Graduate Taxation Seminar
Exam Materials
Course Introduction
The Graduate Taxation Seminar is an advanced course designed for students seeking an in-depth understanding of tax law and policy. This seminar emphasizes contemporary issues in taxation, including the economic, social, and ethical implications of tax legislation and enforcement. Students critically analyze selected topics through case studies, scholarly articles, and legislative developments, and participate in class discussions and presentations. The course also focuses on developing research and analytical skills, enabling students to independently evaluate complex tax problems and construct effective solutions within both domestic and international contexts.
Recommended Textbook
South Western Federal Taxation 2013 Corporations Partnerships Estates and Trusts 36th Edition
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20 Chapters
2489 Verified Questions
2489 Flashcards
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Page 2
Chapter 1: Understanding and Working With the Federal Tax Law
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Sample Questions
Q1) Proposed Regulations are published in the Federal Register.
A)True
B)False Answer: True
Q2) A district court must abide by the precedents set by the court of appeals of jurisdiction.
A)True
B)False Answer: True
Q3) Subchapter C refers to the "Corporate Distributions and Adjustments" section of the Code.
A)True
B)False Answer: True
Q4) Treasury Decisions are issued by the Treasury Department to promulgate new Regulations.
A)True
B)False Answer: True
Page 3
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Chapter 2: Corporations: Introduction and Operating Rules
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Sample Questions
Q1) A calendar year C corporation can receive an automatic 6-month extension to file its 2012 corporate return (Form 1120)by filing Form 7004 by March 15,2013.
A)True
B)False
Answer: True
Q2) Copper Corporation,a C corporation,had gross receipts of $5 million in 2009,$6 million in 2010,and $3 million in 2011.Gold Corporation,a personal service corporation (PSC),had gross receipts of $4 million in 2009,$7 million in 2010,and $5 million in 2011.Which of the corporations will be allowed to use the cash method of accounting in 2012?
A)Copper Corporation only.
B)Gold Corporation only.
C)Both Copper Corporation and Gold Corporation.
D)Neither Copper Corporation nor Gold Corporation.
E)None of the above.
Answer: C
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4
Chapter 3: Corporations: Special Situations
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Sample Questions
Q1) How is the accumulated earnings credit calculated?
Answer: The accumulated earnings credit is the greater of the minimum credit $250,000 ($150,000 for personal service corporations)or the current E & P for the year needed to meet the reasonable needs of the business.In determining the minimum credit or the current E & P required to meet the reasonable needs of the business,the balance of past (i.e. ,accumulated)E & P must be considered.This balance,once it reaches $250,000,also eliminates the use of the minimum credit.
Q2) Boat Corporation manufactures an exercise machine at a cost of $800 and sells the machine to Kirby Corporation for $1,000 in 2012.Kirby incurs TV advertising expenses of $200 and sells the machine by phone order for $1,700.If Boat and Kirby corporations are members of an expanded affiliated group (EAG),their QPAI is:
A)$30.
B)$700.
C)$1,000.
D)$1,600.
E)None of the above.
Answer: B
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Page 5
Chapter 4: Corporations: Organization and Capital Structure
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Sample Questions
Q1) When forming a corporation,a transferor-shareholder may choose to receive some corporate debt along with stock.Identify some of the issues the transferor must consider when deciding whether debt should be a part of the transaction.
Q2) Nick exchanges property (basis of $100,000;fair market value of $3 million),for 65% of the stock of Yellow Corporation.The other 35% of the stock is owned by Gloria who acquired it several years ago.What are the tax consequences to Nick?
Q3) As part of a § 351 transfer,a shareholder receives boot.If a realized loss resulted,none of the boot is taxed.
A)True
B)False
Q4) In determining whether § 357(c)applies,assess whether the liabilities involved exceed the bases of all assets a shareholder transfers to the corporation.
A)True
B)False
Q5) What is the rationale underlying the tax deferral treatment available under § 351?
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Page 6
Chapter 5: Corporations: Earnings Profits and Dividend
Distributions
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Sample Questions
Q1) Ashley,the sole shareholder of Hawk Corporation,has a stock basis of $200,000 at the beginning of the year.On July 1,she sells all of her stock to Matt for $1 million.On January 1,Hawk has accumulated E & P of $90,000 and during the year,current E & P of $160,000.Hawk makes the following cash distributions: $270,000 to Ashley on March 31 and $90,000 to Matt on December 1.How are the distributions taxed to Ashley and Matt? What is Ashley's recognized gain on the sale to Matt?
Q2) A distribution from a corporation will be taxable to the recipient shareholders only to the extent of the corporation's E & P.
