Course Introduction
Tax Accounting Question
Bank
Tax Accounting provides students with a comprehensive understanding of the principles and practices related to accounting for income taxes, both for individuals and businesses. Topics covered include the structure of tax systems, concepts such as gross income, deductions, credits, and tax compliance, as well as the preparation and analysis of tax returns. The course also examines tax planning strategies, the implications of tax laws on financial decision-making, and the ethical considerations in tax practice. Students will develop practical skills in interpreting and applying relevant tax codes and regulations, preparing them for roles in public accounting, corporate finance, and government agencies.
Recommended Textbook
Prentice Halls Federal Taxation 2015 Comprehensive 28th Edition by Timothy J. Rupert
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Chapter 1: Tax Research
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Q1) Which tax service is usually deemed to be the most authoritative?
A)United States Tax Reporter
B)Standard Federal Tax Reporter
C)Federal Tax Coordinator 2d
D)All are equally authoritative.
Answer: D
Q2) Tax planning is not an integral part of open-fact situations.
A)True
B)False
Answer: False
Q3) What is "forum-shopping"?
Answer: Forum-shopping involves choosing where among the various courts to file a lawsuit.Since courts often disagree as to the appropriate tax treatment of the same item,a taxpayer can file in the jurisdiction that has precedents that favor his circumstances.
Q4) What is the purpose of Treasury Regulations?
Answer: The Treasury Department issues regulations that expound upon the IRC.Treasury Regulations often contain examples with computations that provide valuable assistance in understanding the statutory language.
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Chapter 2 an Introduction to Taxation
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Q1) The primary objective of the federal income tax law is to achieve various economic and social policy objectives.
A)True
B)False
Answer: False
Q2) When new tax legislation is being considered by Congress,
A)the tax bill will usually originate in the Senate.
B)different versions of the House and Senate bills are reconciled by the Speaker of the House and the President of the Senate.
C)different versions of the House and Senate bills are reconciled by a Joint Conference Committee.
D)after the President of the U.S.approves a tax bill,the Joint Conference Committee must then vote on passage of the bill.
Answer: C
Q3) The terms "progressive tax" and "flat tax" are synonymous.
A)True
B)False
Answer: False
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Chapter 3: Corporate Formations and Capital Structure
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Q1) Identify which of the following statements is true.
A)Property contributions to a corporation by nonshareholders will result in income recognition by the corporation if the contributed property is subsequently sold.
B)Section 1244 ordinary loss treatment is available to any shareholder.
C)A taxpayer must make a special election to take advantage of Sec.1244.
D)All of the above are false.
Answer: A
Q2) What are the tax consequences to Whitney who owns 50% of Museum Corporation,a qualifying S Corporation that is a calendar-year entity,if Museum Corporation reports $60,000 of taxable income? How would your answer change if Museum Corporation reported a $40,000 loss?
Answer: Whitney must pay taxes on $30,000,his 50% share of Museum Corporation's income,whether it is distributed to him or not.Museum Corporation pays no corporate income taxes.If Museum Corporation reports a $40,000 loss,Whitney's $20,000 share of the loss reduces his taxable income.
Q3) There are no tax consequences of a partnership converting to a C corporation.
A)True
B)False
Answer: False
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Page 5
Chapter 4: I: Determination of Tax
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Q1) Juanita's mother lives with her. Juanita purchased clothing for her mother costing $1,000 and provided her with a room that Juanita estimates she could have rented for $4,000. Juanita spent $5,000 on groceries she shared with her mother. Juanita also paid $700 for her mother's health insurance coverage. How much of these costs is considered support?
A)$5,000
B)$7,500
C)$10,000
D)$10,700
Q2) Tom and Alice were married on December 31 of last year.What is their filing status for last year?
A)They file as single.
B)They file as married joint or married separate.
C)They file as single for half the year and married for the other half.
D)They file as single for 364 days and married for one day.
