Principles of Taxation Review
Questions
Course Introduction
Principles of Taxation provides an introduction to the fundamental concepts and frameworks that underpin modern taxation systems. This course explores the objectives and functions of taxation, the legal and ethical contexts of tax policy, and the basic principles guiding the assessment, collection, and administration of various taxes, including income, corporate, value-added, and indirect taxes. Students will develop a foundational understanding of key tax concepts such as tax incidence, equity, efficiency, and compliance, while analyzing the impact of taxation on individuals, businesses, and the broader economy. The course also addresses current issues in tax law, tax planning strategies, and the role of taxation in government finance and economic development.
Recommended Textbook
South Western Federal Taxation 2019 Comprehensive 42nd Edition by David M. Maloney
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28 Chapters
4038 Verified Questions
4038 Flashcards
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Chapter 1: An Introduction to Taxation and Understanding
the Federal Tax Law
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211 Verified Questions
211 Flashcards
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Sample Questions
Q1) Failure to file penalty
A)3 years from date return is filed
B)3 years from due date of return
C)20% of underpayment
D)5% per month (25% limit)
E)0.5% per month (25% limit)
F)Conducted at IRS office
G)Conducted at taxpayer's office
H)6 years
I)45-day grace period allowed to IRS
J)No statute of limitations (period remains open)
K)75% of underpayment
L)No correct match provided
Answer: D
Q2) A parent employs his twin daughters, age 17, in his sole proprietorship. The daughters are not subject to FICA coverage.
A)True
B)False
Answer: True
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Chapter 2: Working with the Tax Law
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Sample Questions
Q1) The IRS is not required to make a letter ruling public.
A)True
B)False
Answer: False
Q2) A taxpayer should always minimize his or her tax liability.
A)True
B)False Answer: False
Q3) Subchapter D refers to the "Corporate Distributions and Adjustments" section of the Internal Revenue Code.
A)True
B)False
Answer: False
Q4) Deferring income to a subsequent year is considered to be tax avoidance.
A)True
B)False Answer: True
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Chapter 3: Computing the Tax
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180 Flashcards
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Sample Questions
Q1) An uncle who lives with taxpayer.
Answer: b
Q2) Dan and Donna are husband and wife and file separate returns for the year. If Dan itemizes his deductions from AGI, Donna cannot claim the standard deduction.
A)True
B)False
Answer: True
Q3) Pedro is married to Consuela, who lives with him. Both are U.S. citizens and residents of Nebraska. Pedro furnishes all of the support of his parents, who are citizens and residents of the United States. He also furnishes all of the support of Consuela's parents, who are citizens and residents of El Salvador. Consuela has no gross income for the year. If Pedro and Consuela file as married persons filing jointly, how many dependents can they claim?
Answer: Two. Only Pedro's parents are dependents. Consuela's parents meet neither the citizenship nor residency tests.
Q4) An ex-husband (divorce occurred last year) who lives with taxpayer.
Answer: b
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5
Chapter 4: Gross Income: Concepts and Inclusions
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Sample Questions
Q1) Mark is a cash basis taxpayer. He is a partner in the M&M partnership, and his share of the partnership's profits for 2018 is $90,000. Only $40,000 was distributed to him in January 2018, and this was his share of the 2017 partnership profits. None of the 2018 profits were distributed. Mark's gross income from the partnership for 2018 is $40,000.
A)True
B)False
Q2) In some foreign countries, the tax law specifically designates the types of income items that are includible in gross income. How does this approach compare with the U.S. Internal Revenue Code (§ 61)? What is a major advantage to the approach used in the U.S. tax law?
Q3) Ted and Alice were in the process of negotiating a divorce agreement. They own bonds with a basis of $800,000 and a fair market value of $800,000. They also own common stock with a basis of $600,000 and a fair market value of $800,000. Alice is trying to decide whether to bargain to receive the bonds or the stock. She has no plans for selling the bonds or stock, whichever she receives.
a. Which would you advise Alice to receive?
b. From Ted's perspective, are the assets of equal value?
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Chapter 5: Gross Income: Exclusions
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Sample Questions
Q1) Roger is in the 35% marginal tax bracket. Roger's employer has created a flexible spending account for medical and dental expenses that are not covered by the company's health insurance plan. Roger had his salary reduced by $1,200 during the year for contributions to the flexible spending plan. However, Roger incurred only $1,100 in actual expenses for which he was reimbursed. Under the plan, he must forfeit the $100 unused amount. His after-tax cost of overfunding the plan is $65.
