Tax Accounting Exam Practice Tests
Course Introduction
Tax Accounting is a course designed to provide students with a comprehensive understanding of the principles and practices related to federal, state, and local taxation as it applies to individuals, corporations, partnerships, and other entities. The course covers topics such as income recognition, deductions, property transactions, tax credits, and tax compliance. Students learn how to interpret and apply tax laws, prepare tax returns, and analyze the tax implications of various business and personal financial transactions. Emphasis is placed on the development of critical thinking and problem-solving skills needed to navigate the complexities of the tax code and make informed decisions in both planning and compliance contexts.
Recommended Textbook
Income Tax Fundamentals 2019 37th Edition by Gerald E. Whittenburg
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12 Chapters
1187 Verified Questions
1187 Flashcards
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Chapter 1: The Individual Income Tax Return
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) An individual is a head of household.What is her standard deduction?
A)$12,000
B)$9,350
C)$18,000
D)None of the above
Answer: C
Q2) An individual taxpayer with a net capital loss may deduct up to $3,000 per year against ordinary income.
A)True
B)False Answer: True
Q3) A married person with a dependent child may choose to file as head of household if it reduces his or her tax liability.
A)True
B)False
Answer: False
Q4) All taxpayers may use the tax rate schedule to determine their tax liability.
A)True
B)False
Answer: False
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Chapter 2: Gross Income and Exclusions
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) Seymore named his wife, Penelope, the beneficiary of a $100,000 insurance policy on his life.The policy provided that, upon his death, the proceeds would be paid at a rate of $4,000 per year plus interest over a 25-year period.Seymore died June 25 of last year, and in the current year Penelope received a payment of $5,200 from the insurance company.What amount should she include in her gross income for the current year?
A)$200
B)$1,200
C)$4,000
D)$5,200
E)None of the above
Answer: B
Q2) Reimbursement of hospital expenses from a health insurance plan
Answer: b
Q3) In June of the current year, a wealthy aunt gave Janie a stock portfolio worth $150,000.During the year, she collects $4,000 in dividends.How much of these amounts, if any, should Janie include in gross income for the current year? Why?
Answer: $4,000.The gift of stock is not classified as income, but earnings on the stock are income.
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Chapter 3: Additional Income Part 1
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) Marco makes the following business gifts during the year: \[\begin{array} { l l }
\text { Miss Scarlett (a potential dient) } & \$ 30 \\
\text { Mr. and Mrs. White (both are dlients) } & \$ 40 \\
\text { Professor Plum (a client) } & \$ 18 \\
\text { Mrs. Plum (the nonclient wife of Professor Plum) } & \$ 12 \\
\text { Charles Mustard (Marco's boss) } & \$ 27
\end{array}\] Marco also spent $15 on wrapping paper and a card for the above gift to the Whites.Calculate Marco's total allowed deduction for gifts
Answer: \[\begin{array} { l c }
\text { Miss Scarlett } & \$ 25 \text { limitation } \\
\text { Mr. and Mrs. White } & 40 \\
\text { Professor and Mrs. Plum } & 25 \text { limitation } \\
\text { Wrapping paper and card } & \underline { 15 } \\
\text { Total } & \$ 105
\end{array}\]
Q2) The standard mileage rate for automobiles in 2018 is 56 cents per mile.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Additional Income Part 2
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) In October of the current year, Mike sold a share of Berkshire-Hathaway for $73,000.He had acquired it several years ago at a cost of $42,000.He also sold Microsoft stock he had held for 3 years at a gain of $17,000.He had a short-term $2,000 loss on the sale of stock of a start-up technology company.He has $85,000 in taxable income before capital transactions are taken into account.Assuming Mike is single with no dependents, what is the amount of Mike's tax on the capital transactions?
Q2) In 2018, Keri has wages of $20,000, a Schedule C business loss of $30,000, and nonbusiness capital gains of $4,000.She deducts the standard deduction of $12,000 for a taxable loss of $18,000.Compute Keri's NOL to carry forward to 2018.
Q3) Choose the correct statement.Passive losses
A)May not be used to offset passive income.
B)May be used to offset portfolio income.
C)Often result from the rental of real estate.
D)If unused are lost forever.
E)If unused are lost forever
Q4) A taxpayer's personal automobile is a capital asset.
A)True
B)False
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Chapter 5: Deductions and Adjustments to Income
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) Which of the following is not an exception to the 10% early withdrawal penalty of a traditional IRA:
A)Paying the costs of higher education, including tuition, fees, books, and room and board for a dependent child
B)Withdrawing up to $30,000 of first-time home-buying expenses
C)Using the withdrawals for medical expenses in excess of 7.5 percent of their AGI, for persons younger than 59½ years old
D)Over 59½ years old
Q2) If real property is sold during the year, the property taxes must be allocated between the buyer and seller based on the number of days the property was held by each party. A)True
B)False
Q3) Jake developed serious health problems and had his bathroom remodeled so it is wheelchair-accessible and had a handicapped shower installed, based on a written prescription by his doctor.The cost of the remodel is $15,000 and is deemed to add no value to his house by a real estate appraiser.How is the cost of the remodel treated on Jake's tax return?
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Page 7
Chapter 6: Accounting Methods and Taxes
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68 Verified Questions
68 Flashcards
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Sample Questions
Q1) Tom, a cash basis sole proprietor, provides the following information: \(\begin{array}{llcc}
\text { Gross receipts } &\$30,000 \\
\text { Dividend income (on personal investments) } &200\\
\text { Cost of sales} &15,400\\
\text { Other operating expenses } &3,000\\
\text {State busines s taxes paid } &300\\ \end{array}\)
What amount should Tom report as net earnings from self-employment?
