Graduate Taxation Seminar
Chapter Exam Questions
Course Introduction
The Graduate Taxation Seminar offers an in-depth exploration of advanced topics in taxation, with emphasis on current issues, legislative developments, and policy analysis affecting individuals, businesses, and governmental entities. Through a combination of case studies, scholarly readings, and student-led discussions, participants critically examine complex tax concepts, recent court decisions, and their practical implications. Designed for graduate students with foundational knowledge of tax law, the seminar encourages analytical thinking, sophisticated problem-solving, and effective communication of intricate tax-related matters in both oral and written formats.
Recommended Textbook
South Western Federal Taxation 2012 Comprehensive by William H. Hoffman
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Page 2
Chapter 1: An Introduction to Taxation and Understanding
the Federal Tax Law
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Q1) Timothy recently converted a warehouse into apartment lofts,which he is renting to single professionals.In making the conversion,he emphasized improvements that were portable in nature.Thus,the sprinkler system,heating and cooling units,and room dividers are all removable from the building.In terms of ad valorem property taxes,what was Timothy trying to accomplish?
Answer: When personalty is permanently attached to real estate so that its removal will cause irreparable damage,it becomes a fixture.Consequently,it ceases to be personalty and is now regarded as realty.The classification of an asset is important because different ad valorem taxes apply to realty than to personalty.For one thing,the ad valorem tax on realty is less easily avoided.Also to be considered is the possibility that the ad valorem tax on personalty (even if it cannot be avoided)could be lower than that applicable to realty.
Q2) The ratification of the Sixteenth Amendment to the U.S.Constitution was necessary to validate the Federal income tax on individuals.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Working With the Tax Law
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Q1) What administrative release deals with a proposed transaction rather than a completed transaction?
A) Letter Ruling.
B) Technical Advice Memorandum.
C) Determination Letter.
D) Field Service Advice.
E) None of the above.
Answer: A
Q2) Which court decision carries less weight?
A) Federal District Court.
B) Fifth Circuit Court of Appeals.
C) Memorandum U.S. Tax Court decision.
D) Small Cases Division of U.S. Tax Court.
E) U.S. Court of Federal Claims.
Answer: D
Q3) Revenue Rulings deal with the internal management practices and procedures of the IRS.
A)True
B)False Answer: False
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Chapter 3: Tax Determination: Personal and Dependency
Exemptions: an Overview of Property Transactions
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Q1) For 2011,Stuart has a short-term capital loss,a collectible long-term capital gain,and a long-term capital gain from land held as investment.The short-term loss is first applied to the collectible capital gain.
A)True
B)False
Answer: True
Q2) Gain on the sale of collectibles held for more than 12 months is subject to tax at a rate no higher than 28%.
A)True
B)False
Answer: True
Q3) Once TI (taxable income)is determined,the taxpayer must make a choice between itemizing or claiming the standard deduction.
A)True
B)False
Answer: False
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Chapter 4: Gross Income: Concepts and Inclusions
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Q1) The B & W partnership earned taxable income of $100,000 for the year.Bryan is entitled to 50% of the profits,but Bryan withdrew only $40,000 during the year.Bryan must include in gross income his $50,000 share of the profits from the partnership.
A)True
B)False
Q2) The constructive receipt doctrine requires that income must be recognized when it is made available to the cash basis taxpayer,although it has not been actually received.The constructive receipt doctrine does not apply to accrual basis taxpayers.
A)True
B)False
Q3) The annual increase in the cash surrender value of a life insurance policy:
A) Is taxed according to the original issue discount rules.
B) Is not included in gross income because the policy must be surrendered to receive the cash surrender value.
C) Reduces the deduction for life insurance expense.
D) Is exempt because it is life insurance proceeds.
E) None of the above.
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Chapter 5: Gross Income: Exclusions
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Q1) John told his nephew,Steve,"if you maintain my house when I cannot,I will leave the house to you when I die.Steve maintained the house and when John died Steve inherited the house.The value of the residence must be included in Steve's gross income.
A)True
B)False
Q2) Hazel,a solvent individual but a recovering alcoholic,embezzled $6,000 from her employer.In the same year that she embezzled the funds,her employer discovered the theft.Her employer did not fire her and told her she did not have to repay the $6,000 if she would attend Alcoholics Anonymous.Hazel met the conditions and her employer canceled the debt.