A)True
B)False
Q2) A scholarship recipient at State University may exclude from gross income the scholarship proceeds used to pay for:
A) Only tuition.
B) Tuition, books, and supplies.
C) Tuition, books, supplies, meals, and lodging.
D) Meals and lodging.
E) None of these.
Q3) What are the tax problems associated with payments received by a wife from her deceased husband's employer? (Assume the wife renders no services to the employer.)
Q4) 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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Sample Questions
Q1) Salaries are considered an ordinary and necessary expense of a trade or business if they meet what other requirement? What are the tax consequences if this requirement is not met?
Q2) If part of a shareholder/employee's salary is classified as unreasonable, determine the effect on the:
a. Shareholder/employee's gross income.
b. Corporation's taxable income.
Q3) Fines and penalties paid for violations of the law (e.g., illegal dumping of hazardous waste) are deductible only if they relate to a trade or business.
A)True
B)False
Q4) The cost of legal advice associated with the preparation of an individual's Federal income tax return that is paid in 2018 is not deductible because it is a personal expense. A)True
B)False
Q5) Briefly discuss the disallowance of deductions for capital expenditures.
Q6) What is the appropriate tax treatment for expenditures paid by a taxpayer for another's benefit?
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Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
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Sample Questions
Q1) What are the three methods of handling research and experimental expenditures incurred in a trade or business?
Under what circumstances would you choose each?
Q2) Which of the following events would produce a deductible loss in 2018?
A) Erosion of personal use land due to rain or wind.
B) Termite infestation of a personal residence over a several year period.
C) Damages to personal automobile resulting from a taxpayer's willful negligence.
D) A misplaced diamond ring.
E) None of the above.
Q3) A net operating loss occurring in 2018 can only be carried forward and can offset no more than 80% of taxable income in a subsequent year.
A)True
B)False
Q4) If an election is made to defer deduction of research expenditures, the amortization period is based on the expected life of the research project if less than 60 months.
A)True
B)False
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Chapter 8: Depreciation, Cost Recovery, Amortization, and Depletion
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Sample Questions
Q1) Under MACRS, the double-declining balance method is used for property other than real estate with a recovery period of 15 or 20 years.
A)True
B)False
Q2) Sid bought a new $1,320,000 seven-year class asset on August 2, 2018. On December 2, 2018, he purchased $800,000 of used five-year class assets. If Sid elects § 179 and does not take additional first-year depreciation, what is the maximum cost recovery deduction for these purchases for 2018?
Q3) On May 5 of the current tax year, Byrne purchased a patent that qualifies as a § 197 intangible. The cost of the patent was $207,000 and Byrne is a calendar-year taxpayer. In the current tax year, how much of the patent's cost may Byrne amortize?
A) $1,150.
B) $4,600.
C) $9,200.
D) $13,800.
E) None of the above.
Q4) Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.
Page 10
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Chapter 9: Deductions: Employee and
Self-Employed-Related Expenses
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Sample Questions
Q1) Contributions to a Roth IRA can be made up to the due date (excluding extensions) of the taxpayer's income tax return.
A)True
B)False
Q2) The § 222 deduction for tuition and related expenses is available:
A) Regardless of the amount of a taxpayer's MAGI.
B) To cover room and board expenses to attend college.
C) To a married taxpayer filing a separate return.
D) Even if a taxpayer does claim the standard deduction.
E) None of these.
Q3) When using the automatic mileage method, which, if any, of the following expenses also can be claimed?
A) Engine tune-up.
B) Parking.
C) Interest on automobile loan.
D) MACRS depreciation.
E) None of these.
Q4) When is a taxpayer's work assignment in a new locale temporary? Permanent? What difference does it make?
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Chapter 10: Deductions and Losses: Certain Itemized
Deductions
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Sample Questions
Q1) Shirley sold her personal residence to Mike for $400,000. Before the sale, Shirley paid the real estate taxes of $7,030 for the calendar year. For income tax purposes, the deduction is apportioned as follows: $4,000 to Shirley and $3,030 to Mike.
a. What is Mike's basis in the residence?
b. What is Shirley's amount realized from the sale of the residence?
c. What amount of real estate taxes can Mike deduct?
d. What amount of real estate taxes can Shirley deduct?
Q2) Joe, a cash basis taxpayer, took out a 12-month business loan on December 1, 2018. He prepaid all $3,600 of the interest on the loan on December 1, 2018. Joe can deduct only $300 of the prepaid interest in 2018.
A)True
B)False
Q3) Mason, a physically handicapped individual, pays $10,000 this year for the installation of wheelchair ramps, support bars, and railings in his personal residence. These improvements increase the value of his personal residence by $2,000. Only $8,000 of the expenditure qualifies as a medical expense for tax purposes.
A)True
B)False
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Chapter 11: Investor Losses
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Sample Questions
Q1) Nell sells a passive activity with an adjusted basis of $45,000 for $105,000. Suspended losses attributable to this property total $45,000. The total gain and the taxable gain are:
A) $60,000 total gain? $105,000 taxable gain.
B) $10,000 total gain? $15,000 taxable gain.
C) $60,000 total gain? $0 taxable gain.
D) $60,000 total gain? $15,000 taxable gain.
E) None of the above.
Q2) Jackson Company incurs a $50,000 loss on a passive activity during the year. The company has active income of $34,000 and portfolio income of $24,000. If Jackson is a personal service corporation, it may deduct $34,000 of the passive activity loss.
A)True
B)False
Q3) Roger owns and actively participates in the operations of an apartment building which produces a $40,000 loss during the year. He has AGI of $150,000 from an active business. He may deduct $25,000 of the loss.
A)True
B)False
Q4) Treatment of an installment sale of a passive activity.
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Page 13
Chapter 12: Tax Credits and Payments
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Sample Questions
Q1) If an employee holds two jobs during the year, an overwithholding of FICA tax always will result.
A)True
B)False
Q2) Susan generated $55,000 of net earnings from the conduct of a tax preparation business that she operated during the tax-filing season. She also received wages of $78,200 from her full-time job. Compute the self-employment taxes due for 2018.
Q3) A taxpayer's earned income credit is dependent on the number of his or her qualifying children.
A)True
B)False
Q4) In the event that overwithholding of FICA tax occurs because the taxpayer has more than one employer, the excess amount should be claimed as a credit on the Federal income tax return of the employee.
A)True
B)False
Q5) Explain the purpose of the disabled access credit and describe the general characteristics of its computation.
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Chapter 13: Property Transactions: Determination of Gain or
Loss, Basis Considerations, and Nontaxable Exchanges
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285 Verified Questions
285 Flashcards
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Sample Questions
Q1) A loss from the sale of a personal use asset that would be disallowed cannot be recognized even if the taxpayer converts the asset to business use prior to its sale.
A)True
B)False
Q2) 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?
Q3) The amount of the loss basis of a gift will differ from the amount of the gain basis only if at the date of the gift the adjusted basis of the property exceeds the property's fair market value.
A)True
B)False
Q4) The adjusted basis of an asset is the original cost (or basis) plus capital recoveries less capital additions.
A)True
B)False
Q5) What requirements must be satisfied for a delayed swap to qualify for § 1031 like-kind exchange treatment?
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Chapter 14: Property Transactions: Capital Gains and
Losses, Section 1231, and Recapture Provisions
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167 Verified Questions
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Sample Questions
Q1) Residential real estate was purchased in 2015 for $345,000, held as rental property, and depreciated straight-line.
Assume the land cost was $45,000 and the building cost was $300,000. Depreciation totaled $34,089. The building and land were sold on June 10, 2018, for $683,000 total. What is the tax status of the property, the nature of the gain from the disposition, and is any of it § 1250 depreciation recapture gain or unrecaptured § 1250 gain?
Q2) The tax law requires that capital gains and losses be separated from other types of gains and losses. Among the reasons for this treatment are:
A) Long-term capital gains may be taxed at a lower rate than ordinary gains.
B) Capital losses that are short-term are not deductible.
C) Net capital loss is deductible only up to $3,000 per year for individual taxpayers.
D) a. and c.
E) None of the above.
Q3) If § 1231 asset casualty gains and losses net to a gain, the gain is treated as a § 1231 gain.
A)True
B)False
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Page 16
Chapter 15: Taxing Business Income
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Sample Questions
Q1) Tomas owns a sole proprietorship, and Lucy is the sole shareholder of a C corporation. In the current year both businesses make a net profit of $60,000. Neither business distributes any funds to the owners in the year. For the current year, Tomas must report $60,000 of income on his individual tax return, but Lucy is not required to report any income from the corporation on her individual tax return.
