25 May Question 1. Robin Corporation has ordinary income from operations of $30,000,
Question
1. Robin Corporation has ordinary income from operations of $30,000, net long-term capital gain of $10,000, and net short-term capital loss of $15,000. What is the taxable income for 2014?
a. $25,000.
b. $27,000.
c. $28,500.
d. $30,000.
e. None of the above.
2. Violet, Inc., has a 2014 $80,000 long-term capital gain included in its $285,000 taxable income. Which of the following is correct?
a. Violet will benefit from an alternative tax on net capital gains computation.
b. Violet’s regular tax on taxable income will be the same as its tax using an alternative tax on net capital gains approach.
c. Violet’s $80,000 net capital gain is not taxable.
d. Violet’s regular tax on taxable income will be greater than its tax using an alternative tax on net capital gain approach.
e. None of the above.
3. White Company acquires a new machine for $75,000 and uses it in White’s manufacturing operations. A few months after White places the machine in service, it discovers that the machine is not suitable for White’s business. White had fully expensed the machine in the year of acquisition using § 179. White sells the machine for $60,000 in the tax year after it was acquired, but held the machine only for a total of 10 months. What was the tax status of the machine when it was disposed of and the amount of the gain or loss?
a. A capital asset and $60,000 gain.
b. An ordinary asset and $60,000 gain.
c. A § 1231 asset and $60,000 gain.
d. A § 1231 asset and $60,000 loss.
e. None of the above.
4. Which of the following assets held by a manufacturing business isa § 1231 asset?
a. Inventory.
b. Office furniture used in the business and held less than one year.
c. A factory building used in the business and held more than one year.
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