CHAPTER 7 TB

50. Which of the following is not a taxpayer filing status for purposes of determining the
appropriate tax rate
schedule?
A. Head of Household
B. Qualifying Widow or Widower
C. Married Filing Separately
D. Single
E. All of these are taxpayer filing statuses
51. The taxable income levels in the married filing jointly tax rate schedule are _______
those in the married
filing separately schedule.
A. the same as
B. double
C. half the amount of
D. none of these
52. Linda is a qualifying widow in 2012. In 2012, she reported $75,000 of taxable income
(all ordinary).
What is her gross tax liability using the tax rate schedules?
A. $10,810
B. $14,890
C. $14,780
D. $13,518

(75,000 70,700) * .25 + 9735 = 10,810

53. Miley, a single taxpayer, plans on reporting $26,350 of taxable income this year (all
of her income is
from a part-time job). She is considering applying for a second part-time job that would
give her an
additional $10,000 of taxable income. By how much will the income from the second job
increase her tax
liability (use the tax rate schedules)?
A. $1,000
B. $1,500
C. $1,600
D. $2,500
54. Tamra and Jacob are married and they file a joint tax return. Tamra received nearly
three times the salary
that Jacob received. Which of the following statements is true?
A. Tamra and Jacob likely pay no tax marriage penalty nor receive a tax marriage benefit.

B. Tamra and Jacob likely pay a tax marriage penalty.

C. Tamra and Jacob likely receive a tax marriage benefit.
D. Tamra and Jacob likely will pay a tax marriage penalty and receive a tax marriage
benefit.
55. Stephanie and Mitch are married and they file a joint tax return. Mitch received a
slightly higher salary
than Stephanie did during the year. Which of the following statements is true?
A. Stephanie and Mitch likely pay no tax marriage penalty nor receive a tax marriage
benefit.
B. Stephanie and Mitch likely pay a tax marriage penalty.
C. Stephanie and Mitch likely receive a tax marriage benefit.
D. Stephanie and Mitch likely will pay a tax marriage penalty and receive a tax marriage
benefit.
56. Harrison received a qualified dividend. Without knowing any additional facts, which
of the following
statements is true regarding the rate at which the dividend will be taxed to Harrison?
A. The dividend will be taxed at a 15% tax rate.
B. The dividend will be taxed at a 0% tax rate.
C. The entire dividend will be taxed at either 0% or the entire dividend will be taxed at
15% depending on
Harrison's marginal ordinary income tax rate.
D. None of these.
57. Jamie is single. In 2012, she reported $100,000 of taxable income, including a longterm capital gain
of $5,000. What is her gross tax liability, rounded to the nearest whole dollar amount (use
the tax rate
schedules)?
A. $22,861
B. $21,461
C. $20,811
D. $15,000
58. Angelena files as a head of household. In 2012, she reported $50,000 of taxable
income, including a
$10,000 qualified dividend. What is her gross tax liability, rounded to the nearest whole
dollar amount
(use the tax rate schedules)?
A. $5,380
B. $5,778
C. $7,500
D. $7,145
59. Which of the following is not a barrier to income shifting among family members?

A. The assignment of income doctrine

B. Net unearned income for children 18 and younger taxed at parents' marginal tax rates
C. Elimination of preferential tax rates (on dividends and long-term capital gains)
for dependents
D. Two of these
60. The Olympians have three children. The kiddie tax applies to unearned income
received by which of the
following children?
A. Poseidon is a 20-year-old full-time student who does not support himself.
B. Demeter, a 23-year-old full-time student who supports herself with a job at a grocery
store.
C. Zeus is 20 years old and not a student.
D. Two of these.
E. None of these.
61. Assuming the kiddie tax applies, what amount of a child's income is subject to the
kiddie tax?
A. All of it
B. All of the unearned income
C. The net unearned income
D. Taxable income less the standard deduction
62. During 2012, Montoya (age 15) received $2,200 from a corporate bond. He also
received $600 from
a savings account established for him by his parents. Montoya lives with his parents and
he is their
dependent. What is Montoya's taxable income?
A. $0
B. $2,200
C. $2,800
D. $1,850
63. During 2012, Jasmine (age 12) received $2,400 from a corporate bond. She also
received $600 from
a savings account established for her by her parents. Jasmine lives with her parents and
she is their
dependent. Assuming her parents' marginal tax rate is 28%, what is Jasmine's gross tax
liability?
A. $0
B. $95
C. $308
D. $403
64. Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2012,
Hestia received

