Income Taxation Exam Solutions
Course Introduction
Income Taxation is an essential course that introduces students to the principles, laws, and procedures governing the taxation of income for individuals, partnerships, and corporations. The course covers the computation of taxable income, identification of taxable and non-taxable items, understanding filing requirements, allowable deductions, and applicable tax credits. Students will explore statutory and judicial sources of income tax law, the implications of tax compliance and planning, and common issues in tax administration and enforcement. Practical applications, case studies, and recent developments in tax legislation provide learners with the analytical framework necessary for ethical and effective tax practice in both personal and business contexts.
Recommended Textbook
South western Federal Taxation 2017 Comprehensive Edition 40th Edition by William
Available Study Resources on Quizplus 28 Chapters
3604 Verified Questions
3604 Flashcards
Source URL: https://quizplus.com/study-set/3572 Page 2
H. Hoffman
Chapter 1: An Introduction to Taxation and Understanding
the Federal Tax Law
Available Study Resources on Quizplus for this Chatper
159 Verified Questions
159 Flashcards
Source URL: https://quizplus.com/quiz/70946
Sample Questions
Q1) A provision in the law that compels accrual basis taxpayers to pay a tax on prepaid income in the year received and not when earned is inconsistent with generally accepted accounting principles.
A)True
B)False
Answer: True
Q2) Characteristics of the "Fair Tax" (i.e., national sales tax) include which, if any, of the following:
A)Abolition of the Federal individual (but not the corporate) income tax.
B)Abolition of all Federal income taxes but retention of payroll taxes (including the self-employment tax).
C)Abolition of all Federal income taxes and payroll taxes but retention of the Federal estate and gift taxes.
D)Abolition of all Federal income and payroll taxes as well as the Federal estate and gift taxes.
E)None of the above.
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: Working With the Tax Law
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/70934
Sample Questions
Q1) Which tax source may override a Regulation section?
A)Revenue Ruling.
B)Revenue Procedure.
C)U.S.tax treaty.
D)Technical Advice Memoranda.
E)None of the above.
Answer: C
Q2) Before a tax bill can become law, it must be approved by the President.
A)True
B)False Answer: False
Q3) A letter ruling applies only to the taxpayer who asks for and obtains a letter ruling.
A)True
B)False
Answer: True
Q4) There are 11 geographic U.S.Circuit Court of Appeals.
A)True
B)False Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Computing the Tax
Available Study Resources on Quizplus for this Chatper
150 Verified Questions
150 Flashcards
Source URL: https://quizplus.com/quiz/70925
Sample Questions
Q1) Wilma, age 70 and single, is claimed as a dependent on her daughter's tax return.During 2012, she had interest income of $2,400 and $800 of earned income from baby sitting.Wilma's taxable income is:
A)$700.
B)$850.
C)$1,800.
D)$2,250.
E)None of the above.
Answer: E
Q2) Roy and Linda were divorced in 2011.The divorce decree awards custody of their children to Linda but is silent as to who is entitled to claim them as dependents.If Roy furnished more than half of their support, he can claim them as dependents in 2012.
A)True
B)False
Answer: False
Q3) Once a child reaches age 19, the kiddie tax no longer applies.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Gross Income: Concepts and Inclusions
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/70924
Sample Questions
Q1) The effects of a below-market loan for $100,000 made by a corporation to its chief executive officer as an enticement to get him to remain with the company are:
A)The corporation has imputed interest income and the employee is deemed to have received a gift.
B)The corporation has imputed interest income and dividends paid.
C)The employee has no income unless the funds are invested and produce investment income for the year.
D)The employee has imputed compensation income and the corporation has imputed interest income.
E)None of the above.
