Advanced Federal Taxation Test Bank
Course Introduction
Advanced Federal Taxation delves into the complex aspects of federal tax law as it pertains to individuals, corporations, partnerships, estates, and trusts. The course emphasizes tax planning, compliance, and research skills, exploring advanced topics such as corporate reorganizations, multi-jurisdictional issues, accounting methods and periods, tax consequences of property transactions, and the taxation of flow-through entities. Students will analyze current tax regulations, administrative rulings, and case law while developing the expertise necessary to address sophisticated tax scenarios encountered in professional practice.
Recommended Textbook
Prentice Halls Federal Taxation 2015 Comprehensive 28th Edition by Timothy J. Rupert
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29 Chapters
3271 Verified Questions
3271 Flashcards
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Page 2
Chapter 1: Tax Research
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Sample Questions
Q1) Identify which of the following statements is false.
A)When a court opinion discusses facts and issues on which the court does not rule,the comments are called dicta.
B)Dicta in a court opinion has no influence on other tax proceedings.
C)Published articles and tax services are examples of secondary sources of authority.
D)Dicta are not authoritative.
Answer: B
Q2) Why does a researcher use a citator?
A)to check on authorities issued subsequent to a court decision
B)to determine whether a private letter ruling exists on the subject
C)for examples of the application of a tax provision
D)none of the above
Answer: A
Q3) Discuss the purposes and scope of temporary regulations.
Answer: Temporary regulations are issued by the Treasury Department after statutory changes have occurred to give guidance with respect to procedural and computational matters.Temporary regulations are also issued as proposed regulations with the same authoritative value as final regulations.
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Chapter 2 an Introduction to Taxation
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Sample Questions
Q1) Latashia reports $100,000 of gross income on her 2014 tax return,filed April 15,2015.She omits $30,000 of income,but the error was not fraudulent.When does the statute of limitations for examining her tax return expire?
A)April 15,2017
B)April 15,2018
C)April 15,2021
D)It never expires.
Answer: C
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) If a taxpayer's total tax liability is $4,000,taxable income is $20,000,and total economic income is $40,000,then the effective tax rate is 20 percent.
A)True
B)False
Answer: False
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4
Chapter 3: Corporate Formations and Capital Structure
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Q1) South Corporation acquires 100 shares of treasury stock for $10,000.The next year,South reissues the 100 shares for land having a $15,000 FMV.What is the amount of gain or loss realized by South Corporation,and how much is recognized?
Answer: South realizes a $5,000 ($15,000 - $10,000)gain on the exchange.None of it is recognized.
Q2) Dan transfers property with an adjusted basis of $50,000 and an FMV of $100,000 to a newly formed Sun Corporation in exchange for 500 shares of Sun stock,which is one-half of the outstanding Sun stock.His daughter,Sylvia,transfers property with an adjusted basis of $25,000 and an FMV of $50,000 for the other 500 shares at the same time.What are the tax consequences of the two transfers,assuming all the requirements of Sec.351 are met?
Answer: No gain or loss is recognized by either Dan or Sylvia.However,since the stock was not received in proportion to the relative FMVs of the properties contributed,the IRS may attempt to reconstruct the transaction in the form that Dan has received 667 shares of stock and made a gift of 167 shares to his daughter Sylvia.Dan's basis in his 500 shares of stock is $37,538 [(500/667)× $50,000 basis in property transferred].Sylvia's basis in her 500 shares is $37,462 [$25,000 basis in property transferred + ($50,000 - $37,538)basis in the shares received as a gift from Dan].
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Page 5
Chapter 4: I: Determination of Tax
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Sample Questions
Q1) In 2014 Brett and Lashana (both 50 years old)file a joint tax return claiming as a dependent their son who is blind.Their standard deduction is
A)$12,400.
B)$13,600.
C)$13,950.
D)$7,750.
Q2) Steve and Jennifer are in the 33% tax bracket for ordinary income and the 15% bracket for capital gains.They have owned several blocks of stock for many years.They are considering the sale of two blocks of stock.The sale of one would produce a gain of $12,000 while the sale of the other would produce a loss of $18,000.For purposes of this problem,ignore personal exemptions,itemized deductions,phase-outs and additional investment taxes.They have no other gains and losses this year.
a.How much tax will they save if they sell the block of stock that produces a loss?
b.How much additional tax will they pay if they sell the block of stock that produces a gain?
c.What will be the impact on their taxes if they sell both blocks of stock?
