Federal Income Taxation Test
Bank
Course Introduction
Federal Income Taxation provides an in-depth exploration of the principles, policies, and practices underpinning the federal income tax system in the United States. The course examines the structure of the Internal Revenue Code, the definition and computation of gross income, deductions, exemptions, and tax credits for individuals and businesses. Students analyze landmark cases, statutory materials, and administrative regulations to understand tax liability, procedural rules, and the impact of taxation on economic behavior. The course also addresses tax planning strategies, compliance, and current developments in tax law, preparing students for more advanced study or professional practice in tax-related fields.
Recommended Textbook
Income Tax Fundamentals 2019 37th Edition by Gerald E. Whittenburg
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12 Chapters
1187 Verified Questions
1187 Flashcards
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Chapter 1: The Individual Income Tax Return
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) Most taxpayers may deduct the standard deduction amount or the amount of their itemized deductions, whichever is higher.
A)True
B)False
Answer: True
Q2) Partnership capital gains and losses are allocated separately to each of the partners.
A)True
B)False
Answer: True
Q3) The unmarried taxpayer supports his dependent mother, who lives next door in a separate apartment.
Answer: d
Q4) Schedule 1 of Form 1040 is used to report:
A)Salary income.
B)Joint return status.
C)Withholding on wages.
D)Self-employment income.
Answer: D
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Chapter 2: Gross Income and Exclusions
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) Which taxpayer would benefit the most from a tax-free municipal bond compared to a taxable bond?
A)A taxpayer whose only income is from Social Security
B)A taxpayer who won a mega-million-dollar lottery
C)The average low income worker
D)They would all equally benefit from the tax-free municipal bond
Answer: B
Q2) Interest on US Treasury Bonds is not taxable.
A)True
B)False
Answer: False
Q3) A "no-additional-cost" service includes only those services in the major line of business in which the employee is employed.
A)True
B)False
Answer: True
Q4) Alimony from a 2016 divorce
Answer: a
Q5) Lottery winnings
Answer: a
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Chapter 3: Additional Income Part 1
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) A business gift with a value of $35 presented to a client and his nonclient spouse is fully deductible by the donor.
A)True
B)False
Answer: False
Q2) Curt is self-employed as a real estate salesman and drives his car frequently to take clients to see homes for sale.Curt drove his car 20,000 miles for business purposes and 25,000 miles in total.His actual expenses for operating the auto including depreciation are $10,000 since he drove it so much during the year.Curt has used the actual cost method since he started his business in 2015.How much is Curt's deductible auto expense for the year?
Answer: $8,000 (20,000 / 25,000 miles × $10,000).Since Curt has used the actual cost method in the previous tax year, he is not entitled to use the standard mileage method.
Q3) Most taxpayers must use the specific charge-off method in calculating the bad debt deduction.
A)True
B)False
Answer: True
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Chapter 4: Additional Income Part 2
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) In 2018, Keri has wages of $20,000, a Schedule C business loss of $30,000, and nonbusiness capital gains of $4,000.She deducts the standard deduction of $12,000 for a taxable loss of $18,000.Compute Keri's NOL to carry forward to 2018.
Q2) Karen has a net operating loss in 2018.If she does not make any special elections, what is the first year to which Karen can carry the net operating loss?
A)2015
B)2016
C)2017
D)2019
E)2020
Q3) Jerry bought his home 15 years ago for $60,000.Three years ago, Jerry married Debbie and she moved into the same house and has lived there since.If they sell Jerry's house in the current year for $340,000, what is their taxable gain on a joint tax return?
A)$0
B)$280,000
C)$155,000
D)$30,000
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Chapter 5: Deductions and Adjustments to Income
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) Matthew purchases a new principal residence in the current year and pays points of $2,000 to obtain a mortgage loan.What is the proper tax treatment for the points paid?
A)The points are a nondeductible personal expense.
B)The points must be amortized over the life of the loan.
C)The points are fully deductible in the current year.
D)The points must be capitalized into the cost of the residence.
E)The points must be amortized over 5 years.
Q2) In some cases, a taxpayer may deduct an otherwise allowable contribution to an IRA, even though the contribution is made after the close of the tax year.
A)True
B)False
Q3) To calculate the amount of state and local income taxes which may be deducted as an itemized deduction, state income taxes paid during the year must be reduced by state income tax refunds received during the year.
A)True
B)False
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Chapter 6: Accounting Methods and Taxes
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68 Flashcards
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Sample Questions
Q1) Annualizing" is a method by which the taxpayer can usually decrease the amount of tax he or she pays.
A)True
B)False
Q2) The Affordable Care Act (ACA)added a Medicare tax of 3.8 percent on net investment income
A)True
B)False
Q3) Salary earned by minors may be included on the parents' tax return.
A)True
B)False
Q4) Which of the following is not an acceptable method of accounting under the tax law?
A)The accrual method
B)The cash method
C)The hybrid method
D)All of the above are acceptable
E)None of the above are acceptable
Q5) What was the original purpose of the alternative minimum tax?
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Chapter 7: Tax Credits
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73 Flashcards
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Sample Questions
Q1) Sheila and Jerry are married taxpayers with $600 of foreign tax withholding from the dividends in a mutual fund.They have enough foreign income from the mutual fund to claim the full $600 as a foreign tax credit.They are in the 35% tax bracket and they itemize deductions.Should they claim the foreign tax credit on the Form 1040 or a deduction for foreign taxes on their Schedule A? Why?
