Accounting for Income Taxes
Test Preparation
Course Introduction
Accounting for Income Taxes explores the principles, rules, and procedures for recognizing, measuring, and reporting income taxes in corporate financial statements, emphasizing the differences between financial accounting and tax regulations. The course covers topics such as deferred tax assets and liabilities, temporary and permanent differences, valuation allowances, and the computation of current and deferred tax expense under ASC 740 (formerly FAS 109). Students will also analyze tax disclosures, the impact of tax planning strategies, and the effects of changes in tax laws or rates, preparing them to accurately interpret and apply income tax accounting in a variety of organizational contexts.
Recommended Textbook
Prentice Halls Federal Taxation 2015 Comprehensive 28th Edition by Timothy J. Rupert
Available Study Resources on Quizplus
29 Chapters
3271 Verified Questions
3271 Flashcards
Source URL: https://quizplus.com/study-set/3423 Page 2
Chapter 1: Tax Research
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/67961
Sample Questions
Q1) Statements on Standards for Tax Services are issued by
A)the SEC.
B)the IRS.
C)the AICPA.
D)the FASB.
Answer: C
Q2) The Senate equivalent of the House Ways and Means Committee is the Senate A)Finance Committee.
B)Ways and Means Committee.
C)Tax Committee.
D)Joint Conference Committee.
Answer: A
Q3) The committee that is responsible for holding hearings on tax legislation for the House of Representatives is the A)Finance Committee.
B)Joint Committee on Taxation.
C)Conference Committee.
D)Ways and Means Committee.
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2 an Introduction to Taxation
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/67960
Sample Questions
Q1) Helen,who is single,is considering purchasing a residence that will provide a $28,000 tax deduction for property taxes and mortgage interest.If her marginal tax rate is 25% and her effective tax rate is 20%,what is the amount of Helen's tax savings from purchasing the residence?
A)$5,600
B)$7,000
C)$21,000
D)$22,400
Answer: B
Q2) All states impose a state income tax which is generally based on an individual's federal adjusted gross income (AGI)with minor adjustments.
A)True
B)False Answer: False
Q3) For gift tax purposes,a $14,000 annual exclusion per donee is permitted.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Corporate Formations and Capital Structure
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/67963
Sample Questions
Q1) Lynn transfers land having a $50,000 adjusted basis,an $80,000 FMV,and $10,000 cash to Allied Corporation in exchange for 100% of Allied's stock.The corporation assumes the $70,000 mortgage on the land.Which of the following statements is correct?
A)Lynn recognizes no gain and the stock basis is $60,000.
B)Lynn recognizes a $10,000 gain and the stock basis is $60,000.
C)Lynn recognizes no gain and the stock basis is $50,000.
D)Lynn recognizes a $10,000 gain and the stock basis is zero.
Answer: D
Q2) Under Sec.351,corporate stock may include all of the following except
A)voting stock.
B)nonvoting stock.
C)stock warrants.
D)qualified preferred stock.
Answer: C
Q3) The City of Providence donates land worth $125,000 to Triple A Corporation to induce it to locate in Providence and provide jobs for its citizens.How much gross income must Triple A Corporation recognize because of the land contribution,and what is the land's basis to Triple A Corporation?
Answer: The corporation recognizes no income and the land has a $0 basis.
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: I: Determination of Tax
Available Study Resources on Quizplus for this Chatper
138 Verified Questions
138 Flashcards
Source URL: https://quizplus.com/quiz/67962
Sample Questions
Q1) All of the following items are generally excluded from income except A)child support payments.
B)interest on corporate bonds.
C)interest on state and local government bonds.
D)life insurance proceeds paid by reason of death.
Q2) Elise,age 20,is a full-time college student with earned income from wages of $4,400 and interest income of $500.Elise's parents provide more than half of her support.Elise's taxable income is
A)$0.
B)$150.
C)$500.
D)$3,900.
Q3) Foreign exchange student Yung lives with Harold and Betty while he studies in the US. He moved into their home January 5,2014 and has resided with them for the remainder of the year. Yung does not pay anything for his room and board. Harold and Betty provide all of Yung's meals. Yung receives a scholarship to pay for his tuition,books and fees. He works on campus,earning $4,000 a year. What tax issues should Harold and Betty consider?
