Business Tax Planning Test
Questions
Course Introduction
Business Tax Planning provides students with a comprehensive understanding of the strategies and principles involved in minimizing tax liabilities and ensuring compliance for various forms of business organizations. The course explores the structure and implications of corporate, partnership, and sole proprietorship taxation, emphasizing legal ways to plan for tax efficiency in both short-term transactions and long-term operations. Students learn to identify tax-saving opportunities, analyze the impact of tax regulations on business decisions, and apply relevant tax laws to real-world scenarios. Practical case studies and contemporary issues are incorporated to help students develop effective tax planning techniques applicable in todays dynamic business environment.
Recommended Textbook
Prentice Halls Federal Taxation 2015 Comprehensive 28th Edition by Timothy J. Rupert
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Chapter 1: Tax Research
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Q1) Title 26 of the U.S.Code includes
A)income tax legislation only.
B)gift tax and estate tax legislation only.
C)alcohol and tobacco tax legislation only.
D)all of the tax legislation mentioned above.
Answer: D
Q2) When the House and Senate versions of a tax bill are not in agreement,the disagreements are resolved by the
A)Ways and Means Committee.
B)Mediation Committee.
C)Revenue Committee.
D)Conference Committee.
Answer: D
Q3) Which of the following is secondary authority?
A)Internal Revenue Code
B)Treasury Regulations
C)RIA and CCH tax services
D)Revenue Ruling
Answer: C
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Page 3
Chapter 2 an Introduction to Taxation
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Q1) 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
Q2) The unified transfer tax system,comprised of the gift and estate taxes,is based upon the total property transfers an individual makes during lifetime and at death.
A)True
B)False
Answer: True
Q3) Adam Smith's canons of taxation are equity,certainty,convenience and economy.
A)True
B)False Answer: True
Q4) Flow-through entities do not have to file tax returns since they are not taxable entities.
A)True
B)False Answer: False
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Chapter 3: Corporate Formations and Capital Structure
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Q1) Frans and Arie own 75 shares and 25 shares of Vogel Corporation stock,respectively.There are no other owners.Frans transfers property with a $30,000 adjusted basis and a $50,000 FMV to Vogel Corporation in exchange for an additional 25 shares of Vogel stock.Does this property-for-stock exchange qualify for Sec.351 treatment?
Answer: Yes.Since Frans owned 80% (100 ÷ 125)of the Vogel stock and is in control of Vogel Corporation,Frans does not recognize any gain on the exchange.
Q2) Identify which of the following statements is true.
A)Property contributions to a corporation by nonshareholders will result in income recognition by the corporation if the contributed property is subsequently sold.
B)Section 1244 ordinary loss treatment is available to any shareholder.
C)A taxpayer must make a special election to take advantage of Sec.1244.
D)All of the above are false.
Answer: A
Q3) The check-the-box regulations permit an LLC to be taxed as a C corporation.
A)True
B)False
Answer: True
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Chapter 4: I: Determination of Tax
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Q1) Married couples will normally file jointly. Identify a situation where a married couple may prefer to file separately.
A)The spouse with lower income has substantial medical expenses.
B)A couple is separated and contemplating divorce.
C)One spouse can be held responsible for the entire tax liability.
D)All of the above.
Q2) Sean and Martha are both over age 65 and Martha is considered blind by tax law standards.Their total income in 2014 from part-time jobs and interest income from a bank savings account is $60,000.Their itemized deductions are $12,000.
Required: Compute their taxable income.
Q3) Lewis,who is single,is claimed as a dependent on his parents' tax return.He received $2,000 during the year in dividends,which was his only income.What is his standard deduction?
A)$1,000
B)$2,000
C)$2,350
D)$6,200
Q4) What options are available for reporting and paying tax on the unearned income of a child under age 24?
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Chapter 5: The Corporate Income Tax
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Q1) How does the use of an NOL differ for individual and corporate taxpayers?
Q2) Baxter Corporation is a personal service corporation.Baxter Corporation has taxable income of $10,000.Baxter Corporation's tax is
A)$1,500.
B)$3,400.
C)$3,500.
D)$3,900.
Q3) Which of the following statements is correct?
A)Deferred tax assets/liabilities are always classified as current on the balance sheet.
B)The classification of deferred tax assets/liabilities depends on whether the related asset is current or noncurrent.
C)Deferred tax assets are classified based on their expected reversal dates.