Q3) Although exclusions are usually not reported on an individual's income tax return,interest income on state and local government bonds must be reported on the tax return.
A)True
B)False
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Chapter 5: The Corporate Income Tax
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Q1) Identify which of the following statements is true.
A)A corporate NOL can be carried back two years and forward 15 years.
B)An election to forgo an NOL carryback must be made on or before the return due date (including extensions)for the year in which the NOL is incurred.
C)In computing an NOL for the current year,a deduction is allowed for NOLs from previous years.
D)All of the above are false.
Q2) If a controlling shareholder sells depreciable property to a controlled corporation and the property is depreciable by the purchaser,any gain on the sale is a 1231 gain.
A)True
B)False
Q3) Baxter Corporation is a personal service corporation.Baxter Corporation has taxable income of $10,000.Baxter Corporation's tax is
A)$1,500.
B)$3,400.
C)$3,500.
D)$3,900.
Q4) How does the use of an NOL differ for individual and corporate taxpayers?
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Page 7
Chapter 6: Gross Income: Inclusions
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Q1) Hoyt rented office space two years ago to Harris,receiving the first and last months' rent plus a security deposit of $1,000.In early January of this year,Harris moves and Hoyt refunds $250 of the deposit and keeps the remainder to cover $500 which is spent for repairs to the office space and one week of unpaid rent that amounts to $250.How would this information be reflected on Hoyt's tax return this year?
A)$750 income and $500 deduction
B)$750 income and no deduction
C)$250 income and $500 deduction
D)No income is recognized,but a $250 deduction is allowed.
Q2) The recipient of a taxable stock dividend includes the value of the stock received in gross income and that amount becomes the basis for the stock received.
A)True
B)False
Q3) On January 1,1996,Erika Greene purchased a single premium annuity for $15,000 that will pay her $5,000 every year for life beginning on January 1,2014.Based on actuarial tables published by the IRS,her life expectancy multiple is 10.
a.What is the amount to be excluded Erika's income for 2014?
b.What is the amount to be excluded in Erika's income for the year 2024?
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Chapter 7: Corporate Nonliquidating Distributions
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Q1) Rich owns 60 of the 100 outstanding shares of Rainbow Corporation's stock and 80 of the 100 outstanding shares of Oz Corporation's stock.Rich's basis in his Rainbow shares is $12,000,and his basis in his Oz shares is $8,000.Rich sells 30 of his Rainbow shares to Oz Corporation for $50,000.At the end of the year of the sale,Rainbow and Oz Corporations have E&Ps of $25,000 and $40,000,respectively.
a)What is the amount and character of Rich's gain or loss?
b)What is Rich's basis in his remaining shares of the Rainbow and Oz stock?
c)How does the sale affect the E&Ps of Rainbow and Oz Corporations?
d)What basis does Oz Corporation take in the Rainbow shares it purchases?
e)How would your answer to part (a)change if Rich owns only 50 shares of the 100 outstanding shares of Oz Stock?
Q2) Kiara owns 100% of the shares of Lion Corporation.Kiara's basis is $70,000 and the FMV of the shares is $200,000.Kiara is willing to sell all of the stock to Tia,but Tia is unwilling to pay more than $150,000 for the stock because the Corporation has excess cash balances.They have agreed that Kiara can withdraw $50,000 in cash from Lion before the stock sale.What tax issues should be considered with respect to Kiara and Tia's agreement?
Q3) Outline the computation of current E&P,including two examples for each adjustment. To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Gross Income: Exclusions
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Q1) Discuss briefly the options available for avoiding double taxation for the U.S.citizen earning income from sources outside the United States.
Q2) Sumedha is the beneficiary of her mother's $500,000 life insurance policy.She receives $54,000 per year over ten years in settlement of her mother's policy. Sumedha will exclude the $54,000 proceeds received each year from the life insurance company.