Q4) Discuss reasons why a married couple may choose not to file a joint return.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: The Corporate Income Tax
Available Study Resources on Quizplus for this Chatper
126 Verified Questions
126 Flashcards
Source URL: https://quizplus.com/quiz/67965
Sample Questions
Q1) Andy owns 20% of North Corporation and 60% of Tent Corporation.North and Tent have only one class of stock outstanding.Barbara owns 50% of North Corporation and 20% of Tent Corporation.North and Tent Corporations will be brother-sister corporations if
A)no stock ownership change occurs.
B)Barbara acquires an additional 10% of North stock.
C)Andy acquires an additional 10% of North stock and Barbara acquires an additional 10% of Tent stock.
D)Barbara acquires an additional 10% of North stock and an additional 10% of Tent stock.
Q2) Trail Corporation has gross profits on sales of $140,000 and deductible expenses of $180,000.In addition,Trail has a net capital gain of $60,000.Trail's taxable income is
A)a $20,000 loss.
B)a $40,000 loss.
C)$60,000.
D)$20,000.
Q3) What are the various levels of stock ownership by corporate shareholders for the dividends-received deduction (DRD)? What is the DRD% for each level of ownership?
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Gross Income: Inclusions
Available Study Resources on Quizplus for this Chatper
132 Verified Questions
132 Flashcards
Source URL: https://quizplus.com/quiz/67964
Sample Questions
Q1) In order to be treated as alimony for tax purposes,payments must be made in cash.
A)True
B)False
Q2) Natasha,age 58,purchases an annuity for $40,000.Natasha will receive $400 per month for the rest of her life.The expected return multiple is 20.0.At age 65,the amount that Natasha may exclude from income is
A)$0.
B)$2,000.
C)$2,800.
D)$4,000.
Q3) Alimony is
A)deductible by both the payor and the payee.
B)deductible by the payor and included in income by the payee.
C)included in income by the payor and deducted by the payee.
D)an item which does not affect the payor's or the payee's tax reporting.
Q4) Interest credited to a bank savings account is taxed regardless of whether or not it is withdrawn.
A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Corporate Nonliquidating Distributions
Available Study Resources on Quizplus for this Chatper
113 Verified Questions
113 Flashcards
Source URL: https://quizplus.com/quiz/67967
Sample Questions
Q1) Define Sec.306 stock.
Q2) Strong Corporation is owned by a group of 20 shareholders.During the current year,Strong Corporation pays $225,000 in salary and bonuses to Stedman,its president and controlling shareholder.The IRS audits Strong's tax return and determines that reasonable compensation for Stedman would be $125,000.Strong Corporation agrees to the adjustment.
a)What effect does the disallowance of part of the deduction for Stedman's salary and bonuses have on Strong Corporation and Stedman?
b)What tax savings could have been obtained by Strong Corporation and Stedman if an agreement had been in effect that required Stedman to repay Strong Corporation any amounts determined by the IRS to be unreasonable?
Q3) River Corporation's taxable income is $25,000,after deducting a $5,000 NOL carryover from last year and after claiming a $10,000 dividends-received deduction.What is the current E&P?
Q4) What is a stock redemption? What are some of the reasons for making a stock redemption? Why are some redemptions treated as sales and others as dividends?
Q5) When is E&P measured for purposes of determining whether a distribution is a dividend?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Gross Income: Exclusions
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/67966
Sample Questions
Q1) Brad suffers from congestive heart failure and has been admitted to a nursing home where he is expected to spend the remainder of his life.His doctor has certified him as chronically ill.Brad receives $320 per day from his life insurance policy for 100 days ($32,000)as accelerated death benefits.Brad's nursing home care costs $300 per day ($30,000 for the 100 days of care). Brad will be allowed to exclude A)$0.
B)$30,000.
C)$32,000.
D)$2,000.
Q2) Dividends on life insurance policies are generally excludable income because they are considered a return of premium.