Q2) In January 2012, Tammy purchased a bond due in 24 months.The cost of the bond is $857 and its maturity value is $1,000.No interest is paid each year, but the compound interest rate on the bond is 8%.Tammy also purchased a Series EE United States Government bond for $558, with a maturity value in 10 years of $1,000.This is the only Series EE bond she has ever owned.The Series EE bond is sold to yield 6% interest.Tammy is 13 years old and has no other source of income.She is claimed as a dependent by her parents.Compute Tammy's gross income from the bond and Series EE bond for 2012.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Gross Income: Exclusions
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/70923
Sample Questions
Q1) The exclusion for health insurance premiums paid by the employer applies to:
A)Only current employees and their spouses.
B)Only current employees and their spouses and dependents.
C)Only current employees and their disabled spouses.
D)Present employees, retired former employees, and their spouses and dependents.
E)None of the above.
Q2) Ridge is the manager of a motel.As a condition of his employment, Ridge is required to live in a room on the premises so that he would be there in case of emergencies.Ridge considered this a fringe benefit, since he would otherwise be required to pay $800 per month rent.The room that Ridge occupied normally rented for $70 per night, or $2,100 per month.On the average, 90% of the motel rooms were occupied.As a result of this rent-free use of a room, Ridge is required to include in gross income.
A)$0.
B)$800 per month.
C)$2,100 per month.
D)$1,890 ($2,100 ´ .90).
E)None of the above.
Q3) What Federal income tax benefits are provided for college students?
To view all questions and flashcards with answers, click on the resource link above.
7
Chapter 6: Deductions and Losses: in General
Available Study Resources on Quizplus for this Chatper
153 Verified Questions
153 Flashcards
Source URL: https://quizplus.com/quiz/70922
Sample Questions
Q1) The period in which an accrual basis taxpayer can deduct an expense is determined by applying the economic performance and all events tests.
A)True
B)False
Q2) Bobby operates a drug trafficking business.Because he has an accounting background, he keeps detailed financial records.What expenses can Bobby deduct on his Federal income tax return?
Q3) The amount of the addition to the reserve for bad debts for an accrual method taxpayer is allowed as a deduction for tax purposes, but is not allowed for a cash method taxpayer.
A)True
B)False
Q4) Which of the following are deductions for AGI?
A)Mortgage interest on a personal residence.
B)Property taxes on a personal residence.
C)Mortgage interest on a building used in a business.
D)Fines and penalties incurred in a trade or business.
E)None of the above.
Q5) Briefly discuss the disallowance of deductions for capital expenditures.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/70921
Sample Questions
Q1) A nonbusiness bad debt deduction can be taken any year after the debt becomes totally worthless.
A)True
B)False
Q2) A corporation which makes a loan to a shareholder can have a nonbusiness bad debt deduction.
A)True
B)False
Q3) Last year, Sarah (who files as single) had silverware worth $10,000 (basis $6,000) stolen from her home. Sarah's insurance company told her that her policy did not cover the theft. Sarah's other itemized deductions last year were $10,000. She had AGI of $30,000 last year. In August of the current year, Sarah's insurance company decided that Sarah's policy did cover the theft of the silverware and they paid Sarah $5,000. Determine the tax treatment of the $5,000 received by Sarah during the current year.
A)None of the $5,000 should be included in gross income.
B)$2,900 should be included in gross income.
C)$5,000 should be included in gross income.
D)Last year's return should be amended to include the $5,000.
E)None of the above.
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Depreciation, Cost Recovery, Amortization, and Depletion
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/70920
Sample Questions
Q1) The basis of an asset on which $139,000 has been expensed under § 179 will be reduced by $139,000, even if $139,000 cannot be expensed in the current year because of the taxable income limitation.
A)True
B)False
Q2) Land improvements are generally not eligible for cost recovery.
A)True
B)False
Q3) The maximum cost recovery method for all personal property under MACRS is 150% declining balance.
A)True
B)False
Q4) Once the more-than-50% business usage test is passed for listed property, it does matter if the business usage for the property drops to 50% or less during the recovery period.