A) Hazel did not realize any income because she obtained the funds illegally.
B) Hazel is not required to include the $6,000 in gross income because her employer made a gift to her.
C) Hazel must include $6,000 in gross income from discharge of indebtedness.
D) Hazel may exclude the $6,000 from gross income because the debt never existed.
E) None of the above.
Q3) What Federal income tax benefits are provided for college students?
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Page 7
Chapter 6: Deductions and Losses: in General
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Q1) In a related party transaction where realized loss is disallowed,when can the disallowed loss be used by the buyer on the subsequent sale of the property?
Q2) Benita incurred a business expense on December 10,2011,which she charged on her bank credit card.She paid the credit card statement which included the charge on January 5,2012.Which of the following is correct?
A) If Benita is a cash method taxpayer, she cannot deduct the expense until 2012.
B) If Benita is an accrual method taxpayer, she can deduct the expense in 2011.
C) If Benita uses the accrual method, she can choose to deduct the expense in either 2011 or 2012.
D) Only b. and c. are correct.
E) a., b., and c. are correct.
Q3) Briefly discuss the two tests that an accrual basis taxpayer must apply before an expense can be deducted.
Q4) Briefly explain the provisions regarding the deductibility of expenditures paid for another's benefit or obligation.
Q5) In distinguishing whether an activity is a hobby or a trade or business,discuss the presumptive rule.
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Page 8
Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
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Q1) "Other casualty" means casualties similar to those associated with fires,storms,or shipwrecks.
A)True
B)False
Q2) Norm's car,which he uses 100% for personal purposes,was completely destroyed in an accident in 2011.The car's adjusted basis at the time of the accident was $13,000.Its fair market value was $10,000.The car was covered by a $2,000 deductible insurance policy.Norm did not file a claim against the insurance policy because of a fear that reporting the accident would result in a substantial increase in his insurance rates.His adjusted gross income was $14,000 (before considering the loss).What is Norm's deductible loss?
A) $0.
B) $100.
C) $500.
D) $9,500.
E) None of the above.
Q3) Identify the factors that should be considered in determining whether a transaction is a bona fide loan or a gift.
Q4) How is qualified production activities income (QPAI)calculated?
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Chapter 8: Depreciation, cost Recovery, amortization, and Depletion
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Q1) Under the MACRS mid-quarter convention,an asset sold on December 10 will be treated as though it were sold on November 15 for a calendar year taxpayer.
A)True
B)False
Q2) On June 1,2011,Norm leases a taxi and places it in service.The lease payments are $1,000 per month.Assuming the dollar amount from the IRS table is $241,determine Norm's inclusion amount.
A) $0.
B) $241.
C) $907.
D) $1,687.
E) None of the above.
Q3) The basis of cost recovery property must be reduced by the cost recovery allowed.
A)True
B)False
Q4) Property used for the production of income is not eligible for § 179 expensing.
A)True
B)False
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Chapter 9: Deductions: Employee and
Self-Employed-Related Expenses
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Q1) An individual is considered an active participant in an employer-sponsored retirement plan merely because an individual's spouse is an active participant for any part of a plan year in applying the IRA phase-out provision.
A)True
B)False
Q2) An education expense deduction can be allowed even if the education results in a promotion or pay raise for the employee.
A)True
B)False
Q3) Some transactions can qualify as either business entertainment or as a business gift.In such cases,the business entertainment classification usually predominates.However,in one situation a choice between the two is allowed.Explain.
Q4) For tax purposes,"travel" is a broader classification than "transportation."
A)True B)False
Q5) Once set for a year,when might the IRS change the rate for the automatic mileage method?
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Chapter 10: Deductions and Losses: Certain Itemized
Deductions
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Q1) Patrick and Leah are married and together have AGI of $100,000 in 2011.They have three dependents and file a joint return.They pay $3,000 for a high deductible health insurance policy and contribute $2,400 to a qualified Health Savings Account.During the year,they paid the following amounts for medical care: $8,200 in doctor and dentist bills and hospital expenses,and $2,500 for prescribed medicine and drugs.In December 2011,they received an insurance reimbursement of $3,400 for hospitalization.They expect to receive an additional reimbursement of $1,700 in January 2012.Determine the maximum deduction allowable for medical expenses in 2011.