$1,000 of interest income from a bond that she owns. In addition, she has earned income
of $200. What is
her taxable income for 2012?
A. $0
B. $250
C. $700
D. $1,200
65. Montague (age 15) is claimed as a dependent by his parents Matt and Mary. In 2012,
Montague received
$5,000 of qualified dividends and he received $800 from a part time job. What is his
taxable income for
2012?
A. $100
B. $3,900
C. $4,700
D. $4,850
66. Hester (age 17) is claimed as a dependent by his parents, Charlton and Abigail. In
2012, Hester received
$10,000 of qualified dividends and he received $6,000 from a part time job. What is his
taxable income
for 2012?
A. $16,000
B. $15,050
C. $10,050
D. $9,700
67. The alternative minimum tax base is typically ______ the regular income tax base.
A. smaller than
B. about the same as
C. larger than
D. exactly the same as
68. The computation of the alternative minimum tax base begins with regular taxable
income. Which of the
following is not part of the formula for computing the alternative minimum tax base?
A. Subtract personal exemptions.
B. Add the standard deduction amount if used for regular tax.
C. Subtract the AMT exemption amount (if any).
D. Add back tax exempt interest from a private activity bond not issued in 2009 or 2010.

69. In 2012, Maia (who files as a head of household) reported regular taxable income of
$115,000. She
itemized her deductions, deducting $8,000 in charitable contributions and $3,000 in state
income taxes.
She claimed exemptions for herself and her son, Hermes, ($3,800 each). What is Maia's
alternative
minimum taxable income?
A. $118,000
B. $115,000
C. $118,800
D. $125,600

115000 + 3000 + 3800 + 3800

70. Which of the following items is not added back to regular taxable income in
computing alternative
minimum taxable income?
A. Home mortgage interest expense.
B. Real property taxes.
C. Tax exempt interest from a private activity bond issued in 2007.
D. Miscellaneous itemized deductions in excess of the 2% floor.
Home equity interest is added back if proceeds from the loan are not used to
acquire or substantially improve the home.

71. Which of the following statements regarding the AMT exemption amounts is not
true?
A. The amount of the exemption depends on the taxpayer's filing status.
B. The exemption amount is completely phased-out for high income taxpayers.
C. Taxpayers must choose whether they will claim the exemption or itemize
deductions.
D. None of these statements is false (all of these statements are true).
72. Persephone has a regular tax liability of $12,475 and a tentative minimum tax of
$11,500. Given just this information, what is her alternative minimum tax liability for the
year?
A. $0
B. $11,500
C. $975
D. $12,475

Because Persephone's regular tax liability exceeds the tentative minimum tax, she
does not owe any alternative minimum tax.

73. Harmony reports a regular tax liability of $15,000 and tentative minimum tax of
$17,000. Given just this
information, what is her alternative minimum tax liability for the year?
A. $0
B. $2,000
C. $15,000
D. $17,000
74. Which of the following statements accurately describes the alternative minimum tax
rate(s)?
A. The top AMT marginal rate is higher than the top regular tax marginal tax rate.
B. The AMT rates represent a progressive tax rate structure.
C. The AMT rate is the same rate for all taxpayers.
D. None of these.
75. Which of the following is not typical of taxpayers who are most likely affected by the
AMT?
A. Have many dependents
B. Pay high state income tax
C. Pay high property taxes
D. Have relatively low capital gains
76. Which of the following could explain why an increasing number of taxpayers are
subject to (or couldbecome subject to) AMT?
A. Decreasing regular tax rates
B. The AMT exemption amount is indexed to increase with inflation
C. Property values are decreasing
D.The personal and dependency exemption amounts are not increasing as fast as the
AMT exemption is decreasing
77. Asteria earned a $25,500 salary as an employee in 2012. How much should her
employer have withheld
from her paycheck for FICA taxes (rounded to the nearest whole dollar amount)?
A. $370
B. $1,071
C. $1,441
D. $3,392
78. Baker earned $113,300 of salary as an employee in 2012. How much should his
employer have withheld
from his paycheck for FICA taxes (rounded to the nearest whole dollar amount)?
A. $1,643
B. $8,667
C. $6,267

