▪ Special classes of employment, tax withholding and supplemental wage withholding
Final Exam
SCORE: 94%
PASSED
1,
What is the limitation on the soil and water conservation expense deduction a farmer may claim each year?
X 25% of gross ordinary income from farming plus gains from the sale of livestock and other assets used in the production of farm income.
25% of net income from all farm sources plus net gain from the sale of livestock held for draft, dairy, breeding, or sporting purposes.
25% of gross ordinary income from farming plus gains from the sale of livestock held for draft, dairy, breeding, or sporting purposes.
25% of net income reported on Schedule F plus net gain from the sale of livestock and other assets used in the production of farm income.
2,
Which of the following is NOT a deductible expense on Schedule F?
FUTA taxes paid
Cost of purchase and application of chemicals applied to farm land
Premiums for business interruption insurance
X Cost of food provided to family members who are farm employees
3,
Which of the following is NOT a requirement that Marita Lyon must satisfy with respect to wages paid to her farm employees?
Withhold income and FICA taxes, and pay her share of FICA taxes, on total cash wages (except less than $150 to certain piece-rate workers) if cash wages she pays to all employees during the year total $2,500 or more.
Report cash and non-cash wages on Form W-2 provided to each employee, including family members to whom she paid wages, whether or not any taxes were withheld.
X Pay federal FUTA if she paid total cash wages of $15,000 or more during the year, or employed 7 or more farm workers at least one day during each of 20 different calendar weeks.
Withhold income and FICA taxes, and pay her share of FICA taxes, if she pays cash wages of $150 or more during the year to any one farm employee.
4,
Where on her tax return would Alice Johansen, a cash-basis farmer, deduct $5,640 mortgage interest expense; 20% allocable to her home and 80% allocable to the farm land?
$5,460 on Schedule A
$1,128 on Schedule A, and $4,512 increases the basis of the farm land
$5,460 on Schedule F
X $1,128 on Schedule A, and $4,512 on Schedule F
5,
Which of the statements below, regarding cash and non-cash benefits received from the U.S. Department of Agriculture (USDA) agricultural programs, is NOT correct?
Crop insurance and disaster payments from the USDA are taxable but may qualify to be deferred to the following year.
X Wetlands reserve program payments (WRP) from the USDA are 1231 gain, fully taxable on Form 4797, Part I.
Certain cost-sharing payments received from the USDA may qualify to be excluded from income.
Cash and non-cash benefits received from the USDA are taxable in the year received, unless an exception applies.
6,
Farmers may elect to deduct certain soil or water conservation expenses that are otherwise capital expenses which would be added to the basis of the land. Which of the following is NOT a requirement a farmer must satisfy to make this election?
Expenses must be allocable to land actually used in farming.
Expenses must be consistent with a plan approved by the USDA or a comparable state agency.
The farmer must cultivate, operate, or manage a farm for profit, as either an owner or a tenant.
X The farmer must notify the county agricultural extension office.
7,
What is the definition of gross income from farming for purposes of determining eligibility to use the estimated tax rule applicable to farmers and fishers?
Gross farming income from Schedule F, Form 4835, and Schedule E, and ordinary gains from farming assets on Form 4797, Part II.
Gross income from Schedule F and Form 4835, and gains from the sale of livestock used for draft, breeding, or dairy purposes.
Gross income from Schedule F and Form 4835, and gains from the sale of livestock and other assets used in the production of farm income.
X Gross farming income from Schedule F, Form 4835, and Schedule E, Parts II and III, and gains from the sale of livestock used for draft, breeding, sporting, or dairy purposes reported on Form 4797.
8,
A penalty paid by a farmer for which of the following actions is deductible as farm expense?
Underpayment of employment taxes due on farm laborers
X Marketing crops in excess of farm marketing quotas
Noncompliance with a conservation reserve program (CRP) agreement
Excessive loaded truck weight while taking livestock to market
9,
Instead of paying estimated tax by the usual due dates, farmers or fishers may elect to make no estimated tax payments, file their returns, and pay the entire tax due on or before March 1, or they may make one estimated tax payment on or before January 15 and file their return on or before April 15. What is the gross income requirement that qualifies a farmer or fisher for this estimated tax rule?
X At least 2/3 of total gross income for preceding year was from farming or fishing, OR at least 2/3 of total gross income for current year is from farming or fishing.
At least 90% of total gross income for preceding year was from farming or fishing.
At least 3/4 of total gross income for the current year is from farming or fishing.
At least 2/3 of total gross income for preceding year was from farming or fishing, AND at least 2/3 of total gross income for current year is from farming or fishing.
10,
Which of the statements below is NOT correct with respect to the farm optional method of computing self-employment (SE) tax?
If gross farm income is $6,840 or less, SE tax may be computed on the amount of gross farm income.
X If gross farm income is $6,840 or less, a farmer can elect the optional method, regardless of the amount of net farm income.
If gross farm income is more than $6,840, a farmer can elect the optional method if net farm income is less than $4,894.
If gross farm income is more than $6,840 and net farm income is less than $4,894, SE tax, using the optional method, is computed on $4,520.
11,
The fuels tax credit is computed on Form 4136 based on which of the following?
Excise tax paid on qualified fuel
Qualified farm-related mileage
Cost of qualified fuel purchased
X Gallons of qualified fuel purchased
12,
Charles Land, a cash-basis farmer, has gross income of $2,190 and net income of $395 from his farming activity. Which of the following is the correct amount on which Mr. Land may compute his optional method self-employment tax?
