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Acc565 Taxation and Estate Planning: Week 11 Final Exam Review

A review of taxation and estate planning concepts covered in Week 11 of ACC565.

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    Acc565 Taxation and Estate Planning: Week 11 Final Exam Review Report this Question as Inappropriate Question 1 Parent and Subsidiary Corporations have filed calendar - year consolidated tax returns for several years. Parent Corporation uses the cash method of accounting while Subsidiary Corporation uses the accrual method of accounting. If Parent lends Subsidiary money, Answer the interest expense is deductible when accrued. the interest expense and interest income may be reported in different consolidated return years. the interest income is reported when the interest expense is accrued by Subsidiary. the interest expense deduction is taken when Parent reports the interest income. Question 2 A consolidated return's tax liability is owed by Answer all group members in equal portions. the group member responsible for that portion of the tax liability. all group members who are severely liable. the parent corporation. Question 3 Albert contributes a Sec. 1231 asset to a partnership on June 1 of this year in exchange for a 10% partnership interest. He had purchased the asset on March 1, 2002. His holding period for the partnership interest begins Answer March 1, 2002. March 2, 2002. June 1 of the current year. June 2 of the current year. Question 4 Meg and Abby are equal partners in the AM Partnership, which earns $40,000 ordinary income, $6,000 long - term capital gain (LTCG), and $2,000 Sec. 1231 loss during the current year. What is the amount and character of income that must be reported on Abby's tax return for this year's partnership operations? Answer $20,000 ordinary income, $3,000 LTCG, $1,000 Sec. 1231 loss $19,000 ordinary income, $3,000 LTCG $23,000 ordinary income, $1,000 Sec. 1231 loss $22,000 ordinary income Question 5 Allen contributed land, which was being held for sale to Allen's customers, to a partnership in exchange for a 20% interest. The partnership uses the land in its business for three years and then sells the property. When the property was contributed, it had a basis in Allen's hands of $500,000 and an FMV of $600,000. The partnership sells the land for $700,000. The gain reported by the partnership is Answer $100,000 of ordinary income and $100,000 of Sec. 1231 gain. $100,000 of Sec. 1231 gain and $100,000 of capital gain.

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    $200,000 of ordinary income. $200,000 of Sec. 1231 gain. Question 6 The AB Partnership has a machine with an FMV of $25,000 and a basis of $20,000. The partnership has taken an $8,000 depreciation on the machine. The unrealized receivable related to the machine is Answer $0. $5,000. $8,000. $20,000. Question 7 The definition of "inventory" for purposes of Sec. 751 includes Answer cash. land held for investment. marketable securities not held by dealers. depreciation recapture potential on Sec. 1231 assets. Question 8 An S corporation is not treated as a corporate taxpayer with respect to which one of the following fringe benefits? stock options qualified retirement plans group term life insurance premiums nonqualified deferred compensation Question 9 Which one of the following individuals or entities is ineligible to be an S corporation shareholder? Answer an estate resident alien of the United States a voting trust where all of the beneficiaries are U.S. citizens a partnership where all of the partners are U.S. citizens Question 10 The recognition period for the built - in gains tax extends for how many years after the S election takes effect? Answer one year three years five years ten years Question 11 In 1998, Delores made taxable gifts to her son of property with an FMV of $200,000. In the current year when Delores dies, the property is worth $800,000. The amount included in Delores's estate tax base because of the 1998 gift is Answer

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