A) $1,100.
B) $2,800.
C) $5,200.
D) $10,300.
E) None of the above.
Q2) For purposes of computing the deduction for qualified residence interest,a qualified residence includes the taxpayer's principal residence and two other residences of the taxpayer or spouse.
A)True B)False
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Chapter 11: Investor Losses
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Q1) Jenny spends 32 hours a week,50 weeks a year,operating a DVD rental store that she owns.She also owns a music store in another city that is operated by a full-time employee.Jenny spends 140 hours per year working at the music store.She elects not to group them together as a single activity under the "appropriate economic unit" standard.
A) Neither store is a passive activity.
B) Both stores are passive activities.
C) Only the DVD rental store is a passive activity.
D) Only the music store is a passive activity.
E) None of the above.
Q2) Rachel acquired a passive activity several years ago.Until 2008,the activity was profitable,and Rachel's at-risk amount at the beginning of 2008 was $300,000.The activity produced losses for Rachel of $80,000 in 2008,$50,000 in 2009,and $70,000 in 2010.In 2011,the activity produced income of $90,000.How much is Rachel's suspended passive loss at the beginning of 2012?
A) $150,000.
B) $110,000.
C) $60,000.
D) $0.
E) None of the above.
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Page 13
Chapter 12: Tax Credits and Payments
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Q1) Discuss the treatment of unused general business credits.
Q2) During the year,Green Corporation (a U.S.corporation)has U.S.-source income of $750,000 and foreign income of $500,000.The foreign-source income generates foreign income taxes of $240,000.The U.S.income tax before the foreign tax credit is $425,000.Green Corporation's foreign tax credit is:
A) $170,000.
B) $240,000.
C) $425,000.
D) $500,000.
E) None of the above.
Q3) For purposes of computing the credit for child and dependent care expenses,the qualifying employment-related expenses are limited to an individual's actual or deemed earned income.
A)True
B)False
Q4) Child care payments to a relative are not eligible for the credit for child and dependent care expenses if the relative is a child (under age 19)of the taxpayer.
A)True
B)False
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Chapter 13: Property Transactions
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Sample
Questions
Q1) Under what circumstance is there recognition of some or all of the realized gain associated with the giving of boot by the taxpayer in a like-kind exchange?
Q2) Taxpayer acquired a personal residence ten years ago when he was 50 years old.During this period he has occupied the residence for only nine months (out of 12)each year due to winter vacations in Florida.Is taxpayer eligible for exclusion of gain under § 121?
Q3) Identify two tax planning techniques that can be used to avoid the wash sale disallowance of loss.
Q4) Albert,age 57,leased a house for one year in Denver with an option to buy as his personal residence.At the end of the lease,he purchased the house.He lived there for an additional 25 months before his employer transferred him to Tucson.Expecting to be in Tucson for 18 to 24 months,he rented the Denver house for 18 months with an option to extend on a month to month basis for an additional 6 months.At the end of the 18-month period,Albert's employer offered him a permanent position in Tucson as branch manager.The tenant who had been occupying Albert's house in Denver purchased it at the end of the 24-month extended lease period.Is Albert eligible to elect exclusion treatment under § 121?
Q5) Can related parties take advantage of the like-kind exchange provisions?
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Chapter 14: Property Transactions: Capital Gains and Losses
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Sample Questions
Q1) Ebon Company had an involuntary conversion on December 23,2011.The machinery had been acquired on April 1,2009,for $69,000 and its adjusted basis was $14,200.The machinery was completely destroyed by fire and Ebon received $10,000 of insurance proceeds for the machine and did not replace it.This was Ebon's only casualty or theft event for the year.As a result of this event,Ebon initially has:
A) $10,000 § 1231 loss.
B) $10,000 § 1245 recapture gain.
C) $4,200 casualty loss.
D) $4,200 § 1231 loss.
E) None of the above.
Q2) The tax law does not require that capital gains and losses be separated from other types of gains and losses because there are no limitations on the deduction of net capital losses.
A)True
B)False
Q3) Is it generally better to have a net § 1231 loss year followed by a net § 1231 gain year rather than a net § 1231 gain year followed by a net § 1231 loss year?
