CPA REG Practice Test 1

According to the Uniform Capitalization Rules of Code Sec 263A, which of the following costs are required to be capitalized.

A consultant has the following income items:

Self Employment Income: $55,000

Rental Income: $30,000

Dividend Income: $4,500

Long-Term Capital Gain: $3,600

Short Term Capital Loss: $2,200

What should the consultant report as passive income?

Which of the following deductions is used in calculating an individuals adjusted gross income?

Shell Corp. purchased a tractor for business use for $40,000 and made $2,000 in improvements. After deducting $7,000 for depreciation, Shell Corp gave the equipment to Bean Corp for business use. At the time the gift was made, the tractor had a fair market value of 39,000.

Ignoring gift tax consequences, what is Bean Corp.’s basis in the equipment?

Top Corp files a consolidated return with Sub Corp and Sub2 Corp. They have filed a consolidated return since their inception. The entities had the following taxable income (loss) for Year 3.

Neither member reported a capital gain or loss on charitable contribution. What is the consolidated net operating loss?

Jake owned 40% of the outstanding stock of Bell Corporation. During the year, Bell Corporation recorded $300,000 in taxable income. They also distributed $50,000 in dividends to its shareholders.

What is the gross income on Jake’s tax return if Bell Corporation is a C Corporation and what would gross income be if it was an S Corporation?

Which type of income can generally offset a passive activity loss?

Bridge Organization, a not-for-profit entity, has the following types of income. Which are included in unrelated business income?

1. Rent from real property where substantial personal service is provided
2. Gain from the sale of property not held for sale to customer in the ordinary course of business
3. Income from research activities by a hospital
4. Interest and dividend income from investments

Garret gave land to as a gift to Tyler. Garret purchased the land for $9,000 and the fair market value of the land at the time of the gift was $6,000. Tyler sold the land for $7,000. What amount of gain should be recorded?

Grant sold a personal residence with an adjusted basis of $80,000 for $175,000. He owned and lived in the residence for 9 years. The selling expense on the property was $15,000. A month before the sale, Grant upgraded all the sinks for $3,000.

What is the gain recognized by Grant if he is unmarried?