Question

1) Ed has a 25% marginal tax rate and has already recognized a STCL of $16,000 and a LTCG of $9,000, both due to the sale of stock. He is considering the sale of an antique clock held for investment that would result in an $11,000 LTCG. What is the increase in his tax liability if he goes ahead with the proposed transaction this year? a. $3,080

b. $ 600

c. $2,950

d. $2,350

e. None of the answers provided is correct.

2) Amy sells land to her son, Ken, for its FMV of $50,000. Her adjusted basis in the land is $60,000. Which of the following statements is true?

a. Amy's recognized loss is $10,000.

b. Ken's AB in the land is $60,000.

c. If Ken sells the land for $58,000, his recognized loss is $2,000.

d. If Ken sells the land for $65,000, his recognized gain is $5,000.

e. None of the answers provided is correct.

3) During the current year, Helen pays legal and accounting fees for the following reasons:

To draft a will -----------------------------------------------------------------------$1,000

To resolve a tax dispute with respect to Helen's business -------------$3,000

To prepare Helen's Schedule C ----------------------------------------------- $ 700

To prepare the remainder of Helen's Form 1040/Sch. A/Sch. B -------$ 500

Which of the following statements is true with regard to the payment of these fees?

a. Helen can deduct $5,200 from AGI.

b. Helen can deduct $3,700 for AGI and $1,500 from AGI.

c. Helen can deduct $3,700 for AGI and nothing else.

d. Helen can deduct $4,200 for AGI and nothing else.

e. None of the answers provided is correct.

Answer 1

1	Correct answer is "A"
	The LTCG will be taxed @ 28% as per the provisions of law, if the LTCG is arising from asset held for investment.
2	Correct answer is "A"
	Amy will recognize the loss of $10000
	and Ken will record the asset at $50000, the FMV on the date of purchase
	In C& D income or loss is calculated at $60000 which is not correct.
3	Correct answer is "E"
	all the items shown will be taken into account while calculating NET INCOME,
	but not in AGI