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Page 16
Chapter 15: Alternative Minimum Tax
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Q1) Negative AMT adjustments for the current year caused by timing differences are offset by the positive AMT adjustments for prior tax years also caused by timing differences.
A)True
B)False
Q2) Danica incurs circulation expenditures of $120,000 in 2011.No additional circulation expenditures are incurred in 2012 or 2013.The cumulative adjustment for circulation expenditures for 2011,2012,and 2013 is $120,000.
A)True
B)False
Q3) The phaseout of the AMT exemption amount for a taxpayer filing as a head of household both begins and ends at a higher income level than it does for a single taxpayer.
A)True
B)False
Q4) Interest on a home equity loan may be deductible for AMT purposes.
A)True
B)False
Q5) Can AMT adjustments and preferences be both positive and negative?
Q6) Why is there a need for a second tax system called the alternative minimum tax?
Page 17
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Chapter 16: Accounting Periods and Methods
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Q1) The DEF Partnership had three equal partners when it was formed.Partners D and E were calendar year taxpayers and Partner F's tax year ended on June 30th before he joined the partnership.Partner F was required to change his tax year to end on December 31st upon joining the partnership.
A)True
B)False
Q2) Laura Corporation changed its tax year-end from June 30th to December 31st in 2011.The income for the period July 1,2011 through December 31,2011 was $45,000.The corporate tax rate is 15% on the first $50,000 of income,25% on income from $50,001 to $75,000,and 34% on income from $75,001 to $100,000.A portion of Laura's JulyDecember 2011 income will be taxed at 34%.
A)True
B)False
Q3) A CPA practice that is incorporated earns 60% of its annual revenues in the months of February,March,and April.Because the CPA practice is a professional services corporation (PSC),it must use a calendar year to report its income.
A)True
B)False
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Chapter 17: Corporations: Introduction and Operating Rules
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Q1) Falcon Corporation,a C corporation,had gross receipts of $3 million in 2008,$7 million in 2009,and $6 million in 2010.Hawk Corporation,a personal service corporation (PSC),had gross receipts of $3 million in 2008,$5 million in 2009,and $4 million in 2010.Which of the corporations will be allowed to use the cash method of accounting in 2011?
A) Neither Falcon Corporation nor Hawk Corporation.
B) Both Falcon Corporation and Hawk Corporation.
C) Falcon Corporation only.
D) Hawk Corporation only.
E) None of the above.
Q2) Unlike individual taxpayers,corporate taxpayers do not receive a preferential tax rate with respect to long-term capital gains.
A)True
B)False
Q3) Almond Corporation,a calendar year C corporation,had taxable income of $900,000,$1.1 million,and $790,000 for 2008,2009,and 2010,respectively.Almond's taxable income is $1.5 million for 2011.Compute the minimum estimated tax payments for 2011 for Almond Corporation.
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Page 19
Chapter 18: Corporations: Organization and Capital Structure
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Q1) Kevin and Nicole form Indigo Corporation with the following transfers: inventory from Kevin (basis of $360,000 and fair market value of $400,000)and improved real estate from Nicole (basis of $320,000 and fair market value of $375,000).Nicole,an accountant,agrees to contribute her services (worth $25,000)in organizing Indigo.The corporation's stock is distributed equally to Kevin and Nicole.As a result of these transfers:
A) Indigo can deduct $25,000 as a business expense.
B) Nicole has a recognized gain of $55,000 on the transfer of the real estate.
C) Indigo has a basis of $360,000 in the inventory.
D) Indigo has a basis of $375,000 in the real estate.
E) None of the above.
Q2) A taxpayer transfers assets and liabilities to a corporation in return for its stock.If the liabilities exceed the basis of the assets transferred,the taxpayer will recognize gain to avoid having a negative basis in the stock.
A)True
B)False
Q3) Issues relating to basis arise when a taxpayer is involved in a § 351 transaction.Describe the underlying rules,and the purpose they serve.
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Chapter 19: Corporations: Distributions Not in Complete
Liquidation
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Q1) If stock rights are taxable,the recipient has income to the extent of the fair market value of the rights.
A)True
B)False
Q2) To determine E & P,some (but not all)previously excluded income items are added back to taxable income.