A)True
B)False
Q3) Ahmad's employer pays $10,000 in tuition this year for Ahmad to attend a graduate business program.How much of the employer-provided tuition is taxable to Ahmad?
A)$0
B)$4,750
C)$5,250
D)$10,000
Q4) Kelly was sent by her employer to work on a special assignment in Paris for six months. Kelly will be able to exclude some of her income earned in Paris.
A)True
B)False
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Chapter 9: Other Corporate Tax Levies
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Q1) Identify which of the following statements is true.
A)The minimum tax credit carries forward indefinitely and offsets regular tax liabilities in future years.
B)The minimum tax credit available for a corporation's alternative minimum tax liability can be carried over for five years.
C)The general business credit is permitted to offset 100% of the larger of (1)a corporation's regular tax amount,or (2)its tentative minimum tax amount.
D)All of the above are false.
Q2) When using the Bardahl formula,an increase in annual credit sales (while holding the average accounts receivable balance constant)has which of the following effects on the working capital requirements?
A)increase
B)decrease
C)no effect
D)increase,decrease,or no effect,depending on other factors
Q3) The courts and the Treasury Regulations have mentioned a number of reasonable needs that allow a corporation to accrue earnings and avoid the accumulated earnings tax.What are these reasons?
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Chapter 10: Property Transactions: Capital Gains and Losses
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Q1) Kathleen received land as a gift from her grandfather.At the time of the gift,the land had a FMV of $85,000 and an adjusted basis of $110,000 to Kathleen's grandfather.One year later,Kathleen sold the land for $80,000.What was her gain or (loss)on this transaction?
A)no gain or loss
B)($5,000)
C)$5,000
D)$30,000
Q2) All recognized gains and losses must eventually be classified either as capital or ordinary.
A)True
B)False
Q3) Net long-term capital gains receive preferential tax treatment if they exceed net short-term capital losses.
A)True
B)False
Q4) Gain on sale of a patent by an inventor generally is ordinary income.
A)True
B)False
Page 12
Q5) What are arguments for and against preferential treatment of capital gains?
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Chapter 1: Corporate Liquidating Distributions
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Q1) Under the general liquidation rules,Missouri Corporation is liquidated,with Jefferson receiving $5,000 in cash plus other property having a $6,000 FMV and assuming a $2,000 mortgage on the property.Jefferson's basis in his Missouri stock is $8,000.What is Jefferson's amount realized and gain or loss recognized on the liquidation?
Q2) Jack Corporation is owned 75% by Sherri and 25% by Mark.Sherri and Mark have $125,000 and $50,000 bases in their stock,respectively.Jack Corporation adopts a plan of liquidation on March 1.On April 12,Sherri receives the following property as a liquidating distribution: cash of $30,000; land,$125,000 FMV; and 150 shares of Green Corporation stock,$30,000 FMV.The land is subject to a $20,000 mortgage.On the same date,Mark receives $10,000 FMV of Green stock (50 shares)and cash of $45,000 as a liquidating distribution.The land has a basis of $50,000 and the stock has a basis of $70,000 in Jack Corporation's hands.Both are capital assets to Jack Corporation and have been held for a number of years.
a)What is the amount and character of Jack Corporation's recognized gain or loss on the liquidating distributions?
b)What are the amounts and characters of Sherri and Mark's recognized gains or losses?
c)What are the bases of the land and stock to Sherri and Mark?
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Chapter 12: Deductions and Losses
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Q1) Anita has decided to sell her stock in TOM,Inc.She purchased the stock 5 years ago for $1,000.The current fair market value is $600.Anita's sister,Kathy,is interested in buying the stock as is Anita's friend,Marcia.What tax issues should Anita consider when deciding to whom the stock should be sold?
Q2) American Healthcare (AH),an insurance company,is trying to persuade Congress to enact nationwide anti-smoking legislation. As part of this effort,AH paid $500,000 to hire a lobbying firm to discuss its concerns with members of Congress. AH also contributed $100,000 to candidates for political office who support limiting public smoking. What amount of these expenditures can AH deduct?