A)True
B)False
Q2) Taylor, a single taxpayer, has taxable income before the QBI deduction of $187,500. Taylor, a CPA, operates an accounting practice as a single member LLC (which he reports as a sole proprietorship). During 2018, his proprietorship reports net income of $150,000 and W-2 wages of $125,000 and $10,000 of qualified property. What is Taylor's qualified business income deduction?
A) $-0-.
B) $12,000.
C) $30,000.
D) $31,500.
E) None of the above.
Q3) What are some of the issues remaining unresolved with the QBI deduction?
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Chapter 16: Accounting Periods and Methods
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Sample Questions
Q1) Red Corporation and Green Corporation are equal partners in the R & G Partnership. Red Corporation's tax year ends September 30th, and Green Corporation is a calendar year taxpayer. The greatest aggregate deferral of income would occur if the partnership used a calendar year for tax purposes.
A)True
B)False
Q2) Barbara operates a sporting goods store. She uses the cash method and treats inventory as non-incidental supplies. At the beginning of the year, she had inventory of $26,000. She purchased $470,000 of goods during the year. Her ending inventory was $42,000. She makes sure to pay all of her suppliers by the last day of her tax year. What is Barbara's inventory deduction for the year?
A) $428,000.
B) $454,000.
C) $470,000.
D) $538,000.
E) None of the above.
Q3) What incentives do the tax accounting rules provide for taxpayers to voluntarily change from an incorrect method of accounting that has reduced the company's tax liability in prior years?
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Page 18
Chapter 17: Corporations: Introduction and Operating Rules
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Sample Questions
Q1) Wanda is the Chief Executive Officer of Pink corporation, a publicly traded, calendar year corporation. For the current year, Wanda's compensation package consists of: Cash compensation $2.5 million
Nontaxable fringe benefits 250,000
Taxable fringe benefits 150,000
Bonus tied to company performance 2 million
How much of Wanda's compensation is deductible by Pink Corporation?
A) $1,000,000.
B) $1,250,000.
C) $3,250,000.
D) $4,900,000.
E) None of the above.
Q2) What is the purpose of Schedule M-3? Which corporations are required to file Schedule M-3?
Q3) Explain the rules regarding the accounting periods available to corporate taxpayers.
Q4) Briefly describe the charitable contribution deduction rules applicable to C corporations.
Q5) Briefly describe the accounting methods available for adoption by a C corporation.
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Page 19
Chapter 18: Corporations: Organization and Capital Structure
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Sample Questions
Q1) Ann transferred land worth $200,000, with a tax basis of $40,000, to Brown Corporation, an existing entity, for 100 shares of its stock. Brown Corporation has two other shareholders, Bill and Bob, each of whom holds 100 shares. With respect to the transfer:
A) Ann has no recognized gain.
B) Brown Corporation has a basis of $160,000 in the land.
C) Ann has a basis of $200,000 in her 100 shares in Brown Corporation.
D) Ann has a basis of $40,000 in her 100 shares in Brown Corporation.
E) None of the above.
Q2) If both §§ 357(b) and (c) apply to the same transfer (i.e., the liability is not supported by a bona fide business purpose and also exceeds the basis of the properties transferred), § 357(c) predominates.
A)True
B)False
Q3) Similar to the like-kind exchange provision, § 351 can be partly justified under the wherewithal to pay concept.
A)True
B)False
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Chapter 19: Corporations: Distributions Not in Complete
Liquidation
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Sample Questions
Q1) A decrease in the LIFO recapture amount during the year.
Q2) Dividends taxed as ordinary income are considered investment income for purposes of the investment interest expense limitation.
A)True
B)False
Q3) Lucinda owns 1,100 shares of Blackbird Corporation stock at a time when Blackbird has 2,000 shares of stock outstanding. The remaining shareholders are unrelated to Lucinda. What is the minimum number of shares Blackbird must redeem from Lucinda so that the transaction will qualify as a disproportionate redemption?
A) 220
B) 393
C) 484
D) 880
E) None of the above
Q4) Briefly define the term "earnings and profits."
Q5) Under certain circumstances, a distribution can generate (or add to) a deficit in E & P.
