Tax Accounting Exam Solutions
Course Introduction
Tax Accounting introduces students to the fundamental principles and practices of accounting for income taxes, including the preparation and analysis of tax returns for individuals, partnerships, and corporations. The course covers key concepts such as tax regulations, reporting requirements, deferred tax assets and liabilities, tax planning strategies, and the implications of changing tax laws on business operations. Through case studies and practical exercises, students learn to apply current tax codes and identify the tax consequences of various business transactions, ensuring compliance and optimal tax outcomes for individuals and organizations.
Recommended Textbook
Concepts in Federal Taxation 2018 25th Edition by Kevin E. Murphy
Available Study Resources on Quizplus
16 Chapters
2096 Verified Questions
2096 Flashcards
Source URL: https://quizplus.com/study-set/3540
Page 2
Chapter 1: Conceptual Foundations of Tax Law
Available Study Resources on Quizplus for this Chatper
150 Verified Questions
150 Flashcards
Source URL: https://quizplus.com/quiz/70323
Sample Questions
Q1) When property is transferred,gift and estate taxes are based on the A)fair market value of the assets on the date of transfer.
B)replacement cost of the transferred property.
C)transferor's original cost of the transferred property.
D)transferor's adjusted basis of the transferred property.
E)fair market value less adjusted basis on the date of the transfer.
Answer: A
Q2) The term "tax law" as used in your textbook includes I.Treasury regulations.
II.College textbooks (i.e."Concepts in Federal Income Taxes").
III.Internal Revenue Code of 1986.
IV.Tax related decisions of a U.S.Circuit Court of Appeals.
A)Only statement III is correct.
B)Statements I,III,and IV are correct.
C)Statements I and III are correct.
D)Only statement II is correct.
E)All four statements are correct
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Income Tax Concepts
Available Study Resources on Quizplus for this Chatper
153 Verified Questions
153 Flashcards
Source URL: https://quizplus.com/quiz/70322
Sample Questions
Q1) Deduction concepts and constructs include which of the following?
I.Legislative Grace Concept.
II.Business Purpose Concept.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Answer: C
Q2) Thomas had $8,500 withheld from his paycheck,but since he has a large amount of interest and dividends,he is required to make quarterly estimated tax payments due to the
A)Ability to Pay Concept.
B)Administrative Convenience Concept.
C)Arm's-Length Transaction Concept.
D)Capital Recovery Concept.
E)Pay-as-You-Go Concept.
Answer: E
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Income Sources
Available Study Resources on Quizplus for this Chatper
154 Verified Questions
154 Flashcards
Source URL: https://quizplus.com/quiz/70321
Sample Questions
Q1) Victoria is an employee of The Bellamy Corporation.During a recent business trip,one of Victoria's connecting flights was overbooked.Because Victoria did not have a business meeting until the next day,she volunteered to take the next available flight.The airline gave Victoria a $20 meal ticket and a coupon worth $100 off any future flight on the airline for giving up her seat on the overbooked flight.Has Victoria realized income from the receipt of the meal ticket and the coupon? Explain in terms of the income tax concepts.
Answer: Under the All-Inclusive Income Concept,all income received is included in gross income.The cash-equivalent approach to income recognition requires recognition of income when anything of value is received as income.To have income,the taxpayer's wealth must have increased and the increase in wealth must be realized.A realization consists of a change in the form and/or substance of the taxpayer's property or property in an Arm's-Length Transaction.
Based on the income tax concepts,the following issues should be addressed: 11ea8564_c7e2_ba16_9aec_b555ba07dbd0_TB1197_00
Q2) Net collectibles gains are taxed at a maximum rate of 25 percent. A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Income Exclusions
Available Study Resources on Quizplus for this Chatper
161 Verified Questions
161 Flashcards
Source URL: https://quizplus.com/quiz/70320
Sample Questions
Q1) A college student who is a candidate for a degree may exclude the value of a scholarship received for I.Meals.
