1) Ben Chase needs to pay off some of his debts over the next few months. Which item on his balance sheet would help him decide what amounts are due in the near future? A. Current liabilities B. The budget variance C. Investment assets D. Current assets 

2) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of A. $23,000 B. $45,000 C. $67,000 D. $22,000 

3) A budget deficit would result when a person's or family's A. actual expenses are less than planned expenses B. net worth decreases C. assets exceed liabilities D. actual expenses are greater than planned expenses

 4) The tax base for an individual tax return is A. gross income B. realized income from whatever source derived C. adjusted gross income minus from AGI deductions D. adjusted gross income

 5) All of the following are for AGI deductions EXCEPT A. rental and royalty expenses B. moving expenses C. charitable contributions D. business expenses 

6) Which of the following series of inequalities is generally most accurate? A. Adjusted gross income is greater than or equal to gross income which is greater than or equal to taxable income B. Gross income is greater than or equal to adjusted gross income which is greater than or equal to taxable income C. Gross income is greater than or equal to taxable income which is greater than or equal to adjusted gross income D. Adjusted gross income is greater than or equal to taxable income which is greater than or equalt to gross income

 7) Which of the following has the lowest authoritative weight? A. Private letter ruling B. Legislative regulation C. Interpretive regulation D. Revenue ruling

 8) Josephine is considering taking a 6-month rotation in Paris for her job. Which type of authority may be especially helpful in determining the tax consequences of Josephine's job in Paris? A. Tax treaty B. Determination letter C. Private letter ruling D. Regulation 

9) Which of the following has the highest authoritative weight? A. Tax article B. Text book C. Private letter ruling D. Revenue ruling

 10) Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because A. health insurance premiums cannot be deducted otherwise B. employers are allowed to deduct social security (FICA) taxes as a business expense C. self-employed taxpayers need an alternate mechanism for reducing the cost of health care D. this deduction provides a measure of equity between employees and the self-employed 

11) Hector is a married self-employed taxpayer, and this year he paid $3,000 for his health insurance premiums. Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI? A. Hector can deduct the health insurance premiums regardless of the insurance status of his spouse. B. Hector chose not to participate in the employer-sponsored plan of his spouse. C. Hector's spouse participates in an employer-sponsored plan, but Hector is not eligible to participate in this plan. D. Neither Hector nor his spouse participates in an employer-sponsored plan although both are eligible to participate in a plan. 

12) Graham has accepted an offer to do graduate work in the chemistry department at State University. The chemistry department offered Graham a scholarship that will pay $5,000 toward his tuition, $500 toward his university fees, and $3,500 toward the cost of room and meals. Under the terms of the scholarship, Graham must work in the chemistry labs during the summer. What amount must Graham include in his gross income? A. $4,000 B. $4,000 C. $9,000 D. $5,500 

13) After a meeting with a prospective client, Holly paid for dinner. After dinner, Holly took the prospective client to the theatre. Holly paid $290 for the meal and $250 for the tickets, amounts that were reasonable under the circumstances. What amount of these expenditures can Holly deduct as a business expense? A. None?the meals and entertainment are not deductible except during travel. B. $540 C. $415 D. $270 

14) Rhianna and Jay are married filing jointly in 2009. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2009 tax return? A. $4,000 B. $5,300 C. $6,000 D. $12,000 

15) Which of the following taxes will not qualify as an itemized deduction? A. Real estate taxes on a residence B. Personal property taxes assessed on the value of specific property C. Gasoline taxes on personal travel D. State, local, and foreign income taxes 

16) Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss? A. $400,000 ordinary gain B. $40,000 ordinary and $360,000 Section 1231 gain C. $400,000 capital gain D. $200,000 ordinary and $200,000 Section 1231 gain 

17) The sale of machinery for more than the original cost basis (before depreciation), used in a trade or business, and held for more than one year results in the following types of gain or loss: A. Capital and Section 1231 B. Capital and ordinary C. Section 1245 and Section 1231 D. Ordinary only 