D)Deferred tax assets/liabilities are classified as noncurrent on the balance sheet.
Q4) The dividends-received deduction is designed to reduce double taxation of corporate dividends payable to individual shareholders.
A)True
B)False
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Chapter 6: Gross Income: Inclusions
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Q1) "Gross income" is a key term in the tax law and is defined in IRC Sec.61. Gross income is not reported on Form 1040.
A)True
B)False
Q2) Emma is the sole shareholder in Pacific Corporation and has owned the stock for five years.The basis in her stock is $50,000.Pacific distributes $35,000 to Emma.Accumulated earnings and profits at the beginning of the year equal $25,000 and current earnings and profits equal $5,000.
Required:
a.What are the tax consequences of this information?
b.What are the tax consequences of this information if,instead of distributing $35,000 to Emma,Pacific distributes $100,000 to Emma?
Q3) Edward,a single taxpayer,has AGI of $50,000 which includes $1,000 of qualified dividends.Edward has $7,000 of itemized deductions.What is his 2014 federal income tax?
A)$5,619
B)$5,519
C)$5,454
D)$6,506
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Page 8
Chapter 7: Corporate Nonliquidating Distributions
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Q1) 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.
Q2) Jerry purchased land from Winter Harbor Corporation,his 100%-owned corporation,for $275,000.The corporation purchased the land three years ago for $300,000.Similar tracts of land located nearby have sold for $400,000 in recent months.What tax issues should be considered with respect to the corporation's sale of the land?
Q3) What must be reported to the IRS by corporations when nondividend distributions are made to its shareholders?
Q4) How does a shareholder classify a distribution for tax purposes?
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Chapter 8: Gross Income: Exclusions
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Q1) Nondiscrimination requirements do not apply to working condition fringe benefits. A)True
B)False
Q2) Exter Company is experiencing financial difficulties.It has assets worth $2 million,but owes liabilities of $2.1 million.It has a longstanding relationship with the bank.The bank has agreed to forgive $300,000 of debt principal.Because of this debt forgiveness,Exter will recognize income of A)$0.
B)$100,000.
C)$200,000.
D)$300,000.
Q3) Jan has been assigned to the Rome office of ABC Corporation.She arrives in Rome on November 1,2012 and does not return to the U.S.until March 5,2015.During her stay in Rome,Jan earned $102,000 in 2014. Jan may exclude A)$0.
B)$2,800.
C)$99,200.
D)$102,000.
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Chapter 9: Other Corporate Tax Levies
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Q1) Flower Corporation,a C corporation but not a personal service corporation,has taxable income of $200,000 plus $125,000 of positive adjustments plus $150,000 of tax preferences.Its regular tax liability is $68,000.Calculate Flower Corporation's minimum tax credit.
Q2) Identify which of the following statements is true.
A)The Bardahl formula is based on the firm's inventory period,receivables period,credit period,and total cash expenditures for cost of sales and operating expenses.
B)The Bardahl formula uses the concept of working capital,cash over current liabilities.
C)The Bardahl formula provides mathematical exactness when calculating reasonable working capital needs for accumulated earnings tax purposes.
D)All of the above are false.
Q3) Wind Corporation is a personal holding company.Its taxable income for this year is $100,000.The corporation's charitable contributions are $5,000 greater than its income tax charitable contribution deduction limitation.Wind's UPHCI is $95,000,assuming no other adjustments must be made.
A)True
B)False
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Page 11
Chapter 10: Property Transactions: Capital Gains and Losses
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Q1) Unlike an individual taxpayer,the corporate taxpayer does not utilize the 25% and 28% specialty capital gain rates,but it does apply the 15% tax rate to adjusted net capital gain.
A)True
B)False
Q2) Bad debt losses from nonbusiness debts are deductible as short-term or long-term capital losses depending on how long the debt was outstanding.
A)True
B)False
Q3) Antonio is single and has taxable income of $150,000 without considering the sale of a capital asset (land held for investment)in September of 2014 for $25,000.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain (without consideration of the additional Medicare tax)is
A)$1,000.
B)$3,000.
C)$5,600.
D)$7,000.
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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Q1) Riverwalk Corporation is liquidated,with Juan receiving $5,000 in money,other property having a $6,000 FMV,and a $1,000 mortgage on the property.Juan's basis in his River walk stock is $8,000.Upon liquidation,Juan must recognize a gain of A)0)
B)$2,000.