A)$10,900
B)$11,300
C)$11,400
D)$14,400
E)None of the above
Q2) Under the cash basis of accounting, most expenses are generally deducted in the year they are paid.
A)True
B)False
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Page 8
Chapter 7: Tax Credits
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73 Verified Questions
73 Flashcards
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Sample Questions
Q1) Jim has foreign income.He earns $26,000 from Country A which taxes the income at a 20 percent rate.He also has income from Country B of $18,000.Country B taxes the $18,000 at a 10 percent rate.His US taxable income is $90,000, which includes the foreign income.His US income tax on all sources of income before credits is $19,000.What is his foreign tax credit?
A)$6,500
B)$7,000
C)$9,289
D)$19,000
E)Jim does not qualify for a foreign tax credit.
Q2) To be eligible for the earned income credit for 2018, a taxpayer must have a "qualifying child."
A)True
B)False
Q3) Brad works at the local pizza shop as a delivery person.He is hoping to change to a position in the kitchen and takes a culinary course at the local community college for $1,400.Assuming he is eligible, Brad's lifetime learning credit is:
Q4) What would generally reduce income taxes more: a $100 tax credit or a $100 tax deduction?
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Chapter 8: Depreciation and Sale of Business Property
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) The maximum amount of depreciation including bonus depreciation on a passenger auto placed in service in 2018 is:
A)$0
B)$3,160
C)$10,000
D)$18,000
Q2) Max purchases a new auto in 2018 at a cost of $56,000.He uses the car 80% for business.Assuming a half-year convention, bonus depreciation, but no immediate expensing, what is the depreciation deduction on the auto?
A)$44,800
B)$14,400
C)$18,000
D)$10,000
E)$8,000
Q3) Depreciation is the process of allocating the cost of assets to expense over a period of years.
A)True
B)False
Q4) To be depreciated, must an asset actually lose value each year?
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Chapter 9: Payroll, Estimated Payments, and Retirement Plans
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75 Verified Questions
75 Flashcards
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Sample Questions
Q1) Mary is self-employed for 2019.Mary estimates her required annual estimated tax payment for 2019 to be $4,000.Mary had a $500 overpayment of last year's taxes which she will apply against her first quarter estimated payment.
a.How much should Mary pay with her first quarter estimated tax voucher?
b.When is the payment due?
Q2) What is the purpose of backup withholding?
Q3) Sally is an employer with one employee, Sara.Sara earned $12,000 from January 1, 2018 through June 30, 2018, and the state unemployment tax rate is 5.4 percent.Calculate the following amount for Sally.
a.FUTA tax after the state tax credit
b.What form should Sally use to report her FUTA tax liability for 2018?
Q4) Mark the correct answer.FICA taxes are:
A)7.65 percent of all earned income with no limitations.
B)7.65 percent of earned income up to $150,000.
C)Paid by the employee and by the employer.
D)Not subject to cost of living adjustments each year.
Q5) A nondeductible penalty may be imposed on underpayments of estimated taxes.
A)True
B)False
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Chapter 10: Partnership Taxation
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83 Verified Questions
83 Flashcards
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Sample Questions
Q1) Mario and Luigi are brothers and they are equal partners in Pipes of Your Dreams Plumbing.Mario sells his fancy sports car to the business for $40,000.Mario's basis in the car is $45,000.
a.What is the amount of Mario's recognized gain or loss on this transaction, and what is the nature of the gain or loss?
b.If the partnership later sells the sports car for $55,000, how much of the gain is recognized?
Q2) Jim's basis in his partnership is $200,000.His share of the current year partnership income is $60,000.The partnership paid him a $75,000 distribution in the current year.What is his new basis in the partnership at the end of the year and what is his taxable income from the partnership?
A)$200,000; $75,000
B)$260,000; $60,000
C)$140,000; $60,000
D)$185,000; $60,000
E)$185,000; $135,000
Q3) A partnership generally must adopt the same tax year as its majority partners.
A)True
B)False
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Page 12
Chapter 11: The Corporate Income Tax
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74 Verified Questions
74 Flashcards
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Sample Questions
Q1) Ficus, Inc.began business on March 1, 2018, and elected to file its income tax return on a calendar-year basis.The corporation incurred $800 in organizational expenditures.Assuming the corporation does not elect to expense but chooses to amortize the costs over 180 months, the maximum allowable deduction for amortization of organizational expenditures in 2018 is:
A)$4.44
B)$44.44
C)$53.28
D)$800.00
E)None of the above
Q2) Corporations can elect to deduct up to $5,000 of organizational costs in the year they begin business, assuming their total organizational expenses do not exceed $50,000.
A)True
B)False
Q3) 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.
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Chapter 12: Tax Administration and Tax Planning
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66 Verified Questions
66 Flashcards
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Sample Questions
Q1) The statute of limitations for a tax return generally is 3 years.
A)True
B)False
Q2) If a calendar year taxpayer's 2018 individual income tax return is mailed on June 15, 2019, the statute of limitations would normally run out on:
A)June 15, 2021
B)June 15, 2022
C)April 15, 2021
D)April 15, 2022
E)None of the above
Q3) 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
Q4) The Wage and Investment Office of the IRS handles small business taxpayers.
A)True
B)False
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