A)True
B)False
Q5) Rod paid $950,000 for a new warehouse on April 14, 2012.He sold the warehouse on September 29, 2017.Determine the cost recovery deduction for 2012 and 2017.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Deductions: Employee and
Self-Employed-Related Expenses
Available Study Resources on Quizplus for this Chatper
166 Verified Questions
166 Flashcards
Source URL: https://quizplus.com/quiz/70919
Sample Questions
Q1) A participant who is at least age 59 1/2 can make a tax-free qualified withdrawal from a Roth IRA after a five-year holding period.
A)True
B)False
Q2) Janet, who lives and works in Newark, travels to Atlanta for a Thursday-Friday business conference. She stays over after the conference and visits relatives and friends on Saturday. Under certain circumstances, the meals and lodging expenses for Saturday can be considered as business related.
A)True
B)False
Q3) Concerning the deduction for moving expenses, what circumstances, if any, will excuse a taxpayer from meeting the time test of 39 or 78 weeks?
Q4) Madison is an instructor of fine arts at a local community college.If she spends $600 (not reimbursed) on art supplies for her classes, $250 of this amount can be claimed as a deduction for AGI.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Deductions and Losses: Certain Itemized
Deductions
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/70945
Sample Questions
Q1) Chad pays the medical expenses of his son, James.James would qualify as Chad's dependent except that he earns $7,500 during the year.Chad may not claim James' medical expenses because he is not a dependent.
A)True
B)False
Q2) George, a sculptor, has an elevator installed in his house to transport heavy materials to his loft studio because he is concerned that he might strain his back by lifting heavy objects. George may deduct the full cost of the elevator as a medical expense.
A)True
B)False
Q3) Ronaldo contributed stock worth $12,000 to the Children's Protective Agency, a qualified charity.He acquired the stock twenty months ago for $6,000.He may deduct $6,000 as a charitable contribution deduction (subject to percentage limitations).
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
12
Chapter 11: Investor Losses
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/70944
Sample Questions
Q1) Kenton has investments in two passive activities.Activity A, acquired three years ago, produces income in the current year of $60,000.Activity B, acquired last year, produces a loss of $110,000 in the current year.At the beginning of this year, Kenton's at-risk amounts in Activities A and B are $10,000 and $120,000, respectively.What is the amount of Kenton's suspended passive loss with respect to these activities at the end of the current year?
A)$100,000.
B)$50,000.
C)$40,000.
D)$0.
E)None of the above.
Q2) Identify how the passive loss rules broadly classify various types of income and losses.Provide examples of each category.
Q3) Rachel participates 150 hours in Activity A and 400 hours in Activity B, both of which are nonrental businesses.Both activities are passive.
A)True
B)False
Q4) Describe the general rules that limit the deduction of investment interest expense.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Tax Credits and Payments
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/70943
Sample Questions
Q1) Child and dependent care expenses do not include amounts paid for general household services.
A)True
B)False
Q2) If a taxpayer is required to recapture any tax credit for rehabilitation expenditures, the recapture amount need not be added to the adjusted basis of the rehabilitation expenditures.
A)True
B)False
Q3) Several years ago, Tom purchased a structure for $300,000 that was originally placed in service in 1929.Three and one-half years ago he incurred qualifying rehabilitation expenditures of $600,000.In the current year, Tom sold the property in a taxable transaction.Calculate the amount of the recapture of the tax credit for rehabilitation expenditures.
A)$0.
B)$24,000.
C)$36,000.
D)$48,000.
E)None of the above.
Q4) Discuss the treatment of unused general business credits.
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Property Transactions: Determination of Gain or
Loss, Basis Considerations, and Nontaxable
Exchanges-Part 1
Available Study Resources on Quizplus for this Chatper
200 Verified Questions
200 Flashcards
Source URL: https://quizplus.com/quiz/70942
Sample Questions
Q1) Agnes, a calendar year taxpayer, lists her principal residence with a realtor on January 7, 2012, enters into a contract to sell on March 5, 2012, and sells (i.e., the closing date) the residence on May 15, 2012. The realized gain on the sale is $240,000. Which date is the appropriate ending date in determining if the residence has been owned and used by the taxpayer as the principal residence for at least two years during the prior five-year period?