X $395
$1,460
$4,894
$4,520
13,
Which of the following types of farmer is not eligible for the deduction of soil or water conservation expenses?
Vegetable farmer
X Timber farmer
Fruit farmer
Fish farmer
14,
Jim Jaffers, a cash-basis farmer, paid $2,100 for fertilizer and lime expenses, the effects of which will last about three years. He received $1,200 for fertilizer from the USDA. His total expense for fertilizer, feed, seed, and similar items for the current year and each of the past three years has been 40% of his total farming expense. Which of the following is correct with respect to actions Jim may take?
Deduct the fertilizer and lime expense in the year the expense was paid.
Capitalize fertilizer and lime expense, and depreciate over a five-year recovery period.
Deduct the expense only in the year the fertilizer and lime are applied to the soil.
X Deduct $900 ($2,100 expense $1,200 USDA payment for fertilizer) in year paid.
15,
In what year and on what tax form would Jose Santez, a cash-basis farmer, report the $3,890 expenses of raising 15 feeder calves paid in 2011 and the $12,600 proceeds from the 2012 sale of the calves?
$3,890 cost as basis of livestock sold and $12,600 as sales proceeds on 2012 Form 4797, Part II.
$3,890 cost as basis of livestock sold and $12,600 as sales proceeds on 2012 Schedule F.
X $3,890 as expense on 2011 Schedule F and $12,600 as sales proceeds on 2012 Schedule F.
$3,890 cost as expense on 2012 Schedule F and $12,600 as sales proceeds on 2013 Schedule F.
16,
Which of the statements below, regarding the tax reporting requirements applicable to Commodity Credit Corporation (CCC) loans, is NOT correct?
X A farmer can elect each year whether or not to report loan proceeds when received.
A farmer can request income tax withholding from CCC loan payments received.
A CCC loan amount is normally taxable in the year the pledged commodity is sold.
A farmer can elect to report the loan amount in the year the proceeds are received.
17,
Which of the statements below, with regard to cash-basis farmers reporting items on Schedule F, is correct?
The expenses of raising items held for sale are deducted in the year the items are sold and the sales price is included in income.
The expenses of readying purchased livestock for resale are generally added to the cost of the livestock and subtracted from the sales proceeds in the year of sale.
X The cost of purchased items held for sale is subtracted from the sales proceeds in the year of sale.
The expenses of raising livestock used for draft, breeding, dairy, or sporting purposes are capitalized and depreciated when the livestock is placed in service.
1,
Where on her tax return would Alice Johansen, a cash-basis farmer, deduct $5,640 mortgage interest expense; 20% allocable to her home and 80% allocable to the farm land?
$5,460 on Schedule A
X $1,128 on Schedule A, and $4,512 increases the basis of the farm land
$5,460 on Schedule F
$1,128 on Schedule A, and $4,512 on Schedule F
2,
Which of the statements below is NOT correct with respect to the farm optional method of computing self-employment (SE) tax?
If gross farm income is $6,840 or less, SE tax may be computed on the amount of gross farm income.
X If gross farm income is $6,840 or less, a farmer can elect the optional method, regardless of the amount of net farm income.
If gross farm income is more than $6,840, a farmer can elect the optional method if net farm income is less than $4,894.
If gross farm income is more than $6,840 and net farm income is less than $4,894, SE tax, using the optional method, is computed on $4,520.
3,
Which of the following is NOT a requirement that Marita Lyon must satisfy with respect to wages paid to her farm employees?
Withhold income and FICA taxes, and pay her share of FICA taxes, on total cash wages (except less than $150 to certain piece-rate workers) if cash wages she pays to all employees during the year total $2,500 or more.
Report cash and non-cash wages on Form W-2 provided to each employee, including family members to whom she paid wages, whether or not any taxes were withheld.
X?? Pay federal FUTA if she paid total cash wages of $15,000 or more during the year, or employed 7 or more farm workers at least one day during each of 20 different calendar weeks.
Withhold income and FICA taxes, and pay her share of FICA taxes, if she pays cash wages of $150 or more during the year to any one farm employee.
4,
Which of the following types of farmer is not eligible for the deduction of soil or water conservation expenses?
Vegetable farmer
X Timber farmer
Fruit farmer
Fish farmer
Question with wrong answer:
Question 1
What is the limitation on the soil and water conservation expense deduction a farmer may claim each year?
Your answer: 25% of gross ordinary income from farming plus gains from the sale of livestock and other assets used in the production of farm income.
Question 10
Which of the statements below is NOT correct with respect to the farm optional method of computing self- employment (SE) tax?
Your answer: If gross farm income is $6,840 or less, a farmer can elect the optional method, regardless of the amount of net farm income.
Question 12
Charles Land, a cash-basis farmer, has gross income of $2,190 and net income of $395 from his farming activity. Which of the following is the correct amount on which Mr. Land may compute his optional method self-employment tax?
Your answer: $395
Question 14
Jim Jaffers, a cash-basis farmer, paid $2,100 for fertilizer and lime expenses, the effects of which will last about three years. He received $1,200 for fertilizer from the USDA. His total expense for fertilizer, feed, seed, and similar items for the current year and each of the past three years has been 40% of his total farming expense. Which of the following is correct with respect to actions Jim may take?
Your answer: Deduct $900 ($2,100 expense $1,200 USDA payment for fertilizer) in year paid.
