1. Regarding the tax treatment of a business's research and experimental (R&E) expenditures, which of the following statements is true?
a. A common reason for electing tax deferral for such expenses is the expectation of lower tax rates in the future.
b. Expenses associated with the acquisition of land upon which a purpose-built
R&E facility is constructed are considered R&E expenditures for tax purposes.
d. Companies may elect to immediately expense R&E costs incurred in the first applicable taxable year and all future years through an appropriate filing with the IRS.
2. Identify the correct statement below regarding the domestic production activities deduction (DPAD).
a. Qualified production activities income (QPAI) is calculated by applying a percentage to net income from an IRS rate table based on specific criteria.
b. The DPAD cannot exceed attributable W-2 wages paid.
c. A sole proprietorship cannot claim the DPAD, but a partnership or an S corporation with more than one shareholder can.
3. Newton, a business owner, signed a ten-year lease beginning in July of 2015, and immediately paid rent for the remainder of 2015, all of 2016, and all of 2017. How much of the rent paid at the lease signing can be declared as a business expense on Schedule C of Newton's 2016 tax return?
a. All of it
b. The July 2015-June 2016 portion only
c. None of it
4. A sale between which of the following could trigger a gain or a loss for Federal tax purposes?
a. Husband and wife
c. Majority shareholder and corporation
d. Ancestor and descendent
5. Quanti Co., a calendar year taxpayer, purchased equipment for $5,000 on December
21, 2016, representing the company's only purchase of tangible personal property that took place during 2016. On its 2016 tax return, how many months of MACRS depreciation may Quanti Co. claim on the tools?
a. One and a half months
b. One month
c. Six months
d. None
6. Which of the following is correct about depreciation under Federal tax law?
I. The recovery period is longer than the useful life of the asset.
II. There are different recovery periods for new and used property.
III. Salvage values are ignored.
b. II only
d. I, II, and III
7. Joe purchased a van on February 1, 2016, for use in his business, Crew Airport Transport. The van was purchased for $30,000, has an estimated useful life of 10 years, and has a Salvage value of $2,000. No other assets were put into service that year. What is Joe's MACRS depreciation for the van in 2016?
a. $2,567
c. $10,500
d. $10,267
8. Dolly purchased and placed into service qualifying depreciable property in 2016 at a total cost of $2,250,000. Dolly has elected to take the § 179 deduction. What is Dolly's § 179 deduction for 2016?
a. $0
c. $500,000
d. $1,750,000
9. In 2016, Christa purchased and placed into service five-year assets at a total cost of $2,250,000. If Christa elects both the § 179 deduction and additional first-year bonus depreciation, but does not elect the straight-line method, what is Christa's depreciation expense for tax purposes for the year, assuming a half-year convention?
a. $260,000
b. $500,000
c. $1,250,000
10. Orange, Inc., a calendar year C corporation, has $800,000 of qualified production activities income (QPAI) and $950,000 of total taxable income in 2016. All of the QDPAI was produced by Orange's manufacturing plant, which relies mainly on a temporary employment agency for its workforce, employing only two W-2 employees who in aggregate earned $140,000 in 2016. Orange also has an office in Mexico, which is unrelated to its domestic manufacturing plant and which employs one W-2 employee, who earned $75,000 in 2016. What amount of domestic production activities deduction may Orange claim on its 2016 corporate tax return?
a. $73,350
b. $72,000
c. Depends on wages paid by employment agency