83. Ms. Plant owns and actively manages an apartment complex. This year, the complex generated a $32,790
net loss. If Ms. Plant’s AGI before considering this loss is $196,100, and she owns no other passive
activities, how much of the loss is deductible this year?
D. None of the above
84. Mr. Vernon owns stock in two S corporations, Able Corporation and Benson Inc. This year, Mr. Vernon
had the following income and loss items.
If Vernon materially participates in Able’s business but not in Benson’s business, compute his AGI.
85. Ms. Watts owns stock in two S corporations, MKP Corporation and Reynolds Inc. This year, Ms. Watts
had the following income and loss items.
If Ms. Watts materially participates in the business of both corporations, compute her AGI.
86. Ms. Cowler owns stock in Serzo Inc., an S corporation, and an interest in OTW Partnership. This year,
Ms. Cowler had the following income and loss items.
If Ms. Cowler’s interests in Serzo and OTW are passive activities, compute her AGI.
87. Mr. and Mrs. Nelson operate a small business as a sole proprietorship. This year, they have the following
D. None of the above
88. In 2010, Mr. Margot purchased a limited interest in a business partnership, which is her only passive
activity. In 2010, she was allocated $14,900 of the partnership’s ordinary business loss. In 2011, she was
allocated $7,700 of the partnership’s ordinary business income. Which of the following statements is
A. In 2010, Mr. Margot could not deduct any of her allocated partnership loss.
B. In 2011. Mr. Margot can deduct $7,700 of the 2010 loss.
C. Mr. Margot has a $7,200 passive activity loss carryforward into 2012.
D. None of the above statements is false.
89. Mr. and Mrs. Perry own stock in an S corporation, which is their only passive activity. They have an
$8,200 passive activity loss carryforward into 2011. In 2011, the Perrys are allocated a $1,600 share of
corporate ordinary business income. Late in 2011, they recognize a $3,500 long-term capital gain on the
sale of their entire stock interest. How much of their loss carryforward can the Perrys deduct in 2011?
90. Ms. Poppe, a single taxpayer, made the three gifts this year. She gave $6,300 cash to her niece to fund a
summer vacation in Europe, $50,000 cash to Yale University, which is her alma mater, 50,000 acres of
land to her brother. Ms. Poppe’s tax basis in the land was $400,000, and its fair market value of date of
gift was $615,000. Compute Ms. Poppe’s taxable gifts for the year.
91. Mr. and Mrs. Gupta want to make cash gifts to each of their four children, the children’s four spouses, and
three grandchildren (11 donees). Compute the total amount that the Guptas can transfer to their youngergeneration
family members without making a taxable gift for the year.
92. Bess gave her grandson ten acres of undeveloped land. Bess’ tax basis in the land was $35,000, and its
fair market value at date of gift was $175,000. Two years after receiving the land, the grandson sold it for
$200,000. Compute his recognized gain on sale.
93. Mr. Lee made the following transfers this year. Which of the transfers are treated as gifts for federal tax
A. Political contribution to the Democratic party
B. Charitable contribution to the United Way
C. Payment to a hospital for the medical expenses of his 39-year old son
D. None of the above are treated as gifts.
94. Which of the following statements about the federal gift tax is false?
A. The tax is imposed on the donor.
B. The tax is based on the fair market value of the gifted property.
C. An individual can give away $5 million every year without being subject to tax.
D. The donor’s basis in the gifted property carries over to become the donee’s basis.
95. Which of the following are included in a decedent’s taxable estate?
A. Real property owned by the decedent and included in the probate estate.
B. Proceeds of a life insurance policy on the decedent’s life if the decedent owned the policy.
An individual retirement account owned by the decedent and payable to the beneficiary named in the
D. All of the above are included.
96. Which of the following reduce a decedent’s taxable estate?
A. The decedent’s funeral expenses.
B. Testamentary transfers to charitable organizations.
C. Testamentary transfers to the decedent’s spouse.
D. Testamentary transfers to the decedent’s children.
97. Mrs. Heyer inherited real estate from her mother. The mother’s basis in the real estate was $382,000, and
the fair market value at the date of the mother’s death was $900,000. The mother’s taxable estate was only
$2.4 million, so the estate did not owe any federal estate tax. This year, Mrs. Heyer sold the real estate for
$875,000. Compute her gain or loss recognized on sale.
B. $25,000 loss
C. $493,000 gain
D. $875,000 gain
98. Mr. Lainson died in 2010 when the total FMV of his property was $12 million and his debts totaled
$450,000. His executor paid $15,000 of funeral expenses and $50,000 of accounting and legal fees to
settle the estate. Mr. Lainson bequeathed $1 million to Villanova University, $200,000 to the Lutheran
church, and $3 million to his surviving wife. He left the remainder of the estate to his children. Compute
Mr. Lainson’s taxable estate.
99. Mr. McCann died in 2011. During his lifetime, he made taxable gifts significantly in excess of his $5
million lifetime exclusion. Mr. McCann’s taxable estate was $12.9 million. Compute the estate tax on this
A. $4.515 million
B. $5.805 million
C. $5.355 million
D. $4.23 million
100.In 2009, Mr. Yang paid $160,000 for a corporate bond with a $200,000 stated redemption value. Based
on the bond’s yield to maturity, amortization of the $40,000 discount was $3,024 in 2009 and $2,960
in 2010. Mr. Yang sold the bond for $169,500 in 2011. What are his tax consequences in each year
a. He bought the newly issued bond from the corporation?
b. He bought the bond in the public market through his broker?
101.Beverly earned a $75,000 salary and recognized a $7,200 loss on the sale of corporate stock this year.
Compute her AGI in each of the following independent cases.
a. Beverly had no other capital transactions this year.
b. Beverly recognized a $13,500 capital gain on the sale of mutual fund shares.
c. Beverly received a $9,500 capital gain distribution from a mutual fund and had a $3,200 capital loss
carryforward from a previous year.
102.Mr. Carp, a single taxpayer, recognized a $44,000 long-term capital gain, a $12,000 short-term capital
gain, and a $10,000 long-term capital loss. Compute Mr. Carp’s tax if his taxable income before
consideration of his capital transactions is $405,000.
103.Ms. Mollani owns stock in two S corporations, Aloha and Honu. This year, she had the following income
and loss items:
Compute Sheila’s AGI under each of the following assumptions.
a. She materially participates in Aloha’s business but not in Honu’s business.
b. She materially participates in Honu’s business but not in Aloha’s business.
c. She materially participates in both corporate businesses.
d. She does not materially participate in either business.
104.Mr. Ames, an unmarried individual, made a gift of real estate to his nephew. Compute the amount subject
to the federal gift tax in each of the following situations.
a. FMV of the real estate was $1,800,000, and the transfer was Mr. Ames first taxable gift.
b. FMV of the real estate was $7,250,000 and the transfer was Mr. Ames first taxable gift.
c. FMV of the real estate was $2,300,000. Two years ago, Mr. Ames made his first taxable gift of
marketable securities with a $3,920,000 FMV in excess of the annual exclusion