A)True
B)False
Q3) Jeff,who has been employed by the Peach Corporation for twelve years,receives $400 cash for his years of hard work.The cash award is taxable.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
10
Chapter 9: Other Corporate Tax Levies
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/67969
Sample Questions
Q1) Identify which of the following statements is true.
A)The personal holding company tax is levied to prevent closely held corporations from sheltering passive income.
B)Caleb Corporation is owned by a mother and her two daughters.It reports $100,000 of rental income,$30,000 of depreciation,interest,and property taxes on the rental real estate,and $10,000 of dividend income.Caleb Corporation is classified as a personal holding company.
C)Luke Corporation is owned by a father and his son.The corporation employs 10 individuals to provide public accounting services.Father and son make all of the work assignments for the professional employees.The professional fees earned by the corporation are personal holding company income.
D)All of the above are false.
Q2) ASC 740 requires that
A)the AMT is not considered as federal income tax expense.
B)companies must establish a valuation allowance for the minimum tax credit.
C)the minimum tax credit creates a deferred tax asset.
D)the minimum tax credit increases federal income tax expense.
Q3) How is alternative minimum taxable income computed?
Q4) Explain the carryover provisions of the minimum tax credit.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Property Transactions: Capital Gains and Losses
Available Study Resources on Quizplus for this Chatper
133 Verified Questions
133 Flashcards
Source URL: https://quizplus.com/quiz/67968
Sample Questions
Q1) Because of the locked-in effect,high capital gains tax rates may discourage taxpayer's from selling appreciated capital assets.
A)True
B)False
Q2) Corporate taxpayers may offset capital losses only against capital gains and may carry excess losses back three years and then forward five years.
A)True
B)False
Q3) The gain or loss on an asset purchased on March 31,2013,and sold on March 31,2014,is classified as short-term.
A)True
B)False
Q4) Stock purchased on December 15,2013,which becomes worthless in March 2014 produces a STCL since the holding period is one year or less.
A)True
B)False
Q5) Distinguish between the Corn Products doctrine and the ruling in the Arkansas Best Corporation case.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 1: Corporate Liquidating Distributions
Available Study Resources on Quizplus for this Chatper
102 Verified Questions
102 Flashcards
Source URL: https://quizplus.com/quiz/67971
Sample Questions
Q1) Section 336 prevents recognition of a loss when making a pro rata distribution of property to a related person.
A)True
B)False
Q2) Market Corporation owns 100% of Subsidiary Corporation's stock.Market Corporation completely liquidates Subsidiary Corporation,receiving land with a $400,000 adjusted basis and a $500,000 FMV in exchange for Subsidiary stock,which has a $300,000 adjusted basis.Market Corporation has a basis in the land of
A)$300,000.
B)$400,000.
C)$500,000.
D)none of the above
Q3) When a liquidating corporation pays off an unsecured debt obligation,
A)the corporation recognizes no gain or loss if it uses appreciated property.
B)the corporation recognizes no gain or loss if it uses cash.
C)the corporation recognizes any gains but not losses realized.
D)the corporation recognizes losses but not gains realized.
Q4) Under what circumstances does a liquidating corporation not recognize a gain or loss when making a distribution?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Deductions and Losses
Available Study Resources on Quizplus for this Chatper
130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/67970
Sample Questions
Q1) Rachel has significant travel and entertainment expenses for her work,but she has not kept receipts. She will be able to deduct a reasonable amount of these ordinary and necessary expenses under the Cohan rule.
A)True
B)False
Q2) Losses on sales of property between a taxpayer and his/her siblings are disallowed.
A)True
B)False
Q3) Generally,Section 267 requires that the deduction of unpaid (accrued)expenses be deferred until the year in which the related payee recognizes the amount as income.
A)True
B)False
Q4) Expenses attributable to the rental use of a taxpayer's personal residence are limited to the gross income generated by the property.
A)True
B)False
Q5) Discuss when expenses are deductible under the accrual method of accounting.
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Corporate Acquisitions and Reorganizations
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/67973
Sample Questions
Q1) Identify which of the following statements is true.
A)The control requirement for Sec.355 differs from the control requirement under Sec.351.
