Ebook Concepts in Federal Taxation 2019 26Th Edition Murphy Test Bank Full Chapter PDF

Concepts in Federal Taxation 2019 26th
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Chapter 7
1. An operating loss occurs when an entity's deductions exceeds the income generated for the period.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: True / False
HAS VARIABLES: False
LEARNING OBJECTIVES: CIFT.MUHI.14.1 - 2
NATIONAL STANDARDS: United States - AACSB Analytic
United States - AICPA Measurement
DATE CREATED: 10/26/2015 11:06 AM
DATE MODIFIED: 10/26/2015 11:06 AM
2. A transaction loss occurs when an asset is disposed of at less than its basis.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
DATE CREATED: 10/26/2015 11:06 AM
3. A corporation has a net capital loss. The significance of a net capital loss in 2018 for a corporation is that it can be
carried back 3 years and carried forward 5 years by a corporation to offset capital gains in other taxable years.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
CIFT.MUHI.14.2 - 2
DATE CREATED: 10/26/2015 11:06 AM
DATE MODIFIED: 5/9/2018 12:01 PM
4. The term tax shelter refers to investment property that involves residential and commercial real estate.
Copyright Cengage Learning. Powered by Cognero. Page 1
Chapter 7
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
DATE CREATED: 10/26/2015 11:06 AM
5. Lu-Yin purchased her consulting business with $75,000 of her own funds and she borrowed $125,000 from the local
bank. If she is personally responsible for the loan, she is at risk only for $50,000.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
6. Material participation requires that an individual participates in an activity for more than 200 hours per year or spends
more than 50 hours a year in the activity and the time spent is more than anyone else spends on the activity.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
7. Virginia owns a business that rents power equipment to construction companies. Despite maintaining, delivering, and
picking up the equipment, Virginia's business is passive since it is a rental activity.
Chapter 7
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
DATE CREATED: 10/26/2015 11:06 AM
8. While most rental activities are classified as passive, an exception is low-income housing.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
9. Portfolio income consists of unearned income from dividends, interest, royalties, annuities, and other assets held as
investments.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
DATE CREATED: 10/26/2015 11:06 AM
10. A closely held corporation cannot offset net passive losses against income of the business.
a. True
b. False
Chapter 7
ANSWER: False
POINTS: 1
DIFFICULTY: Medium
LEARNING OBJECTIVES:CIFT.MUHI.14.6 - 6
CIFT.MUHI.14.7 - 7
DATE CREATED: 10/26/2015 11:06 AM
11. Dwight owns an apartment complex that has a $30,000 loss. His adjusted gross income is $85,000 before the loss.
Since he qualifies as an active participant he may deduct $25,000.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
12. Leon is allowed to deduct all the current and suspended losses on his passive activity if he sells his entire interest in
the passive activity during the year.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
13. John discovers that termites have destroyed the front porch of his office building. The damage occurred over a 3-year
period. He is eligible for a casualty loss deduction.
a. True

Chapter 7
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
14. The Baskerville Corporation has a net $6,500 capital loss during the current taxable year. They will be able to deduct
$3,000 this year and carries the remaining $3,500 forward.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
15. Any corporate capital loss not used in the current year can be carried back 2 years and carried forward 20 years to
offset capital gains in those years.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
16. Constance owns a boutique. During the current year, she has gross income of $400,000 and allowable deductions
related to the business of $425,000.
I. Constance has incurred a transaction loss, which represents her unrecovered cost of
capital.
Chapter 7
II. Constance has suffered an annual loss, which may be carried forward indefinitely
a. Only statement I is correct.

b. Only statement II is correct.
c. Both statements are correct.
d. Neither statement is correct.
ANSWER: b
POINTS: 1
DIFFICULTY: Medium
QUESTION TYPE: Multiple Choice
DATE CREATED: 10/26/2015 11:06 AM
17. Barry owns all of the stock of Jerrico Corporation; an internet based gaming firm. Barry is also the President of and
works full-time for Jerrico. During the current year, Jerrico has a loss of $125,000 from its operations.
I. If Jerrico is an S Corporation, Barry may deduct the loss on his personal tax return as a
deduction for AGI.
II. If Jerrico is a regular corporation, the corporation can carry the loss forward indefinitely to
reduce taxable income in future years.

ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
18. Perry owns all of the stock of Sound Corporation. Perry is also the President of Sound and works full-time running
Sound. During the current year, Sound has a loss of $75,000 from its operations.
I. If Sound is an S Corporation, Perry deducts the loss on his personal tax return as a
deduction from AGI.
II. If Sound is a regular corporation, the corporation can carry the loss forward indefinitely to
reduce taxable income in future years.

Chapter 7

ANSWER: b
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
19. Kenneth owns all of the stock of Kearney Corporation. Kenneth is also the President of Kearney and works full-time
running the corporation. During the current year, Kearney has a loss of $40,000 from its operations.
I. If Kearney is an S Corporation, the corporation may carry the loss forward indefinitely.
II. If Kearney is a regular corporation, Kenneth may deduct the loss for AGI on his personal
tax return because the corporation is a flow through entity.

ANSWER: d
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
20. Carmen purchased a business for $150,000 by investing $40,000 of her own funds and borrowing $110,000 from
Local National Bank. Carmen signed the note payable as a personal guarantor. In the first year of operations the business
had an operating loss of $120,000. During the second year, the business has an operating loss of $45,000. How much of
the year two loss is deductible against Carmen's income from other business activities? Assume that Carmen materially
participates in the business.
a. $- 0 -
b. $15,000
c. $30,000
d. $45,000
e. $120,000
ANSWER: c
Chapter 7
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
21. Sullivan, a pilot for Northern Airlines, has adjusted gross income of $92,000 before considering the following losses.
The passive activity rules disallow the deduction for a loss in which of the following?
I. Sullivan has a $4,500 loss from his ownership interest in Cowco, a feeder-cattle limited
partnership. Sullivan is a general partner and is responsible for day-to-day management
decisions.
II. Sullivan has a $7,000 loss from his ownership interest in Swineco, a feeder-pig limited
partnership. Sullivan is a limited partner.

ANSWER: b
POINTS: 1
DIFFICULTY: Difficult
CIFT.MUHI.14.6 - 6
DATE CREATED: 10/26/2015 11:06 AM
22. Maria, an engineer, has adjusted gross income of $167,000 before considering the following losses. The passive
activity rules disallow the deduction for the loss in which of the following?
I. Maria has a $21,000 loss from her ownership of Family Apartment Village, a low-income
housing project.
II. Maria owns and actively participates in managing a rental house across the street from East
State College. This activity generates a $7,000 loss in the current year.

ANSWER: b
POINTS: 1
Chapter 7
CIFT.MUHI.14.7 - 7
DATE CREATED: 10/26/2015 11:06 AM
23. If an individual is not a material participant, a rental activity is considered passive. However, certain rental activities
are not deemed to be rentals for passive loss purposes even if the individual is not a material participant. Which of the
following is not excluded from the passive loss rules?
a. Golf cart rentals.
b. Hotel rooms.
c. Jet ski rentals.
d. Apartment rentals.
e. Construction equipment rentals.
ANSWER: d
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
24. Pedro owns a 50% interest in a limited partnership that operates an apartment complex. During the current year, the
partnership generates a taxable rental loss of $42,000. Pedro's other sources of income are salary of $55,000 and interest
of $18,000. What is Pedro's allowable loss from the apartment?
a. $ - 0 -
b. $18,000
c. $21,000
d. $25,000
e. None of the above.
ANSWER: a
POINTS: 1
CIFT.MUHI.14.7 - 7

Chapter 7

DATE CREATED: 10/26/2015 11:06 AM
25. Jose, Mahlon, and Eric are partners in New Communications Partnership. Jose owns a 50% interest, Mahlon owns a
35% interest, and Eric owns a 15% interest. During the current year (the first year of operation for the enterprise), the
business has a loss. Although the partnership is established as a general partnership, Jose functions as the manager and
performs all of the day-to-day duties of a chief operating officer. Mahlon and Eric are merely investors who receive
monthly reports about the business. At the close of the current tax year, each partner will receive a share of the partnership
loss. Which of the partners will be able to deduct his (their) share of the partnership loss?
I. Jose
II. Mahlon
III. Eric
a. Mahlon
b. Jose, Mahlon, and Eric
c. Jose
d. Jose and Mahlon
e. Mahlon and Eric
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
CIFT.MUHI.14.6 - 6
DATE CREATED: 10/26/2015 11:06 AM
26. During 2018, Pamela worked two "jobs." She performed financial consulting activities for 1,000 hours and real estate
development and rental activities for 1,200 hours. Her real estate development and rental activities produced a loss of
$35,000. Her financial consulting generated a net business income of $40,000. How much of the loss can Pamela deduct
against her financial consulting income?
a. $-0-
b. $17,500
c. $25,000
d. $35,000
e. $40,000
ANSWER: d
POINTS: 1
CIFT.MUHI.14.7 - 7
Chapter 7

DATE CREATED: 10/26/2015 11:06 AM
27. During the current year, Alyssa incurred a net loss of $27,500 from a 5 percent interest in a partnership that operated
and managed an office building. Alyssa had adjusted gross income from other sources of $110,000 and spent 67 hours
assisting in the management of the building. Determine Alyssa's total adjusted gross income for the current year.
a. $82,500
b. $90,000
c. $100,000
d. $105,000
e. $110,000
ANSWER: e
POINTS: 1
DIFFICULTY: Medium
CIFT.MUHI.14.7 - 7
DATE CREATED: 10/26/2015 11:06 AM
28. Kenzie and Ross equally own rental real estate. The rental property generated a loss of $20,000. Kenzie is also
employed as a part-time Tupperware salesperson and full time as a real estate agent. For her share of the loss to be fully
deductible, she must:
I. Not have an adjusted gross income in excess of $100,000.
II. Spend more than 750 hours, in total, as a realtor
III. Spend more than 100 hours managing the rental activity, and spend more time than Ross.
IV. She must spend more than 50% of her time as a realtor and must own more than 5% of the
real estate agency.

