Survey of Taxation Final Exam Questions
Course Introduction
Survey of Taxation provides an overview of the fundamental principles and practices of taxation in the United States. The course covers the structure of federal, state, and local tax systems, with emphasis on income, property, and sales taxes affecting individuals, corporations, and other entities. Students will explore key concepts such as tax compliance, planning, and policy, along with ethical considerations and the implications of taxation on financial decision-making. Designed for those with limited or no prior exposure to tax, the course equips students with a foundational understanding necessary for further study or professional work in accounting, finance, or business.
Recommended Textbook Income Tax Fundamentals 2017 35th Edition by Gerald E. Whittenburg
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12 Chapters
1259 Verified Questions
1259 Flashcards
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Chapter 1: The Individual Income Tax Return
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Sample Questions
Q1) Which of the following is not a test that must be met for a child to be considered a dependent?
A)Age test
B)Domicile test
C)Citizenship test
D)Relationship test
E)Blood test
Answer: E
Q2) Norman and Linda are married taxpayers with taxable income of $126,000 in 2016.
a.When you calculate their tax liability are you required to use the tax tables or the tax rate schedules, or does it matter?
b.What is their tax liability?
Answer: a. Taxpayers with incomes of $100,000 or more must use the tax rate schedules. b. Tax liability: $23,042.50 = ($126,000 x 25%) - $8,457.50
Q3) A taxpayer with self-employment income of $600 must file a tax return.
A)True
B)False
Answer: True
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3
Chapter 2: Gross Income and Exclusions
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Sample Questions
Q1) Alimony
A)Included
B)Excluded
Answer: A
Q2) Dividend income arising from stock received as a gift is excluded from gross income since the dividends are considered part of the gift.
A)True
B)False Answer: False
Q3) To promote business activity, the tax rules generally are very liberal in treating business gifts as tax-free income to the recipient.
A)True
B)False Answer: False
Q4) Farm income
A)Included
B)Excluded
Answer: A
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Page 4
Chapter 3: Business Income and Expenses Part I
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Sample Questions
Q1) The standard mileage rate for automobiles in 2016 is 56 cents per mile.
A)True
B)False
Answer: False
Q2) During the current year, Harry, a self-employed accountant, travels from Kansas City to Miami for a 1-week business trip. While in Miami, Harry decides to stay for an additional 5 days of vacation. Harry pays $600 for airfare, $200 for meals, and $500 for lodging while on business. The cost of meals and lodging while on vacation was $300 and $500, respectively. How much may Harry deduct as travel expenses for the trip?
A)$600
B)$1,100
C)$1,200
D)$1,300
E)None of the above
Answer: C
Q3) The cost of a blue wool suit for an accountant is a deductible expense.
A)True
B)False
Answer: False
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Chapter 4: Business Income and Expenses Part II
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Sample Questions
Q1) Net losses on the rental of vacation homes are limited to 15 percent of total gross income.
A)True
B)False
Q2) Unreimbursed qualifying moving expenses are an itemized deduction for 2016.
A)True
B)False
Q3) Which of the following statements is true of a distribution rollover (not a trustee-to-trustee transfer) from a retirement plan?
A)The taxpayer must instruct the trustee of the retirement plan to transfer assets to the trustee of another plan.
B)No withholding is required.
C)In one year, there is no limit to the number of times a taxpayer can request a distribution rollover from one IRA to another IRA.
D)Assuming there are no unusual events, the taxpayer has a maximum of 60 days in which to transfer funds to a new plan to avoid current taxes and penalties.
E)All of the above are true.
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Chapter 5: Itemized Deductions and Other Incentives
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Sample Questions
Q1) All taxpayers may deduct up to $4,000 of higher education tuition expenses.
A)True
B)False
Q2) Bill has a mortgage loan on his personal residence. He decides to pay 18 months of interest in advance on October 1, 2016. The total advanced interest payment is $36,000. How much of the advance interest payment can he deduct in 2016?
A)$6,000
B)$24,000
C)$36,000
D)Mortgage interest is not deductible.
E)If a taxpayer makes an advance payment, he may not deduct any interest.
Q3) Andy borrows $20,000 to invest in bonds. During the current year, his interest on the loan is $2,000. Andy's interest income from the bonds is $400 and his investment expenses are $300.
a.Calculate Andy's itemized deduction for investment interest for this year.
b.Is Andy entitled to a deduction in future years?
Q4) The interest paid on a loan used to acquire municipal bonds is not deductible.
A)True B)False
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Chapter 6: Credits and Special Taxes
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Sample Questions
Q1) Although the alternative minimum tax (AMT) is meant to prevent high-income taxpayers from using tax shelters to avoid paying tax, why might married taxpayers with several children and jobs resulting in high unreimbursed employee business expenses find themselves paying AMT?
Q2) Assume Alan's parents make gifts of $10,000 to him every year starting at age one, Alan's parents are in the 35 percent income tax bracket, and Alan is now 15 years old and has $11,700 of interest income for 2016.
a.Calculate the tax on Alan's interest income.
b.Explain why the "kiddie tax" rules are in the law.
Q3) A taxpayer with earned income of $50,000 is not eligible to claim the credit for child and dependent care expenses.
A)True
B)False
Q4) To be eligible for the earned income credit for 2016, a taxpayer must have a "qualifying child."
A)True
B)False
Q5) What would reduce income taxes more: a $100 tax credit or a $100 tax deduction?