B)Aspect Corporation transfers assets to newly created Expert Corporation in exchange for all of Expert's stock.Shortly after the transfer,Aspect exchanges one-half of the Expert stock that it receives for land.The individuals transferring the land have never been Aspect shareholders.This transaction qualifies as a divisive Type D reorganization and is tax-free to all parties.
C)Common stock can be exchanged for preferred stock in the same corporation as a Type E reorganization.
D)All of the above are false.
Q2) Baxter Corporation transfers assets with an adjusted basis of $300,000 and an FMV of $500,000 to Duke Corporation for 90% of Duke's single class of stock worth $500,000.The Duke stock is then exchanged for Frank's 50% interest in Baxter Corporation.Frank's basis in the Baxter stock he surrenders is $120,000.What is Duke Corporation's basis in the assets it receives?
Q3) What are the advantages and disadvantages of a Type B reorganization?
Q4) What are the advantages of a triangular merger?
Q5) What are the advantages and disadvantages of a Type C reorganization?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Itemized Deductions
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/67972
Sample Questions
Q1) Explain why interest expense on investments is limited to net investment income.
Q2) Christopher,a cash basis taxpayer,borrows $1,000 from ABC Bank by issuing a 3-month note on December 1,2014.Christopher receives $940 but must repay $1,000 on the due date.The amount of interest expense deductible in 2014 is $20.
A)True
B)False
Q3) Carol contributes a painting to a local museum for display.Her AGI is $60,000.Carol paid $22,000 for the painting in 2006,but its market value at the date of the contribution is $25,000.With no special elections,Carol's deductible contribution this year is A)$ 7,000.
B)$18,000.
C)$22,000.
D)$25,000.
Q4) Assessments or fees imposed for specific privileges or services are not deductible as taxes.
A)True B)False
Q5) When are points paid on a loan deductible as interest expense?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Consolidated Tax Returns
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/67975
Sample Questions
Q1) Which of the following statements is true?
A)The definition of an affiliated group is the same for purposes of calculating the U.S.production activities deduction as it is for filing a consolidated return.
B)The consolidated charitable contributions deduction is limited to 10% of adjusted consolidated taxable income,without regard to the consolidated DRD,consolidated NOL carrybacks,consolidated capital loss carrybacks,and consolidated charitable contributions deduction.
C)The definition of an affiliated group for purposes of the U.S.production activities deduction uses a 60% ownership threshold.
D)All of the above are true statements.
Q2) A consolidated return's tax liability is owed by
A)all group members in equal portions.
B)the group member responsible for that portion of the tax liability.
C)all group members who are severely liable.
D)the parent corporation.
Q3) What is the consequence of having losses subject to the SRLY limitations?
Q4) What issues determine whether an affiliated group exists?
Q5) What are the five steps in calculating consolidated taxable income?
Q6) What are the differences between a controlled group and an affiliated group?
Page 17
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: Losses and Bad Debts
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/67974
Sample Questions
Q1) A net operating loss can be carried back three years or carried forward five years.
A)True
B)False
Q2) Leonard owns a hotel which was damaged by a hurricane.The hotel had an adjusted basis of $1,000,000 before the hurricane.A recent appraisal determined that the hotel's FMV was $1,500,000 before the hurricane and $700,000 afterwards.Leonard received insurance proceeds of $500,000.His AGI is $60,000.What is the amount of his deductible casualty loss?
A)$293,900
B)$300,000
C)$793,900
D)$800,000
Q3) For purposes of applying the passive loss limitations for rental real estate,active participation requires a greater time commitment by the taxpayer than does material participation.
A)True
B)False
Q4) What are some factors which indicate that a debt may be worthless?
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Partnership Formation and Operation
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/67977
Sample Questions
Q1) A partner's "distributive share" is the partner's share of any assets distributed by the partnership.
A)True
B)False
Q2) Which of the following is false?
A)A large partnership must not be a service partnership.
B)A large partnership must have fewer than 100 partners.
C)A large partnership must not be engaged in commodity trading.
D)A large partnership is subject to a different system of audits.
Q3) Dinia has agreed to provide services valued at $30,000 to the L-M Partnership.On January 1 of the current year,she is given a 20% capital and profits interest in the partnership in exchange for her services.The partnership has no liabilities at the time but has assets with a basis of $50,000 and an FMV of $70,000.What are the tax consequences to Dinia and the partnership?