D. $6,401
79. Hera had FICA taxes withheld on the $112,000 salary she received as an employee in
2012. Her husband,
Zeus, made $70,000 as an employee at a Greek gyro stand. How much must Zeus have
withheld for FICA
taxes for 2012, assuming he files a joint return with Hera?
A. $0
B. $1,015
C. $5,355
D. $3,955
80. Which of the following statements regarding FICA taxes is true?
A. Low income employees are not required to pay FICA taxes.
B.
An employee who has two different employers during the year may be entitled to a
tax credit for
overpaid FICA taxes.
C.
The maximum amount of Medicare taxes an employee is required to pay is capped each
year but the
maximum amount of Social Security taxes is not.
D. The wage base limit for FICA taxes depends on the taxpayer's filing status.
81. Which of the following suggests that a working taxpayer is an independent contractor
rather than an
employee?
A. Works for more than one firm
B. May realize a loss from business activities
C. Sets own working hours
D. Works somewhere other than on employer premises
E. All of these suggest independent contractor status
82. Which of the following statements best describes the deductions independent
contractors may claim for
valid business expenses?
A. for AGI deductions
B. from AGI deductions not subject to the two percent of AGI floor
C. from AGI deductions subject to a two percent of AGI floor
D. for AGI deductions limited to income from the business activities
83. The wage base for which of the following taxes is capped?
A. Federal income
B. Social Security
C. Medicare
D. Alternative minimum

84. Which of the following statements regarding the self-employment tax is most
accurate?
A.
The self-employment tax base is generally the taxpayer's net income from selfemployment (usually
net income from Schedule C).
B.
Taxpayers who report less than $600 of net income from self-employment (usually net
income from
Schedule C) are not required to pay self employment taxes.
C.
The self-employment tax base is net earnings from self employment which is less
than net income from
self-employment.
D. The Social Security tax limit does not apply to self-employment taxes.
85. Which of the following best describes the manner in which self-employed taxpayers
may deduct selfemployment
taxes?
A. Deduct employer portion from AGI.
B. Deduct entire amount from AGI.
C. Deduct employer portion for AGI.
D. Deduct entire amount for AGI.
E. No deduction
86. For taxpayers who receive both salary as an employee and self-employment income
as an independent
contractor in the same year, which of the following statements regarding FICA and selfemployment
taxes is most accurate?
A. The Social Security limit applies to the salary but not to the self-employment income.
B. The Social Security limit applies to the self-employment income but not to the salary.
C.
Salary is first applied against the Social Security limit and then self-employment
income is applied
against the Social Security limit.
D.
Self-employment income is first applied against the Social Security limit and then salary
is applied
against the Social Security limit.
87. Which of the following statements concerning differences between employees and
independent
contractors is most accurate?

A. Employees and independent contractors deduct business expenses as miscellaneous

itemized
deductions.
B.While employees are typically eligible for nontaxable fringe benefits from
employers, independentcontractors are not.
C.Employers are required to withhold either FICA or self employment taxes from
compensation paid to
employees and compensation paid to independent contractors.
D.Employers typically withhold federal income taxes from compensation paid to
employees and to
independent contractors.
88. Which of the following statements concerning tax credits is true?
A. The tax benefit a taxpayer receives from a credit depends on the taxpayer's marginal
tax rate.
B. Refundable tax credits are limited to a taxpayer's gross tax liability.
C. Tax credits are generally more beneficial than tax deductions.
D. None of these is a true statement.
89. Which of the following is not one of the general tax credit categories?
A. Nonrefundable personal
B. Refundable personal
C. Business
D. Refundable business
90. Which of the following statements regarding the child tax credit is false?
A. The child for whom the credit is claimed must be under the age of 15 at the end of the
year.
B. The credit is subject to phase-out based on the taxpayer's AGI.
C. The full credit for a child who qualifies is $1,000.
D. The child for whom the credit is claimed must meet the definition of a qualifying
child.
91. Quantitatively, what is the relationship between the AGI phase-out thresholds for the
child tax credit?
A. Head of household/Single = Married Filing Separately = Married Filing Jointly
B. Head of household/Single < Married Filing Separately < Married Filing Jointly
C. Head of household/Single = Married Filing Separately > Married Filing Jointly
D. Head of household/Single > Married Filing Separately < Married Filing Jointly
92. Rhianna and Jay are married filing jointly in 2012. 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 2012
tax return?
A. $5,300

