Corporate Taxation Exam Solutions
Course Introduction
Corporate Taxation introduces students to the fundamental principles and practices governing the taxation of corporations under current tax laws. The course examines the formation, operation, and dissolution of corporate entities, exploring topics such as taxable income, deductions, credits, and the treatment of dividends and distributions. Emphasis is placed on the tax implications of corporate transactions including mergers, acquisitions, and reorganizations. Students will analyze the differences between corporate and individual taxation, understand compliance requirements, and assess strategic tax planning opportunities for corporations, equipping them with the knowledge needed for roles in tax advisory, corporate finance, and regulatory compliance.
Recommended Textbook
Fundamentals of Taxation 2017 Edition 10th Edition by Ana Cruz
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Page 2
Chapter 1: Introduction to Taxation, the Income Tax
Formula, and Form 1040ez
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) Circular 230 applies only to paid tax preparers.
A)True
B)False Answer: True
Q2) A Private Letter Ruling is considered to be tax authority only to the taxpayer to whom it is issued.
A)True
B)False Answer: True
Q3) If a taxpayer is covered by Medicare,they are deemed to have qualifying health care insurance coverage.
A)True
B)False Answer: True
Q4) Which of the following courts has the highest tax validity?
A)U)S.Court of Federal Claims.
B)Court of Appeals for the Fifth Circuit.
C)U)S.District Court.
D)U)S.Tax Court. Answer: B
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Chapter 2: Expanded Tax Formula, forms 1040a and 1040, and Basic Concepts
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Sample Questions
Q1) The taxpayer must provide over of the qualifying relative's support to be able to claim a dependency exemption.
A)49%
B)51%
C)75%
D)50%
Answer: D
Q2) If the taxpayer still owes tax after April 15,the IRS assesses interest based on the remaining amount owed.
A)True
B)False
Answer: True
Q3) The tax liability for a head of household taxpayer with taxable income of $124,225 is:
A)$25,701.
B)$25,354.
C)$31,056.
D)$18,634. Answer: B
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Chapter 3: Gross Income: Inclusions and Exclusions
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Sample Questions
Q1) For tax purposes,income is recognized if the transaction meets three conditions: economic benefit,occurrence and completion,and not exempt from tax.
A)True
B)False
Answer: True
Q2) In what form can a taxpayer realize income?
Answer: A taxpayer can realize income in any form,i.e.,money,property,or services.Even for a cash-basis taxpayer,receipt of property or services serves to trigger income recognition.
Q3) Marie is a graduate student at a state university.In 2016,she received a scholarship of $10,500 $7,000 for tuition and fees and $3,500 for campus housing)and a graduate assistantship that pays $6,000.What is the amount that she must report on her tax return?
A)$9,500.
B)$6,000.
C)$7,000.
D)$3,500.
Answer: A
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Chapter 4: Adjustments for Adjusted Gross Income
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Sample Questions
Q1) The cost of self-employed health insurance premiums is deductible above the line at a rate of 80% of the cost.
A)True
B)False
Q2) Why is it important to distinguish between a property settlement and alimony?
Q3) Maria files her tax return married filing separately.She has not lived with her husband for over two years.Beginning in January 2016,by court ordered decree,she is to pay her husband $600 per month as separate maintenance.For 2016 how much will she be able to deduct as alimony?
A)$3,600.
B)$0.
C)$600.
D)$7,200.
Q4) Qualification under the 900-hour working test for the educator's expense deduction is measured by:
A)3 consecutive months.
B)5 consecutive months.
C)The calendar year.
D)The academic year.
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Chapter 5: Itemized Deductions
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Sample Questions
Q1) When are travel costs deductible as medical costs? How are medical travel costs calculated?
Q2) If a taxpayer's personal property is completely destroyed,the casualty loss deduction is still reduced by a required floor amount.
A)True
B)False
Q3) Sid makes weekly cash contributions of $30 to his church.He pays by check.Since his annual contributions to the church are more than $250,he must obtain a written acknowledgment from the church to support his contribution deduction.
A)True
B)False
Q4) Theft losses are deducted in the tax year in which the theft was discovered,rather than the year of theft,if the discovery comes later.