II.Books.
III.Computer.
IV.Tuition.
V.Housing.
A)Statements I and V are correct.
B)Statements II,III,and IV are correct.
C)Only statement IV is correct.
D)Statements II and IV is correct.
E)Statements I,II,III,IV,and V are correct.
Q2) Julia receives $6.3 million in compensatory damages for a personal physical injury.
A)Fully excluded from gross income.
B)Fully included in gross income.
C)Partially excluded from gross income.
Q3) What are the differences between a cafeteria plan and a flexible benefits (salary reduction)plan?
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: Introduction to Business Expenses
Available Study Resources on Quizplus for this Chatper
167 Verified Questions
167 Flashcards
Source URL: https://quizplus.com/quiz/70319
Sample Questions
Q1) Frank is a self-employed architect who maintains a qualifying office in his home.Frank has $80,000 gross income from his practice and incurs $72,000 in salaries,supplies,computer services,etc.Frank's mortgage interest and real estate taxes allocable to the office total $3,000.Other expenses total $9,000 and consist of depreciation,utilities,insurance,and maintenance.Frank's total office in home deductions are
A)$3,000
B)$5,000
C)$8,000
D)$9,000
E)$12,000
Q2) Which of the following is/are currently deductible trade or business expenses?
I.Personal property taxes on a hot air balloon operated as a hobby.
II.Interest paid on the mortgage note on a business warehouse.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Business Expenses
Available Study Resources on Quizplus for this Chatper
148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/70318
Sample Questions
Q1) Business gift
A)Not deductible.
B)Short-term capital loss.
C)Limited to $25 per person.
D)Deductible as an ordinary loss
E)Only 50% of the cost is deductible.
F)Must be away from tax home overnight to be deductible.
G)General area where a taxpayer conducts principal activity.
H)If the "directly-related" test fails;this test may allow the deduction.
Q2) Victor is single and graduated from Wabash College in May of 2016.In January of 2017,he begins to repay his student loans.During the year he pays $1,500 of interest on the loans.His adjusted gross income for the year is $65,000.Victor can deduct student loan interest of
A)$- 0 -
B)$800
C)$1,000
D)$1,200
E)$1,500
To view all questions and flashcards with answers, click on the resource link above.
8
Chapter 7: Losses -- Deductions and Limitations
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/70317
Sample Questions
Q1) Roscoe and Amy are married and own 12,000 shares of qualifying small business stock that they purchased for $150,000.During the current year,they sell 10,000 shares of the small business stock to an unrelated third party for $30,000.Eager to sell the remaining shares,they sell the other 2,000 shares to Amy's sister for $4,000.In addition,they sell stock with a basis of $5,000 for $10,000.The stock was acquired in 2007.In 2010,Roscoe and Amy loaned her brother,Carl,$8,000 to start his business.Carl has only repaid $2,000 on his documented loan.During the year,Carl has filed for bankruptcy.The bankruptcy court liquidates all of Carl's assets and Roscoe and Amy receive nothing from the liquidation.
I.Roscoe and Amy can deduct $120,000 as an ordinary loss on the small business stock.
II.Roscoe and Amy have a net short-term capital loss of $1,000.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q2) A transaction loss occurs when an asset is disposed of at less than its basis.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Taxation of Individuals
Available Study Resources on Quizplus for this Chatper
163 Verified Questions
163 Flashcards
Source URL: https://quizplus.com/quiz/70316
Sample Questions
Q1) During 2017,Marla earns $2,700 from a summer job.She also has interest income of $2,400.Marla,age 19,is a full-time student at Western College.Her parents claim her as a dependent.Their taxable income is $100,000.What is Marla's tax liability for 2017?
A)$210
B)$250
C)$300
D)$450
E)$525
Q2) Federal quarterly estimate of $3,000 paid by a self-employed taxpayer.