c. Statements I and II are correct.
d. Statements II, III, and IV are correct.
e. Statements I, II, III, and IV are correct.
ANSWER: d
POINTS: 1
CIFT.MUHI.14.7 - 7
Chapter 7

DATE CREATED: 10/26/2015 11:06 AM
29. Travis is a 30% owner of 3 rental houses. He spends 625 hours a year managing the properties. In addition, he owns a
20% interest in a real estate business to which he devotes 1,800 hours a year. The rental units generate a total loss of
$22,000, and Travis' adjusted gross income in the current year, before considering the rental properties, is $120,000. How
much of the loss can Travis deduct?
a. $- 0 -
b. $4,500
c. $6,600
d. $15,000
e. $22,000
ANSWER: c
POINTS: 1
CIFT.MUHI.14.7 - 7
DATE CREATED: 10/26/2015 11:06 AM
30. Susan is the owner of a 35-unit apartment complex. She spends 950 hours a year managing the property. In addition,
she works part-time for a mortgage company. She spends 1,150 hours a year as a bookkeeper at the mortgage company.
The apartment complex generated a loss of $32,000, and Susan's adjusted gross income for the current year, before
considering the apartment complex, is $48,000. How much of the loss can Susan deduct?
a. $- 0 -
b. $14,476
c. $16,727
d. $25,000
e. $32,000
ANSWER: d
POINTS: 1
CIFT.MUHI.14.7 - 7
DATE CREATED: 10/26/2015 11:06 AM

Chapter 7
31. A passive activity
I. includes an interest in a limited partnership held by a limited partner investor.
II. includes a working interest in an oil and gas deposit.

ANSWER: a
POINTS: 1
DIFFICULTY: Medium
CIFT.MUHI.14.6 - 6
DATE CREATED: 10/26/2015 11:06 AM
32. A passive activity

I. includes any trade or business in which a taxpayer does not materially participate.
II. includes rentals of apartment buildings, rental houses, etc., where no significant personal
services are involved.

ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
33. Which of the following must be classified as "portfolio income?"

I. Dividend income from an investment in Lincoln Corp. common stock.
II. Royalty income from the ownership of the mineral rights on land. The taxpayer does not
share the expenses with the extraction company.


Chapter 7

ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
34. Which of the following must be classified as "portfolio income?"

I. Interest income on CDs from First National Bank.
II. Loss realized from the sale of one-half of his stock shares in Lockleed Corp. Lockleed is
qualified small business stock.

ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
35. A taxpayer had the following for the current year:

Active Portfolio Passive
Income Income Income
Income $75,000 $22,000 $55,000
Deductions (45,000) (16,000) (110,000)
Income(Loss) $30,000 $6,000 $(55,000)
I. If the taxpayer is a closely held corporation, taxable income from the three activities is
income of $6,000.
II. If the taxpayer is an individual and the passive income is not related to a rental real estate
activity, taxable income is $36,000.

Chapter 7

ANSWER: c
POINTS: 1
DATE CREATED: 10/26/2015 11:06 AM
36. If a taxpayer has the following for the current year:

Active Portfolio Passive
Income Income Income
Income $75,000 $22,000 $55,000
Deductions (45,000) (16,000) (110,000)
Income(Loss) $30,000 $6,000 $(55,000)
I. If the taxpayer is a regular corporation, taxable income from the three activities is a loss of
$19,000.
II. If the taxpayer is an individual and the passive income is related to a rental real estate
activity in which the taxpayer is an active participant, taxable income is $11,000.

ANSWER: c
POINTS: 1
DATE CREATED: 10/26/2015 11:06 AM
37. Salvador owns a passive activity that has a basis of $44,000 and a suspended loss of $18,000. Salvador's taxable
income from active and portfolio income is $55,000. If Salvador's sells the passive activity for $56,000 how will he report
the transaction on his tax return?
I. Salvador will report an ordinary loss of $18,000.
II. Salvador will report a capital gain of $12,000.

Chapter 7

ANSWER: c
POINTS: 1
CIFT.MUHI.14.7 - 7
DATE CREATED: 10/26/2015 11:06 AM
38. During the year, Aimee reports $30,000 of active business income, $15,000 of income from passive activity X, and a
$25,000 loss from passive activity Y. Determine the tax consequences of these events.
I. The $15,000 income from activity X can offset $15,000 of the loss from activity Y.
II. Any passive loss that is not deducted in the current year is suspended.

ANSWER: c
POINTS: 1
CIFT.MUHI.14.7 - 7
DATE CREATED: 10/26/2015 11:06 AM
39. Janine is an engineering professor at Southern College. Her annual salary is $110,000. She owns two 3-unit apartment
buildings near the university. Because of the proximity to campus, Janine actively manages the property. During the
current year, the rental of the property produced a $29,500 loss. How much of the loss may Janine deduct for the current
year?
a. $- 0 -
b. $14,750
c. $20,000
d. $25,000
e. $29,500
ANSWER: c
POINTS: 1
Chapter 7

DATE CREATED: 10/26/2015 11:06 AM
40. Nancy is the owner of an apartment complex. She actively participates in the management of the building. During the
current year, it generates a taxable loss of $27,000. Nancy's other sources of income are salary of $52,000 and interest of
$21,000. What is Nancy's allowable loss from the apartment?
a. $- 0 -
b. $18,000
c. $25,000
d. $27,000
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
41. Nelson is the owner of an apartment complex. He actively participates in the management of the building. During the
current year, it generates a taxable loss of $33,000. Nelson's other sources of income are salary of $148,000 and interest of
$12,000. What is Nelson's allowable loss from the apartment?
a. $- 0 -
b. $ 1,000
c. $12,000
d. $25,000
e. $33,000.
ANSWER: a
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
Chapter 7
42. Bowden is a single individual and has the following income (loss) for the current tax year:
Salary $85,000
Dividends and interest 24,000
Actively managed rental property (23,000)
What is Bowden's adjusted gross income for this year?
a. $ 85,000
b. $ 86,000
c. $ 88,500
d. $ 89,500
e. $109,000
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
43. Karl has the following income (loss) during the current year:
Net business income $45,500
Actively managed rental property (34,000)
What is Karl's adjusted gross income for this year?
a. $23,500
b. $31,400
c. $32,500
d. $45,500
e. $57,500
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
44. Natalie is the owner of an apartment complex. She actively participates in the management of the building. During the
current year, it generates a taxable loss of $33,000. Natalie's other sources of income are salary of $114,000 and interest of
Chapter 7
$16,000. What is Natalie's allowable loss from the apartment in the current year?
a. $-0-
b. $10,000
c. $15,000
d. $16,000
e. $25,000
ANSWER: b
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
45. Tim owns 3 passive investments. During the current year, he has the following income and loss from each activity:
Activity 1 $(7,000)
Activity 2 (3,000)
Activity 3 4,000
What is the amount of suspended loss allocated to Activity 2?
a. $- 0 -
b. $1,800
c. $3,000
d. $4,200
e. $6,000
ANSWER: b
POINTS: 1
DATE CREATED: 10/26/2015 11:06 AM
46. Ricardo owns interests in 3 passive activities: A, B, and C. During the current year, activity A realizes income of
$8,000 while activities B and C realize losses of $16,000 and $24,000, respectively. Determine the amount of suspended
loss attributable to activity C.
a. $- 0 -
b. $ 8,000
c. $12,800
d. $19,200
Chapter 7
e. $24,000
ANSWER: d
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
47. Ling owns 3 passive investments. During the last two years, she has the following income and loss from each activity:
2017 2018
Activity 1 $(14,000) $(6,000)
Activity 2 (6,000) (1,000)
Activity 3 8,000 12,000
At the end of 2018 what is the amount of suspended loss allocated to Activity 2?
a. $1,695
b. $1,815
c. $5,185
d. $5,305
e. $7,000
ANSWER: a
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
48. Loren owns three passive activities that had the following results for the current year:
Passive Activity A $25,000
Passive Activity B (10,000)
Passive Activity C (40,000)
If none of the passive activities are rental real estate activities, what is the amount of suspended loss attributable to
Activity C?
a. $- 0 -
b. $18,750
c. $20,000
d. $25,000
e. $40,000
Chapter 7
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
49. Linda owns three passive activities that had the following results for the current year:
Passive Activity A $(4,500)
Passive Activity B 20,000
Passive Activity C (25,500)
If none of the passive activities are rental real estate activities, what is the amount of suspended loss attributable to
Activity A?
a. $- 0 -
b. $ 1,500
c. $ 4,500
d. $ 8,500
e. $10,000
ANSWER: b
POINTS: 1
DATE CREATED: 10/26/2015 11:06 AM
50. During the current year, Diane disposes of Fine Foods Limited Partnership, at a gain of $12,000. Diane's adjusted
gross income from non-passive sources is $120,000. She has a suspended loss from Fine Foods of $22,000, and a loss
from other passive activities of $4,500. What is the amount of Diane's adjusted gross income for the current year?
a. $95,550
b. $105,500
c. $110,000
d. $115,500
e. $120,000
ANSWER: c
POINTS: 1
Chapter 7

CIFT.MUHI.14.6 - 6
DATE CREATED: 10/26/2015 11:06 AM
51. Darien owns a passive activity that has a basis of $36,000 and a suspended loss of $22,000. If Darien dies during the
year when the passive activity has a fair market value of $52,000, how will the information be presented on his tax return?
I. Darien will report an ordinary loss of $6,000.
II. Darien will report a capital gain of $16,000.

