Tax Compliance and Reporting Exam Bank
Course Introduction
Tax Compliance and Reporting provides a comprehensive overview of the obligations, processes, and best practices related to ensuring accurate and timely fulfillment of tax requirements by individuals and organizations. The course examines the regulatory framework governing tax compliance, including federal, state, and local laws, and explores the ethical responsibilities of taxpayers and tax practitioners. Students learn about the preparation, review, and submission of various tax filings, as well as record-keeping, due diligence, and risk management strategies to avoid errors and penalties. Emphasis is placed on developing analytical skills for interpreting tax regulations, applying them to real-world scenarios, and utilizing technology tools to streamline compliance and reporting functions.
Recommended Textbook
McGraw Hills Taxation of Individuals 2017 8th Edition
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14 Chapters
1609 Verified Questions
1609 Flashcards
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Page 2
By Brian C. Spilker
Chapter 1: An Introduction to Tax
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) Earmarked taxes are:
A) Taxes assessed only on certain taxpayers
B) Taxes assessed to fund a specific purpose
C) Taxes assessed for only a specific time period
D) Taxes assessed to discourage less desirable behavior
E) None of these
Answer: B
Q2) Sin taxes are:
A) Taxes assessed by religious organizations
B) Taxes assessed on certain illegal acts
C) Taxes assessed to discourage less desirable behavior
D) Taxes assessed to fund a specific purpose
E) None of these
Answer: C
Q3) Regressive tax rate structures are typically considered to be vertically equitable.
A)True
B)False
Answer: False
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Chapter 2: Tax Compliance, the Irs, and Tax Authorities
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) Martin has never filed a 2014 tax return despite earning approximately $20,000 providing landscaping work in the community. When does the statute of limitations expire for Martin's 2014 tax return?
A) 2017.
B) 2018.
C) 2021.
D) 2022.
E) None of these.
Answer: E
Q2) For fraudulent tax returns, the statute of limitations for IRS assessment is ten years.
A)True
B)False
Answer: False
Q3) The statute of limitations for IRS assessment generally ends four years after the date a tax return is filed.
A)True
B)False
Answer: False
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Chapter 3: Tax Planning Strategies and Related Limitations
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Assume that Shavonne's marginal tax rate is 50% and her tax rate on dividends is 15%. If a corporate bond pays 10.2% interest, what dividend yield would a dividend-paying stock (with no growth potential) have to offer for Shavonne to be indifferent between the two investments?
A) 6%
B) 7%
C) 10.2%
D) 15%
E) None of these
Answer: A
Q2) If Julius has a 30% tax rate and a 10% after-tax rate of return, a $40,000 tax deduction in two years will save how much tax in today's dollars (rounded)?
A) $40,000
B) $9,912
C) $33,040
D) $12,000
E) None of these
Answer: B
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Chapter 4: Individual Income Tax Overview, Exemptions, and Filing Status
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126 Verified Questions
126 Flashcards
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Sample Questions
Q1) Filing status determines all of the following except ____________
A) the applicable standard deduction amount.
B) the appropriate tax rate schedule or tax table.
C) the standard amount of each personal and dependency exemption.
D) the AGI threshold for reductions in certain tax benefits.
Q2) In April of year 1, Martin left his wife Marianne. While the couple was apart, they were not legally divorced. Marianne found herself having to financially provide for the couple's only child (who qualifies as Marianne's dependent) and to pay all the costs of maintaining the household. When Marianne filed her tax return for year 1, she filed a return separate from Martin. What is Marianne's most favorable filing status for year 1?
A) Married filing separately.
B) Single.
C) Head of household.
D) Qualifying widow.
Q3) Taxpayers who file as qualifying widows/widowers are treated exactly the same for tax purposes in all respects as taxpayers who are married filing jointly for tax purposes.
A)True
B)False
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Chapter 5: Gross Income and Exclusions
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131 Verified Questions
131 Flashcards
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Sample Questions
Q1) Jake sold his car for $2,400 in cash this year. He will realize a taxable gain of $1,000 if he purchased the car for $1,400.
