Tax Accounting Exam Solutions
Course Introduction
Tax Accounting is an essential course that introduces students to the principles and practices of accounting for income taxes in accordance with current laws and regulations. The course covers topics such as tax planning, tax compliance, and tax reporting for individuals, corporations, and other business entities. Students learn to prepare tax returns, analyze the impact of tax laws on business decisions, and apply tax concepts to real-world scenarios. Emphasis is placed on understanding the Internal Revenue Code, tax research methods, and ethical considerations in tax practice. By the end of the course, students will be equipped with the foundational knowledge and skills needed to effectively manage and advise on tax matters in various professional settings.
Recommended Textbook Concepts in Federal Taxation 2014 21st Edition by Kevin
E. Murphy
Available Study Resources on Quizplus
16 Chapters
2109 Verified Questions
2109 Flashcards
Source URL: https://quizplus.com/study-set/3612 Page 2
Chapter 1: Federal Income Taxation - an Overview
Available Study Resources on Quizplus for this Chatper
151 Verified Questions
151 Flashcards
Source URL: https://quizplus.com/quiz/71703
Sample Questions
Q1) Lee's 2013 taxable income is $88,000 before considering charitable contributions.Lee is a single individual.She makes a donation of $10,000 to the American Heart Association in December 2013.By how much did Lee's marginal tax rate decline simply because of the donation?
A)0%
B)10%
C)3%
D)5%
E)8%
Answer: C
Q2) Tax planning involves the timing of income and deductions.General rules of thumb to follow when planning include
I.putting income into the year with the lowest marginal tax rate.
II.deferring deductions.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Answer: A
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/71704
Sample Questions
Q1) A crucial question concerning income is when to recognize it (in which accounting period income should income be taxed?).Which of the following help resolve the problems of timing?
I.Realization Concept.
II.Accounting Method.
III.Constructive Receipt.
IV.Substance-Over-Form Doctrine.
A)Statements I and II are correct.
B)Only statement I is correct.
C)Only statement II is correct.
D)Statements I, II, and III are correct.
E)Statements I, II, III, and IV are correct.
Answer: D
Q2) All deductions are allowed because of the legislative grace concept.
A)True
B)False
Answer: True
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
153 Verified Questions
153 Flashcards
Source URL: https://quizplus.com/quiz/71705
Sample Questions
Q1) For any unrecovered portion of an annuity investment,the taxpayer is allowed a deduction in the year of death.
A)True
B)False
Answer: True
Q2) The income tax concept that is primarily responsible for the treatment of installment sales of property is the:
A)Administrative Convenience Concept.
B)Arm's-Length Transaction Concept.
C)Entity Concept.
D)Realization Concept.
E)Wherewithal-to-Pay Concept.
Answer: E
Q3) Julian is operating an illegal gambling operation.Even though the income is not legal,it is classified as earned.
A)True
B)False
Answer: True
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/71706
Sample Questions
Q1) Bonita's employer has a nondiscriminatory childcare reimbursement plan (a type of flexible benefits plan).Bonita expects that her childcare expenses will total $2,000 for the current year.If she does not participate in the reimbursement plan,she will be allowed a $400 tax credit for childcare.Bonita's marginal tax rate is 25%.What are the tax effects of Bonita's alternatives?
I.Bonita will save $2,000 by using the reimbursement plan.
II.The reimbursement plan is $100 more favorable than the tax credit for Bonita.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q2) Any income earned subsequent to the death of the decedent from inherited property is excludable from the heir's taxable income.
A)True
B)False
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
168 Verified Questions
168 Flashcards
Source URL: https://quizplus.com/quiz/71707
Sample Questions
Q1) All-events Test
A)Specifically disallowed.
B)Appropriate and helpful.
C)Considered a trade or business.
D)Not considered a trade or business.
E)Problems with this generally arise with related parties.
F)This is met when services or property are provided to the taxpayer.
G)Normal, common, and accepted but not necessarily regularly recurring.
H)This is met when the existence and the amount of a liability have been established.
Q2) Sheila extensively buys and sells securities.The IRS has determined upon examination that she is not in a trade or business concerning the securities' transactions and therefore,Shelia must be
A)a broker.
B)an active trader.
C)an active investor.
D)a securities' dealer.
Q3) List the criteria necessary for an expenditure to be deductible as a trade or business expense or an expense for the production of income.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Business Expenses
Available Study Resources on Quizplus for this Chatper
147 Verified Questions
147 Flashcards
Source URL: https://quizplus.com/quiz/71708
Sample Questions
Q1) Sally and Kelly are both enrolled in a graduate accounting course at Deacon University.Discuss how it is possible that Sally can deduct the cost of her tuition as an education expense while Kelly's tuition is not deductible.
Q2) Karen is single and graduated from Marring University in May of 2012.In January of 2013,she begins repaying her student loans and in 2013 pays $2,800 of interest on the loans.Her adjusted gross income is $51,000.
I.Karen can deduct $2,500 of interest as a deduction for adjusted gross income.
II.Karen can deduct $2,800 of interest as a deduction from adjusted gross income.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q3) If an employer reimbursement plan is an accountable plan,for an expense that is fully reimbursed the employee does not have to report either the expense or the reimbursement .
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Losses: Deductions and Limitations
Available Study Resources on Quizplus for this Chatper
131 Verified Questions
131 Flashcards
Source URL: https://quizplus.com/quiz/71709
Sample Questions
Q1) Sarah owns a passive activity that has a suspended loss of $18,000.The activity has a fair market value of $35,000 and her adjusted basis in the activity is $20,000.
I.If Sarah sells the activity,she is allowed to deduct the $18,000 suspended loss.
II.If Sarah gifts the activity,she is only be allowed to deduct $15,000 of the suspended loss.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q2) A passive activity
I.includes an interest in a limited partnership held by a limited partner investor. II.includes a working interest in an oil and gas deposit.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q3) Why did Congress enact the at-risk rules?
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
162 Verified Questions
162 Flashcards
Source URL: https://quizplus.com/quiz/71710
Sample Questions
Q1) Lilly and her husband Ben have a serious argument.In fact,Lilly moved out in August,left town,and has not been heard from since.Ben supports their two children after the split up and maintains their household.What is Ben's filing status for the current year?
A)Single.
B)Head of household.
C)Surviving spouse.
D)Married, filing separately.
Q2) Cory is a 32 years old,unmarried,and has no children.Cory's father lives in a nursing home.
I.Because Cory's father does not live in the same household,Cory cannot file as a head of household.
II.If his father's taxable income is less than $3,900 and the other dependency tests are met,Cory will file as head of household.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q3) Explain the support test and the gross income test to be a qualifying relative.
To view all questions and flashcards with answers, click on the resource link above.
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/71711
Sample
Questions
Q1) Reiko buys 200 shares of Saratoga Corporation common stock on December 10,2012,for $2,000.He buys an additional 200 shares for $1,800 on December 23,2013.On December 28,2013,Reiko sells 100 of the first 200 shares for $800.He sells the remaining 300 shares for $2,500 on November 15,2014.What is(are)the amount(s)and the year of recognition of losses that Reiko can recognize?
\(\begin{array}{cc}
\underline{2013} & \underline{2014} \\
a.-0- & \$ 200 \\
b.-0- & \$ 500 \\
c.\$ 200 & \$ 500 \\
d.\$ 200 & \$ 300 \end{array}\)
Q2) Phyllis purchased an automobile for $3,000 down and a note for $15,000.During the year she paid interest of $1,000.Her basis is $18,000.
A)True
B)False
Q3) Personal property consists of any property that is held by an individual.
A)True
B)False
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
117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/71712
Sample Questions
Q1) Which of the following would not be considered to be Listed Property for depreciation purposes?
A)A camera owned and used by a taxpayer in his real estate business.
B)Computer owned and used by a taxpayer at his home office.
C)Taxpayer's automobile that he uses 30% for business purposes.
D)All of the above are listed property
Q2) During 2013,Williams Company purchases and places in service office equipment with a cost of $40,000.The equipment is 7-year MACRS property.What is its 2013 depreciation deduction for purposes of the alternative minimum tax?
A)$ 2,000
B)$ 2,857
C)$ 3,000
D)$ 4,000
E)$ 5,714
Q3) What is the MACRS recovery period for a video game used in an arcade?
A)3 years.
B)5 years.
C)6 years.
D)7 years.
E)10 years.
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
140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/71713
Sample
Questions
Q1) Pidgeon,Inc.has the following gains and losses from Section 1231 property during 2013: \(\begin{array}{lr}
\text {Casualy losses } &\$(4,000) \\
\text {Casualty gains } &5,000 \\
\text { Section 1231 gains } &6,000 \\
\text { Section 1231 losses } &(3,000) \end{array}\)
No net Section 1231 losses have been deducted as ordinary losses in prior years.How much of the 2013 Section 1231 gains and losses are recognized as long-term capital gains?
A)$ - 0 -
B)$ 1,000
C)$ 3,000
D)$ 4,000
E)$ 6,000
Q2) Section 1231 assets are certain trade or business assets that are not capital assets but are treated as such when sold at a gain or a loss.
A)True
B)False
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/71714
Sample Questions
Q1) Office building for office equipment.
A)qualifies as a like-kind exchange
B)does not qualify as a like-kind exchange
Q2) Which of the following qualifies as a like-kind exchange of property?
I.Registered trademark for a copyright.
II.A 2009 Chevy,business-use automobile for a 2010 Ford,business-use automobile
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q3) Grant exchanges an old pizza oven from his business for a new oven.In addition to the old oven,which had a basis of $10,000,Grant pays $4,000 cash and takes out a loan on the new oven for $6,000.The new oven is valued at $22,000.What is Grant's basis in the new oven?
A)$12,000
B)$16,000
C)$20,000
D)$22,000
E)$32,000
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
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/71715
Sample Questions
Q1) Does the selection of a corporate entity ever make sense based on a desire for lower marginal tax rates? Discuss.
Q2) Dewey and Louie agree to combine their sole proprietorships into one business.They will be equal partners in the Dewlou Diner.Dewey will contribute a building worth $100,000 (adjusted basis of $80,000),and $10,000 in cash.Louie will contribute inventory worth $80,000 (adjusted basis of $85,000)and $30,000 cash.What is Dewlou's basis in the assets?
Building \(\quad\) Inventory
a. \(\$ 80,000 \quad \$ 85,000\)
b. \(\$ 80,000 \quad \$ 80,000\)
c. \(\$ 100,000 \quad \$ 85,000\)
d. \(\$ 100,000 \quad \$ 80,000\)
Q3) A corporation in which the performance of personal activities is the principal pursuit,services are performed by owner-employees,and the owner-employees own 95% or more of the stock is taxed at a flat rate of 35%.
A)True
B)False
Q4) 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
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/71716
Sample Questions
Q1) During the current year the Newport Partnership is liquidated.Which of the following statements is correct concerning the liquidation of the partnership?
I.If only cash is distributed by the partnership,the partners must recognize a gain but cannot recognize a loss.
II.Gain is recognized only if the amount of cash and property distributed exceeds the partner's basis in the partnership.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q2) Roger owns 65% of Silver Trucking,a partnership.During the current year,Roger sells a truck with an adjusted basis of $30,000 to Silver for $20,000.
I.Silver's basis in the truck is $30,000.
II.Roger can deduct the $10,000 loss on the sale of the truck.
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 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/71717
Sample Questions
Q1) Thelma can get the 10% penalty on the early withdrawal from her IRA waived if the money is used to pay her son's college tuition.
A)True
B)False
Q2) On January 22,2011,Dalton Corporation granted Kathleen an option to acquire 1,500 shares of the company's stock for $ 7 per share.The fair market price of the stock on the date of grant was $13.The stock requires that Kathleen remain with the company for one year after the date of exercise.The option did not have a readily ascertainable fair market value.Kathleen exercises the option on August 10,2012,when the fair market value of the stock is $17.She makes a Section 83 (b)election at the exercise date.On August 10,2013,the fair market value of the stock is $23 per share.How much must she report as income in 2012 and 2013? \(2012 \quad\quad \quad 2013\)
a. \(\$ - 0\) - \(\quad \$ 15,000\)
b. \(\$ - 0\) - \(\quad \$ 24,000\)
c. \(\$ 10,500 \quad \$ 4,500\)
d. \(\$ 15,000 \quad \$ - 0 -\)
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/71718
Sample Questions
Q1) Which of the following regulations deals with Income Tax?
A)Reg. Sec. 1.165-1
B)Reg. Sec. 20.2014-5
C)Reg. Sec. 25.2518-5
D)Reg. Sec. 301.7002-5
Q2) Which of the following statements pertaining to tax law is true?
I.A tax textbook is considered a primary source.
II.Secondary sources help locate and interpret primary sources.
III.Primary sources emanate from the three branches of the federal government.
IV.An article in a law journal written by a former commissioner of the Internal Revenue Service is considered a secondary source of tax law.
A)Only statement I is correct.
B)Statements I and II are correct.
C)Statements I, II, and III are correct.
D)Statements II, III, and IV are correct.
E)Statements I, II, III, and IV are correct.
Q3) Describe the steps of the tax research process.
Q4) Tax articles in law review journals are federal income tax law.
A)True
B)False
Page 18
To view all questions and flashcards with answers, click on the resource link above.