Q3) Discuss reasons why a married couple may choose not to file a joint return.
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Chapter 5: The Corporate Income Tax
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Q1) Which of the following items indicate that a company does not need a valuation allowance?
A)existing sales contracts that will produce sufficient income to realize the deferred tax asset
B)excess of appreciated asset value over tax basis sufficient to realize the deferred tax asset
C)a strong history of earnings without considering the deferred tax asset
D)All of the above are correct.
Q2) Identify which of the following statements is true.
A)"Ordinary income property" with regard to the charitable contribution deduction does not include property whose sale would have produced a short-term capital gain.
B)The Twilight Corporation purchases inventory for $5,000.Its FMV on the date it is donated to the Blue-Gray Hospital for the care of the needy is $14,000.The maximum charitable contribution deduction available for the donation is $9,000.
C)Corporations' charitable deductions are limited to 20% of their adjusted taxable income.
D)All of the above are false.
Q3) For corporations,what happens to excess charitable contributions?
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Chapter 6: Gross Income: Inclusions
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Sample Questions
Q1) The wherewithal-to-pay concept provides that a tax should be collected when the taxpayer has the financial resources to pay the tax.
A)True
B)False
Q2) Aaron found a prototype of a new pair of glasses with Internet service and other computing capabilities while in a bar one evening. He offered the prototype to the owner of a magazine and blog that reviews new digital devices. The owner paid Aaron $10,000 in return for the prototype. What tax issues should Aaron consider?
Q3) 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.
Q4) Unemployment compensation is exempt from federal income tax.
A)True
B)False
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Page 8
Chapter 7: Corporate Nonliquidating Distributions
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Sample Questions
Q1) When appreciated property is distributed in a nonliquidating distribution,the net effect on the distributing corporation's E&P is that it is reduced by the FMV of the property distributed and increased by the gain (net of federal income taxes)recognized due to the property distribution.
A)True
B)False
Q2) Identify which of the following statements is false.
A)The rules for the recognition of a gain or loss by a corporation that distributes property in redemption of its stock are the same as the rules for property distributions that are not in redemption of stock.
B)Generally,little or no gain is recognized by the redeeming shareholder in a qualified Sec.303 redemption.
C)When a stock redemption is considered a sale of stock by the shareholder,the E&P of the redeeming corporation is reduced by the FMV of the property used to redeem the stock.
D)Under Sec.311,a corporation does not recognize a loss when it distributes property that has declined in value.
Q3) Define Sec.306 stock.
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Chapter 8: Gross Income: Exclusions
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Sample Questions
Q1) Tim earns a salary of $40,000.This year,Tim's employer establishes a cafeteria plan under which Tim signed a salary reduction of $2,500 for which $1,500 is to cover his health insurance premiums and $1,000 is available to reimburse medical expenses.During the year,he is reimbursed $900 for medical expenses.What is the total taxable to Tim this year?
A)$37,500
B)$37,600
C)$38,400
D)$40,000
Q2) Hope receives an $18,500 scholarship from State University.The university specifies that $8,500 is for tuition,books,supplies,and equipment,while $10,000 is for room and board.In addition,Hope works part-time at the campus library and earns $5,000.Hope's gross income is
A)$5,000.
B)$15,000.
C)$18,500.
D)$23,500.
Q3) Punitive damages are taxable unless they are awarded for physical injuries.
A)True B)False
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Chapter 9: Other Corporate Tax Levies
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Sample Questions
Q1) The personal holding company tax
A)may be imposed regardless of the number of equal stockholders in a corporation.
B)may be eliminated by the payment of a deficiency dividend.
C)qualifies as a tax credit,which may be used by the shareholders to reduce their individual income taxes.
D)applies to any corporation whose shareholders satisfy the stock ownership requirement.
Q2) Identify which of the following statements is true.
A)In practice,the accumulated earnings tax applies only to closely held corporations.
B)A corporation bears the burden of proving that its earnings are not being accumulated to avoid income taxes.
C)To avoid the accumulated earnings tax,a corporation needs to have a definite plan for expending the accumulated earnings.
D)All of the above are true.
Q3) The ACE adjustment always increases alternative minimum taxable income (AMTI).
A)True
B)False
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Chapter 10: Property Transactions: Capital Gains and Losses
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Sample Questions
Q1) Unless the alternate valuation date is elected,the basis of property received from a decedent is generally the property's fair market value at the date of decedent's death.
