25 May Question 1. In Lawrence County, the real property tax
Question
1. In Lawrence County, the real property tax year is the calendar year. The real property tax becomes a personal liability of the owner of real property on January 1 in the current real property tax year (assume this year is not a leap year). The tax is payable on June 1. On May 1, Reggie sells his house to Dana for $350,000. On June 1, Dana pays the entire real estate tax of $7,950 for the year ending December 31. How much of the property taxes may Reggie deduct?
a. $0.
b. $2,614.
c. $2,625.
d. $7,950.
e. None of the above.
2. Brad, who uses the cash method of accounting, lives in a state that imposes an income tax (including withholding from wages). On April 14, 2014, he files his state return for 2013, paying an additional $600 in state income taxes. During 2014, his withholdings for state income tax purposes amount to $3,550. On April 13, 2015, he files his state return for 2014 claiming a refund of $800. Brad receives the refund on June 3, 2015. If he itemizes deductions, how much may Brad claim as a deduction for state income taxes on his Federal income tax return for calendar year 2014 (filed in April 2015)?
a. $3,350.
b. $3,550.
c. $4,150.
d. $5,150.
e. None of the above.
3. Barry and Larry, who are brothers, are equal owners in Chickadee Corporation. On July 1, 2014, each loans the corporation $10,000 at an annual interest rate of 10%. Both shareholders are on the cash method of accounting, while Chickadee Corporation is on the accrual method. All parties use the calendar year for tax purposes. On June 30, 2015, Chickadee repays the loans of $20,000 together with the specified interest of $2,000. How much of the interest can Chickadee Corporation deduct in 2014?
a. $0.
b. $500.
c. $1,000.
d. $2,000.
e. None of the above.
4. Rick and Carol Ryan, married taxpayers, to
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