B. $6,000
C. $12,000
D. $4,000
93. The amount of expenditures eligible for the child and dependent care credit is the
least of three amounts.
Which of the following is not one of those amounts?
A. The total amount of child and dependent care expenditures for the year
B. $3,000 for one qualifying person or $6,000 for two or more qualifying persons
C. The dependent's earned income for the year
D. The taxpayer's earned income for the year
94. Which of the following statements regarding the child and dependent care credit is
false?
A. Taxpayers may claim a credit for only a portion of qualifying dependent care
expenditures.
B. If a taxpayer's income is too high, she will be ineligible to claim any child and
dependent care credit.
C. A single taxpayer must have earned income to claim any child and dependent care
credit.
D.
A taxpayer is not eligible to claim the dependent care credit if any dependent relative
provides the
care.
95. Trudy is Jocelyn's friend. Trudy looks after Jocelyn's four-year-old son during the day
so Jocelyn can go
to work. During the year, Jocelyn paid Trudy $4,000 to care for her son. What is the
amount of Jocelyn's
child and dependent care credit if her AGI for the year was $30,000?
A. $0
B. $810
C. $1,080
D. $3,000
96. Kaelyn's mother, Judy, looks after Kaelyn's four-year-old twins so Kaelyn can go to
work (she drops off
and picks up the twins from Judy's home everyday). Since Judy is a relative, Kaelyn
made sure, for tax
purposes, to pay her mother the going rate for child care ($6,300 for the year). What is
the amount of
Kaelyn's child and dependent care credit if her AGI for the year was $36,000?
A. $1,440
B. $2,100
C. $6,000
D. $0

97. Which of the following statements regarding the child and dependent care credit is
true?
A. A married couple must file jointly to claim the credit.
B.A taxpayer may claim a credit for dependent care expenses for a dependent who is 14
years old or older
but only if the dependent lives in the taxpayer's home for the entire year.
C.All else equal, a taxpayer making qualifying expenditures for three children may claim
more dependent
care credit than a taxpayer making (the same amount of) qualifying expenditures for two
children.
D. None of these statements is true.
98. Which of the following is not true of the American opportunity credit?
A. A taxpayer with multiple eligible dependents can claim a credit for each dependent's
qualifying
expenses
B. The credit is available for students during their first four years of postsecondary
education only
C. It is phased out based on the taxpayer's AGI
D. A taxpayer may not claim a credit unless the taxpayer pays a dependent's qualifying
educational
expenses
99. Which of the following is not true of the lifetime learning credit?
A. It is a nonrefundable credit.
B.
The credit can be claimed by taxpayers who have graduated from college and are taking
professional
training courses to improve their job skills.
C. A taxpayer with multiple dependents can claim a credit for each dependent's qualifying
expenses.
D. The credit is subject to phase out based on the taxpayer's AGI.
100.Which of the following is not a true statement about the American opportunity credit
(AOC) and lifetime
learning credits?
A. A taxpayer may not report both an AOC and a lifetime learning credit on the same tax
return.
B. Certain educational expenses qualify for both credits but taxpayers must claim one
credit or the other
for the expenditures (the taxpayer can not claim both credits for the same expenditures).
C.Taxpayers may choose to either (1) deduct qualifying education expenses of an
individual as for AGI
deductions or claim educational credits for the individual's expenses (but not both).
D.

The AGI phase-out threshold for phasing out the AOC is higher than the AGI phase-out
threshold for
the lifetime learning credit.
101.Which of the following statements regarding the earned income credit is true?
A. It is a nonrefundable credit
B. A taxpayer with more earned income may receive more credit than a taxpayer with less
earned income
C. A 70-year-old taxpayer with no dependents can qualify for the credit in certain
circumstances
D. A taxpayer whose only source of income is interest from corporate bonds is eligible
for the credit
102.Which of the following does not affect the amount of the earned income credit?
A. Filing status
B. Amount of credit taken in previous years
C. Number of qualifying children
D. Taxpayer's AGI
103.Carolyn has an AGI of $38,000 (all from earned income), two qualifying children,
and is filing as a head
of household. What amount of earned income credit is she entitled to?
A. $0
B. $832
C. $3,860
D. $4,404
E. $5,236
104.Which of the following statements regarding credits is correct?
A. Business expenses are generally refundable credits
B. Business credits that are generated in one year but are not utilized in that year expire
C.
Business credits that are generated in one year but are not utilized in that year may be
carried forward
to future years but not back to a prior year
D.
Business credits that are generated in one year but are not utilized in that year may be
carried back to
the previous year and then forward to future years
105.If there is not enough gross tax liability to use the foreign tax credit, _________.
A. it expires unused
B. it is carried back 2 years or forward 20 years
C. it is carried back 3 years or forward 5 years
D. it is carried back 1 year or forward 10 years
106.Which of the following tax credits is fully refundable?