A)True
B)False
Q2) Deb has found it very difficult to repay her loans. Because of these difficulties, the bank decided to forgive one of her most recent loans, an amount of $45,000. After the loan was discharged, Deb had total assets of $232,000 and her remaining loans total $217,000. What amount must Deb include in her gross income?
A) $15,000
B) $45,000
C) $30,000
D) $28,000
E) Zero - Deb was not solvent when the loan was discharged
Q3) Gambling winnings are included in gross income only to the extent that the winnings exceed gambling losses incurred during the same period.
A)True
B)False
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Chapter 6: Individual Deductions
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) Detmer is a successful doctor who earned $204,800 in fees this year, but he also competes in weekend golf tournaments. Detmer reported the following expenses associated with competing in almost a dozen tournaments: \(\ \text{Transportation to various tournaments}\quad\quad\quad\quad\quad\$ 3,450\)
\(\
\text{Lodging}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \quad\quad\quad\quad\quad \quad\quad\quad1,890\)
\(\ \text{Entry fees}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\q uad\quad\quad\quad\quad\quad\quad920\)
\(\ \text{Golf supplies (balls, tees, etc.)}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad75\) This year Detmer won $5,200 from competing in various golf tournaments. Assuming that Detmer itemizes his deductions, what amount of the golfing expenses are deductible after considering all limitations if the tournament golfing is treated as a hobby activity?
Q2) Taxpayers filing single and taxpayers filing married separate have the same basic standard deduction amount.
A)True
B)False
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Page 8
Chapter 7: Individual Income Tax Computation and Tax Credits
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156 Verified Questions
156 Flashcards
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Sample Questions
Q1) Individuals may file for and receive a six-month extension of time to file their tax return and pay their taxes without penalty.
A)True
B)False
Q2) Harrison received a qualified dividend. Without knowing any additional facts, which of the following statements is true regarding the rate at which the dividend will be taxed to Harrison?
A) The dividend will be taxed at a 15% tax rate.
B) The dividend will be taxed at a 20% tax rate.
C) The entire dividend will be taxed at either 15% or the entire dividend will be taxed at 20% depending on Harrison's marginal ordinary income tax rate.
D) None of these.
Q3) All else equal, a reduction in regular income tax rates would require more taxpayers to pay the alternative minimum tax.
A)True
B)False
Q4) Jackson earned a salary of $254,000 in 2014. What amount of FICA taxes should Jackson's employer withhold from his paycheck?
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Chapter 8: Business Income, Deductions, and Accounting Methods
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) Taxpayers must maintain written contemporaneous records of business purpose when entertaining clients in order to claim a deduction for the expenditures.
A)True
B)False
Q2) Which of the following is likely to be a fully deductible business expense?
A) Salaries in excess of the industry average paid to attract talented employees.
B) The cost of employee uniforms that can be adapted to ordinary personal wear.
C) A speeding fine paid by a trucker who was delivering a rush order.
D) The cost of a three-year subscription to a business publication.
E) None of these is likely to be deductible.
Q3) Marilyn operates a day care center as a cash-method sole proprietorship. On August 1st of this year Marilyn received a prepayment of $4,000 for child care services to be rendered evenly over the next 20 months. How much income must Marilyn recognize this year if she is attempting to minimize her tax burden?
Q4) A short tax year can end on any day of any month other than December.
A)True
B)False
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Chapter 9: Property Acquisition and Cost Recovery
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105 Verified Questions
105 Flashcards
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Sample
Questions
Q1) Racine started a new business in the current year. She incurred $52,000 of start-up costs. If her business started on November 23rd of the current year, what is the total expense she may deduct with respect to the start-up costs for her initial year, rounded to the nearest whole number?
A) $2,555
B) $3,544
C) $5,522
D) $52,000
E) None of these
Q2) During August of the prior year, Julio purchased an apartment building that he used as a rental property. The basis was $1,400,000. Calculate the maximum depreciation expense during the current year.
Q3) Which of the following assets is eligible for bonus depreciation?
A) Used office machinery
B) Qualified leasehold improvements
C) A new delivery truck
D) Used office furniture
E) All of these
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Chapter 10: Property Dispositions
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) A parcel of land is always a capital asset.