A)January 7, 2012.
B)March 5, 2012.
C)May 15, 2012.
D)December 31, 2012.
E)None of the above.
Q2) Deidra has owned and occupied her principal residence for 10 years.Two and one-half years ago she married Doug who moved into her house.Doug has never owned a home.When Deidra is transferred to another city, she sells the house and has a realized gain of $425,000.Deidra can exclude the realized gain from her gross income under § 121 if she and Doug file a joint return.
A)True
B)False
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Property Transactions: Determination of Gain or
Loss, Basis Considerations, and Nontaxable
Exchanges-Part 2
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/70941
Sample Questions
Q1) To be eligible to elect postponement of gain treatment for an involuntary conversion, what are the three tests for qualifying replacement property?
Q2) Annette purchased stock on March 1, 2012, for $165,000.At December 31, 2012, it was worth $171,000.She also purchased a bond on September 1, 2012, for $20,000.At year end, it was worth $16,000.Determine Annette's realized and recognized gain or loss.
Q3) For disallowed losses on related-party transactions, who has the right of offset?
Q4) Monica sells a parcel of land to her son, Elbert, for $90,000.Monica's adjusted basis is $100,000.Three years later, Elbert gives the land to his fiancée, Karen.At that date, the land is worth $104,000.No gift tax is paid.Since Elbert is going to be stationed in the U.S.Army in Germany for 3 years, they do not plan on being married until his tour is completed.Six months after receiving the land, Karen sells it for $110,000.At the same time, Karen sends Elbert a "Dear John" email.Calculate Karen's realized and recognized gain or loss.
Q5) Maurice sells his personal use automobile at a realized loss.Under what circumstances can Maurice deduct the loss? What if the personal use asset was sold at a realized gain?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Q6) Define a bargain purchase of property and discuss the related tax consequences.
Chapter 14: Property Transactions: Capital Gains and
Losses, 1231, Recapture Provisions
Available Study Resources on Quizplus for this Chatper
144 Verified Questions
144 Flashcards
Source URL: https://quizplus.com/quiz/70940
Sample Questions
Q1) Red Company had an involuntary conversion on December 23, 2012.The machinery had been acquired on April 1, 2010, for $49,000 and its adjusted basis was $14,200.The machinery was completely destroyed by fire and Red received $10,000 of insurance proceeds for the machine and did not replace it.This was Red's only casualty or theft event for the year.As a result of this event, Red 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) An individual taxpayer received a valuable painting from his uncle, a famous painter. The painter did not create the painting, but had purchased it from another artist. After the taxpayer held the painting for two years, he sold it for a $400,000 gain. The gain is a long-term capital gain.
A)True
B)False
Q3) Section 1231 property generally does not include musical compositions.
A)True
B)False
Page 17
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Alternative Minimum Tax
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/70939
Sample Questions
Q1) If the taxpayer elects to capitalize intangible drilling costs and to amortize them over a 10-year period for regular income tax purposes, there is no adjustment or preference for AMT purposes.
A)True
B)False
Q2) Evan is a contractor who constructs both commercial and residential buildings. Even though some of the contracts could qualify for the use of the completed contract method, Evan decides to use the percentage of the completion method for all of his contracts. Therefore, no AMT adjustment is required.
A)True
B)False
Q3) In 2012, Ben exercised an incentive stock option (ISO), acquiring stock with a fair market value of $190,000 for $170,000.His AMT basis for the stock is $170,000, his regular income tax basis for the stock is $170,000, and his AMT adjustment is $0 ($170,000$170,000).
A)True
B)False
Q4) Can AMT adjustments and preferences be both positive and negative?
Q5) Will all AMT adjustments reverse? That is, do they relate to timing differences?