ANSWER: a
POINTS: 1
CIFT.MUHI.14.6 - 6
DATE CREATED: 10/26/2015 11:06 AM
52. "Active participation" and "real estate professional" are both exceptions to the general rule for passive activity losses
with rental real estate.
I. A taxpayer qualifying under both exceptions is limited to a maximum annual deduction of
$25,000.
II. Active participation results from owning at least a 10% interest in the activity and
arranging for repairs and maintenance and collecting rents.

ANSWER: b
POINTS: 1
DIFFICULTY: Medium
Chapter 7

DATE CREATED: 10/26/2015 11:06 AM
53. "Active participation" and "real estate professional" are both exceptions to the general rule for passive activity losses
with rental real estate.
I. One of the tests that an individual must meet to qualify as a real estate professional is that
the taxpayer spends more than 50% of his/her time in real property trades or businesses.
II. A taxpayer with an AGI of $190,000 qualifying under the real estate professional exception
may deduct an unlimited amount of rental real estate losses.

ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
54. Mark has an adjusted gross income of $154,000. Not included in his adjusted gross income is a $16,000 loss from a
passive activity. Which of the following statements regarding the effect of the passive loss on his adjusted gross income
is/are correct?
I. If the activity does not involve rental real estate, he can only deduct the loss as a
miscellaneous itemized deduction.
II. If the activity is rental real estate and Mark is an active participant, he can deduct the
$16,000 loss for adjusted gross income.

ANSWER: d
POINTS: 1
CIFT.MUHI.14.7 - 7
Chapter 7
DATE CREATED: 10/26/2015 11:06 AM

55. Rose has an adjusted gross income of $130,000. Not included in her adjusted gross income is a $15,000 loss from a
passive activity. Which of the following statements regarding the effect of the passive loss on his adjusted gross income
is/are correct?
I. If the activity is rental real estate and Rose meets the real estate professional exception, she
can deduct the $15,000 loss for adjusted gross income.
II. If the activity is rental real estate and Rose is an active participant, she can deduct $5,000 of
the loss for adjusted gross income.

ANSWER: a
POINTS: 1
CIFT.MUHI.14.7 - 7
DATE CREATED: 10/26/2015 11:06 AM
56. Mary and Philip purchased an apartment building in January 2011, which they actively manage. During the current
year, the apartment building generates a loss of $35,000. Their other income is as follows:
Salaries $80,000
Loss from limited partnership acquired in 2009 (4,000)
What is Mary and Philip's adjusted gross income?
a. $59,000
b. $63,000
c. $84,000
d. $88,000
ANSWER: b
POINTS: 1
DIFFICULTY: Medium
Chapter 7
DATE CREATED: 10/26/2015 11:06 AM

57. Judy and Larry are married and their combined salaries for the current year are $115,000. They actively participate in
the rental of two houses. For the current year they have the following losses:
Income/(Loss)
Limited Partnership A $(5,000)
Limited Partnership B 8,000
Rental house X (5,000)
Rental house Y (2,000)
What is Judy and Larry's adjusted gross income?
a. $108,000
b. $111,000
c. $114,000
d. $115,000
e. $118,000
ANSWER: b
POINTS: 1
DATE CREATED: 10/26/2015 11:06 AM
58. Sarah owns a passive activity that has a suspended loss of $18,000. The activity has a fair market value of $35,000 and
her adjusted basis in the activity is $20,000.
I. If Sarah sells the activity, she is allowed to deduct the $18,000 suspended loss.
II. If Sarah gifts the activity, she is only be allowed to deduct $15,000 of the suspended loss.

ANSWER: a
POINTS: 1
DIFFICULTY: Medium
CIFT.MUHI.14.7 - 7
DATE CREATED: 10/26/2015 11:06 AM
Chapter 7
59. Norris owns a passive activity that has a suspended loss of $12,000. The activity has a fair market value of $42,000
and his adjusted basis in the activity is $27,000.
I. If Norris gifts the property, he is allowed to deduct $3,000 of the suspended loss.
II. If Norris dies, none of the suspended loss is deductible.

ANSWER: b
POINTS: 1
CIFT.MUHI.14.7 - 7
DATE CREATED: 10/26/2015 11:06 AM
60. Anna owns a passive activity that has a basis of $30,000 and a suspended loss of $7,000. Anna gifts the passive
activity to her daughter Patricia when the property has a fair market value of $42,000.
I. Anna will report an ordinary loss of $7,000.
II. Patricia's basis in the passive activity is $30,000.

ANSWER: d
POINTS: 1
DIFFICULTY: Medium
CIFT.MUHI.14.7 - 7
DATE CREATED: 10/26/2015 11:06 AM
61. Which of the following events is a "casualty" loss?

I. Lightning damage.
II. Loss of the topsoil on a farm from a flood.
Chapter 7

ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
62. Which of the following events is a "casualty" loss?

I. Diamonds stolen by thief, reported to police
II. Florida orange trees killed by a freeze.

ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
63. Mario's delivery van is completely destroyed when a tree fell on it. Mario's insurance company pays him $11,000 for
the accident. The van cost $20,000 three years ago. Tax depreciation deductions of $6,000 have been taken to date. The
"Blue Book value" (i.e., fair market value) of the van is $12,000 on the accident date. What is Mario's casualty loss on the
van?
a. $- 0 -
b. $ 1,000
c. $ 3,000
d. $ 8,000
e. $13,000
ANSWER: c
POINTS: 1

Chapter 7
DATE CREATED: 10/26/2015 11:06 AM
64. In April of the current year, Speedy Printing Company's delivery van is stolen. The van was originally purchased in
2011 for $13,000, and its fair market value at the time of the theft is $4,000. The van has a zero adjusted basis on the
books of Speedy. The previous year, Speedy dropped theft insurance on the van, so it receives no compensation for the
loss from its insurance company. What amount of loss can Speedy deduct?
a. $- 0 -
b. $ 4,000
c. $10,900
d. $12,900
e. $13,000
ANSWER: a
POINTS: 1
DATE CREATED: 10/26/2015 11:06 AM
65. Jennifer's business storage shed is damaged by a hail storm. The shed is uninsured. Its adjusted basis is $8,000. Just
before the accident the shed is appraised for $10,000. In its damaged condition, the shed can be sold for $4,000. What is
Jennifer's loss from the storm?
a. $- 0 -
b. $ 4,000
c. $ 6,000
d. $ 8,000
e. $10,000
ANSWER: c
POINTS: 1

Chapter 7
DATE CREATED: 10/26/2015 11:06 AM

66. Gomez, a self-employed consultant, is involved in a traffic accident with his business-use automobile. The car is
totally destroyed and Gomez's insurance policy reimburses him $8,000 for the fair market value of the car immediately
before the accident. His basis in the car is $11,000. What is the amount of Gomez's casualty loss deduction?
a. $- 0 -
b. $ 2,000
c. $ 3,000
d. $ 8,000
e. $11,000
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
67. Ford's automobile that he uses 100% for business is vandalized. The adjusted basis before the vandalism is $3,000.
The fair market value of the car before the vandalism is $7,000, and the fair market value of the property after the
vandalism is $2,000. Ford's insurance does not cover vandalism. What is Ford's loss deduction for the year?
a. $- 0 -
b. $1,000
c. $2,000
d. $3,000
e. $5,000
ANSWER: d
POINTS: 1
DATE CREATED: 10/26/2015 11:06 AM
68. Which of the following losses are generally deductible?

I. Loss on the sale of corporate stock.
II. Losses incurred in carrying on a trade or business.

Chapter 7

ANSWER: c
POINTS: 1
DIFFICULTY: Easy
CIFT.MUHI.14.8 - 8
DATE CREATED: 10/26/2015 11:06 AM
69. Which of the following losses are generally deductible?

I. Loss on the sale of a personal residence.
II. Loss due to the theft of business inventory.

ANSWER: b
POINTS: 1
DIFFICULTY: Easy
DATE CREATED: 10/26/2015 11:06 AM
70. All of the following are capital assets, except

a. Personal residence.
b. Land used for business parking lot.
c. Pickup truck used for personal transportation..
d. Corporate bonds held for investment purposes.
e. A hand-written letter by Dwight Eisenhower held in a private collection.
ANSWER: b
POINTS: 1
DIFFICULTY: Medium
Chapter 7

DATE CREATED: 10/26/2015 11:06 AM
71. In addition to his salary, Peter realizes a $1,000 short-term capital gain and a $5,000 long-term capital loss. The net
effect of the capital asset transactions on Peter's adjusted gross income is
a. $-0-
b. $1,000
c. $(3,000)
d. $(4,000)
e. $(5,000)
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
72. During the current year, Terry has a short-term capital loss of $9,000 and a long-term capital gain of $3,000. Due to
these transactions Terry reports
a. A capital loss deduction of $3,000 and a loss carryforward of $3,000
b. A capital loss deduction of $3,000 and a loss carryforward of $6,000.
c. A capital loss deduction of $9,000.
d. A capital gain of $3,000 and a loss carryforward of $9,000.
e. A capital loss deduction of $6,000
ANSWER: a
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
73. Which of the following is true concerning capital losses and net operating losses for corporations:
Capital loss Net operating loss
a. Carried back 5 years Carried back 2 years
Chapter 7
b. Carried back 5 years Carried forward indefinitely

c. Carried back 3 years Carried forward indefinitely
d. Carried back 5 years Carried forward 5 years
e. Carried back 3 years Carried forward 5 years
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
74. Billingsworth Corporation has the following net capital gains and losses for 2015 through 2018. Billingsworth'
marginal tax rate is 34% for 2015 to 2017 and is 21% in 2018.
2015 2016 2017 2018
$8,000 $3,000 $6,500 $(9,000)
In 2018, Billingsworth Corporation earned net operating income of $30,000. What is/are the tax effect(s) of the $9,000 net
capital loss in 2018?
I. Corporate taxable income is $21,000.
II. The net capital loss will provide income tax refunds totaling $3,060.

