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 Arthur’s room 107
Total $6,157
9. Which of the following items would be an itemized deduction on
Schedule A of Form 1040 not subject to the 2%-of-AGI floor?
10. Rick and Carol Ryan, married taxpayers, took out a mortgage of
$160,000 when purchasing their home ten years ago. In October of the

3. 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?
11. 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.
12. 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.
13. Vic’s 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:
14. 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?
15. 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.
1. 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 Company’s deduction for wages for the year is:

4. 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
building’s basis for cost recovery would increase as a result of the
rehabilitation expenditures are the following amounts:
3.
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?
4.
The ceiling amount and percentage for 2013 for the Social Security
portion of the self-employment tax are:
5.
In terms of the withholding procedures, which statement does not reflect
current rules?
6.
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?

5. 7.
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 Arthur’s recognized gain or loss and Ned’s basis in the land?
8.
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?
9.
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?
10.
A strip along the boundary of Joy’s 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?
11.
Which of the following is correct concerning short sales of stock?
12.
Which of the following real property could be subject to § 1250
depreciation recapture?
13.

6. Stanley operates a restaurant as a sole proprietorship. Which of the
following items are capital assets in the hands of Stanley?
14.
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?
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ACC 307 Final Exam Part 1
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www.snaptutorial.com
1. The § 222 deduction for tuition and related expenses is available:
2. A worker may prefer to be classified as an employee (rather than an
independent contractor) for which of the following reasons:
3. Aaron is a self-employed practical nurse who works out of his home.
He provides nursing care for disabled persons living in their residences.
During the day he drives his car as follows

7. 4. Jordan performs services for Ryan. Which of the following factors
indicate that Jordan is an independent contractor, rather than an
employee?
5. Aiden performs services for Lucas. Which of the following factors
indicate that Aiden is an employee, rather than an independent
contractor?
6. Paul, a calendar year married taxpayer, files a joint return for 2013.
Information for 2013 includes the following:
AGI
$175,000
State income taxes
13,500
State sales tax
3,000
Real estate taxes
18,900
Gambling losses (gambling gains were $12,000)
6,800
Paul’s allowable itemized deductions for 2013 are:
7. Pedro’s child attends a school operated by the church the family
attends. Pedro made a donation of $1,000 to the church in lieu of the

8. normal registration fee of $200. In addition, Pedro paid the regular
tuition of $6,000 to the school. Based on this information, what is
Pedro’s charitable contribution?
8. Barry and Larry, who are brothers, are equal owners in Chickadee
Corporation. On July 1, 2013, each loans the corporation $10,000 at an
annual interest rate of 10%. Both shareholders are on the cash method
of accounting, while Chickadee Corporation is on the accrual method.
All parties use the calendar year for tax purposes. On June 30, 2014,
Chickadee repays the loans of $20,000 together with the specified
interest of $2,000. How much of the interest can Chickadee Corporation
deduct in 2013?
9. Your friend Scotty informs you that he received a “tax-free”
reimbursement in 2013 of some medical expenses he paid in 2012.
Which of the following statements best explains why Scotty is not
required to report the reimbursement in gross income?
10. Emily, who lives in Indiana, volunteered to travel to Louisiana in
March to work on a home-building project for Habitat for Humanity (a
qualified charitable organization). She was in Louisiana for three weeks.
She normally makes $500 per week as a carpenter’s assistant and plans
to deduct $1,500 as a charitable contribution. In addition, she incurred
the following costs in connection with the trip: $600 for transportation,
$1,200 for lodging, and $400 for meals. What is Emily’s deduction
associated with this charitable activity?
11. Josh has investments in two passive activities. Activity A (acquired
three years ago) produces income of $30,000 this year, while Activity B
(acquired two years ago) produces a loss of $50,000. What is the
amount of Josh’s suspended loss for the year?
12. 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

9. 13. Charles owns a business with two separate departments. Department
A produces $100,000 of income and Department B incurs a $60,000
loss. Charles participates for 550 hours in Department A and 100 hours
in Department B. He has full-time employees in both departments
14. Sandra acquired a passive activity three years ago. Until last year,
the activity was profitable and her at-risk amount was $300,000.Last
year, the activity produced a loss of $100,000, and in the current year,
the loss is $50,000. Assuming Sandra has received no passive income in
the current or prior years, her suspended passive loss from the activity
is:
15. Nell sells a passive activity with an adjusted basis of $45,000 for
$105,000. Suspended losses attributable to this property total $45,000.
The total gain and the taxable gain are:
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ACC 307 Final Exam Part 2
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1. An employer calculates the amount of income tax withheld from
salary or wages based on the information an employee provides on the
following form:

10. 2.
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
Company’s deduction for wages for the year is:
3.
Several years ago, Tom purchased a structure for $300,000 that was
originally placed in service in 1929. Three and one-half years ago he
incurred qualifying rehabilitation expenditures of $600,000.In the
current year, Tom sold the property in a taxable transaction. Calculate
the amount of the recapture of the tax credit for rehabilitation
expenditures.
In terms of the withholding procedures, which statement does not reflect
current rules?
4.
The ceiling amount and percentage for 2013 for the Medicare portion of
the self-employment tax are:
5.
If the taxpayer qualifies under § 1033 (nonrecognition of gain from an
involuntary conversion), makes the appropriate election, and the amount
reinvested in replacement property is less than the amount realized,
realized gain is:
6.
Mary sells her personal use automobile for $20,000. She purchased the
car two years ago for $17,000. What is Mary’s recognized gain or loss?
It increased in value due to its excellent mileage, yet safe design.

11. 7.
Neal and his wife Faye reside in Texas, a community property state.
Their community property consists of real estate (adjusted basis of
$800,000;fair market value of $6 million) and personal property
(adjusted basis of $390,000;fair market value of $295,000). Neal dies
first and leaves his estate to Faye. What is Faye’s basis in the property
after Neal’s death?
8.
Which of the following exchanges qualifies for nonrecognition treatment
as a § 1031 like-kind exchange?
9.
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?
10.
Hiram is a computer engineer and, while unemployed, invents a
switching device for computer networks. He patents the device, but does
not reduce it to practice. Hiram has a zero tax basis for the patent. In
consideration of $800,000 plus a $1 royalty per device sold, Hiram
assigns the patent to a computer manufacturing company. Hiram
assigned all substantial rights in the patent. Which of the following is
correct?
11.
Lynne owns depreciable residential rental real estate which has
accumulated depreciation (all from straight-line) of $65,000. If Lynne

12. sold the property, she would have a $53,000 gain. The initial
characterization of the gain would be:
12.
Which of the following creates potential § 1245 depreciation recapture
and potential § 1231 gain?
13.
A business taxpayer sells inventory for $80,000. The adjusted basis of
the property is $58,000 at the time of the sale and the inventory had
been held more than one year. The taxpayer has:
14.
Section 1239 (relating to the sale of certain property between related
taxpayers) does not apply unless the property:
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ACC 307 Mid Term Exam Part 1
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A characteristic of FUTA is that:

13. 2. Which of the following statements best describes the history of the
Federal income tax?
3. Taxes not imposed by the Federal government include:
4. A VAT (value added tax):
5. Which of the following transactions will decrease a taxing
jurisdiction’s ad valorem tax revenue imposed on real estate?
6.
In 2013, Cindy had the following transactions:
Salary
$90,000
Short-term capital gain from a stock investment
4,000
Moving expense to change jobs
(11,000)
Received repayment of $20,000 loan she made to her sister in 2009
(includes no interest)
20,000
State income taxes
(5,000)

14. Cindy’s AGI is:
7.
Millie, age 80, is supported during the current year as follows:
Percent of Support
Weston (a son)
20%
Faith (a daughter)
35%
Jake (a cousin)
25%
Brayden (unrelated close family friend)
20%
During the year, Millie lives in an assisted living facility. Under a
multiple support agreement, indicate which parties can qualify to claim
Millie as a dependent.
8. Which of the following is a deduction for AGI?

15. 9. Emily, whose husband died in December 2012, maintains a household
in which her dependent mother lives. Which (if any) of the following is
her filing status for the tax year 2013? (Note: Emily is the executor of
her husband’s estate.)
10. Which of the following items is deductible?
11. Our tax laws encourage taxpayers to ____ assets that have
appreciated in value and ____ assets that have declined in value
12. Harry and Wanda were married in Texas, a community property
state, but moved to Virginia, a common law state. The calculation of
their income on a joint return
13. Sarah, a majority shareholder in Teal, Inc., made a $200,000
interest-free loan to the corporation. Sarah is not an employee of the
corporation
14. The purpose of the tax rules that apply to below-market loans
between family members is to:
15. Margaret owns land that appreciates at the rate of 10% each year.
Ralph owns a zero coupon (i.e., all of the interest is paid at maturity but
is taxed annually) corporate bond with a yield to maturity of 10%. At the
end of 10 years, the bond will mature and the land will be sold. At the
end of the 10 years
16. The exclusion of interest on educational savings bonds
17. Employees of the Valley Country Club are allowed to use the golf
course without charge before and after working hours on Mondays,
when the number of players on the course is at its lowest. Tom, an
employee of the country club played 40 rounds of golf during the year at
no charge when the non-employee charge was $20 per round.
18. The Royal Motor Company manufactures automobiles. Employees of
the company can buy a new automobile for Royal’s cost plus 2%. The