A)True
B)False
Q2) Depreciation recapture changes both the amount and character of a gain.
A)True
B)False
Q3) Assets held for investment and personal use assets are examples of capital assets.
A)True
B)False
Q4) Which of the following realized gains results in a recognized gain?
A) Farm machinery traded for farm machinery.
B) Sale to a related party.
C) Involuntary conversion.
D) Iowa cropland exchanged for a Minnesota warehouse.
Q5) Generally, the amount realized is everything of value received in a sale less selling expenses.
A)True B)False
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Chapter 11: Investments
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) What is the tax treatment for qualified small business stock acquired in 2014 and held for more than five years and what is the tax treatment if held for less than five years?
Q2) When a bond is purchased in the secondary bond market at a discount, the amount of discount treated as interest income when the bond is sold prior to maturity is the:
A) market premium
B) market discount
C) accrued market premium
D) accrued market discount
E) None of these
Q3) Generally, interest income is taxed at preferential capital gains rates and dividend income is taxed at ordinary rates.
A)True
B)False
Q4) Compare and contrast how interest income is reported for the following types of bonds: (a) bond originally issued at a discount, (b) bond originally issued at a premium, (c) bond purchased at a discount in a secondary market (d) bond purchased at a premium in a secondary market.
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Chapter 12: Compensation
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102 Verified Questions
102 Flashcards
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Sample
Questions
Q1) Kaijsa received 20 NQOs (each option gives her the right to purchase 30 shares of stock for $8 per share) from her employer at the time she started working when the stock price was $9 per share. Now that the share price is $18 per share, she intends to exercise all of her options. If Kaijsa holds the shares for two years and sells them when the market price is $25, what is the amount of the deduction and tax savings her employer will receive (assume the employer's marginal tax rate is 30 percent?
Q2) An employee's income with respect to restricted stock is the fair market value on the vesting date.
A)True
B)False
Q3) Which of the following is not a purpose of equity-based compensation?
A) Provide risk and incentives to employees.
B) Motivate employees by aligning employee and employer incentives.
C) Avoid compensation limits for executives.
D) Provides a low or no cost form of compensation.
Q4) Group-term life insurance is a fringe benefit that can be partially taxable and partially tax free.
A)True
B)False
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Chapter 13: Retirement Savings and Deferred Compensation
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Which of the following taxpayers is most likely to qualify for the saver's credit?
A) A low AGI taxpayer who does not contribute to any qualified retirement plan.
B) A low AGI taxpayer who contributes to her employer's 401(k) plan.
C) A high AGI self-employed taxpayer.
D) A high AGI employee who does not contribute to any qualified retirement plan.
Q2) Katrina's executive compensation package allows her to participate in the company's nonqualified deferred compensation plan. In the current year, Katrina defers 15 percent of her $300,000 salary. Katrina's deemed investment choice will earn 8 percent annually on the deferred compensation until she takes a lump sum distribution in 10 years. Katrina's current marginal tax rate is 30 percent and she expects her marginal tax rate to be 28 percent upon receipt on the deferred salary. What is her after-tax accumulation from the deferred salary in 10 years?
Q3) When a taxpayer receives a nonqualified distribution from a Roth 401(k) account the taxpayer contributions are deemed to be distributed first. If the amount of the distribution exceeds the taxpayer contributions, the remainder is from the account earnings.
A)True B)False
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Chapter 14: Tax Consequences of Home Ownership
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Taxpayers meeting certain requirements may be allowed to exclude at least a portion of gain realized on the sale of a principal residence.
A)True B)False
Q2) Which of the following statements regarding qualified home equity indebtedness is correct?
A) The limit on qualified home equity indebtedness depends on filing status.
B) Limits on qualified home equity indebtedness and qualified acquisition indebtedness do not apply to the same loan.
C) If the value of a home drops, the amount of qualified home equity indebtedness on an existing home equity loan also drops.
D) In order to deduct interest on home equity indebtedness, taxpayers must use the proceeds of a home equity loan to improve the home.
Q3) Taxpayers renting a home would generally report the rental income and expenses on Schedule
E. A)True B)False
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