Questions -
Q1. Mary owns a drapery business and in 2014 sold three sewing machines for $6000. She purchased the machine for $5000 in 2012 and claimed depreciation of $3000. What are the amount and the correct nature of Mary's gain?
a. 0 ordinary gain and $4000 section 1231 gain
b. 2000 ordinary gain and 2000 section 1231 gain
c. 3000 ordinary gain and 1000 section 1231 gain
d. 4000 ordinary gain and 0 section 1231 gain
Q2. Section 1245 recapture applies to all the following except
a. depreciable personal property
b. assets sold or exchanged at a loss
c. total depreciation or amortization allowed or allowable
d. amortizable intangible personal property.
Q3. If an individual is liable for self-employment tax, a portion of the self-employment tax is
a. a for AGI deduction
b. from AGI as an itemized deduction
c. a Schedule C business expense
d. self-employment tax is nondeductible
Q4. George and Meredith, who are married, have a regular tax liability of $21,800, taxable income of $100,000, tax preferences of $23,000, and positive adjustments attributable to limitations on itemized deductions of $18700 this year. They claim $11,700 of personal exemptions for themselves and their 20 year old dependent daughter. The AMT exemption is $153900 (use the $153,900 as the correct amount of the exemption). What is George and Meredith's alternative minimum tax for 2014?
Q5. James and Ellen Connors, who are both 50 years old and married, sell their personal residence on July 25, 2013 for $950,000. They have lived in the house for 20 years. The basis of their home is $350,000. They purchased a new home for $1,000,000 in August 2014. After living in that home for 125 days, the Connors were forced to sell their new home in 2014 for $1,300,000 and move to another climate due to Ellen's severe health problems. What is the amount of gain recognized on the home sale in 2014?