A. American opportunity credit

B. Dependent care credit
C. Earned income credit
D. None of these
107.How could an individual obtain a business tax credit?
A. Through self-employment activities
B. Through flow-through from a partnership or S corporation
C. By working overseas and obtaining a foreign tax credit
D. All of these
108.Which of the following represents the correct order in which credits are applied to
gross tax liability
(from first to last)?
A. Nonrefundable personal, business, refundable
B. Business, nonrefundable personal, refundable
C. Refundable, nonrefundable personal, business
D. Refundable, business, nonrefundable personal
109.Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundable
personal credits,
$700 of refundable personal credits, and $200 of business credits. What is Cassy's tax
refund or tax
liability due after applying the credits?
A. $1,000 taxes payable
B. $0 refund or taxes payable
C. $700 refund
D. $300 refund
110.Sheryl's AGI is $200,000. Her current tax liability is $52,068. Last year, her tax
liability was $48,722.
She will not owe underpayment penalties if her total estimated tax payments are at least
which of the
following (rounded) amounts (assume she makes the required payments each quarter)?
A. $46,861
B. $48,722
C. $51,547
D. $53,594
111.If an employer withholds taxes from an employee, in general, when are these taxes
treated as paid to the
IRS?
A. As withheld
B. As the employee requests on his/her W - 4 form
C. Evenly throughout the year
D. On April 15

112.Which of the following statements about estimated tax payments and underpayment
penalties is true for
individual taxpayers?
A.Taxpayers who have paid their full tax liability by the original tax return due date are
protected from
underpayment penalties.
B.Taxpayers who have paid their full tax liability by the extended tax return due date are
protected from
underpayment penalties.
C.Taxpayers who have uneven income streams can pay estimated tax quarterly in uneven
amounts and
not be susceptible to underpayment penalties.
D.Taxpayers who have paid their required amount of estimated tax, even though not on
time, are
protected from underpayment penalties.
113.Which of the following statement(s) concerning estimated tax payments and
underpayment penalties for
individuals is (are) true?
A. Whether taxpayers are subject to underpayment penalties is determined on a quarterly
basis.
B.
Due dates for estimated tax payments for a given year are April 15, June 15, September
15 of that year
and January 15 of the next year unless these dates fall on a weekend or a holiday.
C. The amount of penalty depends on the amount of the underpayment among other
factors.
D. All of these statements are true.
114.What happens if the taxpayer owes an underpayment penalty, but does not compute it
on Form 2210?
A. Nothing, unless the taxpayer is audited
B. The taxpayer is immediately sent to the Tax Court
C. The IRS will compute and assess the penalty
D. The penalty is increased by five percentage points
115.Happy, Sleepy, Grumpy, and Doc all did not make adequate estimated payments.
Which of them will not
owe underpayment penalties for 2012 given the following information?
A. Happy
B. Sleepy
C. Grumpy
D. Doc
E. Two of these
F. None of these

116.Taxpayers are not required to file a tax return unless their gross income passes a
certain threshold. This
threshold is generally the _______.
A. applicable standard deduction amount
B. personal exemption amount
C. twice the applicable standard deduction amount
D. applicable standard deduction amount plus the personal exemption amount
117.Why would a taxpayer file a tax return if not required to do so?
A. to remain in favor with the IRS
B. to claim a refund of taxes paid
C. all taxpayers are required to file returns
D. in order to claim the standard deduction
118.Looking at the following partial calendar for April, when will individual tax returns
be due?
A. Friday, April 14
B. Saturday, April 15
C. Sunday, April 16
D. Monday, April 17
E. Tuesday, April 18
119.Which of the following is not true of the extension to file an individual tax return?
A. It is granted automatically by the IRS if requested
B. It must be requested by the original due date of the return
C.
It extends the due date for the return and associated tax payments beyond the original due
date of the
tax return
D. The extension is for six months beyond the original due date
120.Which of the following taxpayers (all age 40) are required to file a return?
A. Jenny and Jim
B. Allen
C. Timmy
D. None of these
121.What is the underpayment penalty rate that taxpayers pay when they underpay their
estimated taxes?
A. Federal short-term interest rate.
B. Federal short-term interest rate plus three percentage points.
C. Federal long-term interest rate.
D. Zero. The government does not pay interest on overpayments.
122.Which of the following statements regarding late filing penalties is true?
A. If a taxpayer fails to file a tax return, the late filing penalty will continue to grow until