C)$3,000.
D)$11,000.
Q2) Identify which of the following statements is true.
A)The loss realized on the sale of a property is disallowed when such property was received by a corporation as a contribution of capital in a transaction having as its principal purpose the recognition of loss pursuant to the corporation's subsequent liquidation later in the same taxable year.
B)Losses claimed in a tax return filed before the adoption of the plan of liquidation are not restricted by Sec.336(d)(2).
C)Properties acquired by a liquidating corporation as a capital contribution occurring within three years of the adoption of a plan of liquidation are generally presumed to have a tax avoidance motive.
D)All of the above are false.
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Chapter 12: Deductions and Losses
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Q1) On Form 1040,deductions for adjusted gross income include the amounts paid for all of the following except A)alimony.
B)home mortgage interest.
C)student loan interest.
D)moving expenses.
Q2) Business investigation expenses incurred by a taxpayer who is already involved in a similar business and who enters the new business are deductible currently.
A)True
B)False
Q3) Samuel,a calendar year taxpayer,owns 100 shares of R Corporation common stock which was purchased two years ago for $3,600.Samuel sells all 100 shares on December 27 of the current year for $1,000.On January 4 of the following year,Samuel purchases 40 shares of R Corporation preferred stock.Samuel's recognized loss will be A)$0.
B)$960.
C)$1,040.
D)$2,600.
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14
Chapter 13: Corporate Acquisitions and Reorganizations
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Q1) Roger transfers assets from his sole proprietorship to his 100%-owned Motor Corporation.Immediately after the incorporation,Motor Corporation transfers all of its assets to Blue Corporation for 10% of Blue's stock.Motor Corporation is liquidated.Which of the following statements is correct?
A)The asset transfer by Motor Corporation meets the statutory Type C reorganization requirements.
B)The IRS may collapse the two transactions into a single transaction,resulting in denial of tax-free reorganization treatment.
C)The IRS may apply the step transaction doctrine.
D)All of the above statements are correct.
Q2) A stock acquisition that is not treated as a purchase for purposes of meeting the Sec.338 rules is
A)stock whose adjusted basis is determined by its basis in the hands of the person from whom it was acquired.
B)stock acquired from a decedent.
C)stock acquired in a tax-free reorganization.
D)All of the above are correct.
Q3) Briefly describe A,B,C,D,and G reorganization types.
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Chapter 14: Itemized Deductions
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Q1) Capital expenditures for medical care which permanently improve or better the taxpayer's property are deductible to the extent the cost exceeds the increase in fair market value to the property attributable to the capital expenditure.
A)True
B)False
Q2) Sharif is planning to buy a new car for personal use and will need to take out a loan. His sources of the financing include (1)a loan from the car dealership charging 6% interest,(2)a loan from his brokerage firm secured against his stock portfolio charging 6.2% and (3)a home equity bank loan secured against his home charging 7%. Sharif has AGI of $150,000 and does itemize his deductions. He is in the 28% tax bracket. Discuss how income taxes can influence his decision regarding the source of financing.
Q3) Explain what types of tax planning are available for taxpayers making charitable contributions.
Q4) Assessments made against real estate for the purpose of funding local improvements are not deductible in the year paid but rather should be added to the cost basis of the property.
A)True
B)False
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Page 16
Chapter 15: Consolidated Tax Returns
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Q1) Define intercompany transactions and explain the two types of transactions.
Q2) What is the consequence of having losses subject to the SRLY limitations?
Q3) Identify which of the following statements is true.
A)A corporation may be required to file a separate return and file with an affiliated group in the same calendar year.
B)When a corporation joins in filing a consolidated return,taxable income of the member is combined with other members' taxable income prior to any adjustments.
C)If a corporation becomes a member of an affiliated group within the first thirty days of the corporation's tax year,the corporation can elect not to file a short-period tax return.
D)All of the above are false.
Q4) What is the carryback and carryforward rule for consolidated NOLs?
Q5) Alpha,Beta,Gamma,and Delta Corporations form a controlled group.Delta is a nonincludible regulated investment company.Only Alpha,Beta,and Gamma are able to file their income tax returns on a consolidated basis.What options are available for allocating the 15%,25%,and 34% tax rates to the members of the controlled group?
Q6) How do intercompany transactions affect the calculation of capital gains/losses?
Q7) Why are other intercompany transactions not given any special treatment?
