Graduate Taxation Seminar
Solved Exam Questions
Course Introduction
The Graduate Taxation Seminar is an advanced course designed for graduate students seeking an in-depth understanding of contemporary issues in federal, state, and international taxation. The seminar emphasizes critical analysis of complex tax concepts, current legislative developments, and recent case law, encouraging students to engage with both theoretical and practical aspects of tax policy and administration. Through guided discussions, research projects, and presentations, participants will explore specialized topics such as tax planning, corporate taxation, partnership taxation, and the ethical considerations inherent to tax practice, preparing them for expert roles in legal, accounting, or governmental settings.
Recommended Textbook
South Western Federal Taxation 2015 Corporations Partnerships Estates and Trusts 38th Edition
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20 Chapters
2958 Verified Questions
2958 Flashcards
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Chapter 1: Understanding and Working With the Federal Tax Law
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74 Verified Questions
74 Flashcards
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Sample Questions
Q1) Regulations are issued by the Treasury Department.
A)True
B)False
Answer: True
Q2) Which of the following refers to a trial court rather than an appellate court decision?
A) Forgeus v. Comm., 6 B.T.A. 291 (1927).
B) Farris v. Comm., 222 F.2d 320 (CA-10, 1955).
C) Danville Plywood Corp., 899 F.2d 3 (Fed Cir. 1990).
D) Boehm v. Comm., 326 U.S. 287 (1945).
E) None of the above.
Answer: A
Q3) Revenue Procedures deal with the internal management practices and procedures of the IRS.
A)True
B)False
Answer: True
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Chapter 2: Corporations: Introduction and Operating Rules
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113 Verified Questions
113 Flashcards
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Sample Questions
Q1) A corporate net operating loss can be carried back 2 years and forward 20 years to offset taxable income for those years.
A)True
B)False
Answer: True
Q2) Quail Corporation is a C corporation with net income of $125,000 during the current year. If Quail paid dividends of $25,000 to its shareholders, the corporation must pay tax on $100,000 of net income. Shareholders must report the $25,000 of dividends as income.
A)True
B)False Answer: False
Q3) Eagle Company, a partnership, had a short-term capital loss of $10,000 during the year. Aaron, who owns 25% of Eagle, will report $2,500 of Eagle's shortterm capital loss on his individual tax return.
A)True
B)False Answer: True
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4
Chapter 3: Corporations: Special Situations
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) With respect to the AMT, what is the minimum tax credit?
Answer: The AMT is a separate tax system that is computed side-by-side with the regular tax. Along with the "netting concept," a minimum tax credit is available to eliminate the possibility of double taxation. Essentially, the AMT paid in one tax year may be carried forward indefinitely and used as a credit against the corporation's future regular tax liability that exceeds its tentative minimum tax. The minimum tax credit may not be carried back and may not be offset against any future minimum tax liability. The credit can be used to reduce regular tax liability in future years (but not below the tentative AMT).
Q2) DPGR - Allowable Indirect Costs = QPAI. Is this formula correct?
A)True
B)False
Answer: False
Q3) Under some circumstances, the sale of prepared food at a taxpayer's retail facility can qualify as DPGR.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Corporations: Organization and Capital Structure
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Sample Questions
Q1) Penny, Miesha, and Sabrina transfer property to Owl Corporation for 75% of its stock. Nancy, their attorney, receives 25% of the stock in Owl for legal services rendered in incorporating the business. What are the tax consequences of these transactions? How should this transaction have been handled?
Q2) The control requirement under § 351 requires that the person or persons transferring property to the corporation, immediately after the transfer, own stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation.
A)True
B)False
Q3) In structuring the capitalization of a corporation, the tax law is neutral for the investor as to debt versus equity financing.
A)True
B)False
Q4) What is the rationale underlying the tax deferral treatment available under § 351?
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Chapter 5: Corporations: Earnings Profits and Dividend
Distributions
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) Brown Corporation, an accrual basis corporation, has taxable income of $150,000 in the current year. Included in its determination of taxable income are the following transactions.
-Brown incurred a $65,000 capital loss from the sale of stock. Because Brown had no capital gains this year, none of the loss is deductible.
-The corporation's Federal income tax liability is $41,750.
-Brown incurred $18,000 in nondeductible meal and entertainment expenses.
-Brown uses the LIFO method when accounting for inventory. This year, the company's LIFO recapture amount increased by $3,000.
-Brown claimed a domestic production activities deduction under § 199 of $1,500. What is Brown's current E & P for the year?
Q2) Briefly describe the rationale for the reduced tax rate on dividends for individual taxpayers.
Q3) Gain on installment sale in 2014 deferred until 2015.