ANSWER: b
POINTS: 1
DATE CREATED: 10/26/2015 11:06 AM
75. During the current year, Schmidt Corporation has operating income of $75,000 and a net capital loss of $25,000. What
is Schmidt's taxable income?
a. $- 0 -
b. $50,000
c. $72,000
d. $75,000
Chapter 7
e. $90,000
ANSWER: d
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
76. Melinda and Riley are married taxpayers. During the year, they completed a single capital asset sale in which a loss of
$120,000 is realized on the sale ($15,000 amount realized, less $135,000 adjusted basis) of qualified small business stock.
How much of the loss can the taxpayers deduct?
a. $3,000
b. $53,000
c. $100,000
d. $103,000
e. $120,000
ANSWER: d
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
77. Rosanna, a single taxpayer, owns 2,000 shares of qualifying small business stock that she purchased for $225,000.
During the current year, she sells 800 of the shares for $30,000. If this is the only stock Rosanna sells during the year,
what can she deduct as an ordinary and capital loss?
Ordinary loss Capital loss
a. $58,000 $- 0 -
b. $50,000 $3,000
c. $50,000 $10,000
d. $- 0 - $3,000
e. $- 0 - $60,000
ANSWER: b
POINTS: 1
DIFFICULTY: Medium

Chapter 7

DATE CREATED: 10/26/2015 11:06 AM
78. Roscoe and Amy are married and own 12,000 shares of qualifying small business stock that they purchased for
$150,000. During the current year, they sell 10,000 shares of the small business stock to an unrelated third party for
$30,000. Eager to sell the remaining shares, they sell the other 2,000 shares to Amy's sister for $4,000. In addition, they
sell stock with a basis of $5,000 for $10,000. The stock was acquired in 2007. In 2010, Roscoe and Amy loaned her
brother, Carl, $8,000 to start his business. Carl has only repaid $2,000 on his documented loan. During the year, Carl has
filed for bankruptcy. The bankruptcy court liquidates all of Carl's assets and Roscoe and Amy receive nothing from the
liquidation.
I. Roscoe and Amy can deduct $120,000 as an ordinary loss on the small business stock.
II. Roscoe and Amy have a net short-term capital loss of $1,000.

ANSWER: b
POINTS: 1
DATE CREATED: 10/26/2015 11:06 AM
79. Aunt Bea sold some stock she purchased several years ago for $10,000 to her nephew, Andy, for $6,000.
I. If this is Aunt Bea's only stock transaction, she can deduct only $3,000 of the loss.
II. If Andy sells the stock for $10,000, his taxable gain is $4,000.

ANSWER: c
POINTS: 1
DIFFICULTY: Medium
Chapter 7

DATE CREATED: 10/26/2015 11:06 AM
80. Frasier sells some stock he purchased several years ago for $10,000 to his brother, Niles, for $6,000.
I. If this is Frasier's only stock transaction, he can deduct only $3,000 of the loss.
II. If Niles sells the stock for $10,000, his taxable gain is $4,000.

ANSWER: d
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
81. Georgia sells stock she purchased for $20,000 to her brother Billy for $12,000. Two years later, Billy sells the stock to
Allie, an unrelated individual, for $22,000. What is Billy's recognized gain or loss?
a. $- 0 -
b. $ 2,000 gain
c. $10,000 gain
d. $ 8,000 loss
e. $ 6,000 loss
ANSWER: b
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
82. Lisa sells some stock she purchased several years ago for $10,000 to her brother Bart for $8,000. One year later Bart
sells the stock for $12,000. The tax consequences to Lisa and Bart are:
Lisa Bart
a. $2,000 loss $4,000 gain

Chapter 7
b. No gain or loss $4,000 gain

c. No gain or loss $2,000 gain
d. $2,000 gain No gain or loss
e. $2,000 loss $2,000 gain
ANSWER: c
POINTS: 1
DATE CREATED: 10/26/2015 11:06 AM
83. Olivia sells some stock she purchased several years ago for $9,000 to her brother Jack for $12,000. One year later Jack
sells the stock for $15,000. The tax consequences to Olivia and Jack are:
Olivia Jack
a. $3,000 gain $3,000 gain
b. No gain or loss $6,000 gain
c. No gain or loss $3,000 gain
d. $3,000 gain $6,000 gain
e. No gain or loss No gain or loss
ANSWER: a
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
84. Sylvia owns 1,000 shares of Sidney Sails, Inc., for which she paid $18,000 several years ago. On March 15, she
purchases 400 additional shares for $5,000. Sylvia sells the original 1,000 shares for $13,500 on April 1. These are her
only stock transactions during the year. Sylvia's capital loss deduction for the current year and her basis in the new shares
are:
Capital loss Basis
a. $3,000 $5,000
b. $2,700 $6,800
c. $4,500 $5,000
d. $3,000 $6,800
e. $2,700 $5,000
Chapter 7
ANSWER: b
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
85. Hamlet, a calendar year taxpayer, owns 1,000 shares of Vanity Corporation common stock, which he purchased two
years ago for $4,000. Hamlet sells all of his shares on December 29, 2018, for $2,500. On January 23, 2019, he purchases
600 shares of Vanity Corporation common stock. What is the amount of Hamlet's recognized loss in 2018?
a. $- 0 -
b. $600
c. $900
d. $1,500
e. $4,000
ANSWER: b
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
86. The wash sale provisions apply to which of the following?

I. Tom realizes an $8,000 loss on the June 17, 2018, sale of 650 shares of Roadrunner
Corporation common stock. He replaces the 650 shares with Hawke Inc., stock on July 8,
2018.
II. Rosie realizes a $6,000 loss on the December 29, 2017, sale of 40 Billings corporate bonds.
Each bond has a face value of $1,000. She replaces the Billings corporate bonds with 30
Redeemer corporate bonds, each with a face value of $1,000 on January 16, 2018. The
Redeemer bonds have the same interest rate, maturity date, but a different bond rating
(AAA) as the Billings bonds.

ANSWER: d
POINTS: 1

Chapter 7
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
87. The wash sale provisions apply to which of the following?

I. Jim bought 500 additional shares of Alfa Gamma stock for $4,000 on December 2, 2018.
Jim owned 2,500 shares after that purchase. On December 26, 2018, Jim realizes a loss of
$1,500 on the sale of 250 shares of Alfa Gamma stock.
II. Calvin realizes a $8,000 loss on the December 29, 2018, sale of Sloan corporate bonds.
Each bond has a face value of $1,000. He replaces the Sloan corporate bonds with the same
number of Jackson corporate bonds, each with a face value of $1,000 on January 16, 2019.
The Jackson bonds have a different interest rate and maturity date then the Sloan bonds but
have the same bond rating (AAA).

ANSWER: a
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
88. During the year, Daniel sells both of his personal vehicles. On January 10, he realizes a $9,000 loss on the sale of the
first car. On April 5, he realizes a $1,000 gain on the sale of the second car. Assume Daniel's salary for the year is
$50,000, and he has no other income. What is Daniel's Adjusted Gross Income?
a. $40,000
b. $41,000
c. $42,000
d. $50,000
e. $51,000
ANSWER: e
POINTS: 1
DIFFICULTY: Medium

Chapter 7

DATE CREATED: 10/26/2015 11:06 AM
89. Samantha sells the following assets and realizes the following gains (losses) during the current year:
Home computer (personal) $(600)
Municipal bonds 6,000
Stamp collection 3,000
Carpeting from residence (2,000)
1956 Chevrolet auto 4,000
As a result of these sales, Samantha's adjusted gross income will:
a. Increase by $5,000.
b. Increase by $10,400.
c. Increase by $11,000.
d. Increase by $13,000.
e. Decrease by $ 600.
ANSWER: d
POINTS: 1
DIFFICULTY: Medium
CIFT.MUHI.14.11 - 12
DATE CREATED: 10/26/2015 11:06 AM
90. Willie sells the following assets and realizes the following gains (losses) during the current year:
Personal auto $(5,000)
Municipal bonds (7,000)
Stamp collection 4,000
Furniture (6,000)
1% interest in oil well (8,000)
As a result of these sales, Willie's adjusted gross income will:
a. Decrease by $3,000.
b. Decrease by $4,000.
c. Decrease by $11,000.
d. Decrease by $15,000.
e. Not change.
ANSWER: a
POINTS: 1

Chapter 7
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
91. During the current year, Cathy realizes

• a $3,000 loss on the sale of her personal use automobile held 4 years.
• a $4,000 loss on the sale of Itoham Corporation stock held 3 years for investment.
• a $2,000 gain on the sale of Sterling, Inc., bonds held 7 months for an investment.
Determine the tax consequences of these events.
a. Cathy deducts a $5,000 net capital loss.
b. Cathy deducts a $3,000 net capital loss.
c. Cathy deducts a $2,000 net capital loss.
d. Cathy deducts a $1,000 net capital loss.
e. Cathy deducts a $7,000 net capital loss.
ANSWER: c
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
92. During 2018, Shipra's apartment is burglarized and her TV and stereo are taken. Her basis in the TV is $1,200 and it
has a fair market value of $700. Her basis in the stereo is $400 and it has a fair market value of $600. What is Shipra's
theft loss deduction (before considering the annual limitation based upon AGI)?
a. $- 0 -
b. $900
c. $1,000
d. $1,200
e. $1,300
ANSWER: a
POINTS: 1
DIFFICULTY: Medium
Chapter 7