A)True
B)False
Q3) A corporation borrows money to purchase State of Texas bonds.The interest on the loan has no impact on either taxable income or current E & P.
A)True
B)False
Q4) How does the definition of accumulated E & P differ from the definition of current E & P?
Q5) How does the payment of a property dividend affect E & P?
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Chapter 6: Corporations: Redemptions and Liquidations
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Sample Questions
Q1) For purposes of a partial liquidation,the termination of a business test is a subjective test that should be relied upon only after obtaining a favorable ruling from the IRS.
A)True
B)False
Q2) To carry out a qualifying stock redemption,Turaco Corporation (E & P of $800,000)transfers land held for investment purposes to Aida,a shareholder.The land had a basis of $250,000,a fair market value of $400,000,and is subject to a $300,000 liability.Aida has a basis of $70,000 in the shares redeemed.Which of the following is a correct statement regarding the tax consequences of this redemption?
A)Aida will have $400,000 of dividend income.
B)Aida will have a $100,000 basis in the land.
C)Turaco Corporation will recognize a gain of $50,000.
D)Aida will recognize a gain of $30,000.
E)None of the above.
Q3) For tax purposes,all stock redemptions are treated as dividend distributions.
A)True B)False
Q4) When is a redemption to pay death taxes under § 303 most advantageous?
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Chapter 7: Corporations: Reorganizations
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Sample Questions
Q1) Explain whether shareholders are exempted from gain/loss recognition in nontaxable corporate reorganization or the gain/loss recognition is merely postponed.If postponed,what is the vehicle for ensuring the postponed gain/loss will be recognized in the future?
Q2) Which of the following statements is false?
A)A "Type B" reorganization is most likely to run afoul of the continuity of interest doctrine because the target remains a separate corporation.
B)Liabilities are problematic for "Type A" and "Type C" reorganizations.
C)The step transaction doctrine can be problematic in acquisitive "Type D" and "Type C" reorganizations.
D)"Type E" and "Type F" are not likely to be subject to the § 382 limitation.
E)All of the statements are true.
Q3) The yearly § 382 limitation is computed by multiplying the ____________________ of the loss corporation's stock on the ____________________ date by the ____________________.For the ____________________,the § 382 limitation must be multiplied by the fraction equal to the number of days remaining in the year divided by days in the year. or or
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Page 9
Chapter 8: Consolidated Tax Returns
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Sample Questions
Q1) In computing consolidated taxable income,compensation amounts are removed from the taxable incomes of the group members and determined on a group basis.
A)True
B)False
Q2) Which of the following entities is eligible to file Federal income tax returns on a consolidated basis?
A)Professional sports team operating as a limited partnership.
B)Japanese corporation engaged in multinational operations,including two-thirds of its activities in the U.S.
C)Japanese corporation engaged in multinational operations,including one-third of its activities in the U.S.
D)U.S.corporation engaged in the nuclear energy industry.
Q3) In terms of the consolidated return rules,Telefono Sales of Uruguay is a(n)____________________ entity.
Q4) After a takeover,the parent's balance sheet shows a fair market value cost basis in the subsidiary,for both book and tax purposes.
A)True
B)False
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Chapter 9: Taxation of International Transactions
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Sample Questions
Q1) "Inbound" and "offshore" asset transfers by a U.S.business can be subject to immediate Federal income taxation under § 367.
A)True
B)False
Q2) WorldCo,a foreign corporation not engaged in a U.S.trade or business,receives $50,000 in interest income from deposits with the foreign branch of a U.S.bank.The U.S.bank earns 78% of its income from foreign sources.How much of WorldCo's interest income is U.S.source?
A)$0.
B)$11,000.
C)$39,000.
D)$50,000.
Q3) The source of income received for the use of intangible property is the home country of the owner of the property producing the income.
A)True
B)False
Q4) Describe and diagram the timeline that most businesses use to enter the international markets.
Q5) Discuss the primary purposes of income tax treaties.
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Chapter 10: Partnerships: Formation, operation, and Basis
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Sample Questions
Q1) On a partnership's Form 1065,which of the following statements is not true?
A)The partnership reconciles its net income (including separately stated items)to book income on Schedule M-1 or M-3.
B)The partnership balance sheet on Schedule L is generally presented on a financial (book)basis.
C)All partnership income and expense items are reported on Form 1065,page 1.
D)The partnership's equivalent of taxable income is reported in the "Analysis of Income (Loss)."
E)None of the above statements are true.
