Which of these statements concerning the alternative minimum tax (AMT) is correct?
A) If the tentative minimum tax is smaller than the regular tax, he or she must pay the alternative minimum tax.
B) The alternative minimum tax credit rate is 26 percent.
C) For married taxpayers, the alternative minimum tax rate is 26 percent of the first $175,000.
D) The alternative minimum tax rate for capital gains and dividends is 26 percent.
E) Married taxpayers are allowed an exemption allowance, regardless of their level of alternative minimum taxable income.
-From the records of Ted, a cash basis sole proprietor, the following information was available:
Gross receipts $45,000
Interest income on personal investments 600
Cost of sales 25,000
Other operating expenses including rent on office 5,000
State business license 300
Property taxes on home 1,200
What amount should Ted report as net earnings from self-employment?
A) $15,000
B) $12,900
C) $13,500
D) $14,100
E) $14,700
-On January 1, 2011, Rusty, a sole proprietor, purchased for use in his business a new production machine (7-year property) at a cost of $60,000. Rusty did not purchase any other property during 2011 and has net income from his business of $80,000. The standard double-declining balance recovery period table would allow $8,574 of depreciation expense on the $60,000 of equipment purchased in 2011. What is Rusty’s maximum depreciation deduction for 2011 if he elects to use a double-declining balance recovery period table, including the amount that could be deducted under the election to expense (Section 179)?
A) $68,574
B) $500,000
C) $80,000
D) None of these.
E) $60,000
-Wonton Foods is a partnership owned 40 percent by Sze-Ern, 25 percent by Quinquang, and 35 percent by Zhaou. Sze-Ern and Zhaou each have an October 31 tax year-end, while Quinquang has a February 28 tax year-end. Under the general rule, what tax year-end should the partnership adopt?
A) October 31
B) November 30
C) February 28
D) October 31 or January 31
E) December 31
-G&M Enterprises purchased a 6,500 pound SUV (not considered a passenger automobile for purposes of the listed property and luxury automobile limitations) on June 1, 2011 for use in its business. The SUV, with a cost basis of $29,000, has a 5-year estimated life. It also is 5-year recovery property. How much depreciation and Section 179 expense should be taken on the SUV for the 2011 calendar tax year, assuming G&M Enterprises wishes to maximize its deduction? Do not consider bonus depreciation.
A) $4,000
B) $5,800
C) $25,000
D) $25,800
E) $2,917
-Ponce acquired raw land costing $60,000 as an investment in 1998. In 2011, the land is sold for a total sales price of $150,000, consisting of $30,000 cash and the buyer’s note for $120,000. Assume that Ponce uses the installment method to recognize the gain and receives only the $30,000 down payment in the year of sale. How much gain should Ponce recognize in 2011?
A) $12,000
B) $18,000
C) $0
D) $90,000
E) $30,000
-On December 31, 2011, Harold, a sole proprietor, sold for $85,000 a machine that was used in his business. The machine had been purchased in 2006 for $60,000, and when it was sold it had an adjusted basis of $45,000. For the year 2011, how should this gain be treated?
A) Section 1231 gain of $40,000
B) Ordinary income of $40,000
C) None of these
D) Section 1231 gain of $15,000 and ordinary income of $25,000
E) Section 1231 gain of $25,000 and ordinary income of $15,000
-In 2011, Philippe, a single taxpayer, has taxable income of $40,000 exclusive of capital gains and losses. Philippe incurred a $2,000 short-term capital loss and a $6,000 long-term capital loss in 2011. What is the amount of his long-term capital loss carryover to 2012?
A) $0
B) $6,000
C) $3,000
D) $2,000
E) $5,000
-Burt purchased an apartment building on January 1, 1998, for $345,000. The building has been depreciated over the appropriate recovery period using the straight-line method. On December 31, 2011, the building was sold for $420,000, when the accumulated depreciation was $126,500. On his 2011 tax return, Burt should report which of the following?
A) Section 1231 gain of $75,000 and unrecaptured depreciation of $126,500
B) Ordinary income of $201,500
C) None of these
D) Section 1231 gain of $126,500 and ordinary income of $75,000
E) Section 1231 gain of $75,000 and ordinary income of $126,500
-What minimum amount of tips must an employer report as allocated to employees if gross food and beverage sales in the restaurant are $175,000?
A) $26,250
B) $10,500
C) $21,000
D) $14,000
E) $17,500