Q4) A deficit in current E & P is treated as occurring ratably during the year, unless the taxpayer can show otherwise.
A)True
B)False
Page 7
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Chapter 6: Corporations: Redemptions and Liquidations
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Sample Questions
Q1) A subsidiary corporation is liquidated at a time when it is indebted to its parent corporation. The subsidiary corporation distributes property to the parent corporation in satisfaction of the indebtedness. If the liquidation is governed by § 332, neither the subsidiary nor the parent recognize gain or loss on the transfer of property in satisfaction of indebtedness.
A)True
B)False
Q2) At a time when Blackbird Corporation had E & P of $700,000 and 1,000 shares of stock outstanding, the corporation distributed $300,000 to redeem 400 shares of its stock. The transaction qualified as a disproportionate redemption for the shareholder. Blackbird's E & P is reduced by $300,000 as a result of the distribution.
A)True
B)False
Q3) To qualify a partial liquidation under the termination of a business test, the distribution must consist of the assets of a qualified trade or business.
A)True
B)False
Q4) Explain the stock attribution rules that apply in the case of stock redemptions.
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Page 8
Chapter 7: Corporations: Reorganizations
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) The application of the § 382 limitation to credits requires determining the income tax reduction benefit when applying the § 382 limitation to deductions.
A)True
B)False
Q2) Pear Corporation wishes to merge with Plum Corporation. Plum has more name recognition with consumers so Pear would like Plum to be the surviving corporation. Pear transfers all of its assets to Plum for 75% of Plum's shares. Pear distributes the Plum stock to its shareholders in exchange for their Pear stock. Pear then liquidates.
Q3) Federal bankruptcy legislation created the reorganization. To qualify for this type of reorganization, the corporation must be before the reorganization.
Q4) Black Corporation has been engaged in manufacturing toys and investing in high technology corporate stock for eight years. Black creates Blue and White Corporations. It transfers the toy division to Blue and the investments to White, in exchange for all of each corporation's common voting stock. The stock of Blue and White is distributed to Black shareholders in return for all of their Black stock. Black then liquidates.
Q5) Compare an acquisitive "Type D" reorganization with the "Type C" reorganization.
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Chapter 8: Consolidated Tax Returns
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Sample Questions
Q1) Members of a parent-subsidiary controlled group must share one $40,000 for the tax year.
Q2) How must the IRS collect the liability for Federal taxes from among a consolidated group?
A) Against the parent of the group.
B) According to the members' current internal taxsharing agreement.
C) Against the member of the group that generated the tax.
D) No particular order of collection is prescribed by IRS rules.
Q3) 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
Q4) When a subsidiary sells to the parent some business-use property that has appreciated from its $20,000 basis to a $50,000 fair market value, the subsidiary immediately recognizes $30,000 ordinary income on the consolidated return.
A)True
B)False
Q5) Ownership level of parent at which a subsidiary can join the consolidated group.
Q6) Member's capital gain
Page 10
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Chapter 9: Taxation of International Transactions
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177 Verified Questions
177 Flashcards
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Sample Questions
Q1) GlobalCo, a foreign corporation not engaged in a U.S. trade or business, receives $80,000 in interest income from deposits with the foreign branch of a U.S. bank. The U.S. bank earns 24% of its income from foreign sources. How much of GlobalCo's interest income is U.S. source?
A) $0
B) $19,200
C) $60,800
D) $80,000
Q2) Which of the following statements best describes the primary purpose of the Subpart F income provisions?
A) They allow for a deferral of non-U.S.-source income from U.S. taxation.
B) They provide certainty as to the U.S. income tax treatment of cross-border transactions.
C) They prevent shifting of income from the U.S. to high-tax non-U.S. jurisdictions.
D) They prevent shifting of income from the U.S. to low-tax non-U.S. jurisdictions.
Q3) A nonU.S. citizen who holds a "green card."
Q4) Treasury powers over transfer pricing.
Q5) Individual who is not a U.S. citizen or resident.
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Chapter 10: Partnerships: Formation, Operation, and Basis
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) PaulCo, DavidCo, and Sean form a partnership with cash contributions of $80,000, $50,000 and $30,000, respectively, and agree to share profits and losses in the ratio of their original cash contributions. PaulCo uses a January 31 fiscal year-end, while DavidCo and Sean use a November 30 and December 31 year-end, respectively. The partnership must use the least aggregate deferral method to determine its year end.
A)True
B)False
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) In a limited liability company, all members are protected from all debts of the partnership unless they personally guaranteed the debt.
A)True
B)False
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Page 12
Chapter 11: Partnerships: Distributions, Transfer of Interests, and
Terminations
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) Jeremy sold his 40% interest in the HIJ Partnership to Ashley for $400,000. The inside basis of all partnership assets was $600,000 at the time of the sale. If the partnership makes a § 754 election, it will record a $160,000 step-up in the basis of the partnership assets, and the step-up will be attributed solely to Ashley.