A)True
B)False
Q5) What are the general limits or floors placed on deductible personal casualty losses?
Q6) Define a personal casualty loss.
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Page 7
Chapter 6: Self-Employed Business Income Line 12 of Form
1040 and Schedule C
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Sample Questions
Q1) Taxpayers must use the mid-month convention when more than 40% of the personal property is placed in service during the last three months of the tax year.
A)True
B)False
Q2) In order for an employee to deduct home office expenses,which of the following must occur:
A)The business use of the home must be specifically for trade or business purposes.
B)The taxpayer's most important activities must occur in the home.
C)There must be no other fixed business location.
D)The home office must be for the convenience of his or her employer.
Q3) Marion drives 20 miles a day from his first job to his second job.He worked 125 days during 2016 on both jobs.What is Marion's mileage deduction rounded to the nearest dollar assuming he uses the standard mileage rate and mileage is incurred ratably throughout the year?
A)$1,400.
B)$1,350.
C)$1,438.
D)$70.
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Chapter 7: Capital Gains and Other Sales of Property
Schedule D and Form 4797
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Sample Questions
Q1) Section 1221 assets are any asset used in a trade or business.
A)True
B)False
Q2) Currently,the maximum capital gain rate applied to a taxpayer in the 15% regular tax bracket is 0%.
A)True
B)False
Q3) The gain or loss on the sale of property held as an investment is recorded on which one of the following forms or schedules?
A)Form 4797 if the sale was from an asset used for investment purposes by a taxpayer who purchased it with company money as a sole proprietor.
B)Form 4797 regardless if the asset was purchased for investment if the taxpayer is a sole proprietor.
C)Schedule D if the sale was an asset used for investment purposes by a taxpayer.
D)Schedule D if the sale was an asset used in a trade or business by a sole proprietor.
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9
Chapter 8: Rental Property, royalties, and Income From
Flow-Through Entities Line 17, form 1040, and Schedule E
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Sample Questions
Q1) Naomi and Matt received the following amounts from a tenant who is renting their condominium during the current year rent is $1,500 per month): 2 months rent $ 2,200
Deposit 1,600
Rent for two months would normally have been $3,000,but the tenant paid $800 for a plumbing repair.The repair would normally have been paid by Naomi and Matt but the problem occurred while they were out of town.How much should Naomi and Matt report as rental income for the current tax year?
A)$2,400
B)$2,200
C)$3,000
D)$4,600
Q2) Flow-through entities supply each owner at the end of the year with a Schedule E,indicating his/her income and expenses to report.
A)True
B)False
Q3) When reporting the income and expenses of a rental property,what determines the use of the Schedule C versus the Schedule E?
Q4) Explain what is considered personal use of a rental property.
Page 10
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Chapter
9: Tax Credits Form 1040, lines 46 Through 54 and Lines 66a Through 73
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Sample Questions
Q1) The Affordable Care Act requires all individuals to have health care coverage.
A)True
B)False
Q2) Mindy and Xavier have a tax liability of $475 before EIC.Their EIC for the current year is $2,578.What is their total tax refund or tax liability for the current year assume they have no other credits or additional tax liability)?
A)$2,103 tax refund.
B)$0.
C)$2,578 tax refund.
D)$475 tax liability.
Q3) Which of the following statements is false regarding the earned income credit EIC)?
A)Maximum amount of the credit depends on the earned income and number of children.
B)A taxpayer without children cannot claim the credit.
C)The credit is refundable.
D)If certain requirements are met,a taxpayer may receive advance payments of EIC.
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11
Chapter 10: Payroll Taxes
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Sample Questions
Q1) Mahmet earned wages of $118,700 during 2016.He is single and claims two withholding allowances.How much FICA tax is Mahmet's employer responsible to remit in 2016?
A)$18,136.30.
B)$18,155.30.
C)$18,148.70.
D)$18,161.10.
Q2) Sergio is single,is paid $2,750 per week,and claims two withholding allowance.What is the amount of federal income tax withheld from Sergio's gross wages for the week using the percentage method? Round your answer to 2 decimal places.)
A)$580.40.
B)$602.17.
C)$464.29.
D)$811.25.
Q3) The penalty per return for intentional disregard of filing requirements is:
A)$50 per return.