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Chapter 7: Accounting Periods and Methods and Depreciation
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Sample Questions
Q1) Perry develops a successful advertising business that he subsequently sells to his competitor, Carl, for $108,000. He retires in the same town where he has always lived and done business. Carl insists that Perry sign a covenant not to compete.The advertising business has no tangible assets; Carl receives only the name of the business, the client lists and whatever going-concern value there is. How should Carl treat the $108,000 cost of the advertising business he purchased?
Q2) An asset (not an automobile) put in service in June 2016 has a depreciable basis of $535,000, a recovery period of 5 years, and is the only asset placed in service during the year. Assuming bonus depreciation is used, a half-year convention, and the expensing election is made, what is the maximum amount of cost that can be deducted in 2016 (assume no income limitation)?
A)$267,500
B)$321,000
C)$500,000
D)$521,000
E)$535,000
Q3) If a corporation has a short tax year, other than their first or last year of operation, explain how the corporation calculates the tax for the short period.
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Chapter 8: Capital Gains and Losses
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Sample Questions
Q1) If property is received from a decedent, the taxpayer who inherits the property has the same basis in the property as the decedent.
A)True
B)False
Q2) Nick received a gift of stock from his father. Nick's father had purchased the stock 2 years earlier and his father's basis in the stock was $30,000. On the date of the gift, the stock had a fair market value of $25,000.
a.If Nick sells the stock for $33,000, calculate the amount of Nick's gain or loss on the transaction.
b.If Nick sells the stock for $22,000, calculate the amount of Nick's gain or loss on the transaction.
c.If Nick sells the stock for $27,000, calculate the amount of Nick's gain or loss on the transaction.
Q3) What are capital assets?
Q4) Assuming a taxpayer has no other gains or losses for the year, a loss from the theft of a Section 1231 asset is treated as a capital loss.
A)True
B)False
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Page 10
Chapter 9: Withholding Estimated Payments and Payroll Taxes
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Sample Questions
Q1) Which of the following taxpayers are not required to make estimated payments?
A)A car mechanic who is self-employed and earns $50,000 a year.
B)A wealthy individual whose earnings are from corporate dividends.
C)An employee who works at a local department store with appropriate withholding and no other income.
D)All of the above must make estimated payments.
Q2) An individual who expects to receive more than $500 of income from sources other than wages meets the requirements for having to file quarterly estimated tax payments.
A)True
B)False
Q3) Mark the incorrect answer. Estimated income tax payments:
A)Need not be filed if the estimated tax, after subtracting withholding, can reasonably be expected to be more than $1,000.
B)If inadequate, may result in nondeductible penalties.
C)May be based on the amount of the tax liability for the prior year.
D)Are made in four installments on April 15, June 15, and September 15 of the tax year and on January 15 of the following year.
Q4) What is the purpose of backup withholding?
Page 11
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Chapter 10: Partnership Taxation
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81 Flashcards
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Sample Questions
Q1) Which of the following is a disadvantage of an LLC?
A)For security law purposes, an ownership interest in an LLC is not necessarily a security.
B)There is no general partner requirement.
C)Taxable income and losses pass through to the owners.
D)The states are not uniform in their treatment of limited liability companies.
Q2) Rochelle owns 40 percent of a partnership and her brother owns the remaining 60 percent interest. During the current tax year, Rochelle sold a building to the partnership for $180,000, to be used for the partnership's office. She had held the building for 3 years at the time of the sale.
a.Assuming Rochelle's basis in the building was $200,000, what is the amount and nature of her gain or loss?
b.Assuming Rochelle's basis in the building was $150,000, what is the amount and nature of her gain or loss?
Q3) A partnership will terminate and its tax year will close if the partnership ceases to carry on any business activity.
A)True
B)False
Q4) List three advantages of an LLC.
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Page 12
Chapter 11: The Corporate Income Tax
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Sample Questions
Q1) Is it correct to state that the maximum corporate tax rate is 35 percent? Please describe the structure of the corporate tax rate schedule in your answer.
Q2) Brokers' fees incurred in the issuance of a corporation's stock are considered organizational expenditures.
A)True
B)False
Q3) The accumulated earnings tax will not be imposed on accumulations that can be shown to be necessary to meet the reasonable needs of the business.
A)True
B)False
Q4) In general, estimated payments for calendar-year corporations are due on:
A)March 15, June 15, September 15, and December 15.
B)March 15, June 15, September 15, and January 15 of the following year.
C)April 15, June 15, September 15, and December 15.
D)April 15, June 15, September 15, and January 15 of the following year.
Q5) A corporation may carry forward capital losses for an indefinite period.
A)True
B)False
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Chapter 12: Tax Administration and Tax Planning
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Sample Questions
Q1) Interest paid on an underpayment of taxes (other than an underpayment of estimated taxes) is not subject to the consumer interest limitation.
A)True
B)False
Q2) Which of the following is the most common type of audit for an individual taxpayer?
A)Office audit
B)Telephone audit
C)Correspondence audit
D)Field audit
E)None of the above
Q3) The statute of limitations for the deduction of a worthless security is 5 years.
A)True
B)False
Q4) An "office audit" is an audit in which the revenue agent visits the taxpayer's office.
A)True
B)False
Q5) List three different ways that a tax return may be selected for an audit.
Q6) What is the difference between tax avoidance and tax evasion?
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