Q4) Does the contribution of services to a partnership in exchange for an unrestricted partnership interest qualify for Sec.721 nontaxable treatment?
Q5) Jeremey is a partner in the Jimimey partnership.Why does he need to know his basis in his partnership interest?
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Employee Expenses and Deferred Compensation
Available Study Resources on Quizplus for this Chatper
135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/67976
Sample Questions
Q1) Employees receiving nonqualified stock options recognize ordinary income at the grant date or exercise date if there is a readily ascertainable fair market value.
A)True
B)False
Q2) Personal travel expenses are deductible as miscellaneous itemized deductions subject to the 2% of AGI floor.
A)True
B)False
Q3) Which statement is correct regarding SIMPLE retirement plans?
A)SIMPLE plans are not subject to nondiscrimination rules.
B)This plan can only be adopted by employers with 50 or fewer employees.
C)Only the employer can contribute to the plan.
D)Employer contributions must vest within three years.
Q4) Travel expenses for a taxpayer's spouse are deductible if the spouse is an employee,the travel is for a bona fide purpose,and the expenses are otherwise deductible.
A)True
B)False
Page 20
Q5) Why did Congress establish Health Savings Accounts (HSAs)? How do HSAs operate?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Special Partnership Issues
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/67979
Sample Questions
Q1) When a retiring partner receives payments that exceed the value of that partner's partnership property,the excess payment is a guaranteed payment.
A)True
B)False
Q2) What is the character of the gain/loss on the sale of a partnership interest?
Q3) Identify which of the following statements is true.
A)A liquidating distribution that terminates a partnership interest cannot include more than one distribution.
B)A partnership with a large amount of unrealized receivables and substantially appreciated inventory items liquidated and distributed all of its assets in kind to each partner in proportion to their partnership interests.Each partner will report ordinary income at the time these assets are received equal to their FMV.
C)The rule for recognizing gain on a liquidating distribution is the same rule that is used for a current distribution.
D)All of the above are false.
Q4) Do most distributions made by a partnership require a Sec.751 calculation?
Q5) What is included in the definition of unrealized receivables?
Q6) What are some advantages and disadvantages of making a Section 754 election?
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Depreciation cost Recovery amortization and Depletion
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/67978
Sample Questions
Q1) The basis of an asset must be reduced by the depreciation allowable.
A)True
B)False
Q2) Intangible assets are subject to MACRS depreciation.
A)True
B)False
Q3) Off-the-shelf computer software that is purchased for use in the taxpayer's trade or business is amortized over 36 months,or it can be immediately expensed under a Sec.179 election.
A)True
B)False
Q4) On August 11,2014,Nancy acquired and placed into service residential rental property,which cost $430,000; the cost of the land has been excluded.Nancy annually elects the maximum allowed Sec.179 deduction.The total depreciation for the year is (rounded)
A)$5,865.
B)$4,141.
C)$5,117.
D)$15,636.
22
To view all questions and flashcards with answers, click on the resource link above.
Chapter 21: S Corporations
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/67981
Sample Questions
Q1) Identify which of the following statements is true.
A)The overall S corporation loss limitation equals the shareholder's adjusted basis for his/her S corporation stock plus his/her ratable share of all S corporation liabilities.
B)The loss pass-throughs from an S corporation may produce a net operating loss for the shareholder.
C)An S corporation shareholder can increase the adjusted basis of his/her stock by any indebtedness owed the shareholder by the S corporation.
D)All of the above are false.
Q2) An S corporation is not treated as a corporate taxpayer with respect to which one of the following fringe benefits?
A)stock options
B)qualified retirement plans
C)group term life insurance premiums
D)nonqualified deferred compensation
Q3) Garret and Hans own all the stock of GH Corporation.Garret sells all his GH stock to Olga on February 12.The next day,GH makes an S election.For the election to apply to the current year,who must consent to the election?
To view all questions and flashcards with answers, click on the resource link above.
