Jan 16, 2018 sample paper

# How much self-employment tax must Robert pay?

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Gisela gave Ellen stock worth \$50,000 this year. Gisela
purchased the stock for \$60,000 four years ago. Calculate Ellen’s basis for the
stock if she sells it

a. for \$65,000. \$

b. for \$45,000. \$

c. for \$55,000. \$

Question 2

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On June 26, 2013, Elaine purchased and placed into service a
new computer system costing \$8,000. The computer system was used 80 percent for
business and 20 percent for personal use in both 2013 and 2014 and Elaine
claimed only regular MACRS depreciation. In 2015, the computer system was used
45 percent for business and 55 percent for personal use.

a. Compute the depreciation deduction for the computer
system in 2015 and the cost recovery recapture.

Depreciation deduction: \$

Cost recovery recapture: \$

b. Assume that Elaine had instead expensed the cost of the
computer system under Section 179 in 2013. Compute the cost recovery recapture
in 2015.

\$

Question 3

Partially correct

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Indicate whether a taxpayer can claim deductions for
depreciation or amortization for the following.

Land used in the taxpayer’s ranching business.

An automobile used in business. The taxpayer accounts for
the deductible car expenses using the standard mileage rate.

The costs attributable to goodwill and a
covenant-not-to-compete.

Question 4

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Linda inherited a car from her Uncle Ted, who had purchased
the car two years ago for \$38,000. The car’s value was \$30,000 at the date of
Ted’s death. What is Linda’s basis for the car?

Question 5

Incorrect

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Robert, the sole proprietor of a consulting business, has
gross receipts of \$600,000 in 2015. Expenses paid by his business are

Robert purchased a used car for his business on May 15 for
\$28,000. He also purchased \$50,000 of new 5-year equipment and \$238,000 of used
7-year fixtures on August 1. Robert drove the car 10,000 miles (8,000 for
business and 2,000 personal miles). He paid \$200 for business-related parking
and tolls. He also paid \$1,000 for insurance and \$1,200 for gasoline and oil
for the new car. He would like to maximize his deductions. Assume that the 2014
Section 179 and bonus depreciation provisions were extended into 2015.

a. What is Robert’s net income (loss) from his business?

\$

b. How much self-employment tax must Robert pay?

\$

c. If this is Robert’s only source of income, what is his

\$

Question 6

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Go to the IRS Web site at www.irs.gov and locate Publication
946: How to Depreciate Property. Locate the depreciation tables at the end of
the publication and calculate the first-year depreciation for a \$60,000 bus

Question 7

Partially correct

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Kondar Corporation (a calendar-year taxpayer) spent
\$2,050,000 to purchase used machinery in February 2014.

a. What was the maximum that Kondar could elect to expense
under Section 179?

\$

b. What was the basis for calculating regular MACRS
depreciation on this machinery if the maximum Section 179 deduction was
elected?

\$

c. What was Kondar’s total depreciation deduction for 2014?

\$

d. What is Kondar’s depreciation deduction for this
machinery for 2015?

\$

Question 8

Correct

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Goldrush Corporation bought a mine in year 1 for \$90,000 and
estimated there were 100,000 tons of extractable ore. In year 1, it mined 8,000
tons and sold 7,000 tons. In year 2, it mined 7,000 and sold the remaining
1,000 tons from year 1 and 6,500 of the ore mined in year 2. At the end of year
2, Goldrush Corporation estimated that, including the ore extracted but unsold,
there were 160,000 tons of ore remaining. Compute the allowable cost depletion
for year 1 and year 2.

a. Year 1? \$

b. Year 2? \$

Question 9

Correct

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At the beginning of 2015, AB Corporation (a calendar-year
corporation) owned the following assets:

On February 1, 2015, AB sold its office furniture. On March
15, 2015, AB sold its computer equipment. Compute AB Corporation’s 2015
depreciation deduction for these two assets.

a. Office Furniture \$

b. Computer Equipment \$

Question 10

Correct

10.00 points out of 10.00

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Go to the IRS Web site at www.irs.gov and locate Publication
946: How to Depreciate Property. Locate the depreciation tables at the end of
the publication and calculate the regular first-year depreciation for the
following assets, all placed in service in the third month of the year:

a. Sidewalks costing \$6,000: \$

b. Dairy milking barn costing \$120,000: \$

c. Tugboat costing \$85,000: \$

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