the taxpayer
files the tax return.
B.The amount of the late filing penalty is the same for both fraudulent failure to file and
non fraudulent
failure to file.
C.Taxpayers who owe no tax as of the due date of their tax returns are not subject to late
filing penalties
even if they file late.
D. None of these.
123.Which of the following statements regarding late filing penalties and/or late payment
penalties is true?
A.
An extension of time to file the tax return protects a taxpayer from late payment penalties
as long as the
tax is paid by the extended due date of the return.
B. The penalty rate for late filing penalties is less than the penalty rate for late payment
penalties.
C.If a taxpayer has not paid the full tax liability by the original due date of the return and
the taxpayer has
not filed a tax return by the due date of the return, the maximum late filing and late
payment penalty will
be no greater than the late filing penalty by itself.
D. None of these.
CHAPTER 9
36. Tax cost recovery methods do not include:
A. Amortization
B. Capitalization
C. Depletion
D. Depreciation
E. All of these are tax cost recovery methods
37. Which of the following is not depreciated?
A. Automobile
B. Building
C. Patent
D. Machinery
E. All of these are depreciated
38. Which of the following is not usually included in an asset's tax basis?
A. Purchase price

B. Sales tax
C. Shipping
D. Installation costs
E. All of these are included in an asset's tax basis
39. Which of the following would be considered an improvement rather than a routine
maintenance?
A. Oil change
B. Engine overhaul
C. Wiper blade replacement
D. Air filter change
40. Tax depreciation is currently under what system?
A. Sum of the years digits
B. Accelerated cost recovery system
C. Modified accelerated cost recovery system
D. Straight line system
E. None of these
41. Which is not an allowable method under MACRS?
A. 150 percent declining balance
B. 200 percent declining balance
C. Straight line
D. Sum of the years digits
E. All of these are allowable methods under MACRS
42. Which of the allowable methods allows the most accelerated depreciation?
A. 150 percent declining balance
B. 200 percent declining balance
C. Straight line
D. Sum of the years digits
E. None of these allow accelerated depreciation
43. How is the recovery period of an asset determined?
A. Estimated useful life
B. Treasury regulation
C. Revenue Procedure 87 - 56
D. Revenue Ruling 87 - 56
E. None of these
44. Which of the following depreciation conventions are not used under MACRS?
A. Full-month
B. Half-year
C. Mid-month
D. Mid-quarter
E. All of these are used under MACRS

45. Which depreciation convention is the general rule for tangible personal property?
A. Full-month
B. Half-year
C. Mid-month
D. Mid-quarter
E. None of these are conventions for tangible personal property
46. The MACRS recovery period for automobiles and computers is:
A. 3 years
B. 5 years
C. 7 years
D. 10 years
E. None of these
47. Lax, LLC purchased only one asset during the current year. It placed in service
computer equipment (5- year property) on August 26 with a basis of $20,000. Calculate
the maximum depreciation expense for the current year (ignoring 179 and bonus
depreciation):
A. $2,000
B. $2,858
C. $3,000
D. $4,000
E. None of these
48. Sairra, LLC purchased only one asset during the current year. It placed in service
furniture (7-year
property) on April 16 with a basis of $25,000. Calculate the maximum depreciation
expense for the current year, rounding to a whole number (ignoring 179 and bonus
depreciation):
A. $1,786
B. $3,573
C. $4,463
D. $5,000
E. None of these
49. Beth's business purchased only one asset during the current year. It placed in service
machinery (7-year property) on December 1 with a basis of $50,000. Calculate the
maximum depreciation expense (ignoring 179 and bonus depreciation):
A. $1,785
B. $2,500
C. $7,145
D. $10,000
E. None of these