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Chapter 16: Losses and Bad Debts
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Q1) All of the following losses are deductible except A)decline in value of securities.
B)total worthlessness of securities.
C)sale or exchange of business property.
D)destruction of personal use property by fire,storm,or casualty.
Q2) Nicole has a weekend home on Pecan Island that she purchased in 2005 for $250,000.Recently,the home was appraised at $260,000.After the appraisal,a hurricane hit Pecan Island,severely damaging Nicole's home.An appraisal placed the value of the home at $140,000 after the hurricane.Because of its prohibitive cost,Nicole had no hurricane insurance.Before any reductions or limitations,Nicole's casualty loss amount is A)$0.
B)$10,000.
C)$120,000.
D)$140,000.
Q3) What is required for an individual to be considered as actively participating in a real estate activity for purposes of utilizing the $25,000 ceiling on rental real estate losses?
Q4) What must an individual taxpayer prove to receive a worthless security deduction?
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Chapter 17: Partnership Formation and Operation
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Q1) Yong contributes a machine having an adjusted basis of $20,000 and an FMV of $25,000 for a 10% partnership interest.Yong had taken $10,000 of depreciation prior to the contribution.The partnership has no liabilities.As a result of the contribution,Yong must recognize
A)no gain or loss.
B)a $5,000 Sec.1245 gain.
C)a $5,000 capital gain.
D)$10,000 ordinary income.
Q2) A partnership has one general partner,Allen,who materially participates in the business.Allen had a $30,000 distributive share of ordinary losses for this year and the partnership had no separately stated gains or losses.There are no changes in liabilities during this year and there are no additional contributions or distributions.At the beginning of this year,the Sec.705 basis was $40,000 and the at-risk basis was $15,000.The basis on December 31 of this year based on the above information is
A)$10,000.
B)$15,000.
C)$25,000.
D)$40,000.
Q3) What is included in partnership taxable income?
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Page 19
Chapter 18: Employee Expenses and Deferred Compensation
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Q1) Explain when educational expenses are deductible for an employee.
Q2) Josiah is a human resources manager of a large software company.He is considering asking for a leave of absence to pursue an MBA degree.Josiah will pay for his MBA tuition of $45,000 a year without any employer assistance.Josiah will incur a large debt if he pursues an MBA.Upon completing his MBA,he would want to consider various job opportunities.Discuss the tax issues affecting Josiah's decision?
Q3) Jack takes a $7,000 distribution from his Health Savings Account. $2,000 is used to pay for X-rays and dental surgery. The other $5,000 to make a down payment on a new car.What are the tax consequences to Jack?
Q4) When a public school system requires advanced education for a teacher to continue employment,the teacher's expenses are a deductible education expense.
A)True
B)False
Q5) Corporations issuing incentive stock options receive a tax deduction for compensation expense.
A)True
B)False
Q6) Why did Congress establish Health Savings Accounts (HSAs)? How do HSAs operate?
Page 20
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Chapter 19: Special Partnership Issues
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Q1) Jerry has a $50,000 basis for his interest in JJ Partnership before receiving a current distribution consisting of $8,000 in money,accounts receivable having a zero basis to the partnership,and land having a $28,000 basis to the partnership.What will Jerry's basis be in these assets?
Q2) Identify which of the following statements is true.
A)The basis for property distributed by a partnership cannot be increased above the carryover basis amount when it is received by a partner in a nonliquidating distribution. B)A partner's partnership capital account balance cannot be less than zero.
C)The length of time a partner owns a partnership interest is relevant when determining the holding period for distributed property.
D)All of the above are false.
Q3) What is included in the definition of unrealized receivables?
Q4) For Sec.751 purposes,"substantially appreciated inventory" means property held for sale to customers whose market value exceeds its adjusted basis.
A)True
B)False
Q5) What are some advantages and disadvantages of making a Section 754 election?
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Page 21
Chapter 20: Depreciation cost Recovery amortization and Depletion
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Q1) Under the MACRS system,depreciation rates for real property must always use the mid-month convention in the year of acquisition.
A)True
B)False
Q2) The election to use ADS is made on a year-by-year,property-class by property-class basis for real and personal property.
A)True
B)False
Q3) Once the business use of listed property falls to 50% or below,the alternative depreciation system must be used for the current year and all subsequent years,even if the business use percentage increases to more than 50% in a subsequent year.