A)True
B)False
Q2) At the beginning of the year, Elsie's basis in the E&G Partnership interest is $90,000. She receives a proportionate nonliquidating distribution from the partnership consisting of $10,000 of cash, unrealized accounts receivable (basis of $0, fair market value $40,000), and land (basis of $30,000, fair market value of $50,000). After the distribution, Elsie's bases in the accounts receivable, land, and partnership interest are:
A) $0; $30,000; and $50,000.
B) $0; $50,000; and $30,000.
C) $40,000; $30,000; and $10,000.
D) $40,000; $40,000; and $0.
E) None of the above.
Q3) Limited liability partnership
Q4) Installment receivables for sale of a capital asset.
Page 13
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Chapter 12: S: Corporations
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158 Flashcards
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Sample Questions
Q1) Separately stated items are listed on Schedule of the Form 1120S.
Q2) Only 51% of the shareholders must consent to an S election.
A)True
B)False
Q3) The termination of an S election occurs on the day after a corporation ceases to be a qualifying S corporation.
A)True
B)False
Q4) Individuals Adam and Bonnie form an S corporation, with Adam contributing cash of $100,000 for a 50% interest, and Bonnie contributing appreciated ordinary income property with an adjusted basis of $20,000 and a fair market value of $100,000.
a. Determine Bonnie's initial basis in her stock, assuming that she receives a 50% interest. b. The S corporation sells the property for $120,000. Determine Adam's and Bonnie's stock basis after the sale.
c. Determine Adam's and Bonnie's gain or loss if the company is liquidated.
Q5) The Schedule M-3 is the same for a C corporation and an S corporation.
A)True
B)False
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Chapter 13: Comparative Forms of Doing Business
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Sample Questions
Q1) Which of the following statements is incorrect?
A) The number of owners of an LLC is not limited.
B) If the LLC has three or more corporate characteristics, it will be taxed as a C corporation.
C) An LLC can elect to be taxed as a C corporation or as a partnership.
D) Only a. and c.
E) a., b., and c. are incorrect.
Q2) The special allocation opportunities that are available to partnerships are available to S corporations only if affected shareholders elect to do so.
A)True
B)False
Q3) Sale of corporate stock by the S corporation shareholders.
Q4) Mercedes owns a 30% interest in Magenta Partnership (basis of $52,000) which she sells to Calvin for $65,000. Mercedes' recognized gain of $13,000 will be classified as capital gain.
A)True
B)False
Q5) What tax rates apply for the AMT for an individual taxpayer and for a C corporation?
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Chapter 14: Taxes on the Financial Statements
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Sample Questions
Q1) You are assisting LipidCo, a U.S. corporation subject to GAAP, to determine its current-year book expense for income taxes. The following represent the steps that you will take in making this computation. Put the steps into the correct order.
A. Compute the deferred tax provision.
B. Determine book income before income tax effects.
C. Determine the current tax provision.
D. Determine whether a valuation allowance is required, and apply or release it.
E. Identify and measure temporary book-tax differences.
F. Prepare the disclosures for the financial statement footnotes.
G. Add/Subtract any permanent book-tax differences.
Q2) Book-tax differences can be explained in part by examining the objectives underlying financial accounting and taxable income computations. Evaluate this statement.
Q3) A corporation's taxable income almost never is the same as its GAAP financial accounting income. Explain why this occurs. Use the terms permanent and temporary book-tax differences in you answer. Give at least two examples of each type of book-tax difference.
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Page 16
Chapter 15: Exempt Entities
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Sample Questions
Q1) The due date for the Exempt Organization Business Income Tax Return (Form 990-T) is the fifteenth day of the third month after the end of the taxable year.
A)True
B)False
Q2) Which of the following statements are correct?
A) If an exempt organization has annual gross receipts of less than $50,000, it files Form 990-N.
B) Private foundations must file Form 990-PF (Return of Private Foundation).
C) An exempt organization with less than $250,000 in gross receipts may file a Form 990-EZ.
D) Only a. and b. are correct.
E) a., b., and c. all are correct.
Q3) Agnes is aware that a feeder organization is subject to Federal income taxation. She wonders whether an organization otherwise taxable as a feeder organization can avoid such status if it remits less than 80% of its profits to the § 501(c)(3) entity.
Q4) Unrelated business income is generally that derived from the unrelated trade or business, reduced by the deductions directly connected with the conduct of the unrelated trade or business.
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Page 17
Chapter 16: Multistate Corporate Taxation
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Sample Questions
Q1) Almost all of the states allow treatment to an LLC for income tax purposes.
