The document outlines various tax scenarios related to individual and corporate tax situations, including real estate transactions, deductions, and business-related expenses. It presents a series of questions, each examining specific tax rules or calculations, such as the treatment of passive losses, amortization of goodwill, and gain/loss recognition on asset sales. Additionally, it covers topics like dependency exemptions, the computation of depletion, and travel status tax advantages.

1. ACCT 324 Final Exam
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Question 1.1. (TCOs 2 & 3) Evelyn sold her personal residence to Drew on March 1
for $300,000. Before the sale, Evelyn paid the real estate taxes of $3,000 for the
calendar year. For income tax purposes, the real estate tax deduction is apportioned
as follows: $750 to Evelyn and $2,250 to Drew. Drew's basis in the residence
is: (Points : 5)
Question 2.2. (TCOs 3, 4, 5, & 7) In the current year, Galaxy Corporation, a closely
held C corporation that is not a personal service corporation, has $80,000 of passive
losses, $60,000 of active business income, and $10,000 of portfolio income. How
much of the passive loss may Galaxy deduct in the current year? (Points : 5)
Question 3.3. (TCOs 3, 4, 5, & 7) Dorothy holds two jobs. Her main job is with
Eggplant Corporation, and her part-time job is with Carrot Company. On a typical
workday, she drives her car as follows: home to Eggplant, Eggplant to Carrot, and
Carrot to home. Applicable mileage is as follows
Question 4.4. (TCOs 3, 4, 5, & 7) Carrie owns a mineral property that had a basis of
$15,000 at the beginning of the year. The property qualifies for a 22% depletion rate.
Gross income from the property was $150,000, and net income before the percentage
depletion deduction was $100,000. What is Carrie's tax preference for excess
depletion? (Points : 5)
Question 5.5. (TCOs 3, 4, 5, & 7) During the past two years, through extensive
advertising and improved customer relations, Beech Corporation estimated that it had
developed customer goodwill worth $100,000. For the current year, determine the
amount of goodwill Beech Corporation may amortize. (Points : 5)
Question 6.6. (TCOs 3, 4, 5, & 7) Damien, not a dealer in real estate, sold real estate
with a basis of $250,000 for $500,000 cash, a note for $250,000, and the buyer
assumed Damien's mortgage on the property of $125,000. During the year, the
purchaser paid Damien $30,000 principal and $72,000 interest on the note and paid
$6,000 principal and $18,000 interest on the mortgage he assumed. The contract
price for the above transaction is what amount? (Points : 5)
Question 7.7. (TCOs 3, 4, 5, & 7) Which of the following is not an itemized deduction
allowed for AMT purposes? (Points : 5)
Question 8.8. (TCOs 3, 4, 5, & 7) Alex works as an auditor for a major CPA firm.
During the months of August and September of each year, he is permanently assigned
to the team auditing of Hummingbird Corporation. As a result, every day he drives
from his home to Hummingbird and returns home after work. Mileage is as follows:
Question 9.9. (TCOs 7, 8, & 9) Matt and Shanekwa, ages 45 and 44, respectively, file
a joint tax return for 2012. They provided all of the support for their 24-year-old son,

2. who had $2,500 of gross income. Their 23-year-old daughter, a full-time student until
her graduation on June 14, 2012, earned $6,000, which was 45% of her total support
during 2012. Her parents provided the remaining support. Matt and Shanekwa also
provided total support for Shanekwa's father who is a citizen and life-long resident of
Portugal. How many personal and dependency exemptions can Matt and Shanekwa
claim on their 2012 income tax return? (Points : 5)
Question 10.10. (TCOs 2, 8, & 9) Shaquille operates a drug-running operation and
incurred the following expenses
Question 11.11. (TCOs 2, 8, & 9) During 2012, Robin sold the following assets:
business equipment for a $6,000 loss, stock investment for a $15,000 loss, and her
principal residence for a $14,000 loss. Presuming adequate income, how much of
these losses may Robin claim on her 2012 return? (Points : 5)
Question 12.12. (TCOs 2 & 11) Nicholas loaned Lyle (a friend) $30,000 in 2011 with
the agreement that the loan would be repaid in two years. In 2012, Lyle filed for
bankruptcy and Nicholas learned that he could expect to receive $0.50 on the dollar.
In 2012, final settlement was made and Nicholas received $16,000. Assuming the loan
is a nonbusiness bad debt, how should Nicholas account for the bad debt? (Points : 5)
Question 13.13. (TCOs 2 & 11) Kelsey, a stock broker, owns a separate business in
which he participates in the current year. He has one employee who works part-time
in the business. Which of the following statements is correct? (Points : 5)
Question 14.14. (TCOs 2 & 11) During the year, Clara took a trip from Chicago to
Rome. She was away from home for 20 days. She spent 6 days vacationing and 14
days on business (including the 3 travel days). Her expenses are as follows:
Question 15.15. (TCOs 2 & 11) In January, Charlie sold stock with a cost basis of
$40,000 to his brother Allen for $30,000, the fair market value of the stock on the date
of sale. Five months later, Allen sold the same stock through his broker for $45,000.
What is the tax effect of these transactions? (Points : 5)
Question 1.1. (TCO 1) Which of the following is a judicial source of the tax law?
Question 2.2. (TCOs 2, 3, 6, 8, 9, & 10) Which, if any, of the following is a
deduction from AGI
Question 3.3. (TCOs 2, 3, 6, 8, 9, & 10) Sergio lives in an apartment building and has
a 2-year lease that began 13 months ago. His landlord is willing to pay Sergio $2,000
to vacate the apartment immediately. The landlord wants to sell the building to a
buyer who will convert the building into condominiums. Sergio's lease on the
apartment is a capital asset, but has no tax basis. The $2,000 Sergio will receive if he
accepts the landlord's offer will be
Question 4.4. (TCOs 2, 3, 6, 8, 9, & 10) Rockwell purchased a tract of land for
$125,000 in 2004 when he heard that a new highway was going to be constructed
through the property and that the land would soon be worth $300,000. Highway
engineers surveyed the property and indicated that he would probably get $200,000.
The highway project was abandoned in 2012, and the value of the land fell to
$80,000. What is the amount of loss Rockwell can claim in 2012
Question 5.5. (TCOs 2, 3, 6, 8, 9, & 10) Donald has a $20,000 disallowed loss from a
sale of property to a related taxpayer. The property was sold for $70,000. Donald
uses the $70,000 to purchase different property than the property that was sold.
Which of the statements below is correct concerning the property Donald purchased