A)True
B)False
Q2) In 2011 Toni purchased 100 shares of common stock in Blue Corporation for $5,280.In 2012,Blue declared a stock dividend of one share of its common stock for each 10 shares held.This year,2014,Blue's common stock split 2 for 1 at a time when the FMV was $80 a share.What is Toni's basis in each of her shares of the Blue Corporation stock if both distributions were tax-free?
A)$24 per share
B)$48 for 110 shares and $0 for all additional shares
C)$52.80 for 100 shares and $0 for all additional shares
D)$80 per share
Q3) Expenditures which do not add to the value or prolong the life of property may be expensed in the year in which they are incurred.
A)True
B)False
Q4) What are arguments for and against preferential treatment of capital gains?
Page 12
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Chapter 1: Corporate Liquidating Distributions
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Sample Questions
Q1) A liquidation must be reported to the Internal Revenue Service on Form 966
A)within 60 days of the adoption of a plan of liquidation.
B)that is filed with the national IRS office.
C)whether the shareholders' realized gain is recognized or not.
D)by the shareholders.
Q2) Greg,a cash method of accounting taxpayer,owns 100 shares of Parker Corporation stock with a basis of $20,000.Greg receives two liquidating distributions of $8,000 on March 3 of last year,and $8,000 on August 8 of this year.The amount of the second distribution is not known until June 15 of this year.Greg recognizes
A)a gain of $8,000 last year and a loss of $12,000 this year.
B)a loss of $2,000 last year and a loss of $2,000 this year.
C)no loss last year and a $4,000 loss this year.
D)none of the above
Q3) A Sec.332 liquidation requires a complete statement be filed with the distributee's tax return
A)when a liquidating distribution is received.
B)when the liquidation plan is adopted.
C)when the liquidation is compiled.
D)No statement is required with the return.
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Page 13
Chapter 12: Deductions and Losses
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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) Individuals are allowed to deduct the greater of the standard deduction or itemized deductions.
A)True
B)False
Q3) Jones,Inc.,a calendar-year taxpayer,is in the air conditioner repair business.The business uses the cash method.In December of the current year,Jones charged $100 of supplies at Refrigeration,Inc.,(he will pay the credit card bill in January)and also purchased $600 of supplies at XYZ on open account (he will make a payment on the open account in January).What is the amount that is deductible by Jones,Inc.,in the current year?
A)$100
B)$600
C)$700
D)The amounts must be capitalized and charged to expense as used.
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Page 14
Chapter 13: Corporate Acquisitions and Reorganizations
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Q1) Identify which of the following statements is true.
A)Acquisition of the stock of a target corporation in a taxable acquisition transaction is reflected in an increased basis for the target corporation's assets on its books.
B)Acquisition of 100% of the stock of a target corporation in a taxable transaction followed by a tax-free liquidation of the target corporation permits a step-up in the basis of the target corporation's assets to their FMV.
C)Usually when 100% of the stock of a target corporation is purchased by an acquiring corporation,the basis of the assets of the target corporation reflects the purchase price of the target stock.
D)All of the above are false.
Q2) Melon Corporation makes its first purchase of 30% of Hill Corporation stock on July 31 of this year.Melon Corporation uses a calendar tax year.To use the Sec.338 election,Melon Corporation must purchase
A)an additional 50% of Hill Corporation stock by December 31 of this year.
B)an additional 50% of Hill Corporation stock by July 30 of next year.
C)an additional 51% of Hill Corporation stock by December 31 of this year.
D)an additional 51% of Hill Corporation stock by July 30 of next year.
Q3) What are the two steps of a Sec.338 deemed liquidation election?
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Chapter 14: Itemized Deductions
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Q1) All of the following are deductible as medical expenses except A)vitamins and health foods that improve a taxpayer's general health.
B)payments for a vision exam and contact lenses.
C)payments to a hospital for laboratory fees and X-rays for diagnosis of a medical problem.
D)cosmetic surgery necessary to correct a deformity arising from a congenital abnormality.
Q2) A charitable contribution deduction is allowed for the FMV of services rendered to a qualified charitable organization.
A)True
B)False
Q3) Discuss the timing of the allowable medical expense deduction.
Q4) Interest expense incurred in the taxpayer's trade or business is deductible as a for AGI deduction without limitation if the taxpayer materially participates in the business. A)True B)False
Q5) Explain why interest expense on investments is limited to net investment income.
Q6) Discuss what circumstances must be met for personal property taxes to be deductible.