Q2) Cassandra is a 10% limited partner in C&C,Ltd.Her basis in the interest is $60,000 before loss allocations,including her $30,000 share of the partnership's nonrecourse debt.(This debt is not qualified nonrecourse financing. )Cassandra is also a 10% limited partner in MNOP,in which her basis is $30,000.Cassandra is allocated an $80,000 loss from C&C,and $20,000 of income from MNOP.How much of the loss from C&C may Cassandra deduct? Under what Code provisions are the remaining losses suspended?
Q3) The "outside basis" is defined as a partner's basis in the partnership interest. A)True B)False
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Chapter 11: Partnerships: Distributions, transfer of Interests, and
Terminations
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Sample Questions
Q1) Landon received $50,000 cash and a capital asset (basis of $70,000,fair market value of $80,000)in a proportionate liquidating distribution.His basis in his partnership interest was $100,000 prior to the distribution.How much gain or loss does Landon recognize and what is his basis in the asset received?
A)$0 gain or loss;$70,000 basis.
B)$0 gain or loss;$50,000 basis.
C)$20,000 gain;$70,000 basis.
D)$30,000 gain;$70,000 basis.
E)$30,000 gain;$80,000 basis.
Q2) Marcie is a 40% member of the M&A LLC.Her basis is $10,000 immediately before the LLC distributes to her $30,000 of cash and land (basis to the LLC of $20,000 and fair market value of $25,000).As a result of the proportionate,nonliquidating distribution,Marcie recognizes a gain of $20,000 and her basis in the land is $0.
A)True
B)False
Q3) A property distribution from a partnership to a partner is generally taxable to the partner.
A)True
B)False
Page 13
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Chapter 12: S: Corporations
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154 Flashcards
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Sample Questions
Q1) The LIFO recapture tax is a variation of the passive investment income penalty tax.
A)True
B)False
Q2) Tax-exempt income is not separately stated on Schedule K of Form 1120S.
A)True
B)False
Q3) Only 80% of the shareholders must consent to an S election.
A)True
B)False
Q4) Tax-exempt income is a Schedule K item for an S corporation.
A)True
B)False
Q5) The alternative minimum tax applies to an S corporation.
A)True
B)False
Q6) S corporation status provides many of the benefits of ____________________ taxation and at the same time gives the owner ____________________ ____________________ protection from creditors. or
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Chapter 13: Comparative Forms of Doing Business
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Sample Questions
Q1) Candace,who is in the 33% tax bracket,is establishing a business which could have potential environmental liability problems.Therefore,she is trying to decide between the C corporation form and the S corporation form.She projects that the business will generate earnings of about $75,000 each year.Advise Candace on the tax consequences of each tax form.
Q2) The ACE adjustment associated with the C corporation AMT can be either positive or negative.
A)True
B)False
Q3) Roger owns 40% of the stock of Gold,Inc.(adjusted basis of $800,000).Silver redeems 60% of Roger's shares for $900,000.If the stock redemption qualifies for return of capital treatment,Roger's recognized gain is $100,000.
A)True
B)False
Q4) If an S corporation distributes appreciated property as a dividend,it must recognize gain as to the appreciation.
A)True
B)False
Q5) Do the § 465 at-risk rules apply to partnerships,LLCs,and S corporations?
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Chapter 14: Taxes on the Financial Statements
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Sample Questions
Q1) A deferred tax asset is the current tax benefit (savings)associated with income or expense to be reported in future year GAAP financial statements.
A)True
B)False
Q2) Phyllis,Inc. ,earns book net income before tax of $600,000.Phyllis puts into service a depreciable asset this year,and first year tax depreciation exceeds book depreciation by $120,000.Phyllis has recorded no other temporary or permanent book-tax differences.Assuming that the U.S.tax rate is 35%,what is Phyllis's total income tax expense reported on its GAAP financial statements?
A)$252,000.
B)$210,000.
C)$168,000.
D)$42,000.
Q3) If a valuation allowance is decreased (released)in the current year,the corporation's effective tax rate is less than if the valuation allowance had not increased.
A)True
B)False
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Chapter 15: Exempt Entities
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Sample Questions
Q1) The key factors in determining whether an exempt entity's income from a bingo game is unrelated trade or business income are whether substantially all the work is performed by volunteers and all of the prizes to be awarded are received as donations.
A)True
B)False
Q2) Which of the following are exempt organizations?
A)National Football League (NFL).
B)American Bankers Association (ABA).
C)Professional Golfers Association (PGA).
D)Only a.and c.
E)a. ,b. ,and c.
Q3) What is the purpose of the unrelated business income tax?
Q4) Discuss benefits for which an exempt organization may be eligible,other than exemption from Federal income tax.