3. Question 6.6. (TCOs 2, 3, 6, 8, 9, & 10) A taxpayer who loses in the U.S. Court of
Federal Claims may appeal directly to the
Question 7.7. (TCO 6) Eighteen-year residential real property owned by an individual
has accumulated accelerated depreciation of $275,000 at January 1, 2012. If
depreciation had been computed under the straight-line method, accumulated
depreciation would be $200,000. The property is sold on January 1, 2012 with a
recognized gain of $300,000. What is the amount of depreciation recapture
Question 8.8. (TCO 6) Opal, Inc. owns a delivery truck that initially cost $40,000.
After a depreciation of $15,000 had been deducted, the truck was traded-in on a new
truck that cost $50,000. Opal was required to pay the car dealer $10,000 in cash.
What is Opal's basis for the new truck
Question 9.9. (TCO 6) Judy exchanges a rental house at the beach with an adjusted
basis of $165,000 and a fair market value of $150,000 for a rental house at the
mountains with a fair market value of $100,000 and cash of $50,000. What is the
recognized gain or loss
Question 10.10. (TCO 6) Terron gives her son stock with a basis in her hands of
$225,000 and a fair market value of $180,000. No gift tax is paid. Her son
subsequently sells the stock for $190,000. What is his recognized gain or loss
Question 11.11. (TCOs 2, 6, & 11) Juaquin owns five activities. He elects not to group
them together as a single activity under the appropriate economic unit standard. He
participates for 140 hours in Activity A, 165 hours in Activity B, 196 hours in Activity
C, 100 hours in Activity D, and 85 hours in Activity E. Which of the following
statements is CORRECT
Question 1.1. (TCOs 1, 2, 4, & 7) Dabney and Nancy are married, both gainfully
employed, and have two children who are 3 and 6 years old. Dabney's salary is
$35,000 while Nancy's salary is $40,000. During the year, they spend $7,000 for child
care expenses that are required so both of them can work outside of the home.
Calculate the credit for child and dependent care expenses
Question 2.2. (TCOs 1, 3, & 10) In 2012, Walter had the following transactions
Question 3.3. (TCOs 9 & 12) In connection with facilitating the function of the IRS in
the administration of the tax laws, comment on the utility of the following: I) the
power to make adjustments to properly reflect a taxpayer's income, and II) the
availability of interest and penalties for taxpayer noncompliance
Question 4.4. (TCOs 1 & 5) Steve has a tentative general business credit of $85,000
for the current year. His net regular tax liability before the general business credit is
$95,000, and his tentative minimum tax is $90,000. Compute Steve's allowable
general business credit for the year
Question 1.1. (TCOs 1, 6, 8, & 11) Faith inherited an undivided interest in a parcel of
land from her father on February 15, 2012. Her father had purchased the land on
August 25,1965, and his basis for the land was $325,000. The fair market value of the
land is $1,250,000 on the date of her father's death and is $1,100,000 six months
later. The executor elects the alternate valuation date. Faith has nine brothers and
sisters and each inherited a one-tenth interest
Question 2.2. (TCOs 2, 3, & 11) Discuss the computation of percentage depletion

4. Question 3.3. (TCOs 1, 2, 3, & 11) Travel status requires that the taxpayer be away
from home overnight. I) What does away from home overnight mean? II) What tax
advantages result from being in travel status
Question 4.4. (TCOs 1, 2, 3, & 11) Rachel owns rental properties. When Rachel rents
to a new tenant, she usually requires the tenant to pay an amount in addition to the
first month's rent. The additional amount serves as security for damages to the
property and the tenant's failure to pay future rents. How should the payments be
characterized (e.g., on lease documents) to minimize Rachel's current tax liability