A)$0
B)$100,000
C)$500,000
D)$600,000
Q3) According to the tax formula,individuals can deduct the greater of for AGI deductions or from AGI deductions.
A)True
B)False
Q4) Discuss when expenses are deductible under the accrual method of accounting.
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Page 14
Chapter 13: Corporate Acquisitions and Reorganizations
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Q1) American Corporation acquires the noncash assets of Utech Corporation in exchange for $700,000 of its voting stock plus $50,000 of cash.Utech Corporation assets are worth $750,000.Utech Corporation does not distribute the stock and cash but instead holds the stock as an investment.Utech will use the American cash along with the cash it retained to start a new business.The transaction can be classified as a
A)Type A reorganization.
B)Type B reorganization.
C)Type C reorganization.
D)The transaction does not qualify as a tax-free reorganization.
Q2) Brad exchanges 1,000 shares of Goodyear Corporation stock having a $15,000 basis for Atlas Corporation stock having a $25,000 FMV as part of a Type A tax-free reorganization.Brad also receives $6,000 cash as part of the reorganization.How much gain must Brad recognize?
Q3) The assets of Bold Corporation have a $1,000,000 basis and a $3,000,000 FMV.Its liabilities are $500,000.Tidel Corporation acquires 80% of the Bold Corporation stock for $2,000,000.What gain is recognized by Bold Corporation if a timely Sec.338 election is made by Tidel Corporation? What is the total basis of the assets to Bold Corporation following the deemed sale? Assume a 34% corporate tax rate.
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15
Chapter 14: Itemized Deductions
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Q1) Acquisition indebtedness for a personal residence includes debt incurred to substantially improve the residence.
A)True
B)False
Q2) Discuss the timing of the allowable medical expense deduction.
Q3) Doug pays a county personal property tax on his automobile of $1,500.The $1,500 includes $800 based on the weight of the car and $700 based on the value of the car.How much of the tax can Doug deduct on his tax return?
A)$0
B)$700
C)$800
D)$1,500
Q4) Which of the following is not required substantiation for a noncash charitable contribution?
A)name and address of charitable organization
B)method used to determine the donated property's fair market value
C)date and location of property donated
D)use of donation by charitable organization
Q5) Explain why interest expense on investments is limited to net investment income.
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Chapter 15: Consolidated Tax Returns
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Q1) The Alto-Baxter affiliated group filed a consolidated return for the first time last year.The group does not come under the "large" corporation rules.For last year,the group reports a tax liability of $60,000.Cooper Corporation has a $30,000 tax liability last year.This year,the Alto-Baxter affiliated group purchased all of the Cooper stock.This year,the Alto-Baxter-Cooper group reports an $110,000 consolidated tax liability.To avoid penalties for the current year,the group must make timely estimated tax payments of how much during the year?
A)$60,000
B)$90,000
C)$110,000
D)No estimated tax payments are required.
Q2) What is the consequence of having losses subject to the SRLY limitations?
Q3) A separate return year is a corporation's tax year for which it files a separate tax return or files a consolidated tax return with another affiliated group.
A)True
B)False
Q4) The election to file a consolidated return is made annually.
A)True
B)False
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Chapter 16: Losses and Bad Debts
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Q1) If an NOL is incurred,when would a taxpayer elect to forgo the carryback period and only carry the loss deduction forward?
Q2) In order to be recognized and deducted on a tax return,a loss must first be realized.
A)True
B)False
Q3) Adam owns interests in partnerships A and B,both of which are Publicly Traded Partnerships.During the current year,Adam's share of the income from A is $12,000.Adam's share of B's loss is $3,500.B also generates portfolio income of which Adam's share is $2,000.What are the tax consequences of these income and loss items?