DATE CREATED: 10/26/2015 11:06 AM
93. The Ottomans own a winter cabin in Durango, Colorado. They purchased the cabin in 2004 for $65,000. During 2018,
a blizzard, a federally-declared disaster, partially destroys the cabin. The fair market value of the cabin after the blizzard is
$70,000. The insurance company estimates that the cost of repairing the cabin will be $40,000. The insurance company
will reimburse the Ottomans for 70% of the repair cost. What can they deduct as a casualty loss if their adjusted gross
income for the year is $80,000?
a. $3,900
b. $4,000
c. $8,000
d. $11,900
e. $12,000
ANSWER: a
POINTS: 1
DATE CREATED: 10/26/2015 11:06 AM
94. Jerome owns a farm, which has three separate houses. He rents out two of the houses and lives in the other house.
During 2018, a tornado, a federally-declared disaster, goes through his property causing damage to the houses. Rental
House A had a fair market value of $40,000 and an adjusted basis of $20,000, but it is not damaged by the tornado. A
local real estate agent told Jerome that because of the tornado, property values in the area have declined 10%. Rental
House B, which has an adjusted basis of $25,000, is worth $60,000 before the tornado and $20,000 after the tornado.
Jerome's insurance company pays him $20,000 for the damage to Rental House B. Jerome's residence (which has an
adjusted basis of $80,000) was worth $70,000 before it is totally destroyed by the tornado. Jerome's insurance company
reimburses him $60,000 for the loss of his residence. Ignore the limitation based on Adjusted Gross Income.
I. Jerome deducts a loss of $5,000 on Rental House A.
II. Jerome deducts a loss of $35,000 on Rental House B.
III. Jerome's loss on his residence is $9,900.
IV. Jerome cannot deduct a loss on Rental House A.

c. Only statement III is correct.
d. Statements II and IV are correct.
e. Statements III and IV are correct.
ANSWER: e
POINTS: 1

Chapter 7
DATE CREATED: 10/26/2015 11:06 AM
Match each statement with the correct term below.

a. Limited to $3,000 annually for individuals.
b. When an asset is disposed of for less than its basis.
c. An excess of business deductions over business income.
d. A trade or business in which the taxpayer is not a material participant.
e. A loss that results from some sudden, unexpected, or unusual event.
f. Any asset that is not a receivable, inventory, or depreciable or real property used in a trade or business.
DIFFICULTY: Easy
QUESTION TYPE: Matching
DATE CREATED: 10/26/2015 11:06 AM
95. Capital asset

ANSWER: f
POINTS: 1
96. Capital loss

ANSWER: a
POINTS: 1
97. Casualty loss

ANSWER: e
POINTS: 1
98. Net operating loss

ANSWER: c
POINTS: 1
99. Passive activity

ANSWER: d
POINTS: 1
100. Transaction loss

ANSWER: b
Chapter 7
POINTS: 1
Match each statement with the correct term below.

a. A loss that is generally not deductible.
b. The borrower is personally liable for the debt.
c. The loss is used to offset income in future periods.
d. A liability that is only secured by the underlying property.
e. The loss may be used to offset income from prior periods.
f. A type of stock that receives some ordinary loss treatment.
g. Involved in a rental activity for more than 500 hours in a year.
h. Cash or other assets contributed plus recourse debts of the activity.
i. Owns at least a 10% interest and is significantly involved in the rental activity.
j. The amount of the loss for fully destroyed property is the property's adjusted basis.
k. The amount of loss is limited to the lower of the property's adjusted basis, or the reduction in fair market value.
l. Management is left to at least one general partner whose liability is not limited and who is responsible for the on-
going activities of the business.
DIFFICULTY: Easy
QUESTION TYPE: Matching
DATE CREATED: 10/26/2015 11:06 AM
101. Active participant

ANSWER: i
POINTS: 1
102. At-risk amount

ANSWER: h
POINTS: 1
103. Business casualty loss

ANSWER: j
POINTS: 1
104. Limited partnership

ANSWER: l
POINTS: 1
105. Material participant

ANSWER: g
POINTS: 1
106. NOL carryback

ANSWER: e
Chapter 7
POINTS: 1
107. NOL carryforward

ANSWER: c
POINTS: 1
108. Nonrecourse debt

ANSWER: d
POINTS: 1
109. Personal casualty loss

ANSWER: k
POINTS: 1
110. Personal-use loss

ANSWER: a
POINTS: 1
111. Recourse debt

ANSWER: b
POINTS: 1
112. Small business stock

ANSWER: f
POINTS: 1
113. If a corporation incurs a net operating loss of $10,000 in 2018, what would cause it not to deduct the entire $10,000
in 2019?
ANSWER: 1. If the corporation has another net operating loss in 2019, then no NOL carry forward
deduction is allowed.
2. The NOL deduction is limited to 80% of taxable income before deducting the NOL
deduction. If in 2019 the corporation has taxable income before the NOL deduction of less
than $12,500, the NOL deduction is limited. For example. if taxable income before the
NOL deduction is $5,000, then the NOL deduction is limited to $4,000 ($5,000 x 80%). if
taxable income before the NOL deduction is $11,000, then the NOL deduction is limited to
$8,800 ($11,000 x 80%). The taxable income cut-off point is $12,500 (the NOL deduction
of $10,000 divided by 80%).
POINTS: 1
DIFFICULTY: Medium
QUESTION TYPE: Subjective Short Answer
DATE CREATED: 10/26/2015 11:06 AM

Chapter 7
114. Tyrone is the president of JWH Manufacturing and owns 30% of its stock. JWH is organized as an S corporation.
During 2018, JWH has a loss of $240,000. At the beginning of 2018, Tyrone's amount at-risk in JWH is $60,000.
a. What is Tyrone' deductible loss in 2018? What is Tyrone's at-risk amount at the end of 2018?
b. In 2019, JWH has a taxable income of $100,000. What is the effect on Tyrone's 2019 income?
What is Tyrone's at-risk amount at the end of 2019?
ANSWER: a. As an S corporation, the income and losses are passed through to its shareholders for
taxation. In 2018, Tyrone's share of the loss is $72,000 ($240,000 × 30%). Tyrone
cannot deduct any loss in excess of his at-risk amount in JWH. Therefore, his 2018
loss deduction is limited to $60,000 (reducing his at-risk amount to zero). The
remaining $12,000 of his loss is suspended until his at-risk amount increases.
b. Tyrone's share of the income is $30,000 ($100,000 × 30%), which is included in his
20198 gross income. This increases his amount at-risk by $30,000 and he is allowed to
deduct the $12,000 loss from 2018 suspended due to the at-risk rules. By deducting the
loss, Tyrone's at risk amount at the end of 2019 is $18,000 ($30,000 - $12,000).
POINTS: 1
CIFT.MUHI.14.4 - 4
United States - AICPA Critical thinking
DATE CREATED: 10/26/2015 11:06 AM
115. Why did Congress enact the at-risk rules?

