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A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not made in lieu of rent

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Question 2.2. (TCOs 2 and

3) A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not made in lieu of rent. At the end of the lease, the value of the improvements are not income to the landlord. This rule is an example of (Points : 5)

the wherewithal to pay concept.
the tax benefit rule.
the arm’s length concept.
a clear reflection of income result.
None of the above
Question 3.3. (TCOs 1, 2, 3, and 5) Detroit Corporation sued Chicago Corporation for intentional damage to Detroit’s goodwill. Detroit had created its goodwill through providing high-quality services to its customers. Thus no basis for the goodwill appeared on Detroit’s balance sheet. The suit was settled and Detroit received $1,000,000 for the damages to its goodwill. Is the $1,000,000 taxable? (Points : 5)

The $1,000,000 is taxable because Detroit has no basis in the goodwill.
The $1,000,000 is not taxable because Detroit did nothing to earn the money.
The $1,000,000 is taxable because it represents a recovery of capital.
The $1,000,000 is not taxable because Detroit settled the case.
None of the above
Question 4.4. (TCOs 1, 2, 3, and 5) Office Palace, Inc. leased an all-in-one printer to a new customer, Ashley, on December 27, 2010. The printer was to rent for $700 per month for a period of 36 months beginning January 1, 2011. Ashley was required to pay the first and last month’s rent at the time the lease was signed. Ashley was also required to pay a $1,000 damage deposit. How much must Office Palace recognize as income for the lease? (Points : 5)

$0 in 2010, if Office Palace is an accrual basis taxpayer
$1,400 in 2011, if Office Palace is a cash basis taxpayer
$2,400 in 2010, if Office Palace is a cash basis taxpayer
$1,400 in 2010, if Office Palace is an accrual basis taxpayer
None of the above
Question 5.5. (TCOs 1, 2, 3, and 5) During the year, Kim sold the following assets: business auto for a $1,000 loss, stock investment for a $1,000 loss, and pleasure yacht for a $1,000 loss. Presuming adequate income, how much of these losses may Kim claim? (Points : 5)

$0
$1,000
$2,000
$3,000
None of the above
Question 6.6. (TCOs 4 and 5) Payments by a cash basis taxpayer of capital expenditures (Points : 5)

must be expensed at the time of payment.
must be expensed by the end of the first year after the asset is acquired.
must be deducted over the actual or statutory life of the asset.
can be deducted in the year the taxpayer chooses.
None of the above
Question 7.7. (TCOs 4 and 5) Tommy, an automobile mechanic employed by an auto dealership, is considering opening a fast food franchise. If Tommy decides not to acquire the fast food franchise, any investigation expenses are (Points : 5)

a deduction for AGI.
a deduction from AGI, subject to the 2% floor.
a deduction from AGI, not subject to the 2% floor.
deductible up to $5,000 in the current year with the balance being amortized over a 180-month period.
not deductible.
Question 8.8. (TCOs 4 and 5) During the current year, Kingbird Corporation (a calendar year C corporation) had the following income and expenses:

Income from operations $135,000
Expenses from operations $99,000
Dividends received (40% ownership) $9,000
Domestic production activities deduction $2,700

On October 1, Kingbird Corporation made a contribution to a qualified charitable organization of $6,300 in cash (not included in any of the above items). Determine Kingbird’s charitable contribution deduction for the current year.

(Points : 5)

$0
$4,230
$4,500
$6,300
None of the above
Question 9.9. (TCOs 4 and 5) On February 20, 2010, Bill purchased stock in Pink Corporation (the stock is not small business stock) for $1,000. On May 1, 2011, the stock became worthless. During 2011, Bill also had an $8,000 loss on  1244 small business stock purchased 2 years ago, a $9,000 loss on a nonbusiness bad debt, and a $5,000 long-term capital gain. How should Bill treat these items on his 2011 tax return? (Points : 5)

$4,000 long-term capital loss and $9,000 short-term capital loss.
$4,000 long-term capital loss and $3,000 short-term capital loss.
$8,000 ordinary loss and $3,000 short-term capital loss.
$8,000 ordinary loss and $5,000 short-term capital loss.
$8,000 long-term capital loss and $6,000 short-term capital loss.
Question 10.10. (TCOs 4 and 5) Paula owns four separate activities. She elects not to group them together as a single activity under the appropriate economic unit standard. Paula participates for 130 hours in Activity A, 115 hours in Activity B, 260 hours in Activity C, and 100 hours in Activity D. She has one employee, who works 125 hours in Activity D. Which of the following statements is correct? (Points : 5)
 
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