Q4) What is required for an individual to be considered as actively participating in a real estate activity for purposes of utilizing the $25,000 ceiling on rental real estate losses?
Q5) One of the requirements which must be met for stock to be considered Section 1244 stock is that the stock must be owned by an individual or a partnership.
A)True
B)False
Q6) What are some factors which indicate that a debt may be worthless?
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Page 18
Chapter 17: Partnership Formation and Operation
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Q1) Meg and Abby are equal partners in the AM Partnership,which earns $40,000 ordinary income,$6,000 long-term capital gain (LTCG),and $2,000 Sec.1231 loss during the current year.What is the amount and character of income that must be reported on Abby's tax return for this year's partnership operations?
A)$20,000 ordinary income,$3,000 LTCG,$1,000 Sec.1231 loss
B)$19,000 ordinary income,$3,000 LTCG
C)$23,000 ordinary income,$1,000 Sec.1231 loss
D)$22,000 ordinary income
Q2) George pays $10,000 for a 20% interest in a general partnership,which has recourse liabilities of $20,000.The partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses.George's basis in his partnership interest is
A)$10,000.
B)$12,000.
C)$14,000.
D)$30,000.
Q3) A partnership must file Form 1065 only if its income exceeds $1,000.
A)True
B)False
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Page 19
Chapter 18: Employee Expenses and Deferred Compensation
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Q1) Which of the following statements regarding independent contractors and employees is true (ignore temporary provisions)?
A)Independent contractors pay Social Security and Medicare tax of 15.3%.
B)Employees must pay unemployment taxes.
C)Independent contractors and employees pay the same Social Security and Medicare tax rates.
D)Independent contractors deduct their business expenses "from AGI."
Q2) Transportation expenses incurred to travel from one job to another are deductible if a taxpayer has more than one job.
A)True
B)False
Q3) In-home office expenses which are not deductible in the year in which the costs were incurred due to limitations may be carried forward to subsequent years.
A)True
B)False
Q4) Explain when educational expenses are deductible for an employee.
Q5) What factors are considered in determining whether an expense is a deductible travel expense?
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Chapter 19: Special Partnership Issues
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Q1) What is included in the definition of unrealized receivables?
Q2) Adnan had an adjusted basis of $11,000 for his interest in the Adnan and Donnell Partnership on December 31.On this date,Adnan received from the partnership,in complete liquidation of his interest,$10,000 cash and land with a $2,000 basis to the partnership and a $3,000 FMV.What is Adnan's basis for the land distributed to him?
Q3) Do most distributions made by a partnership require a Sec.751 calculation?
Q4) In a current distribution,the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.
A)True
B)False
Q5) The limited liability company (LLC)has become a popular business form because of its limited liability protection for its owner.The S corporation also provides limited liability protection for its owner.What advantages does an LLC provide that are not available with an S corporation?
Q6) What are some advantages and disadvantages of making a Section 754 election?
Q7) A partner can recognize gain,but not loss,on a liquidating distribution.
A)True
B)False
Page 21
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Chapter 20: Depreciation cost Recovery amortization and Depletion
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Q1) Eric is a self-employed consultant. In May of the current year,Eric acquired a computer system (5-year property)for $7,000 and used the computer 30% for business.Eric does not use Sec.179.The maximum depreciation deduction for is A)$210.
B)$420.
C)$700.
D)$2,100.
Q2) Under the MACRS system,the same convention that applies in the year of acquisition (e.g.,half-year,mid-quarter,or mid-month)also applies in the year of disposition.
A)True
B)False
Q3) Residential rental property is defined as property from which more than 80% of the gross rental income is rental income from dwelling units.
A)True
B)False
Q4) The mid-quarter convention applies to personal and real property.
A)True
B)False
Page 22
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Chapter 21: S Corporations
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Q1) Up to six generations of a family are considered as one shareholder for purposes of the 100-shareholder limit.
A)True
B)False
Q2) Identify which of the following statements is false.