A)Not Deductible
B)Deductible - For AGI
C)Deductible - From AGI
Q3) Eileen pays $14,000 of interest related to her purchase of investments.During the current year,Eileen's adjusted gross income is $80,000,which includes investment related income of $19,000.Her other investment expenses are $9,000.Determine whether the interest is deductible,how it would be deducted on the taxpayer's return (if there are alternatives possible,discuss the conditions which would determine the treatment)and any limitations that might be placed on the deduction.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Acquisitions of Property
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/70315
Sample Questions
Q1) During 2006,Charles purchased 1,000 shares of Ryan Corporation stock for $12,000.On February 22,2017,he sells all the shares for $9,000.On March 15,2017,he repurchases 1,000 shares of Ryan for $8,000 and holds them until May 29,2076,when he sells them for $10,000.What is Charles' recognized gain or loss on the May 29,2017,sale?
A)$1,000 loss.
B)$2,000 gain.
C)$2,000 loss.
D)$1,000 gain.
E)No gain or (loss)recognized
Q2) Personalty
A)Land and structures permanently attached to land.
B)Property that lacks a physical existence.
C)Property that is used by the taxpayer for purely personal purposes.
D)Any property that has form,shape,and substance.
E)Property with a physical existence that is not real estate.
F)A single property used in more than one category.
Q3) Randall is given five acres of land in 2005.At the time of the gift,the land had a fair market value of $182,000,and its adjusted basis to the donor was $160,000.What is Randall's gain if he sells the land for $184,000?
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Cost Recovery on Property: Depreciation, depletion,
and Amortization
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/70314
Sample Questions
Q1) MACRS eliminates several sources of potential conflict between the IRS and taxpayers concerning an asset's useful life and the calculation of the depreciation deduction.
A)True
B)False
Q2) On March 23,2017,Saturn Investments Corporation purchases a $5,000 computer (5-year property)for business-use.On November 27,2017,it pays $4,000 for new office furniture (7-year property).It does not wish to use the Section 179 election to expense.How much depreciation may Saturn deduct on the computer for 2017?
A)$1,000
B)$1,750
C)$2,625
D)$3,325
E)$3,500
Q3) Under current law,taxpayers must use regular MACRS.
A)True
B)False
Q4) Why would a taxpayer ever elect to use the alternative depreciation system (ADS)rather than the MACRS?
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Property Dispositions
Available Study Resources on Quizplus for this Chatper
139 Verified Questions
139 Flashcards
Source URL: https://quizplus.com/quiz/70313
Sample Questions
Q1) George regularly invests unneeded business cash in Eli Lilly common stock.He has bought 200 shares of stock on May 1 of each year from 1986 through 2016.Because of an urgent need for cash,he sells 100 shares of the stock at an $850 gain on March 28,2017.Because the stock is held in a brokerage account,he did not have any paper shares of stock to surrender.He merely told his broker to sell 100 shares.
A)Long-term capital
B)Short-term capital
C)Collectible gain
D)Section 1231
E)Section 1245
F)Section 1250
G)Ordinary income/loss
H)Nontaxable/nondeductible
Q2) Which of the following is not a capital asset?
A)Office building used as a rental property by a real estate professional..
B)Antique automobile.
C)Land held for investment.
D)Stock held for investment.
Q3) Discuss the general differences between Section 1245 and Section 1250 property.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Nonrecognition Transactions
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/70312
Sample Questions
Q1) Norman exchanges a machine he uses in his pool construction business for a used machine worth $6,000 to use in the same business.He purchased the machine 3 years ago for $22,000 and has taken depreciation of $9,000 on the machine.In the exchange,Norman also receives $3,000 of cash.As a result of the exchange,
I.Norman's basis in the acquired machine is $10,000.
II.Norman recognizes a loss of $3,000 on the exchange.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q2) A Cadillac automobile used 100% for business for a Ford Mustang automobile used 100% for business.