16. automobiles are sold to dealers at cost plus 20%. Generally, employees
of Local Dealer, Inc., are allowed to buy a new automobile from the
company at the dealer’s cost. Officers of Local Dealer are allowed to
use a company vehicle (for personal use) at no cost
19. Jena is a full-time undergraduate student at State University and is
claimed by her parents as a dependent. Her only source of income is a
$10,000 athletic scholarship ($1,000 for books, $5,500 tuition, $500
student activity fee, and $3,000 room and board). Jena’s gross income
for the year is
20. Olaf was injured in an automobile accident and received $25,000 for
his physical injury, $50,000 for his loss of income, and $10,000 punitive
damages. As a result of the award, the amount Olaf must include in
gross income is:
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ACC 307 Mid Term Exam Part 2
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1. In January, Lance sold stock with a cost basis of $26,000 to his
brother, James, for $24,000, the fair market value of the stock on the

17. date of sale. Five months later, James sold the same stock through his
broker for $27,000. What is the tax effect of these transactions?
2. Tommy, an automobile mechanic employed by an auto dealership, is
considering opening a fast food franchise. If Tommy decides not to
acquire the fast food franchise, any investigation expenses are
3. Payments by a cash basis taxpayer of capital expenditures
4. Which of the following is not deductible?
5. Velma and Bud divorced. Velma’s attorney fee of $5,000 is allocated
as follows:
6. Five years ago, Tom loaned his son John $20,000 to start a business.
A note was executed with an interest rate of 8%, which is the Federal
rate. The note required monthly payments of the interest with the
$20,000 due at the end of ten years. John always made the interest
payments until last year. During the current year, John notified his
father that he was bankruptand would not be able to repay the $20,000
or the accrued interest of $1,800. Tom is an accrual basis taxpayer
whose only income is salary and interest income. The proper treatment
for the nonpayment of the note is
7. Jed is an electrician. Jed and his wife are accrual basis taxpayers
and file a joint return. Jed wired a new house for Alison and billed her
$15,000. Alison paid Jed $10,000 and refused to pay the remainder of
the bill, claiming the fee to be exorbitant. Jed took Alison to Small
Claims Court for the unpaid amount and was awarded a $2,000
judgement. Jed was able to collect the judgement but not the remainder
of the bill from Alison. What amount of loss may Jed deduct in the
current year?
8. Norm’s car, which he uses 100% for personal purposes, was
completely destroyed in an accident in 2013. The car’s adjusted basis at
the time of the accident was $13,000. Its fair market value was $10,000.

18. The car was covered by a $2,000 deductible insurance policy. Norm did
not file a claim against the insurance policy because of a fear that
reporting the accident would result in a substantial increase in his
insurance rates. His adjusted gross income was $14,000 (before
considering the loss). What is Norm’s deductible loss?
9. Which of the following events would produce a deductible loss?
10. Ivory, Inc., has taxable income of $600,000 and qualified production
activities income (QPAI) of $700,000 in 2013. Ivory’s domestic
production activities deduction is
11. Bhaskar purchased a new factory building on September 10, 2013,
for $3,700,000. Five hundred thousand of the purchase price was
allocated to the land. He elected the alternative depreciation system
(ADS). Determine the cost recovery deduction for 2014.
12. Howard’s business is raising and harvesting peaches. On March 10,
2013, Howard purchased 10,000 new peach trees at a cost of $60,000.
Howard does not elect to expense assets under § 179. If eligible,
Howard takes additional first-year depreciation. Determine the cost
recovery deduction for 2013.
13. James purchased a new business asset (three-year property) on July
23, 2013, at a cost of $40,000. James takes additionalfirst-year
depreciation. Determine the cost recovery deduction for 2013
14. Alice purchased office furniture on September 20, 2012, for
$100,000. On October 10, 2012, she purchased business computers for
$80,000. Alice placed all of the assets in service on January 15, 2013.
Alice did not elect to expense any of the assets under § 179, nor did she
elect straight-line cost recovery. She did not take additionalfirst-year
depreciation. Determine the cost recovery deduction for the business
assets for 2013.

19. 15. Diane purchased a factory building on April 15, 1993, for
$5,000,000. She sells the factory building on February 2, 2013.
Determine the cost recovery deduction for the year of the sale.:
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