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 16: Accounting Periods and Methods
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/70938
Sample Questions
Q1) Gold Corporation, Silver Corporation, and Platinum Corporation are equal partners in the GSP Partnership, which was formed on July 1, 2012.Gold and Silver use a calendar tax year, and Platinum's tax year ends June 30th.GSP is not a seasonal business.
A)GSP must use a tax year ending December 31st, and Platinum can retain its tax year ending June 30th.
B)GSP must use a tax year ending June 30th, and the partners must change their tax years to end on June 30th.
C)GSP must use a tax year ending December 31st and Platinum must change its tax year to December 31st.
D)GSP may elect its tax year without regard to the partners' tax years.
E)None of the above.
Q2) Ted, a cash basis taxpayer, received a $150,000 bonus in 2012 when he was in the 35% marginal tax bracket.In 2013, when Ted was in the 28% marginal tax bracket, it was discovered that the bonus was incorrectly computed, and Ted was required to refund $40,000 to his employer.As a result of the refund, Ted can reduce his 2013 tax liability by $14,000 (.35 ´ $40,000).
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 17: Corporations: Introduction and Operating Rules
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/70937
Sample Questions
Q1) Bjorn owns a 60% interest in an S corporation that earned $150,000 in 2012.He also owns 60% of the stock in a C corporation that earned $150,000 during the year.The S corporation distributed $30,000 to Bjorn and the C corporation paid dividends of $30,000 to Bjorn.How much income must Bjorn report from these businesses?
A)$0 income from the S corporation and $30,000 income from the C corporation.
B)$30,000 income from the S corporation and $30,000 of dividend income from the C corporation.
C)$90,000 income from the S corporation and $0 income from the C corporation.
D)$90,000 income from the S corporation and $30,000 income from the C corporation.
E)None of the above.
Q2) Lilac Corporation incurred $4,700 of legal and accounting fees associated with its incorporation. The $4,700 is deductible as startup expenditures on Lilac's tax return for the year in which it begins business.
A)True
B)False
Q3) Briefly describe the charitable contribution deduction rules applicable to C corporations.
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 18: Corporations: Organization and Capital Structure
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/70936
Sample Questions
Q1) Rita forms Finch Corporation by transferring land (basis of $125,000; fair market value of $750,000) which is subject to a mortgage of $375,000. Two weeks prior to incorporating Finch, Rita borrows $125,000 for personal purposes and gives the lender a second mortgage on the land. Finch Corporation issues stock worth $250,000 to Rita and assumes the two mortgages on the land. What are the tax consequences to Rita and to Finch Corporation?
Q2) 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
Q3) Even if boot is generated under § 357(b) (i.e., the liability is not supported by a bona fide business purpose), the transferor shareholder may not have to recognize gain.
A)True
B)False
Q4) Because services are not considered property under § 351, a taxpayer must report as income the fair market value of stock received for such services.
A)True
B)False
Page 21
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Corporations: Distributions Not in Complete
Liquidation
Available Study Resources on Quizplus for this Chatper
145 Verified Questions
145 Flashcards
Source URL: https://quizplus.com/quiz/70935
Sample Questions
Q1) Which of the following statements regarding constructive dividends is not correct?
A)Constructive dividends do not need to be formally declared or designated as a dividend.
B)Constructive dividends need not be paid pro rata to the shareholders.
C)Corporations that receive constructive dividends may not use the dividends received deduction.
D)Constructive dividends are taxable as dividends only to the extent of earnings and profits.
E)All of the above.
Q2) Which of the following statements is incorrect with respect to determining current E & P?
A)All tax-exempt income should be added back to taxable income.
B)Dividends received deductions should be added back to taxable income.
C)Charitable contributions in excess of the 10% of taxable income limit should be subtracted from taxable income.
D)Federal income tax refunds should be added back to taxable income.
E)None of the above statements are incorrect.
Q3) When is a redemption to pay death taxes under § 303 most advantageous?