Page 23
Chapter 22: Accounting Periods and Methods
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/67980
Sample Questions
Q1) Emily made the following interest free loans to her children:
(1)$10,000 to Erin for a down payment on a new home.Her net investment income for the year is $1,300.
(2)$50,000 to Sasha to purchase stock.Her net investment income for the year is $800.
(3)$60,000 to Tim to purchase a new boat.His net investment income for the year is $2,800.
The applicable federal interest rate on similar loans is 5%.What is the amount of interest income that Emily must report from these transactions?
Q2) If Jett Corporation receives a charter in 2012 but does not begin operations and file its first tax return until 2014,Jett may elect a fiscal year on the 2014 return.
A)True
B)False
Q3) For tax purposes,the lower of cost or market method must ordinarily be applied to each separate inventory item.
A)True
B)False
Q4) What is the significance of the Thor Power Tool Co.case?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 23: The Gift Tax
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/67983
Sample Questions
Q1) The annual exclusion permits donors to make gifts of $14,000 each to multiple donees.
A)True
B)False
Q2) In the current year,Bonnie,who is single,sells stock valued at $60,000 to Linda for $15,000.Later that year,Bonnie gives Linda $25,000 in cash.Bonnie's taxable gifts from these transfers total
A)$70,000.
B)$59,000.
C)$56,000.
D)$25,000.
Q3) What is a "net gift" and what is the potential income tax problem associated with making a net gift?
Q4) On March 1,Bruce transfers $300,000 to a revocable trust with Sprint Bank as trustee.The trustee must pay out all the income to Sam during Sam's lifetime.At Sam's death,the property is to be paid to Sam Jr.On December 31,the trustee distributes $40,000 of income to Sam.What date did a gift occur? What was the amount of the gift?
Q5) What is the due date for the gift tax return? Are there any exceptions? If so,what are they?
To view all questions and flashcards with answers, click on the resource link above. Page 25
Chapter 24: Property Transactions: Nontaxable Exchanges
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/67982
Sample Questions
Q1) Ed owns a racehorse with a $600,000 basis used for breeding purposes.The racehorse is killed in a tornado,and Ed collects $1,000,000 from the insurance company.He purchases another horse for $550,000.What is the amount of gain recognized on the transaction?
A)$0
B)$50,000
C)$350,000
D)$400,000
Q2) Daniella exchanges business equipment with a $100,000 adjusted basis for $10,000 cash and business equipment with a $96,000 FMV.What is the amount of gain recognized on the exchange?
A)$0
B)$4,000
C)$6,000
D)$10,000
Q3) A taxpayer may elect to defer recognition of a loss resulting from an involuntary conversion.
A)True
B)False
Q4) Discuss the basis rules of property received in a nontaxable like-kind exchange.
Page 26
To view all questions and flashcards with answers, click on the resource link above.
Chapter 25: The Estate Tax
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/67985
Sample Questions
Q1) In 2002,Gert made a $5,000,000 taxable gift.The 2002 gift tax on $5,000,000 was $2,275.800.Gert was entitled to a unified credit of $345,800,resulting in a gift tax of $1,193,000.The marginal tax rate in 2002 is 50%.Assume Gert dies in 2013 when the credit is $2,045.800 and the marginal rate is 40%,the tax on $5,000,000 would equal $1,945,800 before subtracting any credit.In arriving at Gert's estate tax liability,what is the amount subtracted for 1992 gift taxes paid?
Q2) Julian died on November 1 and owned 100 shares of a New York Stock Exchange stock.The stock traded at a high of 100 and a low of 98 on November 1.It opened at 98 and closed at 100.On Julian's estate tax return,what will the per-share and total value of the stock be?
Q3) Wally died on November 15.His gross estate includes 100 shares of ABC Corporation stock.On November 15,ABC's stock trades at a high of $100,a low of $92,and a close of $94.What is the per-share value of the stock in Wally's estate?
Q4) Identify which of the following statements is false.
A)Life insurance can help provide liquidity for paying estate taxes.
B)Life insurance has the potential for large appreciation.
C)The insured does not have to be the owner of the policy.
D)Life insurance is always part of the estate of the insured.
To view all questions and flashcards with answers, click on the resource link above.
