Final Exam > Question 1
Which action is treated as a sale of a home?
Foreclosure
Abandonment
Short sale
XXAll of the above
Final Exam > Question 2
For purposes of the income exclusion for debt forgiveness related to a principal residence, which reason for obtaining the debt will not result in the exclusion?
A loan to substantially improve a principal residence
A mortgage to buy the home
XXA loan to pay off credit card debt
The loan is limited to $2 million of qualifying debt, or $1 million for married persons filing separate returns
Final Exam > Question 3
If debt forgiveness on a principal residence is excluded, the homeowner must reduce:
XXThe basis of the home
The home sale exclusion limit
Nothing
The mortgage interest premium deduction
Final Exam > Question 4
Homeowners receiving certain mortgage assistance can continue to deduct their mortgage interest and taxes:
XXThrough 2011 only
Through 2012 only
Indefinitely
Through 2020 only
(correct answer is Through 2012 only)
Final Exam > Question 5
Which statement is not correct?
Credit card debt can be tax free if discharged in bankruptcy.
Credit card debt can be tax free if the debtor is insolvent at the time of the debt forgiveness.
XXCredit card debt can never be discharged and so can never be tax free.
Credit card debt can always be discharged and so can always be tax free
Final Exam > Question 6
An individual buys a car and finances the purchase. He fails to make payments so the car is repossessed. The lender sells the car, applies the proceeds in satisfaction of the loan, and forgives the balance of the car loan. The individual:
Must report the cancellation of debt, with no exceptions
XXMust report the cancellation of debt unless it is forgiven in bankruptcy or the individual is insolvent at the time of the debt forgiveness
Can opt to exclude debt by making certain elections
Can opt not to report the cancellation of debt, with no exceptions
Final Exam > Question 7
Under loan repayment assistance programs (LRAPs), which type of work will entitle student loan holders to tax- free debt forgiveness?
Working as a lawyer in a legal aid office
Working as a science teacher in an underserved area
Working as a nurse in an underserved rural area
XXAll of the above
Final Exam > Question 8
Which type of debt forgiveness entitles a business to opt for deferral of income?
Discharge of debt in bankruptcy under Title 11
Cancellation of qualified farm debt
Cancellation of qualified real property business debt
XXAll of the above
Final Exam > Question 9
If a business opts to defer income from the cancellation of debt, the reduction is 33-1/3 cents for every dollar, for which tax attribute?
Net operating loss
XXPassive activity credits
Net capital loss
Foreign tax credit carryover
Final Exam > Question 10
C corporations experiencing debt discharge as a result of the reacquisition of debt can defer the income for five years and then spread the income for five years. To which year does this rule apply?
XXReacquisition of debt in 2010
Reacquisition of debt in 2011
Reacquisition of debt in 2012
Reacquisition of debt in 2013