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 20: Corporations: Distributions in Complete
Liquidation and an Overview of Reorganizations
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/70933
Sample Questions
Q1) Lyon has 100,000 shares outstanding that are worth $10 per share.It uses 32% of its stock plus $80,000 to
Q2) The stock in Toucan Corporation is held equally by two brothers. Four years ago, the shareholders transfer property (basis of $200,000, fair market value of $220,000) to Toucan Corporation as a contribution to capital. In the current year and pursuant to a complete liquidation of Toucan, the property is distributed proportionately to the brothers. At the time of the distribution, the property had a fair market value of $40,000. What amount of loss will Toucan Corporation recognize on the distribution of the property?
A)$0.
B)$20,000.
C)$160,000.
D)$180,000.
E)None of the above.
Q3) A subsidiary is liquidated pursuant to § 332. The parent has held 100% of the stock in the subsidiary for the past ten years. The subsidiary has a net operating loss carryover of $400,000. The net operating loss does not carry over to the parent.
A)True
B)False
Page 23
To view all questions and flashcards with answers, click on the resource link above.
Chapter 21: Partnerships
Available Study Resources on Quizplus for this Chatper
159 Verified Questions
159 Flashcards
Source URL: https://quizplus.com/quiz/70932
Sample Questions
Q1) Tara and Robert formed the TR Partnership four years ago.Because they decided the company needed some expertise in multimedia presentations, they offered Katie a 1/3 interest in partnership capital if she would come to work for the partnership.She will also receive a 25% interest in future partnership profits.On July 1 of the current year, the unrestricted partnership capital interest (fair market value of $25,000) was transferred to Katie.How should Katie treat the receipt of the partnership interest in the current year?
A)Nontaxable.
B)$25,000 ordinary income.
C)$25,000 short-term capital gain.
D)$25,000 long-term capital gain.
E)None of the above.
Q2) If the partnership properly makes an election for treatment of a specific tax item, the partner is bound by that treatment.
A)True
B)False
Q3) The "outside basis" is defined as a partner's basis in the partnership interest.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 22: S: Corporations
Available Study Resources on Quizplus for this Chatper
159 Verified Questions
159 Flashcards
Source URL: https://quizplus.com/quiz/70931
Sample Questions
Q1) Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?
A)Taxable dividends.
B)Stock dividend (taxable).
C)Depreciation recapture income.
D)Tax-exempt income.
E)None of the above.
Q2) The alternative minimum tax applies to an S corporation.
A)True
B)False
Q3) Which, if any, of the following can be an eligible shareholder of an S corporation?
A)A resident alien.
B)A U.S.partnership.
C)A foreign corporation.
D)None of the above can own S stock.
Q4) There is no limit on the amount of passive investment income that an S corporation can earn during the year.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 25
Chapter 23: Exempt Entities
Available Study Resources on Quizplus for this Chatper
151 Verified Questions
151 Flashcards
Source URL: https://quizplus.com/quiz/70930
Sample Questions
Q1) Wonder, Inc., a private foundation, makes a speculative investment of $800,000 that puts the foundation assets at risk.Calculate the tax on jeopardizing investments.Assume that corrective action is taken so that the additional tax does not apply.
Q2) Identify the components of the tax model for unrelated business taxable income.
Q3) Teal, Inc., is a private foundation which failed to distribute an adequate amount of income for the exempt purpose of Teal.Which of the following statements is correct?
A)An excise tax in the form of an initial tax at the rate of 5% may be imposed on Teal.
B)An excise tax in the form of an initial tax at the rate of 2.5% may be imposed on the foundation manager.
C)An excise tax in the form of an additional tax at the rate of 100% may be imposed on Teal.
D)An excise tax in the form of an additional tax at the rate of 50% may be imposed on the foundation manager.
E)None of the statements is correct.
Q4) Which exempt organizations are not required to file an annual Federal tax return?
