Question 1. LD Partnership, a cash basis taxpayer, purchases land and

1. LD Partnership, a cash basis taxpayer, purchases land and a building for $200,000 with $150,000 of the cost being allocated to the building. The gross receipts of the partnership are less than $100,000. LD must capitalize the $50,000 paid for the land, but can deduct the $150,000 paid for the building in the current tax year.

a. True

b. False

.

2. Purchased goodwill must be capitalized, but can be amortized over a 60-month period.

a. True

b. False

3. Marge sells land to her adult son, Jason, for its $20,000 appraised value. Her adjusted basis for the land is $25,000. Marge’s recognized loss is $5,000 and Jason’s adjusted basis for the land is $25,000 ($20,000 cost + $5,000 recognized gain of Marge).

a. True

b. False

4. For purposes of the § 267 loss disallowance provision, a taxpayer’s aunt is a related party.

a. True

b. False

5. Sammy, a calendar year cash basis taxpayer who is age 66, has the following transactions:

6. Trade and business expenses should be treated as:

a. A deduction fromAGI subject to the 2%-of-AGI floor.

b. A deduction fromAGI notsubject to the 2%-of-AGI floor.

c. Deductible forAGI.

d. An itemized deduction if not reimbursed.

e. None of the above.

7. Al is single, age 60, and has gross income of $140,000. His deductible expenses are as follows:

8. Marsha is single, had gross income of $50,000, and incurred the following expenses:

Her AGI is:

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