Page 16
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Chapter 15: Consolidated Tax Returns
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Q1) Ajak Corporation owns 85% of the single class of Utech Corporation stock.Utech Corporation owns 35% of Tech Corporation.Ajak Corporation also owns 50% of Tech Corporation,and Tech Corporation owns 75% of Baxter Corporation.
A)Ajak,Tech,Utech,and Baxter Corporations are an affiliated group.
B)Ajak,Tech,and Baxter Corporations are an affiliated group.
C)Ajak,Tech,and Utech Corporations are an affiliated group.
D)None of the above are correct.
Q2) Identify which of the following statements is true.
A)An affiliated group member incurring an NOL in a separate return year that is available as a carryback or carryforward to a consolidated return year is subject to a limit on the use of the NOL when the loss year is designated a separate return limitation year (SRLY).
B)A consolidated NOL may be carried back one year and carried forward twenty years.
C)An NOL incurred in a separate return limitation year by the corporation that is the common parent corporation for the group in the carryover year is subject to the SRLY limitation.
D)All of the above are false.
Q3) Define intercompany transactions and explain the two types of transactions.
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Chapter 16: Losses and Bad Debts
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Q1) When business property involved in a casualty is totally destroyed,the amount of the loss is limited to the lesser of the taxpayer's adjusted basis in the property or the reduction in FMV.
A)True
B)False
Q2) A net operating loss can be carried back three years or carried forward five years.
A)True
B)False
Q3) One of the requirements which must be met for stock to be considered Section 1244 stock is that the stock must be owned by an individual or a partnership.
A)True
B)False
Q4) A passive activity includes any rental activity or any trade or business in which the taxpayer does not materially participate.
A)True
B)False
Q5) What is or are the standards that must be present to warrant a casualty loss deduction?
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Chapter 17: Partnership Formation and Operation
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Q1) For a 20% interest in partnership capital,profits,and losses,Kasi contributes a machine having a basis of $30,000 and an FMV of $40,000.The partnership also assumes a $24,000 recourse liability secured by the machine.The partnership has $6,000 in recourse liabilities immediately preceding Kasi's contributions.Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.Kasi's basis in the partnership interest is
A)$10,800.
B)$12,000.
C)$13,200.
D)$30,000.
Q2) The partners of the MCL Partnership,Martin,Clark,and Lewis,share profits and losses in a ratio of 4:3:3,respectively.The tax basis of each partner,as of December 31 of the current year,is as follows: Martin,$7,200; Clark,$6,000; and Lewis,$2,500.During the current year,the partnership incurred an ordinary loss of $15,000.The loss is not reflected in the tax basis figures presented above.Nothing else occurs during the year that would affect the partners' bases.As a result of this loss,what amount should Martin,Clark,and Lewis report on their individual tax returns for the current year? What limitations (other than the Sec.704(d)loss limitations)may prevent them from deducting their losses in the current year?
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19
Chapter 18: Employee Expenses and Deferred Compensation
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Q1) Gwen traveled to New York City on a business trip for her employer.Gwen spent 4 days in business meetings and conferences and then spent 2 days sightseeing in the area.Gwen's plane fare for the trip was $250.Meals cost $160 per day.Hotels and other incidental expenses amounted to $250 per day. Gwen was not reimbursed by her employer for any expenses.Her AGI for the year is $50,000 and she itemizes but has no other miscellaneous itemized deductions.Gwen may deduct (after limitations)
A)$570.
B)$890.
C)$1,890.
D)$1,570.
Q2) Which of the following statements regarding independent contractors and employees is true (ignore temporary provisions)?
A)Independent contractors pay Social Security and Medicare tax of 15.3%.
B)Employees must pay unemployment taxes.
C)Independent contractors and employees pay the same Social Security and Medicare tax rates.
D)Independent contractors deduct their business expenses "from AGI."
Q3) Why did Congress establish Health Savings Accounts (HSAs)? How do HSAs operate?
Q4) What two conditions are necessary for moving expenses to be deductible?
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Chapter 19: Special Partnership Issues
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Q1) Can a partner recognize both a gain and a loss on the sale of a partnership interest? If so,under what conditions?
Q2) The TK Partnership has two assets: $20,000 cash and a machine having a $28,000 basis and a $40,000 FMV.The partnership has claimed $16,000 in depreciation on the machine since its purchase.If the machine is sold for its FMV,would TK Partnership have an unrealized receivable item?
