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1. Tom and Joan Moore, both CPAs, filed a joint 1994 federal income tax return showing $70,000 in taxable
income. During 1994, Tom's daughter Laura, age 16, resided with Tom. Laura had no income of her own
and was Tom's dependent.
Determine the amount of income or loss, if any that should be included on page one of the Moores' 1994
Form 1040.
The Moores received a stock dividend in 1994 from Ace Corp. They had the option to receive either cash
or Ace stock with a fair market value of $900 as of the date of distribution. The par value of the stock was
$ 500.
A) $3,000
B) $900
C) $1,000
D) $55,000
E) $2,500
F) $1,300
G) $1,250
H) $75,000
I) $50,000
J) $2,000
K) $0
L) $10,000
M) $500
N) $25,000
O) $1,500
2. Wallace purchased 500 shares of Kingpin, Inc. 15 years ago for $25,000. Wallace has worked as an
owner/employee and owned 40% of the company throughout this time. This year, Kingpin, which is not an
S corporation, redeemed 100% of Wallace's stock for $200,000. What is the treatment and amount of
income or gain that Wallace should report?
A) $200,000 long-term capital gain.
B) $175,000 long-term capital gain.
C) $0
D) $175,000 ordinary income.
3. Which one of the following will result in an accruable expense for an accrual-basis taxpayer?
A) A repair completed prior to year end but not invoiced.
B) A repair completed prior to year end and paid upon completion.
C) A signed contract for repair work to be done and the work is to be completed at a later date.
D) An invoice dated prior to year end but the repair completed after year end.
4. During 2001, Adler had the following cash receipts:
What is the total amount that must be included in gross income on Adler's 2001 income tax return?
A) $18,400
B) $18,000
C) $19,900
D) $19,500
5. The uniform capitalization method must be used by:
I. Manufacturers of tangible personal property.
II. Retailers of personal property with $2 million dollars in average annual gross receipts for the 3
preceding years.
A) Neither I nor II.
B) I only.
C) Both I and II.
D) II only.
Solutions:
Question # 1 Answer: B | Question # 2 Answer: B | Question # 3 Answer: A | Question # 4 Answer: D | Question # 5 Answer: B |
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