Answer all questions and problems appearing on this examination under rules governing federal income taxation. Unless instructed otherwise, assume the relevant year to be$2023.$

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All final answers have been rounded to the nearest $$10.$

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$1.$ Effective January $1,20$x$2,$ Andrew Arnold purchased an annuity for $$110,000,$ the terms of which provide for payments to him of $$15,250$ annually for$$ twelve years.$$ How much, if any,$$ of the $$15,250$ received in $20$x$4$ will Andrew report as gross income$$ on his $20$x$4$ Form$1040?$

A$$ $$9,170$

B$6,080$

C$5,250$

D$11,000$

E$$ None of the above

$2.$ Carl Cox gave his daughter, Ellen, his personal residence in $20$x$5.$ Carl had a basis of $$260,000$ for the house, which had a market$$ value$$ of $$240,000$ on the date$$ of the gift.$$ Ellen lived in the house as her personal residence for three years, then sold it in $20$x$7$ for $$230,000.$

How will Ellen report the sale of the house on her $20$x$7$ Form $1040?$ A$$ Recognize a $$10,000$ loss

B$$ Recognize a $$20,000$ loss C$$ Recognize a $$30,000$ loss D Recognize a zero loss

E None of the above

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$3.$ Taxpayer, Donna Dawson, on her $20$x$6$ federal income tax return correctly claims her son as a dependent.$$ Assume that the son earns $$7,000$ in $20$x$6$ mowing lawns while away from home attending college and that the son files a $20$x$6$ Form $1040.$ What personal exemption deduction amount may the son claim on his $20$x$6$ Form $1040?$

A$$ $$4,200$

B$0$

C$1,000$

D$4,300$

E$$ None of the above

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$4.$ Taxpayer acquired a personal use asset two years ago at a cost of $$700.$ Six months ago the taxpayer expended $$400$ to extend the asset's useful life and also make it more productive. One year later, when the asset has a fair market value of $$900,$ Taxpayer converts the machine to business use. For depreciation purposes, at what basis amount will the asset convert to business use?

A$700$

B$1,100$

C$900$

D$0$

E$$ None of the above

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$5.$ Albert Able is a former resident of Richmond, Virginia, but has lived in Ohio for the past three years. Albert is $100\%$ supported by the three individuals listed below, all of whom reside in Richmond.

Albert's brother Franklin Albert's son Charles Unrelated friend, Patrick

$($provided $44\%$ of Albert's support$)($provided $8\%$ of Albert's support$)($provided $48\%$ of Albert's support$)$

Who, if anyone, would be eligible to claim Albert as a dependent? dependent?

A$$ Franklin only

B$$ Charles only

C$$ Patrick only

D$$ Franklin or Patrick E None of the above

$6.$ On August $4,20$x$1,$ calendar year taxpayer Ben Baker acquires and places in service in his sole proprietorship a machine$$ at a cost of $$70,000.$ Assume$$ that the machine has a useful life of $15$ years and a salvage value of $$10,000.$ Assume also that the machine is a MACRS $7$ year asset, that Ben does not claim an IRC $179$ deduction or bonus depreciation, and that Ben purchases no other depreciable assets during the year. What depreciation deduction will Ben claim on his

$20$x$3($third year$)$ Form $1040,$ Schedule C$?$ A$$ $$10,490$

B$3,500$

C$10,720$

D$5,750$

E$$ None of the above

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$7.$ Joan Johnson is married to a nonresident alien who files federal income tax returns using a June $30$ fiscal year. Joan provides $60\%$ of the cost of maintaining a household in which

a qualifying child of Joan resides for all twelve months of calendar year $20$x$2.$ Assuming that Joan seeks to incur the lowest possible income tax liability, what $20$x$2$ Form $1040$ filing status will Joan use?

A$$ Single

B$$ Married joint

C$$ Married separate D Head of household E None of the above

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$8.$ Chris Crone $($age $67)$ is married, but will file as married separate. Assume that Chris has one child, who qualifies as his dependent. Assume also that Chris' spouse has already filed Form $1040($as married separate$)$ claiming itemized deductions of $$17,000$ on

the return. Assume finally that Chris has AGI of $$50,000$ for the year, but has only

$$7,000$ of qualifying itemized deductions and wishes to claim the standard deduction for the year. What is Chris' taxable income for the year?

A$$ $ $38,000$

B$32,700$

C$36,700$

D$43,000$

E$$ None of the above