Q3) Carlos has a basis in his partnership interest of $30,000.He receives a current distribution of $6,000 cash,unrealized receivables (FMV $11,000,basis $10,000),inventory (FMV $8,000,basis $4,000),land held as an investment (FMV $7,000,basis,$6,000),and building (FMV $21,000,basis $9,000).The partners' relative interests in the Sec.751 assets do not change as a result of the current distribution.Carlos's basis in the building is A)$2,500.
B)$6,000.
C)$7,500.
D)$9,000.
Q4) What is an electing large partnership? What are the advantages to the partnership of electing to be taxed under the electing large partnership rules?
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Chapter 20: Depreciation cost Recovery amortization and Depletion
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Q1) Eric is a self-employed consultant. In May of the current year,Eric acquired a computer system (5-year property)for $6,000 and used the computer 80% for business and 20% for personal purposes.Eric does not take any Sec.179 deduction.The maximum depreciation deduction for is
A)$600.
B)$800.
C)$960.
D)$1,200.
Q2) Unless an election is made to expense or defer and amortize research and experimental expenditures,these costs must be capitalized.
A)True
B)False
Q3) Under the MACRS rules,salvage value is not considered in the computation of the cost-recovery or depreciation amount.
A)True
B)False
Q4) Land,buildings,equipment,and stock are examples of tangible property.
A)True
B)False
22
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Chapter 21: S Corporations
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Q1) What is a permitted year?
Q2) Identify which of the following statements is true.
A)An S corporation may be subject to the corporate alternative minimum tax.
B)Allocation of tax preference items for AMT generally occurs on a daily basis.
C)An S corporation may be subject to the corporate alternative minimum tax when the corporation has accumulated E&P from prior C corporation tax years.
D)All of the above are false.
Q3) Identify which of the following statements is true.
A)The natural business year for fiscal-year election purposes is any tax year that ends within six months after the peak period of business.
B)Section 444 permits an S corporation to elect to use a fiscal year other than a permitted year.
C)A new corporation that is 100% owned by Johnny Blake,a cash method of accounting taxpayer,makes an S election for its initial tax year.The S corporation must also elect to use the cash method of accounting as its overall accounting method.
D)All of the above are false.
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Chapter 22: Accounting Periods and Methods
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Q1) Under the percentage of completion method,gross income is reported
A)when the contract is completed.
B)using a percentage that is determined by dividing current year costs by the expected total revenue.
C)based on the portion of work that is incomplete.
D)based on the portion of work that has been completed.
Q2) Under the cash method of accounting,all of the following are true with the exception of:
A)Fixed assets are always expensed as the taxpayer pays for the assets.
B)Gross income includes the value of property received.
C)To some extent,a taxpayer may control the year in which an expense is deductible by choosing when to make the payment.
D)Income is reported in the tax year in which payments are actually or constructively received.
Q3) A newly married person may change tax years to conform to that of his or her spouse so that a joint return may be filed.
A)True
B)False
Q4) What is the significance of the Thor Power Tool Co.case?
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Chapter 23: The Gift Tax
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Q1) On July 1,Frank loans his brother Matt $200,000.The loan is evidenced by an interest-free demand note.The loan is still outstanding on December 31.The applicable interest rate is 12%.Frank is treated as having made a gift of
A)$200,000.
B)$24,000.
C)$12,000.
D)$0.
Q2) In the current year,Donna gives $50,000 cash and $30,000 of stock to Mike.She also gives $40,000 of tax-exempt bonds to Angela.Her husband,Andy,gives $200,000 of land to Angela.Assume the couple elects gift splitting for the current year.Donna's taxable gifts total
A)$132,000.
B)$148,000.
C)$110,000.
D)$60,000.
Q3) Contrast the Crummey trust with the Sec.2503(c)trust.
Q4) What is the due date for the gift tax return? Are there any exceptions? If so,what are they?
Q5) Discuss the statutory exemptions from the gift tax.
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Chapter 24: Property Transactions: Nontaxable Exchanges
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Q1) Cassie owns a Rembrandt painting she acquired on June 1,2008 as an investment.She exchanges the painting on September 5,2014,for a Picasso sculpture and marketable securities to be held as an investment.On what date does the sculpture's holding period begin?
A)June 1,2008
B)June 2,2008
C)September 5,2014
D)September 6,2014
Q2) Realized gain or loss must be recognized unless a specific Code section provides for nonrecognition treatment.