50. Deirdre's business purchased two assets during the current year. It placed in service
computer equipment (5-year property) on January 20 with a basis of $15,000 and
machinery (7-year property) on October 1 with a basis of $15,000. Calculate the
maximum depreciation expense, rounded to a whole number (ignoring 179 and bonus
depreciation):
A. $1,286
B. $5,144
C. $5,786
D. $6,000
E. None of these
51. Suvi, Inc. purchased two assets during the current year. It placed in service computer
equipment (5-year property) on August 10 with a basis of $20,000 and machinery (7-year
property) on November 18 with a basis of $10,000. Calculate the maximum depreciation
expense, rounded to a whole number (ignoring
179 and bonus depreciation):
A. $857
B. $3,357
C. $5,429
D. $6,000
E. None of these
52. Wheeler LLC purchased two assets during the current year. It placed in service
computer equipment (5-year property) on November 16 with a basis of $15,000 and
furniture (7-year property) on April 20 with a basis of $11,000. Calculate the maximum
depreciation expense, rounding to a whole number (ignoring
179 and bonus depreciation):
A. $1,285
B. $2,714
C. $4,572
D. $5,200
E. None of these
53. Tasha LLC purchased furniture (7-year property) on April 20 with a basis of $20,000
and used the midquarter
convention. During the current year, which is the fourth year Tasha LLC owned the
property, the property was disposed of on December 15. Calculate the maximum
depreciation expense, rounding to a whole number:
A. $898
B. $2,095

C. $2,461
D. $2,394
E. None of these
54. Anne LLC purchased computer equipment (5-year property) on August 29 with a
basis of $30,000 and
used the half-year convention. During the current year, which is the fourth year Anne
LLC owned the
property, the property was disposed of on January 15. Calculate the maximum
depreciation expense:
A. $432
B. $1,728
C. $1,874
D. $3,456
E. None of these
55. Poplock LLC purchased a warehouse and land during the current year for $350,000.
The purchase price was allocated as follows: $275,000 to the building and $75,000 to the
land. The property was placed in service on August 12. Calculate Poplock's maximum
depreciation for this first year, rounded to the nearest whole number:
A. $2,648
B. $3,371
C. $3,751
D. $4,774
E. None of these
56. Tom Tom LLC purchased a rental house and land during the current year for
$150,000. The purchase price was allocated as follows: $100,000 to the building and
$50,000 to the land. The property was placed in service on May 22. Calculate Tom Tom's
maximum depreciation for this first year:
A. $1,605
B. $2,273
C. $2,408
D. $3,410
E. None of these
57. Simmons LLC purchased an office building and land several years ago for $250,000.
The purchase price was allocated as follows: $200,000 to the building and $50,000 to the
land. The property was placed in service on October 2. If the property is disposed of on
February 27 during the 10 th year, calculate Simmons' maximum depreciation in the 10 th
year:
A. $641
B. $909
C. $5,128
D. $7,346
E. None of these

58. Lenter LLC placed in service on April 29, 2012 machinery and equipment (7-year
property) with a basisof $500,000. Assume that Lenter has sufficient income to avoid any
limitations. Calculate the maximumdepreciation expense including 179 expensing (but
ignoring bonus depreciation):
A. $71,450.
B. $139,000.
C. $190,587.
D. $210,450.
E. None of these.
59. Littman LLC placed in service on July 29, 2012 machinery and equipment (7-year
property) with a basis of $500,000. Littman's income for the current year before
expensing was $100,000. Calculate the maximum depreciation expense including 179
expensing (but ignoring bonus depreciation):
A. $71,450.
B. $190,587.
C. $157,160.
D. $210,450
E. None of these.
60. Crouch LLC placed in service on May 19, 2012 machinery and equipment (7-year
property) with a basis of $650,000. Assume that Crouch has sufficient income to avoid
any limitations. Calculate the maximum depreciation expense including 179 expensing
(but ignoring bonus depreciation):
A. $92,885.
B. $134,883.
C. $212,022.
D. $231,885.
E. None of these.
61. Clay LLC placed in service machinery and equipment (7-year property) with a basis
of $600,000 on June 6, 2012. Assume that Clay has sufficient income to avoid any
limitations. Calculate the maximum depreciation expense including 179 expensing
(ignoring any possible bonus depreciation), rounded to a
whole number:
A. $170,593
B. $204,877
C. $224,740
D. $285,940