Q2) John graduates from high school in 2018 and enrolls in a private college in the fall.His parents pay $10,000 for his tuition and fees.
a.Assuming John's parents have AGI of $86,000, what is the American Opportunity credit they can claim for John? Explain.
b.Assuming John's parents have AGI of $175,000, what is the American Opportunity credit they can claim for John? Explain.
Q3) To qualify for the additional child tax credit:
A)The typical child tax credit must be limited by tax liability.
B)The taxpayer must have earned income of over $2,500.
C)The taxpayer must have at least one qualifying child.
D)All of the above are required to qualify for the additional child tax credit
Q4) What would generally reduce income taxes more: a $100 tax credit or a $100 tax deduction?
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Page 9
Chapter 8: Depreciation and Sale of Business Property
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) After 4 years of life in the slow lane, Doug decided to give up his goat ranch and move back to the big city.He sold the goat milking machine for $1,000.The machine originally cost $1,200 and had $820 of accumulated depreciation at the time of sale.
a.What is the total gain or loss on the sale of the goat milking machine?
b.Is the gain or loss treated as capital or ordinary? Explain.
Q2) A net long-term gain from the theft of a Section 1231 asset is treated as a Section 1231 gain.
A)True
B)False
Q3) The condemnation of property is not an involuntary conversion, since it is done pursuant to a government decree.
A)True
B)False
Q4) 197 intangibles:
A)Are amortized based on current fair market value rather than their actual cost.
B)Must be amortized over a 15 year life, regardless of their actual life.
C)Include intangible assets created and not purchased by the taxpayer.
D)Do not include purchased goodwill or going-concern value.
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Page 10
Chapter 9: Payroll, Estimated Payments, and Retirement Plans
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75 Verified Questions
75 Flashcards
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Sample Questions
Q1) Which of the following statements is true with regard to the reimbursement of employee business expenses?
A)Reimbursements of ordinary and necessary expenses are subject to federal income tax withholding.
B)Excess reimbursements of ordinary and necessary expenses are never subject to withholding.
C)Reimbursements received by an employee under a plan which contains a requirement to return excess amounts, and the employee does so on a timely basis, are excluded from the definition of wages subject to withholding.
D)Provided that reimbursements are received by an employee under a plan which requires the employee to substantiate the expenses to his employer, the amounts are excluded from the definition of wages subject to withholding, without regard to whether the employee actually substantiates the expenditures.
E)All of the above are true statements.
Q2) Individual quarterly estimated tax payments are filed with Form 1040-ES.
A)True
B)False
Q3) What is the purpose of backup withholding?
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Chapter 10: Partnership Taxation
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83 Verified Questions
83 Flashcards
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Sample Questions
Q1) Which of the following statements is true about partnerships?
A)The formation of a partnership must be documented in writing.
B)An LLC is generally treated as a partnership for tax law purposes.
C)General partners have no liability for partnership obligations beyond their capital contributions.
D)When Sue and Billy Bob invest in land together, they are considered to have formed a partnership.
Q2) A partner's receipt of guaranteed payments is a form of qualified business income.
A)True
B)False
Q3) There is no general partner required in a limited liability company (LLC). A)True
B)False
Q4) The tax year of a partnership generally closes upon entry of a new 20% partner. A)True B)False
Q5) The "at-risk" rule does not apply to activities involving real estate. A)True
B)False
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Chapter 11: The Corporate Income Tax
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74 Flashcards
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Sample Questions
Q1) The F.Repens Corporation has taxable income of $250,000 for the current year, including dividends of $60,000 received from 10-percent-owned domestic corporations.How much is the F.Repens Corporation's dividends received deduction for the current year?
A)$0
B)$30,000
C)$39,000
D)$60,000
E)None of the above
Q2) Which of the following corporations is allowed to make an S corporation election?
A)A US corporation owned and operated by two US citizens (individuals).
B)A US corporation owned by a Brazilian corporation.
C)A US owned and operated corporation with 7,000 separate shareholders.
D)None of the above could be an S corporation.
Q3) Charitable contributions made by an S corporation are not deductible by the corporation; therefore, the shareholders receive no tax benefit from the contributions as itemized deductions.
A)True
B)False
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Page 13
Chapter 12: Tax Administration and Tax Planning
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66 Verified Questions
66 Flashcards
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Sample Questions
Q1) Which of the following is the most common type of audit for an individual taxpayer?
A)Office audit
B)Telephone audit
C)Correspondence audit
D)Field audit
E)None of the above
Q2) Indicate in the blank space the date the statute of limitations would run out on each of the following individual tax returns.
a.A 2018 tax return filed on April 15, 2019 which omitted $20,000 of income.The total gross income shown on the tax return was $40,000
b.A 2018 tax return filed April 15, 2019 which contained a large bad debt deduction
c.A 2015 tax return that was never filed
d.A 2018 tax return filed on April 15, 2019
e.A fraudulent 2018 tax return filed April 15, 2019
Q3) Tax evasion involves the use of illegal methods to reduce or avoid income tax.
A)True
B)False
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