Reference no: EM132581398

Question 1: John started a new secretarial service. He converted his personal computer, which cost $2,700, to use in the business when it was worth $1,750. Which of the following is not true of the basis in the computer?

A. For determining gain, $2,700 is used.
B. For depreciation purposes, $1,750 is used.
C. No loss may be recognized if the asset is sold.
D. For determining either gain or loss, the basis must be reduced for depreciation allowed or allowable.

Question 2: Which of the following is not a proper adjustment to the basis of property, once the original basis is determined?

A. Add repairs and maintenance expenditures exceeding 15% of the cost of the asset within a single year.
B. Subtract other capital recoveries such as deductible casualty losses.
C. Add improvements and betterment.
D. Subtract depreciation allowed or, if no depreciation was claimed, the depreciation that was allowable.

Question 3: Julie has the choice to invest in City of Phoenix bonds or Tandem, Inc. corporate bonds that pay 9 percent interest. Julie is a single taxpayer who earns $70,500 annually. Assume that the City of Phoenix bonds and the Tandem, Inc. bonds have similar risk. What interest rate would the City of Phoenix have to pay in order to make Julie indifferent between investing in the City of Phoeniz and the Tandem, Inc. bonds for 2019?

A. 7.22 percent
B. 9.00 percent
C. 7.02 percent
D. None of the choices are correct
E. 6.42 percent