ANSWER: To disallow the deduction of artificial losses generated by tax-shelter investments. The
intent is to limit loss deductions by individuals and closely held corporations on business
and investment-related activities to the amount of the taxpayer's actual economic
investment.
POINTS: 1
DIFFICULTY: Medium
DATE CREATED: 10/26/2015 11:06 AM
116. Ronald is exploring whether to open a franchise of Quick Tax. He plans on forming an S corporation and investing
$15,000 of his own money while borrowing $45,000 from the bank to finance the purchase of the necessary computing
equipment and software. The bank has proposed two financing options. Under the first option, the interest rate is only
10%, but the loan is recourse. The second option increases the interest rate to 15%, but the loan is nonrecourse.
a. Discuss the tax and non-tax aspects of the two options.
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On the 26th, about half an hour after sunset, arrived at Ghraat;
and were soon visited by a number of Hateeta’s relations, one of
whom was his sister. Some were much affected, and wept at the
sufferings that had detained him so long from them. A number of his
male relations soon came, and many of the inhabitants of the town.
The ladies were a free and lively set. They were not a little pleased
with the grave manner we uttered the various complimentary
expressions. Hateeta was not well pleased with something that he
had heard. He told us not to be afraid; for he had numerous
relations. We said that fear never entered our breasts, and begged
him not to be uneasy on our account.
Saturday, July 27. Early in the morning numerous visitors paid
their respects to Hateeta, and were introduced in due form to us. We
felt the length of time spent in salutations quite fatiguing, and so
absurd in our eyes, that we could scarcely at times retain our gravity.
Our visitors were mostly residents of the city, and all were decorated
in their best. There was a sedateness and gravity in the appearance
of all, which the dress tended greatly to augment. There were three
natives of Gadames, one of whom knew us through our worthy friend
Mahomet D’Ghies; another we had seen in the house of Dr. Dickson;
and the third was well acquainted with European manners, having
been over at Leghorn.
In the afternoon we visited the sultan. Mats had been spread in
the castle, in a small ante-chamber. The old man was seated, but
rose up to receive us and welcome us to his city. He apologized for
not waiting on us; but said he was sick, and had been very little out
for some time. He had guinea-worm, and a cataract was forming in
his eyes. He was dressed in a nearly worn out tobe, and trowsers of
the same colour; and round his head was wrapped an old piece of
yellow coarse cloth for a turban. Notwithstanding the meanness of
the dress, there was something pleasing and prepossessing in his
countenance, and such a freeness as made us soon quite as much
at home as if in our tents. We presented him with a sword, with
which he was highly pleased. Hateeta wished it had been a
bornouse; but we had none with us we considered sufficiently good.
We were led away by the title, sultan. We had no idea the Tuaricks
were so vain; for they used to be filling us with high notions of the
wealth and greatness of the people here.
Our interview was highly interesting; and every one seemed much
pleased with us. The old sultan showed us every kindness; and we
had every reason to believe him sincere in his good wishes. After our
visit we called at the house of Lameens, son of the kadi. He is a
young man of excellent character, and universally respected. His
father is now in Ghadames, arranging with some of the other
principal inhabitants the affairs of the community. He had left
directions with his son to show us every attention. His house was
neatly fitted up, and carpets spread on a high bed, on which we
seated ourselves. Several of the people who were in the castle came
along with us, and by the assistance of those that could speak
Arabic, we were able to keep up a tolerably good conversation. On
inquiring about the Tuarick letters, we found the same sounds given
them as we had before heard from others. We were here at the
fountain head, but were disappointed in not being able to find a book
in the Tuarick language; they told us there was not one. Some only
of the Tuaricks speak the Arabic. We were the more astonished to
find this, when we considered the great intercourse between them
and nations that speak Arabic only.
It was near sunset before we returned to our tents, which were
now tolerably clear of visitors. All had retired to pray and eat. Stewed
meat, bread, and soup, were again sent us by the sultan.
In the evening Hateeta’s kinswomen returned. They were greatly
amused, and laughed heartily at our blundering out a few Tuarick
words. It may be well supposed we were very unfit companions for
the ladies, as they could speak no other language than their own,
and we knew very little of it. Still, however, we got on well, and were
mutually pleased. I could scarcely refrain laughing several times at
the grave manner Clapperton assumed. He had been tutored by
Hateeta, and fully acted up to his instructions; no Tuarick could have
done better. Our friend Hateeta was anxious we should shine, and
read a number of lectures to Clapperton. He is naturally lively, and
full of humour. He was directed not to laugh or sing, but look as
grave as possible, which Hateeta said would be sure to please the
grave Tuaricks. As for myself, I had a natural sedateness, which
Hateeta thought would do. The liveliness of the women, their
freeness with the men, and the marked attention the latter paid them,
formed a striking contrast with other Mahommedan states. Thus the
day passed over well, and we had every reason to be pleased with
the demeanour of the people, and the attention they paid us.
Violent gale from the northward, which almost smothered us with
sand.
About four we went to visit the spring we had heard so much
about, and to make a circuit round the town. The water is contained
in a large reservoir, surrounded with palm trees; and the banks are
covered with rushes, except when the people go to draw water.
There is not that bubbling up we saw in the spring of Shiati and
Ludinat, but apparently an oozing from a large surface, as in those of
Traghan. The water is clear, well tasted, and in abundance: a large
extent of soil is supplied by it, through channels cut in the ground;
and all the town is supplied from this place. Good water and plenty of
it is a great blessing in every quarter of the globe, but much more in
a hot climate. The people are sensible of it; for you hear this place
and that praised for the abundance of this water, and the healthiness
of its quality; and you often hear them say that it does not engender
bile, as the waters of such a place. Some small spots here are really
beautiful, from the diversity of scenery in a small compass. Here and
there patches of grass and beds of water melons, in the edge of the
water channels, fine palms loaded with ripe fruit, small squares of
gufolly and cassoub, and beautiful vines clinging to the trees; in the
brakes, the town and black tinted low hills. We observed platforms,
of palm leaves, raised about five feet from the ground, for the
purpose of sleeping, and defending the person from scorpions,
which are very common.
We now came in sight of the town, and were well pleased with the
appearance. The houses neat and clean; and the mosque, finer than
any thing of the kind in Fezzan. All was neat and simple. It is built at
the foot of a low hill, on the summit of which the former town stood;
but it, as we were told, was destroyed, and the greater part of the
inhabitants, by the giving way of the portion of hill on which it was
erected. The hills, composed as those about here, are very apt to fall
down in large masses. Indeed, none of the hills appear of their
original height. It was not long since a large portion of a neighbouring
mountain gave way, and the noise of its fall was heard at a great
distance. When the melancholy event of the destruction of the town
took place, we could not learn.
The town is surrounded with walls, in good repair, formed of sand
and whitish clay, that gives a clean and lively appearance to the
whole. There is only one gate opening to the east; formerly there
were more, that are now blocked up. The houses are built of the
same substance as the walls, and the external form and internal
arrangement the same as those of Mourzuk and other Mahommedan
towns. The town appears to be about the size of Oubari, and
perhaps contains about 1000 inhabitants. The burying-ground is
outside the town; it is divided into two departments, one for those
arrived at maturity, the other for children,—a distinction not
observable in Fezzan.
In our walk we fell in with a number of females, who had come out
to see us. All were free and lively, and not at all deterred by the
presence of the men. Several had fine features; but only one or two
could be called beautiful. Many of the natives came out of their
houses as we passed along, and cordially welcomed us to their
town. It was done in such a manner, that we could not but feel
pleased and highly flattered.
In the evening we heard a numerous band of females singing at a
distance, which was continued till near midnight. The women were
principally those of the country. This custom is very common among
the people, and is one of the principal amusements in the mountain
recesses. Hateeta said they go out when their work is finished in the
evening, and remain till near midnight in singing and telling stories,
return home, take supper, and go to bed.
The language of the Tuaricks is harsh and guttural; but it has
great strength, and is evidently expressive. That at least is the
opinion we were led to form, with our imperfect knowledge. The want
of books, and the little attention paid to cultivating a language, must
tend to keep it in a very imperfect state. The sedate character of the
Tuarick seems to be a firm barrier against the muses. The males
seldom sing; it is considered an amusement fit only for females.
Their songs were described to us as sweet. We never heard one
repeating any poetical lines. The people have good sound sense,
and give more distinct accounts of what they have seen than I have
received from the Moorish merchants. They would be a shining
people, were they placed in more favourable situations. On almost
every stone in places they frequent, the Tuarick characters are hewn
out. It matters nothing whether the letters are written from the right to
the left, or vice versa, or written horizontally.
LETTERS.
Yet. Yuz.
Yuk. Iz.
Yugh.
Yow Yew.
A. Yid.
Yib. Yir.
Yes. Yei.
Yim. Yigh.
Yish. Yin.
Yill.
These characters will be sufficient to enable the learned to trace

the connexion of the language with others that are now extinct. Here
we have no opportunity of making inquiries into this important
subject.
Note. The rest of the Journal, describing their return to Mourzuk, is wholly
uninteresting, and is therefore omitted.
RECENT DISCOVERIES
IN
AFRICA.
CHAPTER I.
FROM MOURZUK TO KOUKA IN BORNOU.
On the evening of the 29th of November we left Mourzuk,

accompanied by nearly all those of the town, who could muster a
horse: the camels had moved early in the day, and at Zezow we
found the tents pitched—there are here merely a few huts. From
Zezow to Traghan there is a good high road, with frequent
incrustations of salt, and we arrived there before noon. It is a clean
walled town, one of the best of one hundred and nine, of which
Fezzan is said to boast. Traghan was formerly as rich as Mourzuk,
and was the capital and residence of a sultan, who governed the
eastern part of Fezzan, whose castle, in ruins, may still be seen.
A maraboot, of great sanctity, is the principal person in Traghan,
as his father was before him. During the reign of the present
bashaw’s father, when the Arab troops appeared before the town,
the then maraboot and chief went out to meet them; and, from his
own stores, paid sixty thousand dollars to prevent the property of his
townspeople from being plundered. They make carpets here equal to
those of Constantinople. There are some springs of good water in
the gardens near the town, the only ones in Fezzan, it is said, except
the tepid one at Hammam, near Sockna.
After being crammed, as it were, by the hospitality of the
maraboot, we left Traghan for Maefen, an assemblage of date huts,
with but one house. The road to this place lies over a mixture of sand
and salt, having a curious and uncommon appearance: the surface
is full of cracks, and in many places it has the effect of a new
ploughed field: the clods are so hard, that it is with great difficulty
they can be broken. The path by which all the animals move for
some miles is a narrow space, or stripe, worn smooth, bearing a
resemblance, both in hardness and appearance, to ice: near
Maefen, it assumes a new and more beautiful shape, the cracks are
larger, and from the sides of cavities several feet deep hang beautiful
crystals, from beds of frost of the purest white[9]. I broke off a large
mass, but the interior was as brittle as the exterior was difficult to
break; the frost work was fine salt, and fell away in flakes on being
lightly shaken. It extends more than twenty miles, east and west. The
water of Maefen, though strongly tinctured with soda, is not
disagreeable to the taste, or unwholesome.
Quitting Maefen, we quickly entered on a desert plain; and, after a
dreary fourteen hours march for camels, we arrived at Mestoola, a
maten, or resting place, where the camels find some little grazing
from a plant called Ahgul. Starting at sun-rise, we had another
fatiguing day over the same kind of desert, without, I think, seeing
one living thing that did not belong to our kafila—not a bird, or even
an insect: the sand is beautifully fine, round, and red. We now
arrived at Gatrone. The Arabs watch for a sight of the high date
trees, which surround this town, as sailors look for land; and after
discovering these landmarks, they shape their course accordingly.
I here joined my companions, whom I found in a state of health
but ill calculated for undertaking a long and tedious journey. During
my stay at Mourzuk, I had suffered from a severe attack of fever,
which had kept me for ten days in my bed; and although
considerably debilitated, yet was I strong in comparison with my
associates. Doctor Oudney was suffering much from his cough, and
still complaining of his chest. Mr. Clapperton’s ague had not left him,
and Hillman had been twice attacked so violently as to be given over
by the doctor. We all, however, looked forward anxiously to
proceeding, and fancied that change of scene and warmer weather
would bring us all round. Gatrone is not unpleasingly situated: it is
surrounded by sandhills, and mounds of earth covered with a small
tree, called athali. Huts are built all round the town for the Tibboos.
Though encamped on the south side of the town, we had cold
north and north-east winds, and the thermometer in the tent was
from 43 to 45 in the mornings. The person of the greatest importance
at Gatrone is one Hagi-el-Raschid, a large proprietor and a
maraboot. He is a man of very clear understanding and amiable
manners, and as he uses the superstition of the people as the
means of making them happy and turning them from vicious
pursuits, one becomes almost reconciled to an impostor.
Much necessary arrangement had been made here by laying in a
stock of dates, &c. for our long journey: and at eleven A.M. we left
Gatrone. The maraboot accompanied Boo-Khaloom outside the
town, and having drawn, not a magic circle, but a parallelogram, on
the sand, with his wand he wrote in it certain words of great import
from the Koran; the crowd looking on in silent astonishment, while he
assumed a manner both graceful and imposing, so as to make it
impossible for any one to feel at all inclined to ridicule his motions.
When he had finished repeating the fatah aloud, he invited us singly
to ride through the spot he had consecrated, and, having obeyed
him, we silently proceeded on our journey, without even repeating an
adieu.
We passed a small nest of huts on the road, prettily situated,
called El-Bahhi, from whence the women of the place followed us
with songs for several miles. Having halted at Medroosa, we moved
on the next morning, and leaving an Arab castle to the south-east,
and some table-top hills, bearing south and by east, we arrived at
Kasrowa by three in the afternoon.
Kasrowa has tumuli of some height all round the town, covered
with the plant athali, and there is a well of good water: a road from
hence branches off to the south-east, which goes to Kanem and
Waday. It is also said to be the shortest road to Bornou, but there is
a great scarcity of water.
On the 9th, we were to arrive at Tegerhy; and the Arabs
commenced skirmishing as soon as we came within sight of it, and
kept it up in front of the town for half an hour after our arrival.
We were here to halt for a day or two, for the purpose of taking in
the remainder of our dates and provisions, and never was halt more
acceptable. Hillman, our carpenter, and two of our servants, were
really too ill to be moved; two of them had fevers, and one the ague.
Hillman had been so weakened by previous attacks, as to be lifted
on and off his mule: indeed we were all sickly. Doctor Oudney’s
complaint in his chest, and his cough, had gradually become worse;
and going only a few hundred yards to see a dome date tree so
fatigued him that, after lying down, he was obliged to return,
supported by Mr. Clapperton. As our servants were all ill, one of the
negro women made us a mess of kouscasou, with some preserved
fat, which had been prepared in Mourzuk: it was a sorry meal, for the
fat was rancid; and although tired, and not very strong, I could not
refuse an invitation, about nine at night, after I had lain down to
sleep, to eat camel’s heart with Boo-Khaloom: it was wofully hard
and tough, and I suffered the next morning from indulging too much
at the feast.
Drawn by Major Denham. Engraved by E. Finden.
CASTLE AND SALT LAKE AT TEGERHY.