A)True
B)False
Q3) If a gain is realized on the involuntary conversion of property,the gain may be deferred if qualifying replacement property is acquired within a specified time period at a cost equal to or greater than the amount realized on the involuntary conversion.
A)True
B)False
Q4) Discuss the basis rules of property received in a nontaxable like-kind exchange.
Q5) Discuss why a taxpayer would want to avoid like-kind exchange provisions.
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Chapter 25: The Estate Tax
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Q1) Two years ago,Nils transfers a $200,000 life insurance policy on his life to his daughter,Gail.The policy is worth $60,000 at the time of transfer and Gail pays Nils $50,000.When Nils dies this year,the $50,000 cash is still in a savings account.The consideration offset when computing Nils's gross estate is
A)$0.
B)$50,000.
C)$150,000.
D)$166,667.
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) Praneh Patel,a widower,died in March of the current year.His gross estate is $5,325,000,and at the time of his death,he owed debts of $40,000.His will made a charitable bequest of $280,000 and left the rest of his property to his children.His administrative expenses are estimated to be about $55,000.What tax issues should the estate's CPA consider when preparing Praneh's estate tax return and his estate's income tax return?
Q4) Explain why living trusts are popular tax-planning vehicles.
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Chapter 26: Property Transactions: Section 1231 and Recapture
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Q1) Melissa acquired oil and gas properties for $600,000.During 2013 she elected to expense the $180,000 of IDC.Total depletion allowed was $50,000.During the current year,Melissa sells the property for $700,000.
a.What is the amount of and nature of her gain using the facts above?
b.What is the amount of and nature of her gain assuming that she sold the property for $850,000?
Q2) Mark owns an unincorporated business and has $20,000 of Section 1231 gains and $22,000 of Section 1231 losses.He must report a capital loss of $2,000 on his tax return.
A)True
B)False
Q3) During the current year,a corporation sells equipment for $300,000.The equipment cost $270,000 when purchased and placed in service two years ago and $60,000 of depreciation deductions were allowed.The results of the sale are
A)ordinary income of $90,000.
B)Sec.1231 gain of $90,000.
C)ordinary income of $60,000 and LTCG of $30,000.
D)ordinary income of $60,000 and Sec.1231 gain of $30,000.
Q4) What is the purpose of Sec.1245 and what is its significance?
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Chapter 27: Income Taxation of Trusts and Estates
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Q1) What is the basis of inherited IRD items to the beneficiary?
Q2) Martha died and by her will,specifically bequeathed,and the executor distributed,$20,000 cash and a $70,000 house to Harold.The distributions were made in a year in which the estate had $65,000 of DNI,all from taxable sources.The maximum Harold will be required to report as gross income as a result of these distributions is A)$0.
B)$20,000.
C)$65,000.
D)$70,000.
Q3) Identify which of the following statements is true.
A)Tax-exempt income is allocated among beneficiaries in the proportion that total tax-exempt income bears to total distributable net income (DNI).
B)Both income required to be distributed currently and discretionary income distributions are included in tier-1 distributions.
C)Under the tier system,tier-2 beneficiaries are the first to absorb income.
D)All are false.
Q4) Outline the classification of principal and income under the Revised Uniform Principal and Income Act.
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Chapter 28: Special Tax Computation Methods, tax Credits, and Payment of Tax
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Q1) The general business credits are refundable credits.
A)True
B)False
Q2) Discuss the tax planning techniques available to a U.S.citizen who is on a foreign job assignment.
Q3) Jake and Christina are married and file a joint return for 2014 with taxable income of $100,000 and tax preferences and adjustments of $20,000 for AMT purposes.Their regular tax liability is $16,713.What is the amount of their total tax liability?
A)$6,859
B)$9,854
C)$16,713
D)$26,567
Q4) All of the following are self-employment income except
A)net income of a sole proprietorship.
B)dividends received by a corporate shareholder.
C)fees received for serving as a director of a corporation.
D)distributive share of partnership income from a partnership operating a business.
Q5) Discuss when Form 6251,Alternative Minimum Tax,must be filed.
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Chapter 29: Administrative Procedures
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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) How does the IRS regulate the activities of compensated tax return preparers? In particular,list six acts that will cause a compensated tax return preparer to incur a penalty.
Q3) The statute of limitations,which stipulates the time frame within which either the government or the taxpayer may request a redetermination of tax due,usually expires 6 years after the date on which the return is filed.
A)True
B)False
Q4) What is the difference between the burden of proof for civil and criminal fraud?
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