A)True
B)False
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Chapter 20: Corporations: Distributions in Complete
Liquidation and an Overview of Reorganizations
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Sample Questions
Q1) Magenta Corporation acquired land in a § 351 exchange one year ago. The land had a basis of $320,000 and a fair market value of $350,000 on the date of the transfer. Magenta Corporation has two shareholders, Mark (70%) and Megan (30%), who are brother and sister. Magenta Corporation adopts a plan of liquidation in the current year. On this date, the land has decreased in value to $250,000. Magenta Corporation sells the land for $250,000 and distributes the proceeds pro rata to Mark and Megan. What amount of loss may Magenta Corporation recognize on the sale of the land?
A) $0
B) $21,000
C) $30,000
D) $70,000
E) None of the above
Q2) If a liquidation qualifies under § 332, any minority shareholder will recognize gain or loss equal to the difference between the fair market value of assets received and the basis of the shareholder's stock.
A)True
B)False
Q3) Discuss the role of letter rulings in corporate reorganizations.
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Chapter 21: Partnerships
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Sample Questions
Q1) Suzy owns a 30% interest in the JSD LLC. In liquidation of the entity, Suzy receives a proportionate distribution of $30,000 cash, inventory (basis of $16,000, fair market value of $18,000), and land (basis of $25,000, fair market value of $30,000). Suzy's basis in the entity immediately before the distribution was $80,000. As a result of the distribution, what is Suzy's basis in the inventory and land, and how much gain or loss does she recognize?
A) $0 basis in inventory? $25,000 basis in land? $0 gain or loss.
B) $16,000 basis in inventory? $34,000 basis in land? $0 gain or loss.
C) $16,000 basis in inventory? $25,000 basis in land? $9,000 loss.
D) $18,000 basis in inventory? $32,000 basis in land? $0 gain or loss.
E) $16,000 basis in inventory? $25,000 basis in land? $39,000 loss..
Q2) In a proportionate liquidating distribution of his 40% interest in the RST LLC, Stuart received cash ($100,000), land (basis of $60,000 and value of $90,000), and unrealized receivables (basis of $0 and value of $40,000). In addition, Stuart is relieved of his $80,000 share of the LLC's liabilities. Stuart's basis in RST (including his share of LLC liabilities) was $200,000 immediately prior to this distribution.
a. How much gain or loss does Stuart recognize on this distribution?
b. What is Stuart's basis in the receivables and land he receives in the distribution?
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Chapter 22: S Corporations
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Sample Questions
Q1) An S shareholder who dies during the S corporation tax year must report his or her share of the pro rata income (loss) items up to the date of death, on the final individual tax return.
A)True
B)False
Q2) The LIFO recapture tax is a variation of the passive investment income penalty tax.
A)True
B)False
Q3) An S corporation is limited to a theoretical maximum of _____________ shareholders.
Q4) On January 2, 2018, David loans his S corporation $10,000. By the end of 2018 David's stock basis is zero and the basis in his note has been reduced to $8,000. During 2019, the company's operating income is $10,000. The company makes 2019 distributions to David of $11,000. David reports a(n):
A) $1,000 LTCG.
B) $3,000 LTCG.
C) $11,000 LTCG.
D) Loan basis of $10,000.
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Page 24
Chapter 23: Exempt Entities
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Sample Questions
Q1) Faith Church, a § 501(c)(3) organization, operates a bingo game two times each week to raise money to support the youth activities of the church. For the current year, net proceeds from the bingo game are $900,000.
a.Determine the tax consequences for Faith Church if the bingo game is conducted in a jurisdiction where for-profit bingo games are illegal, and where the bingo game is legal for exempt entities.
b.Determine the tax consequences for Faith Church if the bingo game is conducted in a jurisdiction where bingo games are legal for both for-profit and exempt entities.
Q2) Tax on excess business holdings
Q3) Branded calendars
Q4) What are the excise taxes imposed on private foundations, and why are they imposed?
Q5) Which exempt organizations are not required to file an annual Federal tax return?
Q6) A § 501(c)(3) organization exchanges its membership lists with another exempt organization. What are the Federal income tax consequences?
Q7) Why are some organizations exempt from Federal income tax?
Q8) Tax on self-dealing
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Chapter 24: Multistate Corporate Taxation
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Sample Questions
Q1) General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a customer in B. General has not established nexus with B. State A does not apply a throwback rule. In which state(s) will the sale be included in the sales factor numerator?