18) Winchester LLC sold the following business assets during the current year: (1) automobile, $30,000 cost basis, $12,000 depreciation, proceeds $20,000; (2) machinery, $25,000 cost basis, $20,000 depreciation, proceeds $10,000; (3) furniture, $15,000 cost basis, $10,000 depreciation, proceeds $4,000; (4) computer equipment, $25,000 cost basis, $6,000 depreciation, proceeds $10,000; (5) Winchester had unrecaptured Section 1231 losses of $3,000 in the prior 5 years. What is the amount and character of Winchester's gains and losses before the 1231 netting process? A. $7,000 ordinary loss, $4,000 Section 1231 gain B. $3,000 ordinary loss, $0 Section 1231 loss C. $1,000 ordinary gain, $4,000 Section 1231 loss D. $7,000 ordinary gain, $10,000 Section 1231 loss 

19) On the sale of a passive activity, any suspended losses can be used to offset income from A. wages and tips B. other passive activities C. All answers are correct. D. capital gains

 20) Which of the following would be considered passive income? A. Dividends B. Rental real estate income C. Capital gains from sale of mutual funds D. Salary for part-time job

 21) Which of the following would be considered active income? A. Rental real estate income B. Salary for part-time job C. Dividends D. Capital gains from sale of mutual funds 

22) Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $20,000 of qualified nonrecourse debt and $20,000 of debt she is not responsible to repay because she is a limited partner. Sue is allocated a 10 percent share of both types of debt. During the year, ABC LP generated a ($90,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount? A. Zero; all of her loss is allowed to be deducted. B. $2,000 disallowed because of her at-risk amount C. $2,000 disallowed because of her tax basis D. $7,000 disallowed because of her tax basis 

23) Harvey rents his second home. During 2009, Harvey reported a net loss of $35,000 from the rental. If Harvey is an active participant in the rental and his AGI is $80,000, how much of the loss can he deduct against ordinary income in 2009? A. $35,000 B. $25,000 C. $5,000 D. $0 

24) What happens when a taxpayer experiences a net loss from a rental home? A. The taxpayer will not be allowed to deduct the loss under any circumstance if the taxpayer does not have passive income from other sources. B. The loss is fully deductible against the taxpayer's ordinary income, no matter the circumstances. C. If the taxpayer is not an active participant in the rental, the taxpayer may be allowed to deduct the loss even if the taxpayer does not have any sources of passive income. D. If the taxpayer is not allowed to deduct the loss due to the passive activity limitations, the loss is suspended and carried forward until the taxpayer generates passive income or until the taxpayer sells the property.

 25) What is the minimum ownership percentage an owner must have in the entity to avoid gain recognition when property is contributed? A. S corporation ? No minimum ownership percentage is required. B. Taxable corporation ? 80% before property contribution C. Partnership ? 80% after the property contribution D. LLC ? No minimum ownership percentage is required. 

26) What is the tax impact to a taxable corporation or an S corporation when it makes a property distribution to a shareholder? A. Recognizes either gain or loss B. Does not recognize gain or loss C. Recognizes gain only D. Recognizes loss only 

27) What item(s) affect the tax basis of a shareholder in a taxable corporation? A. Income allocated from the entity to owner B. Distributions from earnings and profits to the shareholder C. Distributions in excess of earnings and profits to the shareholder D. Liabilities allocated from the corporation to the shareholder 

28) Antoine transfers property with a tax basis of $500 and a fair market value of $600 to a corporation in exchange for stock with a fair market value of $550 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of $50 on the property transferred. What is Antoine's tax basis in the stock received in the exchange? A. $500 B. $600 C. $450 D. $550 

29) Which of the following requirements do not have to be met in a Section 351 transaction? A. Only property transferred to a corporation is eligible for deferral. B. Each transferor of property must receive stock equal to at least 80 percent of the fair market value of the property transferred. C. All transfers of property to a corporation must be made simultaneously to qualify for deferral. D. In the aggregate, the transferors of property to the corporation must collectively control the corporation immediately after the transfers. 

30) Inez transfers property with a tax basis of $200 and a fair market value of $300 to a corporation in exchange for stock with a fair market value of $250 in a transaction that qualifies for deferral under Section 351. The corporation assumed a liability of $50 on the property transferred. What is the corporation's tax basis in the property received in the exchange? A. $250 B. $150 C. $300 D. $200