Published by John Murray, London. Feb. 1826.
The Tibboos and Arabs kept us awake half the night with their
singing and dancing, in consequence of the bousafer, or feast, on
entering the Tibboo country. Boo-Khaloom gave two camels, and we
gave one. Our sick seemed to gain a little strength; and as we had
succeeded in purchasing a sheep, a little soup seemed to revive
them much; but we feared that Hillman and one of the servants must
be left behind. However distressing would such an event have been,
it was impossible for men who could not sit upright on a mule to
commence a journey of fifteen days over a desert, during which
travellers are obliged to march from sunrise until dark.
The 12th December was a beautifully mild morning, the
thermometer at eight being at 56. After breakfast, all seemed
revived; but it was with pain I observed the exceeding weakness of
Doctor Oudney and Hillman. I managed to get a sketch of the castle
of Tegerhy from the south side of a salt pool close to the town; the
entrance to which is small, low, and arched, something resembling a
sally-port: within a second wall and gateway, there are loop-holes
which would render the entrance by the narrow passage before
mentioned extremely difficult: above the second gateway, there is
also an opening from whence missiles and firebrands, of which the
Arabs formerly made great use, might be poured on the assailants.
Wells of water are within the walls, and tolerably good; and with
supplies, when in a state of repair, I have no doubt Tegerhy might
make a very good defence.
The sultans of Fezzan probably think that the only means of
keeping these people in order is by keeping them poor. Their only
produce is dates, but those are of excellent quality. No vegetables
are raised here, and we could not even procure an onion. Almost
every town in Africa has its charm or wonder, and Tegerhy is not
without one. There is a well just outside the castle gates, the water of
which, we were told most gravely, “always rose when a kafila was
coming near the town! that the inhabitants always prepared what
they had to sell on seeing this water increase in bulk, for it never
deceived them!”—In proof of this assertion, they pointed out to me
how much higher the water had been previous to our arrival than it
was at the moment we were standing on the brink. This I could have
explained by the number of camels that had drank at it, but I saw it
was better policy to believe what every body allowed to be true: even
Boo-Khaloom exclaimed, “Allah! God is great, powerful, and wise!
How wonderful! Oh!” Over the inner gate of the castle there is a large
hole through to the gateway underneath, and they tell a story of a
woman dropping from thence a stone on the head of some leader
who had gained the outer wall, giving him, by that means, the death
of Abimelech in sacred history.
The situation of Tegerhy is rather pleasing than otherwise: it is
surrounded by date trees, and the water is excellent; a range of low
hills extends to the eastward; and snipes, wild-ducks, and geese,
frequent the salt-pools, which are near the town. The natives are
quite black, but have not the negro face: the men are slim, very
plain, with high cheek bones, the negro nose, large mouth, teeth
much stained by the quantity of tobacco and trona (or muriate of
soda) which they eat; and even snuff, when given to them, goes
directly into their mouths.
The young girls are most of them pretty, but less so than those of
Gatrone. The men always carry two daggers, one about eighteen
inches, and the other six inches, the latter of which is attached to a
ring and worn on the arm or wrist. A Tibboo once told me, pointing to
the long one, “this is my gun; and this,” showing the smaller of the
two, “is my pistol.” The women make baskets and drinking-bowls of
palm leaves with great neatness.
On the 13th, we left Tegerhy, and proceeded on the desert: it was
scattered with mounds of earth and sand, covered with athila (a plant
the camels eat with avidity), and other shrubs. After travelling six
miles we arrived at a well called Omah, where our tents were
pitched, and here we halted three days. On the 16th, after clearing
the palm trees, by which Omah is surrounded, we proceeded on the
desert. About nine we had a slight shower of rain. At three in the
afternoon, we came to a halt at Ghad, after travelling ten miles. Near
the wells of Omah, numbers of human skeletons, or parts of
skeletons, lay scattered on the sands. Hillman, who had suffered
dreadfully since leaving Tegerhy, was greatly shocked at these
whitened skulls, and unhallowed remains; so much so, as to want all
the encouragement I could administer to him.
Dec. 17.—We continued our course over a stony plain, without
the least appearance of vegetation. Coarse opal and sand-stone[10]
strewed the path. We saw Alowere-Seghrir, a ridge of hills, bearing
east by south; Alowere-El-Kebir, a still higher ridge, lies more to the
east, but was not visible. These, by the accounts of the natives, are
the highest mountains in the Tibboo country, with the exception of
Ercherdat Erner. More to the south, the inhabitants are called
Tibboo-Irchad (the Tibboos of the rocks). Through passes in both
these mountains, the road lies to Kanem. About sunset, we halted
near a well, within a half mile of Meshroo. Round this spot were lying
more than one hundred skeletons, some of them with the skin still
remaining attached to the bones—not even a little sand thrown over
them. The Arabs laughed heartily at my expression of horror, and
said, “they were only blacks, nam boo!” (damn their fathers!) and
began knocking about the limbs with the butt end of their firelocks,
saying, “This was a woman! This was a youngster!” and such like
unfeeling expressions. The greater part of the unhappy people, of
whom these were the remains, had formed the spoils of the sultan of
Fezzan the year before. I was assured that they had left Bornou with
not above a quarter’s allowance for each; and that more died from
want than fatigue: they were marched off with chains round their
necks and legs: the most robust only arrived in Fezzan in a very
debilitated state, and were there fattened for the Tripoli slave market.
Our camels did not come up until it was quite dark, and we
bivouacked in the midst of these unearthed remains of the victims of
persecution and avarice, after a long day’s journey of twenty-six
miles, in the course of which, one of our party counted 107 of these
skeletons.
Dec. 19[11].—Moved round a winding pass to the west, and after
an ascent of three hundred feet descended a sandy steep to the
east. This was rather a picturesque spot, looking back upon Thenea.
Our road lay over a long plain with a slight ridge. A fine naga (she-
camel) lay down on the road this day, as I thought from fatigue. The
Arabs crowded round, and commenced unloading her, when, upon
inquiry, I found that she was suddenly taken in labour: about five
minutes completed the operation,—a very fine little animal was
literally dragged into light. It was then thrown across another camel;
and the mother, after being reloaded, followed quietly after her
offspring. One of the skeletons we passed to-day had a very fresh
appearance; the beard was still hanging to the skin of the face, and
the features were still discernible. A merchant, travelling with the
kafila, suddenly exclaimed, “That was my slave! I left him behind four
months ago, near this spot.”—“Make haste! take him to the fsug”
(market), said an Arab wag, “for fear any body else should claim
him.” We had no water, and a most fatiguing day.
Dec. 20 was also a dreary day of most uninteresting country; and
it was 5. 30. when we arrived at the Hormut-el-Wahr. These were the
highest hills we had seen since leaving Fezzan: the highest peak
might be five or six hundred feet. They had a bold black appearance,
and were a relief to the eye, after the long level we had quitted. We
entered the pass, which is nearly two miles in width, and wound
round some high hills to the south: the path was rugged and irregular
in the extreme, and bordered by bold conical and table-topped
detached hills. We blundered and stumbled on until ten at night,
when we found the resting-place, after a toilsome and most
distressing day. We were several times foiled in our attempt to find a
path into the wadey, under these hills, by which the camels might
move, and where the water was. Hillman was exceedingly ill this
night, and Dr. Oudney too fatigued to render him any assistance. El-
Wahr is a wadey of loose gravel, and has a well of good water. This
was the eighth day since our camels had tasted water: they were
weak and sore-footed, from the stony nature of the passes in these
hills of El-Wahr. At night it blew a hurricane.
It is three miles from where we halted to the end of the wadey;
where, to the west, there is a high hill called El-Baab. These hills
extend away to the east, and form part of the range which are found
near Tibesty, where they become higher and bolder. We had now a
stony plain, with low hills of sand and gravel, till we reached El-
Garha, which is a detached conical hill to the west, close to our road;
and here we halted for the night[12].
Dec. 22.—We moved before daylight, passing some rough sand
hills, mixed with red stone, to the west, over a plain of fine gravel,
and halted at the maten, called El-Hammar, close under a bluff head,
which had been in view since quitting our encampment in the
morning. Strict orders had been given this day for the camels to keep
close up, and for the Arabs not to straggle—the Tibboo Arabs having
been seen on the look out. During the last two days, we had passed
on an average from sixty to eighty or ninety skeletons each day; but
the numbers that lay about the wells at El-Hammar were countless:
those of two women, whose perfect and regular teeth bespoke them
young, were particularly shocking; their arms still remained clasped
round each other as they had expired; although the flesh had long
since perished by being exposed to the burning rays of the sun, and
the blackened bones only left: the nails of the fingers, and some of
the sinews of the hand, also remained; and part of the tongue of one
of them still appeared through the teeth. We had now passed six
days of desert without the slightest appearance of vegetation, and a
little branch of the souak was brought me here as a comfort and
curiosity. On the following day we had alternately plains of sand and
loose gravel, and had a distant view of some hills to the west. While I
was dozing on my horse about noon, overcome by the heat of the
sun, which at that time of the day always shone with great power, I
was suddenly awakened by a crashing under his feet, which startled
me excessively. I found that my steed had, without any sensation of
shame or alarm, stepped upon the perfect skeletons of two human
beings, cracking their brittle bones under his feet, and, by one trip of
his foot, separating a skull from the trunk, which rolled on like a ball
before him. This event gave me a sensation which it took some time
to remove. My horse was for many days not looked upon with the
same regard as formerly.
Dec. 24.—When the rains fall, which they do here in torrents in
the season, a sort of grass quickly springs up many feet high. In
passing the desert, a few remaining roots of this dried grass, which
had been blown by the winds from Bodemam, were eagerly seized
on by the Arabs, with cries of joy, for their hungry camels. The plain
was this day covered with slight irregularities, and strewed with
various coloured stones—thick beds of gypsum, stones resembling
topazes, and pieces of calcareous spar, which, reflecting the rays of
the setting-sun, displayed a most beautiful variety of tints. An
incrustation of fine whiting lay in patches, at no great distance from
the well: and soon after the sun had retired behind the hills to the
west, we descended into a wadey, where about a dozen stunted
bushes (not trees) of palm marked the spot where the water was to
be found. Even these miserable bushes were a great relief to the
eye, after the dreary sameness of the preceding days; and at day-
break in the morning, I could not help smiling at seeing Hillman
gazing at them with pleasure in his look, while he declared they
reminded him of a valley near his own home in the West of England.
The wells are situated under a ridge of low white hills of sandstone,
called Mafrasben-Kasarettsa, where there are also beds and hills of
limestone. The wells were so choked up with sand, that several cart-
loads of it were removed previous to finding sufficient water; and
even then the animals could not drink until near ten at night.
One of our nagas had this day her accouchement on the road;
and we all looked forward to the milk which the Arabs assured us
she had in abundance, and envied us not a little our morning
draughts, which we were already quaffing in imagination. However,
one of the “many slips between the cup and the lip” was to befall us.
The poor thing suddenly fell, and as suddenly died: the exclamations
of the Arabs were dreadful.—“The evil eye! the evil eye!” they all
exclaimed—“She was sure to die, I knew it.”—“Well! if she had been
mine, I would rather have lost a child, or three slaves!”—“God be
praised! God is great, powerful, and wise! those looks of the people
are always fatal.”
Dec. 25.—This was a beautiful mild morning: the thermometer 54.
at 6. 30. Our skins were here filled with water which was not
disagreeable, although strongly impregnated with sulphur. The
camels moved at eight. The head of a range of high hills bore west-
south-west, called Tiggerindumma: they resemble in shape and
structure those we had passed nearer: they extend to the west, as
far as the Arooda, five days hence, where there is a well; and ten
days beyond which is Ghraat. At the distance of four miles from
Mafras, we came to a small wadey, where we saw the first dome
date trees: they were full of fruit, though green. We continued
winding amongst a nest of hills,—crossed two water-courses, in
which were tulloh and dry grass (ashub), until seven. These hills are
bold and picturesque, composed of black and coloured sandstone.
No water.
Dec. 26[13].—We emerged from the hills, and broke into a plain,
extending to the east as far as the eye could reach; to the west,
Tiggerindumma sweeps off, and forming nearly a semi-circle,
appears again to the south, a very handsome range, though not
exceeding six hundred feet at any part in height. After passing
between two low ridges of dark hills, we opened on a plain bounded
with flat-topped and conical hills, called La Gaba. We found pieces of
iron ore this day, kidney-shaped, and of various other forms. We
travelled till nine at night, when some of us were nearly falling from
our horses with fatigue. After a narrow stony pass, we came to a halt
in a wadey called Izhya.
Here we had a gale of wind from the north-east for three days.
Our tents were nearly buried in sand, and we were obliged to roll
ourselves up in blankets nearly the whole time.
Dec. 30.—Izhya is called by the Tibboos Yaat. There are here four
wells, which resemble troughs cut in the sand, two or three feet
deep; and it is said, that by thus digging, water may be found in any
part of the wadey. We were encamped nearly west of the wells,
about one hundred yards between them and a raas, or head, which
had been in sight for some time. This head is a land-mark to kafilas,
coming in all directions, who wish to make the wadey. We passed
Ametradumma about four hours; from which, to the north-west, is a
wadey of palms, called Seggedem, with sweet water: here is
generally a tribe of plundering Tibboos, who are always on the look
out for small kafilas. No water.
Dec. 31.—A cold shivering morning. At 7. 30. thermometer 49.,
and we had a long day’s march over a plain, varying but little from
Izhya. The Arabs had no knowledge of the road; and the Tibboo
guide was all we had to rely on. We kept on until late, when the
Tibboo acknowledged he had lost the road, that the well was not far
off, but where he knew not; we therefore halted under some low
brown sandstone hills, and determined on waiting for the daylight.
We lost a camel this day from fatigue.
1823.
On the 1st January, after six miles’ travelling, we came to the