Q5) Warmth,Inc. ,a private foundation,makes an expenditure of $800,000 that should not be made by a private foundation.Calculate the tax on taxable expenditures.Assume that corrective action is taken so that the additional tax does not apply.
Q6) Define average acquisition indebtedness with respect to debt-financed property.
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Chapter 16: Multistate Corporate Taxation
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Sample Questions
Q1) A taxpayer has nexus with a state for sales and use tax purposes if it has a physical presence in the state.
A)True
B)False
Q2) A capital stock tax usually is structured as an excise tax imposed on a corporation's "net worth," using financial statement data to compute the tax.
A)True B)False
Q3) Leased property,when included in the property factor,usually is valued at ____________________ times its annual rental,even though the taxpayer does not own the asset. or
Q4) A state can levy an income tax on a business only if the business was incorporated in the state.
A)True B)False
Q5) Under the UDITPA's ____________________ concept,sales are assumed to take place at the point of delivery,as opposed to the location at which the shipment originates.
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Chapter 17: Tax Practice and Ethics
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Sample Questions
Q1) Circular 230 applies to all paid 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) Megan prepared for compensation a Federal income tax return for Joan.Joan's return included an aggressive interpretation of the rules concerning overnight business travel.Megan is not liable for a preparer penalty for taking an unreasonable tax return position if:
A)The tax reduction attributable to the disputed deduction did not exceed $5,000.
B)There was a reasonable basis for Joan's interpretation of the travel deduction rules. C)There was substantial authority for Joan's interpretation of the travel deduction rules. D)The IRS found that the travel deduction was frivolous,but Joan disclosed the position in an attachment to the return.
Q3) The accuracy-related penalties typically relate to ____________________on the part of the taxpayer,or other understatements of tax.
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Chapter 18: The Federal Gift and Estate Taxes
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Sample Questions
Q1) Jacob and Emma are husband and wife and have always lived in New Jersey,a common law state.In 1992 and using separate funds,they bought an annuity from an insurance company-the purchase price was furnished 1/4 by Jacob and 3/4 by Emma.Under the terms of the contract,Jacob is to receive $50,000 per month for life when he reaches age 65.If Emma survives Jacob,she is to receive $30,000 per month for her life.Jacob dies first in 2012,at which time the value of Emma's survivorship annuity is $1,400,000.As to this annuity,how much (if any)is included in Jacob's gross estate?
Q2) At the time of her death,Abigail held a general power of appointment over a trust created by her grandmother in 1990.Since Abigail never exercised the general power,none of the trust is included in her gross estate.
A)True
B)False
Q3) For estate tax purposes,what is the difference between a surviving spouse's share of the community property and a dower (or courtesy)interest?
Q4) In contrasting the computation of the Federal gift and estate taxes,are past taxable gifts handled in the same fashion? Explain.
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Page 20
Chapter 19: Family Tax Planning
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Sample Questions
Q1) Warren sells property that he inherited five years ago from his mother,Candice.Warren believes that the property was significantly undervalued when it was listed on the estate tax return filed for Candice's estate.For income tax purposes,can Warren deviate from this value? Explain.
Q2) Which,if any,of the items listed below are valid factors utilized in valuing the stock in a closely held corporation?
A)The company's dividend-paying capacity.
B)The nature of the business.
C)The history of the company since its inception.
D)The book value of the stock.
E)All of the above.
Q3) How could the election of the alternate valuation date (§ 2032)increase a decedent's charitable deduction?
Q4) Several years ago,Tad purchased land listing ownership as "Tad,Ellen,and Kay,equal tenants in common." In the current year,Kay dies first.One-third of the value of the land is included in Kay's probate estate.
A)True
B)False
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Page 21
Chapter 20: Income Taxation of Trusts and Estates
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Sample Questions
Q1) Three months after Brianna Timkin died,her executor received the final $40,000 installment from a sale of land that Brianna completed several years ago.Which of the following statements is true?
A)The $40,000 is both included in Brianna's gross estate,and subject to tax on her estate's income tax return.
B)The $40,000 is subject to neither income nor estate tax,because it was received after Brianna's death.
C)The $40,000 is subject to tax only on her estate's income tax return.
D)The $40,000 is included only in Brianna's gross estate.
Q2) Dexter established a divorce trust to benefit his ex-wife Jena.The accounting income of the trust is distributed to Jena,in satisfaction of the year's alimony obligation.Under Subchapter J rules,____________________,and not the trust,is taxed on the amount of the distribution.
Q3) Trusts can select any fiscal Federal income tax year. A)True B)False
Q4) Generally,an estate's taxable income is computed in a manner similar to that used for a(n)____________________.
Q5) The IRS encourages ____________________ filing for Forms 1041.
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