Q2) Parent Corporation owns all of the stock of Junior Corporation, a Delaware passive investment company. Parent operates strictly in nonunitary State B, which levies a 9% income tax. This year, Junior earned $200,000 of portfolio interest income and paid a $150,000 dividend to Parent. In which state(s) will the interest income create an income tax liability?
A) Only in B.
B) Only in Delaware.
C) In neither state.
D) In both B and Delaware, according to the apportionment formulas of each.
Q3) A typical state taxable income addition modification is for the Federal income tax paid for the tax year.
A)True
B)False
Q4) Deduction for advertising expenditures.
Q5) P.L. 86-272 (does/does not) create nexus when the sales representative approves a sale at the customer's location.
Q6) Federal general business credit.
Q7) Prescription drugs and medicines purchased by a consumer.
Page 18
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Chapter 17: Tax Practice and Ethics
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Sample Questions
Q1) The IRS national office is organized into operating divisions, broadly on the basis of the tax returns that are each division's responsibilities. List at least four the IRS's operating divisions.
Q2) About % of all Forms 1040 are audited each year. The rate is about ____________________% for large corporations.
Q3) A tax preparer is in violation of Circular 230 if he or she:
A) Files a tax return that includes a math error.
B) Fails to inform the IRS of an error on the client's prioryear return.
C) Charges a fee to prepare an original Form 1120 equal to onethird of the taxpayer's refund due.
D) All of the above are Circular 230 violations.
Q4) The "IRS's attorney" is known as the Chief Counsel. A)True B)False
Q5) Substantial understatement of a tax.
Q6) The accuracy-related penalties typically relate to on the part of the taxpayer, or other understatements of tax.
Q7) The , a presidential appointee, is the "IRS's attorney."
Q8) According to the IRS, the annual "Tax Gap" totals about $ billion.
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Chapter 18: The Federal Gift and Estate Taxes
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Sample Questions
Q1) When Travis learns he is seriously ill, he transfers an insurance policy on his life (maturity value of $2,000,000) to his wife Alexis. The couple's adult children are the designated beneficiaries of the policy. Has Travis acted wisely?
Q2) A transfer in trust in which the trustee has the power to accumulate income is not a gift of a future interest if the trustee never exercises the power.
A)True
B)False
Q3) Maggie purchased an insurance policy on Jim's life and designated Susan as the beneficiary.
Q4) At the time of his death, Hal owned 10 cemetery lots worth $40,000 ($4,000 each) for use by himself and his family. These lots are not included in Hal's gross estate and no deduction is allowed the estate.
A)True
B)False
Q5) The current top Federal transfer tax rate of 40% is the highest rate ever imposed. A)True B)False
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Page 20
Chapter 19: Family Tax Planning
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Sample Questions
Q1) In 2011, Sophia sold real estate (adjusted basis of $500,000) for $1,500,000. Under the terms of the sale, she received two notes of $750,000 each, with 9% interest provided. One note is due in 2012 and the other in 2013. She did not elect out of the installment method of recognizing gain. In 2012 and before the first note matures, Sophia gives both notes to her adult children. At this time, the notes are worth a total of $1,400,000. Disregarding the interest element, a tax result of these transactions is:
A) A gift to the children of $1,500,000.
B) Sophia recognizes no gain.
C) Sophia recognizes a gain of $900,000.
D) Sophia recognizes a gain of $1,000,000.
E) None of the above.
Q2) Spouse purchased residence listing ownership as tenants by the entirety.
Q3) Made life insurance payable to estate.
Q4) The special use valuation method of § 2032A is available for valuing transfers by gift. A)True B)False
Q5) Describe the various tax advantages that are available from donating a conservation easement to charity.
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Chapter 20: Income Taxation of Trusts and Estates
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Sample Questions
Q1) A trust whose remainder beneficiary is its grantor.
Q2) The IRS encourages (paper, electronic, composite) filing for Forms 1041.
Q3) The Yeoman Trust has generated several Federal income tax credits for this tax year. Which taxpayer(s), if any, can use these credits in computing a Federal income tax liability,
e.g., the grantor, the trust, its income beneficiaries, its remainder beneficiaries? Answer for estates, simple trusts, and complex trusts.
Q4) A decedent's income in respect of a decedent is subject to the Federal income tax, but it is excluded from the estate tax.
A)True
B)False
Q5) The fiduciary in charge of an estate.
Q6) Harry, the sole income beneficiary, received a $40,000 distribution from the Lucy Trust, in a year when the trust's distributable net income was $50,000. Harry's AGI can increase by as much as $40,000.
A)True
B)False
Q7) Every simple trust is allowed a $ personal exemption.
Page 22
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