wadey Ikbar, and rested on the 2d. The Arabs here caught an hyæna
(dhubba), and brought it to us: we, however, had no wish beyond
looking at it. They then tied it to a tree, and shot at it until the poor
animal was literally knocked to pieces. This was the most refreshing
spot we had seen for many days; there were dome trees loaded with
fruit, though not ripe, which lay in clusters, and grass in abundance;
and I could have stayed here a week with pleasure, so reviving is the
least appearance of cultivation, or rather a sprinkling of Nature’s
beauty, after the parching wilds of the long dreary desert we had
passed.
Jan. 3.—Looking back with regret at leaving the few green
branches in Ikbar, with nothing before us but the dark hills and sandy
desert, we ascended slightly from the wadey, and leaving the hills of
Ikbar, proceeded towards a prominent head in a low range to the
east of our course, called Tummeraskumma, meaning “you’ll soon
drink water;” and about two miles in advance, we halted just under a
ridge of the same hills, after making twenty-four miles. Four camels
knocked up during this day’s march: on such occasions the Arabs
wait, in savage impatience, in the rear, with their knives in their
hands, ready, on the signal of the owner, to plunge them into the
poor animal, and tear off a portion of the flesh for their evening meal.
We were obliged to kill two of them on the spot; the other two, it was
hoped, would come up in the night. I attended the slaughter of one;
and despatch being the order of the day, a knife is struck in the
camel’s heart while his head is turned to the east, and he dies
almost in an instant; but before that instant expires, a dozen knives
are thrust into different parts of the carcass, in order to carry off the
choicest part of the flesh. The heart, considered as the greatest
delicacy, is torn out, the skin stripped from the breast and haunches,
part of the meat cut, or rather torn, from the bones, and thrust into
bags, which they carry for the purpose; and the remainder of the
carcass is left for the crows, vultures, and hyænas, while the Arabs
quickly follow the kafila.

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Concepts in Federal Taxation 2019 26th

Edition Murphy Test Bank

Copyright Cengage Learning. Powered by Cognero. Page 4

a. Only statement I is correct.

a. Only statement I is correct.

a. Only statement I is correct.

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b. Only statement II is correct.

a. Only statement I is correct.

a. Only statement I is correct.

a. Only statement I is correct.

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United States - AICPA Measurement

NATIONAL STANDARDS: United States - AACSB Analytic

a. Only statement I is correct.

United States - AICPA Measurement

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a. Only statement I is correct.

32. A passive activity

a. Only statement I is correct.

33. Which of the following must be classified as "portfolio income?"

a. Only statement I is correct.

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c. Both statements are correct.

34. Which of the following must be classified as "portfolio income?"

a. Only statement I is correct.

35. A taxpayer had the following for the current year:

a. Only statement I is correct.

d. Neither statement is correct.

36. If a taxpayer has the following for the current year:

a. Only statement I is correct.

a. Only statement I is correct.

d. Neither statement is correct.

a. Only statement I is correct.

QUESTION TYPE: Multiple Choice

HAS VARIABLES: False

a. Only statement I is correct.

a. Only statement I is correct.

United States - AICPA Measurement

a. Only statement I is correct.

a. Only statement I is correct.

DATE CREATED: 10/26/2015 11:06 AM

a. Only statement I is correct.

DATE CREATED: 10/26/2015 11:06 AM

a. Only statement I is correct.

DATE MODIFIED: 3/1/2016 4:48 PM

a. Only statement I is correct.

a. Only statement I is correct.

61. Which of the following events is a "casualty" loss?

a. Only statement I is correct.

62. Which of the following events is a "casualty" loss?

a. Only statement I is correct.

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DATE CREATED: 10/26/2015 11:06 AM

68. Which of the following losses are generally deductible?

a. Only statement I is correct.