To view all questions and flashcards with answers, click on the resource link above. Page 26
Chapter 24: Multistate Corporate Taxation
Available Study Resources on Quizplus for this Chatper
145 Verified Questions
145 Flashcards
Source URL: https://quizplus.com/quiz/70929
Sample Questions
Q1) Almost all of the states allow ____________________ treatment to an LLC for income tax purposes. or or
Q2) General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to an agency of the U.S. government. State A applies a throwback rule. In which state(s) will the sale be included in the sales factor numerator?
A) $0 in A.
B) $50,000 in A, with the balance exempted from other states' sales factors under the Colgate doctrine.
C) $100,000 in A.
D) In all of the states, according to the apportionment formulas of each, as the U.S. government is present in all states.
Q3) Typically exempt from the sales/use tax base is the purchase of tools by a manufacturer to make the widgets that it sells.
A)True
B)False
Q4) An ad valorem property tax is based on the asset's current
To view all questions and flashcards with answers, click on the resource link above. Page 27
Chapter 25: Taxation of International Transactions
Available Study Resources on Quizplus for this Chatper
148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/70928
Sample Questions
Q1) In allocating interest expense between U.S.and foreign sources, a taxpayer must use the tax basis of the income-producing assets.
A)True
B)False
Q2) Serena, a nonresident alien, is employed by GlobalCo, a foreign corporation.Serena works in the United States for 3 days during the year, receiving a gross salary of $2,500 for this period.GlobalCo is not engaged in a U.S.trade or business.Under the "commercial traveler" exception, the $2,500 is not classified as U.S.-source income.
A)True
B)False
Q3) Which of the following is not a U.S.person?
A)Domestic corporation.
B)Citizen of Turkey with U.S.permanent residence status (i.e., green card).
C)U.S.corporation 100% owned by a foreign corporation.
D)Foreign corporation 100% owned by a domestic corporation.
Q4) Losses and deductions, similar to income items, can be U.S.- or foreign-source.
A)True
B)False
Q5) Discuss the primary purposes of income tax treaties.
To view all questions and flashcards with answers, click on the resource link above. Page 28
Chapter 26: Tax Practice and Ethics
Available Study Resources on Quizplus for this Chatper
147 Verified Questions
147 Flashcards
Source URL: https://quizplus.com/quiz/70927
Sample Questions
Q1) The AICPA's Statements on Standards for Tax Services must be followed by its members; they are more than merely advisory.
A)True
B)False
Q2) It is advisable that an IRS audit be conducted at the office of the tax advisor, and not of the client.
A)True B)False
Q3) In connection with the taxpayer penalty for substantial understatement of tax liability, what defenses (if any) are available?
Q4) A taxpayer can be subject to both ____________________ and ____________________ penalties for tax misconduct. or
Q5) Under Circular 230, tax preparer Winston cannot disclose to a mortgage banker the income level of her client Pickett, or other information acquired by preparing the return, without Pickett's permission.
A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 29
Chapter 28: Income Taxation of Trusts and Estates
Available Study Resources on Quizplus for this Chatper
145 Verified Questions
145 Flashcards
Source URL: https://quizplus.com/quiz/70926
Sample Questions
Q1) The Whitmer Trust operates a manufacturing business and distributes the profits to its income beneficiaries. Whitmer passes through to the income beneficiaries the data needed to compute their domestic production activities deduction.
A)True
B)False
Q2) The Crown Trust distributed one-half of its accounting income to Lee this year.Lee also is allocated one-half of Crown's credit for building low-income housing.
A)True
B)False
Q3) If provided for in the controlling agreement, a trust might terminate when the income beneficiary reaches age 35.
A)True
B)False
Q4) The Moot Trust distributes an asset to its income beneficiary that shows a realized gain. What are the Federal income tax consequences of the distribution? What if the asset shows a realized loss?
Q5) Every ____________________ trust is allowed a $300 personal exemption.
Q6) The Form 1041 of a calendar-year trust is due on ____________________ 15.
To view all questions and flashcards with answers, click on the resource link above. Page 30