Federal Taxation


BA 431 Federal Taxation, Fall 2017

Midterm 2







  1. T and Z are married and file a joint return. Their itemized deductions for the current

year are $13,000.  Assuming the standard deduction is $6,300, T and Z should use______________________________________.


  1. X suffered a net operating loss for 2017. Under the general rules, X may carry back ___________years and carry forward__________________years.


  1. The ___________________________ method of depreciation must be used for amortizing                         intangible property.


  1. E moved from Monmouth to San Jose, CA to accept a new job as an accountant. During the trip,                                  he spent $400 on lodging and $500 on meals.  E may deduct $___________________.


  1. H’s house was flooded this year due to abnormal rainfall. She was forced to stay in a motel while the water subsided. Her motel stay, which cost $600, was not covered by her insurance policy. H                                     may deduct $______________________for the motel stay as part of her casualty loss from                                     the flood.


  1. Assuming a taxpayer itemizes deductions and is under the age of 65, medical expenses are deductible only to the extent that they exceed ___________________________% of the taxpayer’s AGI.


  1. J graduated from the University of Texas during the current year and accepted a job in Kansas City. J lived in Austin and moved to Kansas City to commence work on June 1.  J drove 1,800 miles pulling a trailer with all of his belongings.  J rented the trailer for $650.  J owns 2 cats and paid a transport company $400 to move the cats to Kansas City.  On June 1 he moved into an apartment and lived there with his cats temporarily at a cost of $10 per day through July 15.  On July 16 he moved into his new home with his pets.  What will J be able to claim as a moving expense?












  1. P, a calendar year, cash basis taxpayer, started a business on June 1, 2017. His lease required monthly payments of $800 beginning on June 1.  Insurance for premises also began on June 1 and was to be paid every three months and cost $125 per month.  Premiums were paid on June 1, 2017, September 1, 2017, December 1, 2017 and March 1, 2018.  What are the total expenses that P may deduct for 2017?












  1. Complete Depreciation Schedule for a passenger automobile used solely for business purposes.




Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Unadjusted Basis 27000 27000 27000 27000 27000 27000 27000 27000 27000 27000
Depreciation % 0.2 0.32 0.192 0.1152 0.1152 0.0576
MACRS Depreciation
Limit 3160 5100 3050 1875 1875 1875 1875 1875 1875 1875
Cumulative Depreciation
Adjusted Basis







  1. Y’s inventory records reveal the following information:


Item                                        Cost                                        FMV

1                                              3,300                                       3,400

2                                              5,500                                       5,700

3                                              6,300                                       6,000

4                                              7,500                                       8,000

5                                              4,900                                       4,700


For financial accounting purposes, Y values inventory using FIFO and the lower of cost or             market.  For tax purposes, the value of Y’s ending inventory is:




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