A)True
B)False
Q4) The basis of an asset must be reduced by the depreciation allowable. A)True
B)False
Q5) Why would a taxpayer elect to use the alternative depreciation system rather than the MACRS rules?
22
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Chapter 21: S Corporations
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Q1) Martha,a U.S.citizen,owns 40% of the stock of George Corporation,an electing S corporation.At the time of her death this year,the George stock passes to her estate.The stock is subsequently transferred to a trust provided for in Martha's will.Can the testamentary trust hold the George stock for a two-year period before the S election is terminated?
Q2) Identify which of the following statements is true.
A)An election for an S corporation to use the Sec.179 expensing election is made by the corporation and not by its shareholders.
B)The S corporation's separately stated items are in general the same ones that apply in partnership taxation.
C)An S corporation cannot claim a dividends-received deduction.
D)All of the above are true.
Q3) Mary,a U.S.citizen,owned 25% of the stock of Floran Corporation,an electing S corporation.At the time of her death,the Floran stock may go to all the following without affecting the S election except A)her estate.
B)a testamentary trust.
C)a small business trust.
D)a charitable remainder unitrust.
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Page 23
Chapter 22: Accounting Periods and Methods
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Q1) For purposes of the accrual method of accounting,the economic performance test is met when
A)the property or services are actually provided.
B)the amount of the item can be reasonably estimated.
C)all events have occurred that establish the fact of a liability.
D)all events have occurred that fix the taxpayer's right to receive income.
Q2) Nick sells land with a $7,000 adjusted basis for $10,000.Nick receives a $2,000 down payment with the balance of $8,000 due the following year.Nick is unable to collect the remaining $8,000 and,after incurring legal fees of $500,he repossesses the land when it has a fair market value of $9,000.
a.What is the amount of gain that Nick must report in the first year?
b.What is the amount of gain that Nick must report in the second year?
c.What is the basis in the repossessed stock?
Q3) Under the cash method of accounting,payment by credit card entitles the taxpayer to deduct the expenditure at the time the charge is made.
A)True
B)False
Q4) What is the significance of the Thor Power Tool Co.case?
Q5) Discuss the purpose of the imputed interest rules.
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Chapter 23: The Gift Tax
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Q1) Jason funds an irrevocable trust with Liberty Bank as trustee and reserves the right to receive the income for seven years.He provides that at the end of the seventh year,the trust assets will pass outright to his adult daughter,Paula,or to Paula's estate should Paula not be alive.Jason transfers assets valued at $1.5 million to the trust; the assets at present are producing income of about 7.5% per year.Assume that the Sec.7520 rate per the actuarial tables for the month of the transfer is 10%.What tax issues should Jason consider regarding the trust?
Q2) Jack transfers property worth $250,000 to a revocable trust on January 1.Two-and-a-half years later,when the property is worth $300,000,the trust becomes irrevocable.Which of the following statements is correct?
A)A $300,000 gift occurs when the trust became irrevocable.
B)A $250,000 gift occurs when the original transfer was made.
C)A $250,000 gift occurs when the trust became irrevocable.
D)Jack may elect which amount to report as a gift.
Q3) Mia makes a taxable gift when she makes her mother a joint owner on Mia's bank account.Mia has $25,000 in the account.
A)True
B)False
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Page 25
Chapter 24: Property Transactions: Nontaxable Exchanges
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Q1) James and Ellen Connors,who are both 50 years old and married,sell their personal residence on July 25,2014 for $950,000.They have lived in the home for 20 years.The basis of the home is $350,000.They purchased a new home for $1,000,000 in August 2014.After living in that home for 219 days,the Connors were forced to sell their new home in 2015 for $1,300,000 and move to another climate due to Ellen's severe health problems.
a.What is the amount of gain recognized on the home sale in 2014?
b.What is the amount of the gain recognized on the home sale in 2015?
Q2) The building used in Terry's business was condemned by the city of St.Louis.Terry received a condemnation award of $125,000.He paid $1,200 in lawyer's fees and $800 for an appraisal of the property.Terry's adjusted basis in the building was $60,000.Terry reinvests in similar property costing $110,000,and Terry makes the proper election regarding the property.What is the amount of Terry's recognized gain on the condemnation?
A)$15,000
B)$13,000
C)$50,000
D)$63,000
Q3) Discuss the rules regarding the holding period for like-kind property received in a nontaxable exchange.
