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KAPLAN AC256/ KAPLAN AC256 UNIT 10 FINAL EXAM

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Question 1.Characteristics of profit-sharing plans include all of the following except (Points : 4) a predetermined formula is used to allocate employer contributions to individual employees and to establish benefit payments. forfeitures of benefits under the plan may be reallocated to the remaining participants the company must make contributions to the plan if it has profits during the year. annual employer contributions are not required, but substantial, recurring contributions that must be made to satisfy the requirement that the plan be permanent. Question 2.2.Norman traveled to San Francisco for 4 days on vacation and spent another 2 days conducting business for his employer. Norman’s plane fare for the trip was $500, meals cost $150 per day, hotels cost $300 per day, and a rental car cost $150 per day that was used for all 6 days. Norman was not reimbursed by his employer for any expenses. Norman’s AGI for the year is $40,000 and he did not have any other miscellaneous itemized deductions. Norman may deduct (after limitations) (Points : 4) $250. $800. $1,050. $1,200. Question 3.3.Hunter retired last year and will receive annuity payments for life from his employer’s qualified retirement plan of $30,000 per year starting this year. During his years of employment, Hunter contributed $130,000 to the plan. Based on IRS tables, his life expectancy is 260 months. All of the contributions were on a pre-tax basis. This year, Hunter will include what amount in income? (Points : 4) $0 $6,000 $24,000 $30,000 Question 4.4.Ron is a university professor who accepts a visiting position at another university for 6 months and obtains a leave of absence from his current employer. Ron rents an apartment near the university and purchases his food. These living expenses incurred by Ron while visiting the university will be (Points : 4) deductible for AGI. deductible from AGI, without application of a floor deductible from AGI, subject to the 2% of AGI floor nondeductible Question 5.5.In 2014, Carlos filed his 2013 state income tax return and paid taxes of $800. Also in 2014, Carlos’s employer withheld state income tax of $750 from Carlos’s salary. In 2015, Carlos filed his 2014 state income tax return and paid an additional $600 of state income tax due for 2014. How much state income tax can Carlos deduct on his 2014 federal income tax return for state income tax? (Points : 4) $1,350 $1,400 $1,550 $2,150 Question 6.6.On July 31 of the current year, Marjorie borrows $120,000 to purchase a new fishing boat. The loan is secured by her personal residence. On the date of the loan, the outstanding balance on the original debt incurred to purchase the residence is $300,000 and the FMV of the home is $450,000. What is the total amount of debt on which Marjorie can deduct interest in the current year? (Points : 4) $300,000 $400,000 $420,000 $450,000 Question 7.7.In October 2014, Jonathon Remodeling Co., an accrual-method taxpayer, remodels and renovates an office building for Dale and bills him $30,000. Dale signs a note for the debt. Dale keeps delaying payment and files bankruptcy in 2015. Creditors are informed that no assets are available for payment. Jonathon Remodeling Co. will report (Points : 4) $0 income in both years. $30,000 income in 2014 and a bad debt deduction of $30,000 in 2015 $30,000 income in 2014 and a STCL of $30,000 in 2015 limited to $3,000 after netting $30,000 income in 2014 and then must amend last year’s return to show $0 income when advised of the bankruptcy Question 8.8.Gayle, a doctor with significant investments in the stock market, traveled on a cruise ship to Bermuda. Investment specialists provided daily seminars which Gayle attended. The cost of the cruise for 4 days is $2,500. Gayle can deduct (before application of any floors) (Points : 4) $0 $1,250. $2,000. $2,500. Question 9.9.Nicole has a weekend home on Pecan Island that she purchased in 2005 for $250,000. Rece

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