25 May Question 1. In 2014, Juan’s home was burglarized. Juan had the following items stolen:
Question
1. In 2014, Juan’s home was burglarized. Juan had the following items stolen:
· Securities worth $25,000. Juan purchased the securities four years ago for $20,000.
· New tools which Juan had purchased two weeks earlier for $8,000. Juan uses the tools in making repairs at an apartment house that he owns and manages.
· An antique worth $15,000. Juan inherited the antique (a family keepsake) when the property was worth $11,000.
Juan’s homeowner’s policy had a $50,000 deductible clause for thefts. If Juan’s salary for the year is $50,000, determine the amount of his itemized deductions as a result of the theft.
a. $3,100.
b. $6,000.
c. $26,100.
d. $26,500.
e. None of the above.
2. Regarding research and experimental expenditures, which of the following are notqualified expenditures?
a. Costs of ordinary testing of materials.
b. Costs to develop a plant process.
c. Costs of developing a formula.
d. Depreciation on a building used for research.
e. All of the above are qualified expenditures.
3. Blue Corporation incurred the following expenses in connection with the development of a new product:
| Salaries | $100,000 |
| Utilities | 18,000 |
| Materials | 25,000 |
| Advertising | 5,000 |
| Market survey | 3,000 |
| Depreciation on machine | 9,000 |
Blue expects to begin selling the product next year. If Blue elects to amortize research and experimental expenditures over 60 months, determine the amount of the deduction for research and experimental expenditures for the current year.
a. $0.
b. $118,000.
c. $143,000.
d. $152,000.
e. $160,000.
4. Last year, Green Corporation incurred the following expenditures in the development of a new plant process:
| Salaries | $250,000 |
| Materials | 90,000 |
| Utilities | 20,000 |
| Quality control testing costs | 40,000 |
| Management study costs | 5,000 |
| Depreciation of equipment | 15,000 |
During the current year, benefits from the project began being realized in May. If Green Corporation elects a 60 month deferral and amortization period, determine the amount of the deduction for the current year.
a. $48,000.
b. $50,400.
c. $54,667.
d. $57,067.
e. None of the above.
5. Ivory, Inc., has taxable income of $600,000 and qualified production activities income (QPAI) of $700,000 in 2014. Ivory’s domestic production activities deduction is:
a. $36,000.
b. $42,000.
c. $54,000.
d. $63,000.
e. None of the above.
6. For the year 2014, Amber Corporation has taxable income of $880,000, alternative minimum taxable income of $600,000, and qualified production activities income (QPAI) of $640,000. The total W-2 wages paid to employees engaged in qualified domestic production activities are $116,000. Amber’s DPAD for 2014is:
a. $54,000.
b. $57,600.
c. $58,000.
d. $79,200.
e. None of the above.
.
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