A)True
B)False
Q3) When current E & P is positive and accumulated E & P has a deficit balance,the two accounts are netted for dividend determination purposes.
A)True
B)False
Q4) Explain the stock attribution rules that apply in the case of stock redemptions.
Q5) Federal income tax paid in the current year must be subtracted from taxable income to determine E & P.
A)True
B)False
Q6) When is a redemption to pay death taxes under § 303 most advantageous?
Page 21
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Chapter 20: Corporations: Distributions in Complete
Liquidation and an Overview of Reorganizations
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Q1) The stock in Black Corporation is owned entirely by Nancy (80%)and Wanda (20%),mother and daughter.Three years ago,Nancy contributed land (basis of $200,000,fair market value of $250,000)to Black Corporation in a transaction that qualified under § 351.In the current year and pursuant to a complete liquidation of Black,the land is distributed proportionately to Nancy and Wanda.At the time of the liquidating distribution,the land had a fair market value of $100,000.What amount of loss will Black Corporation recognize on the distribution of the land?
A) $20,000.
B) $80,000.
C) $100,000.
D) $150,000.
E) None of the above.
Q2) Noncorporate shareholders may elect out of § 368 and recognize losses when property subject to a liability is distributed to them in a corporate reorganization.
A)True
B)False
Q3) The treatment of corporate reorganizations is similar to like-kind exchanges.
A)True
B)False
Page 22
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Chapter 21: Partnerships
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Q1) On January 1 of the current year,Jenna and Rob form an equal partnership.Jenna makes a cash contribution of $80,000 and a property contribution (adjusted basis of $120,000; fair market value of $160,000)in exchange for her interest in the partnership.Rob contributes property (adjusted basis of $190,000; fair market value of $240,000)in exchange for his partnership interest.Which of the following statements is true concerning the income tax results of this partnership formation?
A) Jenna has a $200,000 tax basis for her partnership interest.
B) Rob recognizes a $50,000 gain on his property transfer.
C) Rob has a $240,000 tax basis for his partnership interest.
D) The partnership has a $160,000 adjusted basis in the property contributed by Jenna.
E) None of the statements is true.
Q2) One of the disadvantages of the partnership form is that the partner's share of the partnership's taxable income is taxed to the partner,regardless of whether or not distributed.
A)True
B)False
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Chapter 22: S Corporations
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Q1) Lott Corporation in Macon,Georgia converts to S corporation status in 2011.Lott used the LIFO inventory method in 2010 and had a LIFO inventory of $420,000 (FIFO value of $550,000).How much tax must be added to the 2010 corporate tax liability,assuming that Lott is subject to a 35% tax rate.
A) $0.
B) $11,375.
C) $45,500.
D) $130,000.
E) None of the above.
Q2) An S shareholder's stock basis is reduced by flow-through losses before accounting for distributions.
A)True
B)False
Q3) Which statement is false?
A) S corporations are treated as corporations under state law.
B) The alternative minimum tax applies to an S corporation.
C) Liabilities affect S shareholders differently than partners.
D) S corporations may not allocate income like partnerships.
E) None of the above.
Q4) What are the characteristics of an S corporation's straight debt?
Page 24
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Chapter 23: Exempt Entities
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Q1) The excise tax that is imposed on private foundations for making jeopardizing investments is imposed because the foundation has made speculative investments that put the foundation's income at risk.
A)True
B)False
Q2) Which of the following statements is correct?
A) No exempt organizations can engage in any lobbying activities.
B) Certain exempt organizations can elect to engage in lobbying activities on a limited basis.
C) Churches can engage in lobbying activities on an unlimited basis because of the separation of church and state provision.
D) Only b. and c. are correct.
E) Only a. and c. are correct.
Q3) Orange,Inc.,a private foundation,engages in a transaction with a disqualified person in the amount of $800,000.Calculate the tax on self-dealing.Assume that corrective action is taken so that the additional tax does not apply.
Q4) How can an exempt organization,otherwise classified as a private foundation,avoid private foundation status?
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Page 25
Chapter 24: Multistate Corporate Taxation
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Q1) Politicians use tax devices to create economic development incentives.
A)True
B)False
Q2) An assembly worker earns a $30,000 salary and receives a fringe benefit package worth $15,000.The payroll factor assigns $30,000 for this employee.