B)$260 per return.
C)$530 per return.
D)$100 per return.
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Page 12
Chapter 11: Retirement and Other Tax-Deferred Plans and Annuities
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Sample Questions
Q1) Mark is single and must start taking distributions from his traditional IRA beginning April 1,2016.At the end of 2015 when Mark was 71 years old,the IRA had a balance of $110,000.What amount must Mark take as a distribution from the IRA by April 1,2016?
A)$7,190.
B)$4,297.
C)$4,151.
D)$6,748.
Q2) If the proceeds of a pension plan are being distributed and the original beneficiary dies:
A)The person who inherits the plan assets can elect to be treated as the original beneficiary if that person is the spouse of the original beneficiary.
B)The balance of the pension plan assets must be distributed in the year of death.
C)The person who inherits the plan assets can elect to be treated as the original beneficiary if that person is unrelated to the original beneficiary.
D)The person who inherits the plan assets will receive the remaining plan assets tax-free.
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Page 13
Chapter 12: Special Property Transactions
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Sample Questions
Q1) If a taxpayer excludes the gain on the sale of his personal residence and,within two years,sells a second residence,he or she can exclude up to $250,000 for a single taxpayer):
A)A ratio of the days owned divided by 730 days for any reason.
B)The entire gain for any reason.
C)A ratio of the days owned divided by 730 days and only if the sale is due to health,employment reasons or unforeseen circumstances.
D)The entire gain on the second sale if the sale is due to health,employment reasons or unforeseen circumstances.
Q2) Raymond and Susan are married and 55 years old.They sell their personal residence for $850,000 cash.They purchased the house fifteen years ago for $200,000.What is the amount of gain that Raymond and Susan should recognize on the sale?
A)$150,000.
B)$500,000.
C)$0.
D)$650,000.
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Chapter 13: At-Riskpassive Activity Loss Rules and the
Individual Alternative Minimum Tax
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Sample Questions
Q1) Jordan purchased a warehouse for $600,000.$100,000 of the cost was properly allocated to the land.
a.If the property was purchased in April of 1998,what is the AMT depreciation adjustment required in 2016?
b.If the property was purchased in April of 2016,what is the AMT depreciation adjustment required in 2016?
Q2) The passive activity loss rules require income/loss items to be separated into two categories: active income/loss and passive income/loss.
A)True
B)False
Q3) To be considered a material participant in an activity,a taxpayer must meet all of the seven tests prescribed in the regulations.
A)True
B)False
Q4) The term "passive activity" includes any activity for the production of income in which the taxpayer does not materially participate.
A)True
B)False
15
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Chapter 14: Partnership Taxation
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Sample Questions
Q1) Partnership income or loss and separately stated items are reported to the individual partners via Schedule K-1.
A)True
B)False
Q2) Miguel contributes land to a partnership with a basis of $12,000 and a FMV of $18,000.How much gain will Miguel recognize?
A)$6,000.
B)$18,000.
C)$0.
D)$12,000.
Q3) When a partner is released of a partnership liability,the partner is treated as receiving a money distribution,which reduces his or her partnership basis.
A)True
B)False
Q4) Partnership income and losses are divided into two components: ordinary items and separately stated items.
A)True
B)False
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Chapter 15: Corporate Taxation
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Sample Questions
Q1) Parent-subsidiary corporations must file a consolidated tax return.
A)True
B)False
Q2) Gold Corporation sells baseball bats and reported net income of $35,000 before charitable contributions.It contributed 100 bats to a local high school.Each bat has a FMV of $40 and a basis of $30.Determine Gold's taxable income and charitable contribution carryforward.
A)Taxable income of $31,000,carryforward of zero.
B)Taxable income of $32,000,carryforward of zero.
C)Taxable income of $35,000,carryforward of $4,000.
D)Taxable income of $31,500,carryforward of $500.
Q3) Large C corporations must use the accrual basis of accounting.
A)True
B)False
Q4) Which of the following items is subtracted from book income to arrive at taxable income?
A)Book depreciation that is in excess of tax depreciation.
B)Life insurance proceeds.
C)Final month rent collected at lease signing.
D)Federal income tax expense on the income statement.
Page 17
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