ACCT 3151 Taxation
33. This
year, GarfieldInc.generated a$25,000netoperating loss.Whichofthefollowingstatementsisfalse? A.IfGarfieldcancarrytheentireNOLbacktodeductagainstprioryeartaxableincome,theNOLwillhaveno deferredtaxconsequences. B. IfGarfieldcan'tuseanyoftheNOLasacarrybackdeduction,theNOLwillresultinadeferred taxliability.C. GarfieldcanelecttogiveupthecarrybackoftheNOL.
D.IfGarfieldcan'tuseanyoftheNOLasacarryback
deduction,itcancarrytheNOLforwardfor20years.
34.PooleCompanymadea$100,000
cashexpenditurethisyear.Whichofthefollowingstatementsisfalse?
A.Poolemustcapitalize
theexpenditureifitcreatesanewassetthatthecompany canuseforthenextfouryears. B. Poolemustcapitalizetheexpenditureifitextendstheestimatedusefullifeofanexistingassetbythreeyears.
C. Poolemustcapitalizetheexpenditureifitresultsinalong-term
economicbenefittothecompany. D. Noneoftheaboveisfalse. 35.KassimCompanypurchasedanassetbypaying$35,000cashandgivingthesellerits3-yearnotefor $240,000.Whichofthefollowingstatementsistrue?
A. Kassim'sbook basis
and tax basis in the asset is $275,000.
B. Kassim'sbookbasis
is$275,000,butitstaxbasisis$35,000.
C. Kassim'sbook basis
and tax basis in the asset is $35,000.
D.IfKassimisacashbasistaxpayer,
itsinitialtaxbasisintheassetiszero. 36.AbasicpremiseoffederalincometaxlawisthatanexpenseisdeductibleunlesstheInternalRevenueCodespecificallyprohibitsthededuction. 37.CosmoInc.paid$15,000 plus$825salestaxplusa$200delivery chargeforanewbusiness asset.Cosmo'staxbasisintheassetis$15,200, anditcandeductthesalestax.(TRUE/FALSE) 38. CosmoInc.purchasedanassetcosting$67,500bypaying$13,500cashatdateofpurchaseandgivingthesellera5-yearinterest-bearingnoteforthe$54,000balance.Cosmo'staxbasisintheassetis$13,500.
(TRUE/FALSE)
39.ColbyCompany
performedprofessionalservicesforM&EInc.Inexchangefortheservices,M&EgaveColbya12-monthleaseoncommercialofficespace.M&Ecouldhavecharged$4,350monthlyrentforthespace ontheopenmarket.ComputeColby'staxbasisinthelease.
A.Theleaseisanintangible
assetandthereforehasazerobasistoColby.B. TheleasehasazerobasisbecauseColbyobtainedtheleaseatnocost.C. $52,200.
D.Noneoftheabove
40. Broadus.,acalendar yeartaxpayer,purchasedatotalof$128,300 tangiblepersonaltyin2012.Broadus' taxableincomewithoutregardtoaSection179deductionwas$92,600.Whichofthefollowingstatementsis true? A.Broaduscanelecttoexpenseonly$92,600ofthecostofthepersonalty. B. Broaduscanelecttoexpensethe$128,300costofthepersonaltybutcandeductonly$92,600oftheexpense. C. Broaduscanelecttoexpenseonly$35,700ofthecostofthepersonalty. D.Broaduscanelecttoexpensethe$168,300costofthepersonaltybutcandeductonly$35,700oftheexpense.
41.Whichofthefollowingcapitalizedcostisnotamortizablefortaxpurposes?
A. Purchasecostofapartnershipinterest
B. Purchase cost
of business goodwill
C. Leaseholdcost
D.Purchase
costofapatent 42.PowellInc.wasincorporatedandbeganoperationsonOctober1andadopted acalendaryearfortaxpurposes. Powellpaid$4,200totheattorneywhohandledthecorporateformation.Whichofthefollowingstatementsis true?
A.IfPowellcapitalizedthe$4,200paymentforfinancial
statementpurposes,itmustalsocapitalizeitfortaxpurposes. B. Powellcandeductthe$4,200paymentonitsfirsttaxreturn. C. Fortaxpurposes,Powellmustcapitalizethe$4,200organizationalcostandamortizeitover15years.D.Noneoftheaboveistrue. 43.LenociInc.paid$310,000 forequipmentthreeyearsago.Thisyear,itsoldtheequipmentfor$200,000. Throughdateofsale,accumulatedbookdepreciationwas$93,840andaccumulatedtaxdepreciationwas $147,327.Whichofthefollowingstatementsistrue? A.Thesaleresultsina$53,487favorabletemporarybook/taxdifference. B. Thesaleresultsina$53,487unfavorabletemporarybook/taxdifference. C. Thesaleresultsina$53,487unfavorablepermanentbook/taxdifference. D.Noneoftheaboveistrue.
44.O&V
soldanassetwitha$78,300 adjustedtaxbasisfor$100,000.Thepurchaserpaid$30,000incashand assumedO&V's $70,000mortgageontheasset.ComputeO&V'snetcashflowfromthesaleassuming a35%taxrate.
A. $22,405
B. $13,095
C. $14,105
D.Noneoftheabove
45.Thisyear,MsLucassoldinvestmentlandfor$125,000cashplusthepurchaser'sassumptionofa$50,000mortgageontheland.Ms.Lucas'taxbasisinthelandwas$93,000.Ifanyrecognizedgainistaxedat15percent, computetheafter-taxcashflowfromthesale.
A.$62,300
B. $69,700
C. $112,700
D.$162,700
46.Mr.Quicksoldmarketablesecuritieswitha$112,900 taxbasistohis100%ownedcorporationfor$95,000 cash.Whichofthefollowingstatementsistrue? A.IfMr.QuickcanofferevidencethattheFMVofthesecuritiesis$95,000,hecanrecognizehis$17,900 realizedloss. B. IfMr.Quickandhiscorporationnegotiatedthetermsofthesaleatarm'slength,Mr.Quickcanrecognizehis $17,900realized loss. C. Thecorporation'staxbasisinthesecuritiesis$112,900. D.Noneoftheaboveistrue.
47.Whichofthefollowing
isacapitalasset?A.Supplies usedinabusiness
B. Business
inventory
C. Landusedinabusiness
D.Noneoftheabove
48. RizziCorporationsoldacapital assetwitha$692,000 bookandtaxbasisfor$650,000cash.ThiswasRizzi's
onlyassetsaleduringtheyear.Thesaleresultsin:
A.$42,000unfavorablepermanentbook/taxdifference
B. $42,000unfavorabletemporarybook/taxdifference
C. $42,000favorablepermanentbook/taxdifference
D.Nobook/tax
difference