Question Number Two

Forty multiple choice exercises$/$problems appear below. You must answer all of them. For each problem you answer, insert the letter which indicates the correct answer in the appropriate space on the separate answer sheet. All final answers have been rounded to the nearest $\backslash (\backslash$$ $10\backslash ).$

$1.$ Spouses Bill and Betty Baker, ages $78$ and $69,$ maintain and reside in a home in which Betty's mother, Bertha, also lives. Bertha is age $92$ and blind with zero gross income. Bill and Betty provide $\backslash (100\backslash \%\backslash )$ of Bertha's support. What standard deduction will Bill and Betty claim on their joint federal income tax return for the year?

A $\backslash$$$30,700$

B $27,700$

C $28,700$

D $29,200$

E None of the above $2.$ Thomas Taylor, who was injured in an automobile accident caused by another driver, Flash Fisher, received $\backslash (\backslash$$ $20,000\backslash )$ from Flash's insurance company to cover medical bills related to Thomas' injuries, $\backslash (\backslash$$ $4,000\backslash )$ in damages because of the injury, and $\backslash (\backslash$$ $15,000\backslash )$ in in punitive damages, all during $20$x$1.$ Thomas also earned $\backslash (\backslash$$ $10,000\backslash )$ from a part$-$time job prior to the accident, received $\backslash (\backslash$$ $900\backslash )$ of United States series EE savings bond interest, and collected $\backslash (\backslash$$ $2,000\backslash )$ in unemployment benefits while out of work during the year. What is Thomas' adjusted gross for the year?

income for the year?

$3.$ Ben Baker purchased Ajax Company stock five years ago for $\backslash (\backslash$$ $9,000\backslash ),$ which he gifted to Anne Able at a time when the stock's market value was $\backslash (\backslash$$ $12,000\backslash ).$ Subsequently, Anne sold the stock for $\backslash (\backslash$$ $13,000\backslash ).$ What will be the amount of Anne's gain or loss on the sale?

$4.$ In $209,$ Russell Rogers is single with net investment income of $\backslash (\backslash$$ $18,000\backslash )$ and modified adjusted gross income of $\backslash (\backslash$$ $270,000\backslash ).$ What is the amount of Russell's net investment income tax for the year?

A $\backslash (\backslash$$ $2,660\backslash )$

B $\backslash (\backslash$quad $0\backslash )$

C $680$

D $\backslash (\backslash$quad $760\backslash )$

E None of the above

$5.$ Judith Jones, single, reports four sales of capital assets during $20$x$3,$ as set out below.

Judith's only other income for the year is salary of $\backslash (\backslash$$ $80,000\backslash ).$ What is Judith's adjusted gross income for the year?

A $\backslash (\backslash$$ $80,000\backslash )$

B $73,000$

C $\backslash (\backslash$quad $77\mathrm{.}000\backslash )$

D $70,000$

E None of the above

$6.$ Spouses, Chip and Carrie Carson, purchased a principal residence in Richmond for $375,000$ on October $1,203.$ Carrie obtained a job in Boston, and on December $1,20$x$4,$ they sold their home in Richmond for $\backslash$$$650,000$ and moved to Boston. How much gain, if any must Chip and Carrie recognize on their $204$ joint federal income tax return?

$7.$ On May $1,20$x$1,$ Maggie Mays $($cash basis$)$ leases property she owns to Tommy Thompson for rent of $\backslash (\backslash$$ $1,000\backslash )$ per month. Tommy pays Maggie $\backslash (\backslash$$ $2,000\backslash )$ as a damage deposit which will be returned at the end of the lease term. In addition, Tommy pays Maggie $\backslash (\backslash$$ $6,000\backslash )$ as advance rent which is to be applied to rent for the last six months of the lease term. The lease runs for a one year period beginning on May $1,201.$ What is Maggie's rental gross income for $20$x$1?$ Assume that Tommy also makes six other $\backslash$$$1,000$ rental payments to Maggie during $20$x$1,$

$8.$ In September, $205,$ married couple, John and Mary Mason, separate. Mary supports their two children after the separation and pays $\backslash (100\backslash \%\backslash )$ of the cost of maintaining the home in which the children live after John moved out in September, $20$x$5.$ The parties remain married as of December $\backslash (31,20\backslash$times $5\backslash ).$ John refuses to file a joint return for $20$x$5.$ Which statement is true regarding Mary's filing status on $20$x$5$ Form $1040?$

A Mary may claim abandoned spouse filing status

B Mary may file as a head of household

C Mary must file as married separate

D Mary may still file a joint return, thereby forcing John to also file jointly

E None of the above

$9.$ During $20$x$1,$ Richard Roberts purchases and places in service machinery costing $\backslash$$$20,000$ and a warehouse costing $\backslash (\backslash$$ $500,000\backslash ).$ Assume that these are the only two acquisitions of depreciable property purchased and placed in service by Richard during $20$x$1.$ What is the maximum Code Sec. $179$ deduction available to Richard for $20$x$1?$

A$.\backslash (\backslash$$ $520,000\backslash )$

B$.\backslash (\backslash$quad $0\backslash )$

C$.500,000$

D$.20,000$

E$.$ None of the above