02 Jan The Royal Motor Company

• Question 1

A characteristic of FUTA is that:

• Question 2

Which of the following statements best describes the history of the Federal income tax?

• Question 3

Taxes not imposed by the Federal government include:

• Question 4

A VAT (value added tax):

• Question 5

Which of the following transactions will decrease a taxing jurisdiction’s ad valorem tax revenue imposed on real estate?

• Question 6

In 2013, Cindy had the following transactions:

Salary $90,000

Short-term capital gain from a stock investment 4,000

Moving expense to change jobs (11,000)

Received repayment of $20,000 loan she made to her sister in 2009 (includes no interest) 20,000

State income taxes (5,000)

Cindy’s AGI is:

• Question 7

Millie, age 80, is supported during the current year as follows:

Percent of Support

Weston (a son) 20%

Faith (a daughter) 35%

Jake (a cousin) 25%

Brayden (unrelated close family friend) 20%

During the year, Millie lives in an assisted living facility. Under a multiple support agreement, indicate which parties can qualify to claim Millie as a dependent.

• Question 8

Which of the following is a deduction for AGI?

• Question 9

Emily, whose husband died in December 2012, maintains a household in which her dependent mother lives. Which (if any) of the following is her filing status for the tax year 2013? (Note: Emily is the executor of her husband’s estate.)

• Question 10

Which of the following items is deductible?

• Question 11

Our tax laws encourage taxpayers to ____ assets that have appreciated in value and ____ assets that have declined in value.

• Question 12

Harry and Wanda were married in Texas, a community property state, but moved to Virginia, a common law state. The calculation of their income on a joint return:

• Question 13

Sarah, a majority shareholder in Teal, Inc., made a $200,000 interest-free loan to the corporation. Sarah is not an employee of the corporation.

• Question 14

The purpose of the tax rules that apply to below-market loans between family members is to:

• Question 15

Margaret owns land that appreciates at the rate of 10% each year. Ralph owns a zero coupon (i.e., all of the interest is paid at maturity but is taxed annually) corporate bond with a yield to maturity of 10%. At the end of 10 years, the bond will mature and the land will be sold. At the end of the 10 years,

• Question 16

The exclusion of interest on educational savings bonds:

• Question 17

Employees of the Valley Country Club are allowed to use the golf course without charge before and after working hours on Mondays, when the number of players on the course is at its lowest. Tom, an employee of the country club played 40 rounds of golf during the year at no charge when the non-employee charge was $20 per round.

• Question 18

The Royal Motor Company manufactures automobiles. Employees of the company can buy a new automobile for Royal’s cost plus 2%. The automobiles are sold to dealers at cost plus 20%. Generally, employees of Local Dealer, Inc., are allowed to buy a new automobile from the company at the dealer’s cost. Officers of Local Dealer are allowed to use a company vehicle (for personal use) at no cost.

• Question 19

Jena is a full-time undergraduate student at State University and is claimed by her parents as a dependent. Her only source of income is a $10,000 athletic scholarship ($1,000 for books, $5,500 tuition, $500 student activity fee, and $3,000 room and board). Jena’s gross income for the year is:

• Question 20

Olaf was injured in an automobile accident and received $25,000 for his physical injury, $50,000 for his loss of income, and $10,000 punitive damages. As a result of the award, the amount Olaf must include in gross income is: