Tax Accounting Final Exam
Course Introduction
Tax Accounting focuses on the principles, regulations, and procedures underlying the preparation and reporting of tax information for individuals and business entities. The course covers key areas such as federal income tax laws, tax planning strategies, income recognition, deductions, property transactions, and the ethical considerations in tax practice. Emphasis is placed on understanding the Internal Revenue Code, tax compliance, and the preparation of basic tax returns, with practical examples illustrating the impact of tax policies on financial decisions.
Recommended Textbook
South Western Federal Taxation 2012 Corporations Partnerships Estates and Trusts Professional
Available Study Resources on Quizplus
20 Chapters
2539 Verified Questions
2539 Flashcards
Source URL: https://quizplus.com/study-set/3523 Page 2
Chapter 1: Understanding and Working With the Federal Tax Law
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/69968
Sample Questions
Q1) Which of the following sources has the highest tax validity?
A) Treasury Regulation.
B) Revenue Ruling.
C) Internal Revenue Code.
D) Proposed Regulation.
E) All of the above have same weight.
Answer: C
Q2) Explain simulations on the CPA examination.
Answer: Simulations are small case studies designed to test a candidate's tax knowledge and skills using real-life work-related situations. The simulations range from 30 to 50 minutes in length and complement the multiple-choice questions. Simulations include a four-function pop-up calculator, a blank spreadsheet with some elementary functionality, and authoritative literature appropriate to the subject matter. The taxation database includes authoritative excerpts (e.g., Internal Revenue Code and Federal tax forms) that are necessary to complete the tax case study simulations.
Q3) Determination letters usually involve proposed transactions.
A)True
B)False
Answer: False
3
To view all questions and flashcards with answers, click on the resource link above.
Chapter 2: Corporations: Introduction and Operating Rules
Available Study Resources on Quizplus for this Chatper
113 Verified Questions
113 Flashcards
Source URL: https://quizplus.com/quiz/69957
Sample Questions
Q1) There is no Federal income tax assessed on partnerships (including those formed as LLCs) or S corporations. Since all states follow the Federal approach as to entity taxation, state income taxation is a neutral factor in the selection of an entity form.
A)True
B)False Answer: False
Q2) Schedule M-2 is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at the end of the year.
A)True
B)False Answer: True
Q3) A corporation with $10 million or more in assets must file Schedule M-3 (instead of Schedule M-1).
A)True
B)False Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Corporations: Special Situations
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/69955
Sample Questions
Q1) Swan Corporation has average gross receipts of $5.5 million, $4.7 million, and $4.6 million in 2008, 2009, and 2010, respectively. Is the company a small corporation with respect to the AMT?
Answer: Yes, Swan is a small corporation because the average gross receipts of $4.933 million is less than the $5 million threshold [($5.5 million + $4.7 million + $ 4.6 million) = $14.8 million/3 = $4.933 million].
Q2) Which formula is correct for DPAD?
A) Smaller of 9% of QPAI or 9% of modified AGI, not to exceed 50% of allocable wages.
B) Larger of 9% of QPAI or 9% of taxable income, not to exceed 50% of allocable wages.
C) Smaller of 9% of QPAI or 9% of taxable income, not to exceed 60% of allocable wages. D) Larger of 9% of QPAI or 9% of alternative minimum tax, not to exceed 60% of allocable wages.
E) None of the above.
Answer: A
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Corporations: Organization and Capital Structure
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/69954
Sample
Questions
Q1) Thomas transfers cash of $160,000 to Grouse Corporation, a newly formed corporation, for 100% of the stock in Grouse worth $90,000 and debt in the amount of $70,000, payable in equal annual installments of $7,000 plus interest at the rate of 5% per annum. In the first year of operation, Grouse has net taxable income of $40,000. If Grouse pays Thomas interest of $3,500 and $7,000 principal payment on the note:
A) Thomas has dividend income of $10,500.
B) Grouse Corporation does not have a tax deduction with respect to the payment.
C) Grouse Corporation has an interest expense deduction of $3,500.
D) Thomas has dividend income of $7,000.
E) None of the above.
Q2) What is the rationale underlying the tax deferral treatment available under § 351?
Q3) When incorporating her sole proprietorship, Samantha transfers all of its assets and liabilities. Included in the $30,000 of liabilities assumed by the corporation is $500 that relates to a personal expenditure. Under these circumstances, the entire $30,000 will be treated as boot.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: Corporations: Earnings Profits and Dividend
Distributions
Available Study Resources on Quizplus for this Chatper
89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/69953
Sample Questions
Q1) Jose receives a nontaxable distribution of stock rights during the year from Gold Corporation on January 30. Each right entitles the holder to purchase one share of stock for $50. One right is issued for every share of stock owned. Jose owns 100 shares of stock purchased two years ago for $5,000. At the date of distribution, the rights are worth $1,000 (100 rights at $10 per right) and Jose's stock in Gold is worth $6,000 (or $60 per share). On December 1, Jose sells all stock rights for $13 per right. How much gain does Jose recognize on the sale?
A) $1,300.
B) $586.
C) $500.
D) $0.
E) None of the above.
Q2) A distribution from a corporation will be taxable to the recipient shareholders only to the extent of the corporation's E & P.
A)True
B)False
Q3) Any loss in current E & P must be treated as occurring ratably during the year.
A)True
B)False
Page 7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Corporations: Redemptions and Liquidations
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/69952
Sample Questions
Q1) Sparrow Corporation purchased 90% of the stock of Warbler Corporation eight years ago for $1 million. In the current year, Sparrow liquidates Warbler and acquires assets with a basis to Warbler of $850,000 (fair market value of $1.2 million). Sparrow will have a basis in the assets of $850,000 (Warbler's basis in the assets), and a recognized loss of $150,000 ($1 million basis in Warbler stock - $850,000 carryover basis in assets).
A)True
B)False
Q2) Joe owns 100% of Green Corporation (E & P of $500,000) and 100% of Navy Corporation (E & P of $400,000). Joe sells 100 shares in Green (basis of $40,000) to Navy for $70,000, its fair market value. Joe purchased the stock in Green six years ago. Joe has:
A) Dividend income of $30,000.
B) Dividend income of $70,000.
C) A long-term capital gain of $30,000.
D) A long-term capital gain of $70,000.
E) None of the above.
Q3) Describe the requirements for and tax consequences of a § 338 election.
Q4) What are the tax consequences of a qualifying stock redemption to the distributing corporation?
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Corporations: Reorganizations
Available Study Resources on Quizplus for this Chatper
121 Verified Questions
121 Flashcards
Source URL: https://quizplus.com/quiz/69951
Sample Questions
Q1) The "Type C" reorganization requires that at least ____________________ percent of the value of the target's assets be acquired with ____________________ stock.
Q2) For corporate reorganizations, the tax laws should be considered while planning the structure of the reorganization.
A)True
B)False
Q3) Debt security holders recognize gain when the interest rate on the securities received is greater than the interest rate on the bonds given up.
A)True
B)False
Q4) When tax attributes are carried over from a loss target corporation to the acquiring corporation, the NOLs are utilized ____________________ (before/after) capital losses.
Q5) Explain how the tax treatment for parties involved in a tax-free reorganization almost exactly parallels the treatment under the like-kind exchange provisions of § 1031.
Q6) Compare an acquisitive "Type D" reorganization with the "Type C" reorganization.
Q7) Discuss the role of letter rulings in corporate reorganizations.
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Consolidated Tax Returns
Available Study Resources on Quizplus for this Chatper
145 Verified Questions
145 Flashcards
Source URL: https://quizplus.com/quiz/69950
Sample Questions
Q1) The right to file on a consolidated basis is available to a group of corporations when they constitute a "parent-subsidiary affiliated group."
A)True
B)False
Q2) Which of the following statements is true with regard to intercompany transactions?
A) An intercompany transaction is eliminated from consolidated taxable income.
B) All intercompany gains are recognized, but losses must be deferred.
C) A cash sale of a business asset by the purchasing member to an acquirer outside of the group triggers immediate recognition of the gain or loss.
D) The gain or loss on an intercompany transaction is deferred for up to ten years, after which it is recognized.
Q3) When a consolidated NOL is generated, each affiliate is allocated a share of the loss.
A)True B)False
Q4) Most of the rules governing the use of consolidated returns are found in tax ____________________, and not the ____________________.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Taxation of International Transactions
Available Study Resources on Quizplus for this Chatper
159 Verified Questions
159 Flashcards
Source URL: https://quizplus.com/quiz/69949
Sample Questions
Q1) Income tax treaties may provide for either higher or lower withholding tax rates on interest income than the rate provided under U.S. statutory law.
A)True
B)False
Q2) USCo, a domestic corporation, receives $700,000 of foreign-source passive income on which foreign taxes of $70,000 are withheld. Its worldwide taxable income is $1,500,000 and its U.S. tax liability before the foreign tax credit is $525,000. What is USCo's allowed foreign tax credit?
A) $245,000.
B) $70,000.
C) $175,000.
D) $770,000.
Q3) Julio, a nonresident alien, realizes a gain on the sale of commercial real estate located in Omaha. The real estate was sold to Mariana, Julio's cousin who is also a nonresident alien. Julio recognizes foreign-source income from the sale because his home country is not the U.S.
A)True
B)False
Q4) Discuss the primary purposes of income tax treaties.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Partnerships: Formation, Operation, and Basis
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/69967
Sample Questions
Q1) At the beginning of the tax year, Zach's basis for his partnership interest and his amount at risk in the partnership was $30,000. His share of partnership items for the year consisted of tax-exempt interest income of $2,000 and an ordinary loss of $44,000. He also received a distribution from the partnership of $20,000 cash during the year. For the tax year, Zach will report:
A) A nontaxable distribution of $20,000, an ordinary loss of $10,000, and a suspended loss carryforward of $34,000.
B) An ordinary loss of $32,000, a suspended loss carryforward of $12,000, and a taxable distribution of $20,000.
C) A nontaxable distribution of $20,000, an ordinary loss of $12,000, and a suspended loss carryforward of $32,000.
D) An ordinary loss of $44,000 and a nontaxable distribution of $20,000.
Q2) An example of the "entity concept" underlying partnership taxation is the fact that the partners (rather than the partnership) pay tax on partnership income.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
12
Chapter 11: Partnerships: Distributions, Transfer of Interests, and Terminations
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/69966
Sample Questions
Q1) A disproportionate distribution occurs when a cash distribution is not made in proportion to the partners' ownership interests in the partnership. (Assume the partnership's only assets are cash and land held for investment).
A)True
B)False
Q2) Marcie is a 40% member of the M&A LLC. Her basis is $40,000 immediately before the LLC distributes to her $30,000 of cash and land (basis to the LLC of $20,000 and fair market value of $25,000). As a result of the proportionate, nonliquidating distribution, Marcie recognizes a gain of $15,000 and her basis in the land equals its fair market value of $25,000.
A)True B)False
Q3) A partnership continues in existence unless one of the following happens: 1) all assets are distributed to the partners in liquidation of the partnership, or 2) one partner buys the interest of the second partner in a two partner partnership (resulting in a single owner of the entity).
A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: S: Corporations
Available Study Resources on Quizplus for this Chatper
157 Verified Questions
157 Flashcards
Source URL: https://quizplus.com/quiz/69965
Sample Questions
Q1) Which statement is true?
A) Charitable contributions are subject to the 10% limitation at the corporate level.
B) The at-risk rules apply to S corporations.
C) The passive loss limitations do not apply to S corporations.
D) S corporations are exempted from state and local taxes.
E) None of the above.
Q2) An S corporation that has total assets of at least $5 million on Schedule L at the end of the tax year must file a Schedule M-3.
A)True
B)False
Q3) Any distribution of cash or property by a corporation that does not exceed the balance of AAA with respect to the stock during a post-termination transition period of approximately one year is applied against and reduces the adjusted basis of the stock.
A)True
B)False
Q4) Most Roth IRAs can own S corporation stock.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Comparative Forms of Doing Business
Available Study Resources on Quizplus for this Chatper
143 Verified Questions
143 Flashcards
Source URL: https://quizplus.com/quiz/69964
Sample Questions
Q1) A limited partner in a limited partnership has limited liability whereas a general partner in a limited partnership has unlimited liability unless the limited partners agree that the general partner will have limited liability.
A)True
B)False
Q2) It is easier to satisfy the § 721 requirements for the nonrecognition of gain or loss on partner contributions than it is to satisfy the § 351 requirements for the nonrecognition of gain or loss on shareholder contributions.
A)True
B)False
Q3) A limited partnership can indirectly avoid unlimited liability of the general partner if the general partner is a corporation.
A)True
B)False
Q4) The AMT tax rate for a C corporation is less than the regular tax rate for C corporations.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 14: Taxes on the Financial Statements
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/69963
Sample Questions
Q1) Create, Inc., a domestic corporation, owns 90% of Vinyl, Ltd., a foreign corporation and Digital, Inc., a domestic corporation. Create also owns 60% of Record, Inc., a domestic corporation. Create receives no distributions from any of these corporations. Which of these entities' net income are included in Create's Federal tax return for the current year assuming Create elects to include all eligible entities in its consolidated Federal income tax return?
A) Create and Digital.
B) Create, Vinyl, and Digital.
C) Create, Vinyl, and Record.
D) Create, Vinyl, Digital, and Record.
Q2) Under GAAP, a corporation can defer a disclosure of the future U.S. tax expense related to the earnings of foreign subsidiaries, by taking into account its repatriation plans for these earnings.
A)True
B)False
Q3) Domestic and foreign entities owned more than 80% are included in a consolidated group's U.S. tax return.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Exempt Entities
Available Study Resources on Quizplus for this Chatper
151 Verified Questions
151 Flashcards
Source URL: https://quizplus.com/quiz/69962
Sample Questions
Q1) Third Church operates a gift shop in its parish house. The total income of the church is $800,000. Of this amount, $300,000 comes from offerings and $500,000 comes from the net income of the gift shop. The gift shop operations are conducted by one full-time employee (the manager) and 50 volunteers. None of the volunteers works more than 15 hours per week. Which of the following statements is correct?
A) The $800,000 is unrelated business income.
B) The $500,000 of gift shop net income is unrelated business income.
C) The $300,000 is unrelated business income because the gift shop is a feeder organization.
D) None of the $800,000 is unrelated business income.
E) The unrelated business income tax does not apply to churches.
Q2) Which of the following are exempt organizations to which contributions made are eligible for the charitable contribution deduction?
A) National Basketball Association (NBA).
B) Red Cross.
C) American Institute of CPAs (AICPA).
D) Only b. and c.
E) a., b., and c.
Q3) Describe how an exempt organization can be eligible to lobby.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Multistate Corporate Taxation
Available Study Resources on Quizplus for this Chatper
160 Verified Questions
160 Flashcards
Source URL: https://quizplus.com/quiz/69961
Sample Questions
Q1) A service engineer spends 60% of her time maintaining the employer's productive business property and 40% maintaining the employer's nonbusiness rental properties. This year, her compensation totaled $90,000. The payroll factor assigns $54,000 to the state in which the employer is based.
A)True
B)False
Q2) Under _____________________, a state is prohibited from taxing a business if the only connection with the state is the solicitation of orders for sales of tangible personal property that are sent outside the state for approval or rejection and, if approved, are filled and shipped by the business from a point outside of the state.
Q3) State and local politicians tend to apply new and increased taxes to taxpayers who are visitors to the jurisdiction and cannot vote to reelect the lawmaker.
A)True
B)False
Q4) You attend a tax webinar in which the presenter mentions the "ultimate destination concept." Define this term, and identify at least two of the most important exceptions to the general rule.
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Tax Practice and Ethics
Available Study Resources on Quizplus for this Chatper
153 Verified Questions
153 Flashcards
Source URL: https://quizplus.com/quiz/69960
Sample Questions
Q1) The taxpayer might secure a(n) ____________________ to assure that a homeless shelter qualifies for tax exempt treatment.
Q2) What are the chief responsibilities of the IRS Commissioner, and of the Chief Counsel of the IRS?
Q3) If the taxpayer shows ____________________ for an underpayment of tax, the failure to pay penalty can be reduced or eliminated.
Q4) With respect to the Small Cases Division of the Tax Court,
A) The taxpayer (but not the IRS) can appeal a contrary judgment.
B) The IRS (but not the taxpayer) can appeal a contrary judgment.
C) Either the IRS or the taxpayer can appeal a contrary judgment.
D) Neither the IRS nor the taxpayer can appeal a contrary judgment.
Q5) Gloria, a calendar year taxpayer subject to a 35% marginal income tax rate, claimed a Form 1040 charitable contribution deduction of $800,000 for a sculpture that the IRS later valued at $100,000. The applicable overvaluation penalty is:
A) $245,000.
B) $98,000.
C) $49,000.
D) $10,000 (maximum penalty).
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: The Federal Gift and Estate Taxes
Available Study Resources on Quizplus for this Chatper
173 Verified Questions
173 Flashcards
Source URL: https://quizplus.com/quiz/69959
Sample Questions
Q1) Paul, a U.S. citizen, will avoid the Federal estate tax if he becomes a Canadian resident and owns no property located in the U.S. at the time of his death.
A)True
B)False
Q2) The § 2513 election to split gifts is less useful in community property states than in common law states. Explain.
Q3) Eric dies at age 96 and is survived by his third wife, Monique (age 22), and a granddaughter, Paula (age 50). Eric's will divides his $11 million estate between these two survivors. Both of these transfers are subject to the generation skipping transfer tax (GSTT).
A)True
B)False
Q4) Pauline sells antique furniture to her daughter, Nicole, for $10,000. If the furniture is really worth $100,000, Pauline has made a gift to Nicole of $100,000.
A)True
B)False
Q5) In most cases, the gross estate of a decedent is larger than the probate estate.
To view all questions and flashcards with answers, click on the resource link above.
Page 20
Chapter 19: Family Tax Planning
Available Study Resources on Quizplus for this Chatper
145 Verified Questions
145 Flashcards
Source URL: https://quizplus.com/quiz/69958
Sample Questions
Q1) A disclaimer by a surviving spouse will generate additional estate tax since it reduces the amount of marital deduction allowed.
A)True B)False
Q2) Paula owns an insurance policy on her life payable to her estate. On Paula's death, the insurance proceeds are included in her gross estate but not her probate estate.
A)True B)False
Q3) Brad and Heather are husband and wife and live in New Mexico. Under Brad's will, his share of the community property passes to the children. Upon Brad's prior death, there will be a change in Heather's income tax basis in her half of the community property. A)True
B)False
Q4) Cost and time are usually saved by passing ownership to out-of-state real estate by death rather than by gift.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Income Taxation of Trusts and Estates
Available Study Resources on Quizplus for this Chatper
156 Verified Questions
156 Flashcards
Source URL: https://quizplus.com/quiz/69956
Sample Questions
Q1) Corpus, principal, and assets of the trust are synonyms.
A)True
B)False
Q2) "First-tier distributions" allowed by the will or trust document are made at the discretion of the executor or trustee.
A)True
B)False
Q3) In computing distributable net income (DNI) for a trust, one removes any corpus net capital gain or loss.
A)True
B)False
Q4) The unextended due date for a calendar-year trust to file its Form 1041 is March 15. A)True B)False
Q5) Your client Pryce is one of the income beneficiaries of the Santiago Trust. Pryce says to you, "I want all of the exempt interest income from Santiago to be allocated to me, as I am the income beneficiary who is subject to the highest marginal Federal income tax rate." How do you respond to Pryce's request?
To view all questions and flashcards with answers, click on the resource link above. Page 22