A)The election form can be signed by a person authorized to sign the S corporation tax return.
B)An S election is filed by the corporation by using Form 2553 on or before the due date (without regard to any extensions)for the corporate tax return for the tax year in question.
C)An S corporation must file a tax return for any year in which the S corporation is in existence.
D)The IRS can grant extensions of time of filing shareholder consents to the S election.
Q3) A testamentary trust can be an S shareholder for two years,beginning on the date the stock transfers to the trust.
A)True
B)False
Q4) What is a permitted year?
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Chapter 22: Accounting Periods and Methods
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Q1) A subsidiary corporation filing a consolidated return with its parent corporation must change its accounting period to conform with its parent's tax year.
A)True
B)False
Q2) Inventory may be valued on the tax return at the lower of cost or market unless
A)replacement cost is higher than historical cost.
B)the taxpayer determines inventory cost using the LIFO method.
C)the taxpayer determines inventory cost using the FIFO method.
D)the cash method of accounting is used by the taxpayer.
Q3) An improper election to use a fiscal year automatically places the taxpayer on the calendar year.
A)True
B)False
Q4) One criterion which will permit a deduction for an expenditure by the accrual-basis taxpayer prior to economic performance is that either the amount is not material or the earlier accrual of the item results in a better matching of income and expense.
A)True
B)False
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Chapter 23: The Gift Tax
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Q1) A qualified disclaimer must be made within nine months after (a)the day the property is transferred,or (b)the day the person receiving the property becomes age 21,whichever is later.
A)True
B)False
Q2) In 1998,Delores made taxable gifts to her son of property with an FMV of $200,000.In the current year when Delores dies,the property is worth $800,000.The amount included in Delores's estate tax base because of the 1998 gift is
A)$0.
B)$189,000.
C)$200,000.
D)$800,000.
Q3) What are the requirements for classifying a transaction as a transfer of a qualified terminable interest property (QTIP)?
Q4) Molly sells her car,valued at $30,000,to her nephew Todd for $18,000.Molly has made a taxable gift.
A)True
B)False
Q5) Discuss the purpose of the gift tax annual exclusion.
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Chapter 24: Property Transactions: Nontaxable Exchanges
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Q1) Under what circumstances can a taxpayer obtain a partial exclusion if a home is sold before the use and ownership tests are satisfied?
A)change in employment that meets the requirement for a moving expense deduction
B)increased traffic due to widening of a road
C)birth of one child
D)divorce
Q2) Which of the following statements is not true with regard to like-kind exchanges?
A)Nonrecognition of gains and losses is mandatory if the exchange is a like-kind exchange.
B)The holding period of like-kind property received includes the holding period of the property exchanged.
C)A loss is always recognized if the taxpayer transfers non-like-kind personal use property (e.g.a personal use car)in an otherwise like-kind exchange.
D)The basis of property received in an exchange is equal to the basis of the property exchanged less the boot received plus the gain recognized and less any loss recognized.
Q3) Discuss the basis rules of property received in a nontaxable like-kind exchange.
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Chapter 25: The Estate Tax
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Q1) On March 1,Sue transfers stock worth $20,000 to Frank.How long must Sue live to avoid inclusion of the $20,000 of stock in her gross estate?
A)six months
B)one year
C)three years
D)No minimum time period exists,but she must be alive at transfer of ownership.
Q2) Lou dies on April 12,2011.All of Lou's property passed to Paula,his daughter.Paula dies on January 15,2013.Both Lou's and Paula's estates pay federal estate taxes.Lou's estate tax was $350,000.How much can Paula's estate claim for a credit for tax on prior transfers?
A)$350,000
B)$280,000
C)$210,000
D)$140,000
Q3) Melissa transferred $650,000 in trust in 2006: income for life to herself,the remainder to her son.What part,if any,of the value of the trust's assets will be included in Melissa's estate?