E. None of these

62. Bonnie Jo purchased a used computer (5-year property) for use in her sole
proprietorship. The basis of the computer was $2,400. Bonnie Jo used the computer in her
business 60 percent of the time and used itfor personal purposes the rest of the time
during the first year. Calculate Bonnie Jo's depreciation expenseduring the first year
assuming the sole proprietorship had a loss during the year (Bonnie did not place the
property in service in the last quarter):
A. $240
B. $288
C. $480
D. $2,400
E. None of these
63. Billie Bob purchased a used computer (5-year property) for use in his sole
proprietorship in the prior year. The basis of the computer was $2,400. Billie Bob used
the computer in his business 60 percent of the time during the first year. During the
second year, Billie Bob used the computer 40 percent for business use. Calculate Billie
Bob's depreciation expense during the second year assuming the sole proprietorship had a
loss during the year (Billie Bob did not place the asset in service in the last quarter):
A. $0
B. $48
C. $192
D. $336
E. None of these
64. Potomac LLC purchased an automobile for $30,000 on August 5 th of 2012. What is
Potomac's depreciation expense for 2012 (ignore any possible bonus depreciation)?
A. $3,060
B. $4,287
C. $6,000
D. $30,000
E. None of these
65. Arlington LLC purchased an automobile for $40,000 on July 5 th of 2012. What is
Arlington's depreciation expense for 2012 if its business use percentage is 75 percent
(ignore any possible bonus depreciation)?
A. $2,295
B. $3,060
C. $6,000
D. $8,000

E. None of these
66. Assume that Bethany acquires a competitor's assets on March 31 st. The purchase
price was $150,000. Of that amount, $125,000 is allocated to tangible assets and $25,000
is allocated to goodwill (a 197 intangible asset). What is Bethany's amortization expense
for the current year, rounded to the nearest whole number?
A. $0
B. $1,250
C. $1,319
D. $1,389
E. None of these
67. Assume that Brittany acquires a competitor's assets on September 30 th of the prior
year. The purchase price was $350,000. Of that amount, $300,000 is allocated to tangible
assets and $50,000 is allocated
equally to two 197 intangible assets (goodwill and a 1-year non-compete agreement).
Given, that the non-compete agreement expires on September 30 th of year 2, what is
Brittany's amortization expense for the second year, rounded to the nearest whole
number?
A. $0
B. $1,667
C. $2,917
D. $3,333
E. None of these
68. Jasmine started a new business in the current year. She incurred $10,000 of start-up
costs. How much of the start-up costs can be immediately expensed for the year?
A. $0
B. $2,500
C. $5,000
D. $10,000
E. None of these
69. Racine started a new business in the current year. She incurred $52,000 of start-up
costs. If her business started on November 23 rd of the current year, what is the total
expense she may deduct with respect to the start-up costs for her initial year, rounded to
the nearest whole number?
A. $2,555.
B. $3,544.
C. $5,522.
D. $52,000.
E. None of these.
70. Daschle LLC completed some research and development during June of the current
year. The related
costs were $60,000. If Daschle wants to capitalize and amortize the costs as quickly as

possible, what is
the total amortization expense Daschle may deduct during the current year?
A. $0
B. $6,500
C. $7,000
D. $12,000
E. None of these
71. Jorge purchased a copyright for use in his business in the current year. The purchase
occurred on July
15 th and the purchase price was $75,000. If the patent has a remaining life of 75 months,
what is the total
amortization expense Jorge may deduct during the current year?
A. $0
B. $5,500
C. $6,000
D. $12,000
E. None of these
72. Geithner LLC patented a process it developed in the current year. The patent is
expected to create
benefits for Geithner over a 10 year period. The patent was issued on April 15 th and the
legal costs
associated with the patent were $43,000. In addition, Geithner had unamortized research
expenditures of
$15,000 related to the process. What is the total amortization expense Geithner may
deduct during the
current year?
A. $2,417
B. $2,559
C. $4,108
D. $4,350
E. None of these
73. Santa Fe purchased the rights to extract turquoise on a tract of land over a five-year
period. Santa Fe
paid $300,000 for extraction rights. A geologist estimates that Santa Fe will recover 5,000
pounds of
turquoise. During the current year, Santa Fe extracted 1,500 pounds of turquoise, which it
sold for
$200,000. What is Santa Fe's cost depletion expense for the current year?
A. $60,000
B. $90,000
C. $110,000
D. $300,000
E. None of these