Page 27
Chapter 26: Property Transactions: Section 1231 and Recapture
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/67984
Sample Questions
Q1) Elaine owns equipment ($23,000 basis and $15,000 FMV)and a building ($136,000 basis and $148,000 FMV),which are used in her business.Elaine uses straight-line depreciation for both assets,which were acquired several years ago.Both the equipment and the building are destroyed in a fire,and Elaine collects insurance proceeds equal to the assets' FMV.
a.What is the tax treatment of these two transactions?
b.Assume that Elaine is only able to collect $3,000 from the insurance company for the equipment loss. What is the tax treatment of the two transactions (assume the basis and insurance reimbursement remain the same for the building).
Q2) If realized gain from disposition of business equipment exceeds total depreciation or cost recovery,a portion of the gain will receive Sec.1231 treatment if the equipment's holding period is more than one year.
A)True
B)False
Q3) What is the purpose of Sec.1245 and what is its significance?
Q4) Section 1250 does not apply to assets sold or exchanged at a loss.
A)True
B)False
Page 28
To view all questions and flashcards with answers, click on the resource link above.
Chapter 27: Income Taxation of Trusts and Estates
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/67987
Sample Questions
Q1) Explain the three functions of distributable net income (DNI).
Q2) For purposes of trust administration,the term "sprinkling" relates to the mandatory distribution of income among various beneficiaries.
A)True
B)False
Q3) In which of the following situations will the grantor trust rules apply?
A)The trust is revocable and mandates the distribution of income to the named beneficiary.
B)The trust is irrevocable,and the trustee,who is also the grantor,has the power to distribute or accumulate income for the named beneficiary.
C)The trust is irrevocable,the income must be paid out currently,and the trust assets will revert to the grantor at the end of nine years.
D)The grantor trust rules will apply in each of the situations.
Q4) Little Trust,whose trust instrument is silent with respect to depreciation,collects rental income of $20,000 and pays property taxes of $1,000.Depreciation expense is $5,000. Little Trust is in a state where all depreciation is charged to principal.What is the trust's net accounting income?
To view all questions and flashcards with answers, click on the resource link above. Page 29
Chapter 28: Special Tax Computation Methods, tax Credits, and Payment of Tax
Available Study Resources on Quizplus for this Chatper
117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/67986
Sample Questions
Q1) The maximum amount of the American Opportunity Tax Credit for each qualified student is
A)$1,500.
B)$2,000.
C)$2,500.
D)$3,000.
Q2) The health insurance premium assistance credit is designed to help lower and middle income taxpayers who purchase their own health insurance insurance directly from an insurance company or through a state or federal exchange.
A)True
B)False
Q3) A wage cap does not exist for which of the following self-employment taxes?
A)Social Security tax
B)FICA
C)FUTA
D)Medicare hospital insurance
Q4) Discuss when Form 6251,Alternative Minimum Tax,must be filed.
Q5) The general business credits are refundable credits.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 30
Chapter 29: Administrative Procedures
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/67988
Sample Questions
Q1) On April 15,2010,a married couple filed their joint 2009 tax return showing gross income of $120,000.Their return was prepared by a professional tax preparer who mistakenly omitted $45,000 of income,which the preparer in good faith considered to be nontaxable.No information with regard to this omitted income was disclosed on the return or attached statements.By what date must the IRS assert a notice of deficiency before the statute of limitations expires?
A)April 15,2015
B)December 31,2011
C)April 15,2009
D)December 31,2009
Q2) One of your corporate clients comes to you asking for advice regarding a proposed merger with XYZ Company.You (a)issue an opinion concerning the FMV of XYZ,(b)prepare pro forma financials for the merged entity to be,(c)draft shareholder resolutions for your client approving the proposed merger,(d)file a shareholder proxy statement with the U.S.Securities and Exchange Commission,and (e)advise your client's board of directors concerning the advantages of a Type A versus a Type B reorganization.Which of these activities,if any,constitutes the unauthorized practice of law?
Q3) For innocent spouse relief to apply,five conditions must be met.Explain them.
Q4) What is the difference between the burden of proof for civil and criminal fraud?
Page 31
To view all questions and flashcards with answers, click on the resource link above.