Q4) Compare the tax treatment of administration expenses with that of the decedent's debts.
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Chapter 26: Property Transactions: Section 1231 and Recapture
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Q1) The amount recaptured as ordinary income under either Sec.1245 or Sec.1250 can never exceed the realized gain.
A)True
B)False
Q2) Elaine owns equipment ($23,000 basis and $15,000 FMV)and a building ($136,000 basis and $148,000 FMV),which are used in her business.Elaine uses straight-line depreciation for both assets,which were acquired several years ago.Both the equipment and the building are destroyed in a fire,and Elaine collects insurance proceeds equal to the assets' FMV.
a.What is the tax treatment of these two transactions?
b.Assume that Elaine is only able to collect $3,000 from the insurance company for the equipment loss. What is the tax treatment of the two transactions (assume the basis and insurance reimbursement remain the same for the building).
Q3) If realized gain from disposition of business equipment exceeds total depreciation or cost recovery,a portion of the gain will receive Sec.1231 treatment if the equipment's holding period is more than one year.
A)True
B)False
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Chapter 27: Income Taxation of Trusts and Estates
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Q1) For purposes of trust administration,the term "sprinkling" relates to the mandatory distribution of income among various beneficiaries.
A)True
B)False
Q2) Charitable contributions made by a fiduciary
A)are limited to 50% of fiduciary income.
B)must be authorized in the trust instrument in order to be deductible.
C)flows through to be deducted on the beneficiary's tax return.
D)are subject to the 2% floor.
Q3) The conduit approach for fiduciary income tax means
A)the distributed income has the same character in the hands of the beneficiary as it has to the trust.
B)the distributed income goes to all beneficiaries proportionately.
C)the distributed income is determined by the trustee annually.
D)the distributed income of a remainder interest is determined by the property.
Q4) A trust has distributable net income (DNI)of $50,000,including $30,000 tax-exempt interest income and $20,000 taxable interest income.The trust instrument requires that all income be distributed at least annually,30% to Jane and 70% to Joe.What is the amount and character of the income that Jane receives?
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Chapter 28: Special Tax Computation Methods, tax Credits, and Payment of Tax
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Q1) Dwayne has general business credits totaling $30,000 before limitation.His regular tax liability is $83,000 and his tentative minimum tax is $79,000.What amount of general business credit can Dwayne take this year?
A)$4,000
B)$14,500
C)$25,000
D)$30,000
Q2) The alternative minimum tax applies to individuals only if it exceeds the taxpayer's regular income tax liability.
A)True
B)False
Q3) Nonrefundable personal tax credits are allowed against the taxpayer's tax liability before other credits are claimed.
A)True
B)False
Q4) Nick and Nicole are both 68 years old and file a joint return.They have AGI of $15,000 and receive nontaxable Social Security payments of $4,200 during the current year.What is the amount of the tax credit for the elderly?
Page 30
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Chapter 29: Administrative Procedures
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Q1) Identify which of the following statements is false.
A)If fraud is asserted in a tax transaction,the burden of proof falls on the IRS.
B)The civil fraud penalty consists of 75% of the tax underpayment attributable to fraud plus 25% of the interest payable on the portion of the underpayment resulting from the fraud.
C)The government must prove its case "beyond a reasonable doubt" in order for the court or jury to convict a taxpayer of criminal fraud.
D)The fraud penalty can be imposed with respect to income,gift,and estate tax returns.
Q2) On July 25 of the following year,Joy files her current calendar- year tax return.She had requested extensions as required.On October 8,she pays the amount due.The tax shown on her return is $22,000.Her current-year withholding tax is $21,000.Joy pays no estimated taxes and does not claim any tax credits on her current-year return.Calculate the penalties that the IRS is likely to assess.Ignore the penalty for underpayment of estimated taxes.Assume she did not commit fraud.
Q3) Explain accountant-client privilege.What are the similarities and differences between it and attorney-client privilege?
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