A) In all of the states, according to the apportionment formulas of each, as the U.S. government is present in all states.
B) $100,000 in A.
C) $100,000 in B.
D) $0 in A and $0 in B.
Q2) Typically included in the sales/use tax base is the purchase of tablet computers and cell phone equipment by a large manufacturing firm, whose sales force uses the items.
A)True
B)False
Q3) All of the U.S. states use an apportionment formula based on the sales, property, and payroll factors.
A)True
B)False
Q4) Treasury Bond interest income.
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Chapter 25: Taxation of International Transactions
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Sample Questions
Q1) The following income of a foreign corporation is not subject to the regular U.S. corporate income tax rates.
A) FIRPTA gains.
B) Capital gains effectively connected with a U.S. trade or business.
C) Net long-term capital gains, where no U.S. trade or business exists.
D) Interest income effectively connected with a U.S. trade or business.
Q2) Jokerz, a CFC of a U.S. parent, generated $80,000 Subpart F foreign base company services income in its first year of operations. The next year, Jokerz distributes $50,000 cash to the parent, from those service profits. The parent is taxed on $0 in the first year (tax deferral rules apply) and $50,000 in the second year.
A)True
B)False
Q3) An effective transfer pricing strategy would:
A) Have a parent entity assess a management fee from a subsidiary in a low-tax country.
B) Decrease the price of inventory that is sold by a parent to a subsidiary in a low-tax country.
C) Both a. and b.
D) Neither a. nor b.
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Page 27
Chapter 26: Tax Practice and Ethics
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) During any month in which both the failure-to-file and failure-to-pay penalties apply, both penalties must be paid in full.
A)True
B)False
Q2) During an audit, the IRS might require that the taxpayer produce the ________________ that underlie the tax return data.
Q3) Fraudulent failure to file a tax return.
Q4) Maria did not pay her Federal income tax on time. When she eventually filed the return, she reported a balance due.
Compute Maria's failure to file penalty in each of the following cases. Disregard any failure to pay penalty.
a. Three months late, $500 additional tax due.
b. Four months late, $2,000 additional tax due.
c. Ten months late, $10,000 additional tax due.
d. Four months late due to fraud by Maria, $10,000 additional tax due.
e. Fifteen months late due to fraud by Maria, $10,000 additional tax due.
Q5) For purposes of tax penalties, a VITA volunteer is not classified as a tax return
________________ .
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Chapter 27: The Federal Gift and Estate Taxes
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) Which of the following is not a characteristic of both the Federal gift tax and the Federal estate tax?
A) A deduction for state death taxes may be available.
B) A charitable deduction is available.
C) A marital deduction is available.
D) An exclusion amount is available in computing the tax.
Q2) Matt and Patricia are husband and wife and live in Oregon. In 2000 and using her funds, Patricia purchases a residence for $400,000, listing title to the property as "Matt and Patricia, joint tenants with right of survivorship." In 2018, Matt dies first when the residence is worth $2 million. A correct statement as to these transactions is:
A) In 2018, Matt's gross estate includes $1 million and a marital deduction of $1 million is allowed for estate tax purposes.
B) In 2000, Patricia made a gift to Matt but no marital deduction is available for gift tax purposes.
C) In 2000, Patricia did not make a gift to Matt.
D) In 2018, Matt's estate includes nothing as to the property.
Q3) Decedent owned a policy on the life of his spouse with himself as the designated beneficiary. The spouse survives.
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29
Chapter 28: Income Taxation of Trusts and Estates
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161 Verified Questions
161 Flashcards
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Sample Questions
Q1) With respect to a trust, the terms creator, donor, and grantor are synonyms.
A)True
B)False
Q2) The trust instrument indicates whether cost recovery is ________________ to fiduciary accounting income, thereby reducing the amount of the distribution to the income beneficiary.
Q3) Generally, an estate's taxable income is computed in a manner similar to that used for a(n)____________________.
Q4) Distributable net income (DNI) is the (maximum, minimum) amount that can be included in the beneficiaries' gross incomes from the fiduciary for the year.
Q5) The Cai Trust is a calendar-year taxpayer. Its Form 1041 is due on which date in the following year?
A) April 15.
B) June 15.
C) September 15, if extended.
D) December 15, if extended.
Q6) The fiduciary in charge of a trust.
Q7) The person who transfers assets to a trust.
Q8) An estate always is created upon the death of this party.
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