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Page 26
Chapter 25: The Estate Tax
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Q1) Yoyo Corporation maintains a retirement plan for its employees to which it makes 70% of the contributions and the employees make 30%.Gary dies this year and is employed at the time of his death.Gary's spouse will receive an annuity valued at $600,000 from the retirement plan.How much of the annuity will be included in Gary's gross estate?
A)$600,000
B)$420,000
C)$180,000
D)$0
Q2) Lily dies early in the current year.All her property passes subject to her will,which provides that her surviving husband,Rick,is to receive all the property outright.Her will further states that any property Rick disclaims will pass instead to their children in equal shares.Lily's gross estate is about $5 million,and her Sec.2053 deductions are very small.Rick,who is in poor health,already owns about $3 million of property.What tax issues should Rick consider with respect to the property bequeathed to him by his wife?
Q3) The estate tax is a wealth transfer tax.
A)True
B)False
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) Octet Corporation placed a small storage building in service in 1999.Octet's original cost for the building is $800,000 and the cost recovery deductions are $300,000.This year the building is sold for $1,100,000. The amount and character of the gain are
A)Ordinary gain of $60,000 and Sec.1231 gain of $540,000.
B)Ordinary gain of $300,000 and Sec.1231 gain of $300,000.
C)Ordinary gain of $600,000.
D)Sec.1231 gain of $600,000.
Q2) Installment sales of depreciable property which result in recaptured income under Secs.1245 or 1250 require that the recaptured income be recognized in the year of sale.
A)True
B)False
Q3) In 2014,Thomas,who has a marginal tax rate of 15%,sells land that is Sec.1231 property at a gain of $4,000.If he has no other 1231 transactions or capital asset transactions and has no nonrecaptured 1231 gain,Thomas will pay no tax on the $4,000 gain.
A)True
B)False
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) Ebony Trust was established two years ago with Brent as the beneficiary.The trust instrument instructed the trustee last year to make discretionary distributions of income to Brent.Beginning in two years,the trustee is instructed to pay all of the trust income earned that year to Brent.What was the trust's personal exemption last year? What will the personal exemption be in two years?
Q2) Distributable net income (DNI)is not reduced by the charitable contribution deduction when calculating the deductible discretionary distributions for a complex trust.
A)True
B)False
Q3) Which of the following is not an addition to trust taxable income when computing distributable net income (DNI)?
A)distribution deduction
B)capital gains allocated to principal
C)tax-exempt interest
D)personal exemption
Q4) The $3,000 limitation on deducting net capital losses does not apply to a trust.
A)True
B)False
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Chapter 28: Special Tax Computation Methods, tax Credits, and Payment of Tax
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Q1) A corporation has $100,000 of U.S.source taxable income and $300,000 of foreign source taxable income from countries X and Y for a total worldwide taxable income of $400,000.Countries X and Y levy a total of $60,000 in foreign taxes upon the foreign source taxable income.U.S.taxes before credits are $140,000.The foreign tax credit limitation is
A)$35,000.
B)$60,000.
C)$80,000.
D)$105,000.
Q2) Discuss the tax planning techniques available to a U.S.citizen who is on a foreign job assignment.
Q3) Current year foreign taxes paid exceed the ceiling based on U.S.tax attributable to foreign source income.These excess foreign tax credits
A)are lost.
B)can be carried forward ten years only.
C)can be carried back one year and then carried forward ten years.
D)can be carried back one year and then carried forward twenty years.
Q4) Discuss when Form 6251,Alternative Minimum Tax,must be filed.
Page 30
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Chapter 29: Administrative Procedures
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Q1) According to Circular 230,what should a CPA do upon discovery of an error in a client's prior-year return?
A)Notify the IRS of the error.
B)Inform the client of the error and its tax consequences.
C)File an amended return for the client.
D)Do nothing.
Q2) Which of the following communications between an accountant and client are privileged?
a)During the preparation of her 2008 tax return,Tammy informs her accountant that she contributed $25,000 to a qualified charitable organization.
b)After filing his tax return,a client mentions to his accountant that he forgot to report a $7,000 prize that he won playing bingo.He asks how he should correct the error.
c)A client tells his accountant that he will no longer pay alimony to his ex-wife.
Q3) A taxpayer who fails to file and fails to pay taxes is subject to a combined 5% monthly penalty on the underpayment.
A)True
B)False
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