A)qualifies as a like-kind exchange
B)does not qualify as a like-kind exchange
Q3) An involuntary conversion occurs whenever a loss (but not a gain)is realized from a transaction that occurs against the taxpayer's will.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Choice of Business Entity -- General Tax and
Nontax Factorsformation
Available Study Resources on Quizplus for this Chatper
101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/70311
Sample Questions
Q1) Carlotta is the director of golf for Birck Enterprises,an electing S corporation.Carlotta owns a 20% interest in Birck.She receives a salary of $60,000 and fringe benefits costing $6,000.Birck's taxable income before considering the payments to and on behalf of Carlotta is $250,000.Birck's distributes a $50,000 dividend to its shareholders.How much income does Carlotta have from Birck?
A)$66,000
B)$70,000
C)$96,800
D)$98,000
E)$102,800
Q2) Which of the following will render a corporation ineligible for S corporation status?
I.The corporation has 125 stockholders.
II.One of the stockholders is another corporation.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q3) Discuss the characteristics of a personal service corporation (PSC).
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: Choice of Business Entity -- Operations and Distributions
Available Study Resources on Quizplus for this Chatper
96 Verified Questions
96 Flashcards
Source URL: https://quizplus.com/quiz/70310
Sample Questions
Q1) The Serenity Corporation distributes $200,000 in cash to its shareholder during 2017.Accumulated earnings and profits are $80,000 as of January 1,2017.Current earnings and profits for 2017 are $84,000.Jonas,the sole shareholder of Serenity Corporation,has a basis of $48,000 in his stock.What is the tax effect of the distribution for Jonas?
A)Jonas will recognize ordinary income of $164,000 and a capital gain of $36,000.
B)Jonas will recognize ordinary income of $84,000,capital gain of $80,000 and a tax-free recovery of capital of $36,000.
C)Jonas will recognize ordinary income of $164,000 and a tax-free return of capital of $36,000.
D)Jonas will recognize ordinary income of $164,000 and a capital loss of $12,000.
E)Jonas will recognize ordinary income of $200,000 and a capital loss of $12,000.
Q2) Discuss two tax-planning techniques that can be used by a 100% owner-employee to reduce his/her tax liability.
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Choice of Business Entity -- Other
Considerations
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/70309
Sample Questions
Q1) Patricia and her daughter Sheila each own 50% of Draper,Inc.Patricia is the president and CFO of the corporation and receives a salary of $125,000.Other individuals with similar responsibilities as Patricia are paid approximately the same salary.Sheila,who is vice president,is paid a salary of $50,000.However,Sheila is not involved in the business decisions and rarely visits the office.Which of the following are correct statements?
I.Draper can deduct $175,000 as salary expense.
II.Sheila must report $50,000 as income.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q2) A taxpayer must begin withdrawals from any type of retirement plan (except a Roth IRA)no later than April 1 of the tax year after the taxpayer reaches age 70<sup>1</sup>/<sub>2</sub> or,if later,the year they retire.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Tax Research
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/70308
Sample Questions
Q1) After major legislation is enacted,a general explanation of the law or "blue book" may be issued by which of the following:
A)House Ways and Means Committee.
B)Joint Committee on Taxation.
C)Treasury Department
D)Senate Finance Committee.
Q2) Ways and Means Committee
A)Where federal tax legislation generally originates.
B)Has jurisdiction over all tax matters in the U.S.Senate.
C)The committee responsible for initial hearings and deliberations on a tax bill.
D)Responsible for negotiating a resolution of the differences in the House and Senate versions of a tax bill.
E)The agency within the administrative branch of government with overall responsibility for administration of tax law.
F)Oversees the operation and administration of the tax system as a whole,and prepares a general explanation of any tax bill signed by the President.
Q3) Describe the steps of the tax research process.
To view all questions and flashcards with answers, click on the resource link above.
18