A)True
B)False
Q3) List which items are included in the payroll factor of a state.Consider all forms of compensation that an employee might receive.Apply the general UDITPA rules.
Q4) In determining taxable income for state income tax purposes,the state NOL deduction typically constitutes a(n)____________________ modification.
Q5) If a state follows Federal income tax rules,the state's tax compliance and enforcement become easier to accomplish.
A)True
B)False
Q6) In some states,an S corporation must withhold Federal income tax for its shareholders who ____________________ (are/are not)state residents.
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Page 26
Chapter 25: Taxation of International Transactions
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Q1) A domestic corporation is one whose assets are primarily (> 50%)located in the U.S. A)True
B)False
Q2) Which of the following persons typically is concerned with the U.S.-sourcing rules for gross income?
A) Foreign persons with only foreign activities.
B) U.S. persons with U.S. and foreign activities.
C) U.S. persons with only U.S. activities.
D) U.S. persons that earn only tax-exempt income.
Q3) Collins,Inc.received gross foreign-source dividend income of $250,000.Foreign taxes withheld on the dividend were $25,000 and no § 902 credit is available.Its worldwide taxable income for the tax year is $500,000.U.S.tax before the FTC is $175,000.Collins' current year FTC is $87,500.
A)True
B)False
Q4) "Inbound" and "offshore" transfers are exempt from taxation under § 367.
A)True B)False
Q5) Discuss the primary purposes of income tax treaties.
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Chapter 26: Tax Practice and Ethics
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Sample Questions
Q1) Circular 230 applies to all tax practitioners.This includes attorneys,CPAs,and enrolled agents,even though each of the groups has its own code of conduct.
A)True
B)False
Q2) Troy Center Ltd.withheld from its employees' paychecks $200,000 in Federal income and Social Security taxes for the Monday,June 30 payroll.It then spent the $200,000 on equipment upgrades,missing altogether the August 2 due date for the tax remittances.How much does Troy now owe the government in taxes and penalties? Ignore interest accruals,and assume that the Treasury can prove that Troy's redirecting of the tax withholdings was willful.
Q3) The taxpayer might secure a(n)____________________ to assure that a homeless shelter qualifies for tax exempt treatment.
Q4) A ____________________% penalty may result when a taxpayer overstates by _____________________ percent or more the value of an asset contributed to a charity. or
Q5) A tax preparer can incur a penalty if the client's return includes an unreasonable or ___________________ tax return position that understates the tax liability.
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Chapter 27: The Federal Gift and Estate Taxes
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169 Verified Questions
169 Flashcards
Source URL: https://quizplus.com/quiz/71485
Sample Questions
Q1) At the time of her death in 2011,Emma still owed $36,000 on her church pledge for the year.Even if church pledges are not an enforceable obligation in the state where Emma resided,her estate can claim a deduction for the $36,000 it later pays.
A)True
B)False
Q2) The death of a tenant in common will defeat his or her interest in the property.
A)True
B)False
Q3) In determining whether a dividend issued on stock held by a decedent is included in the gross estate,the record date (rather than the declaration or payment dates)controls.
A)True
B)False
Q4) Lyle and Beatrice are brother and sister.Using his funds,Lyle purchases land,listing title as: "Lyle and Beatrice,joint tenants with right of survivorship." If Lyle dies first,all of the land is included in his gross estate.
A)True
B)False
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Chapter 28: Income Taxation of Trusts and Estates
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140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/71484
Sample Questions
Q1) A fiduciary entity computes its alternative minimum tax in a manner similar to that used for a(n)____________________.
Q2) This year,the Nano Trust reported $50,000 entity accounting income and $40,000 distributable net income (DNI).Nano distributed $30,000 cash to Horatio,its sole income beneficiary.Nano is a complex trust.Nano's distribution deduction is:
A) $50,000.
B) $40,000.
C) $30,000.
D) $0. Because the distributions of a complex trust are discretionary, no deduction is allowed.
Q3) Generally,capital gains are allocated to fiduciary income,because they relate to investment assets.
A)True
B)False
Q4) Is a trust subject to the alternative minimum tax? Or does the trust "pass through" AMT items to its grantor and beneficiaries?
Q5) List the three major functions of distributable net income (DNI)as that amount is used under Federal income tax law.
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