Tax Law
Test Preparation
Course Introduction
Tax Law is an essential field of legal study that examines the rules, policies, and laws governing taxation at the local, national, and international levels. This course provides an in-depth understanding of the structure and function of tax systems, including the principles underlying income, corporate, property, and sales taxes. Students will learn how tax laws are applied to individuals and businesses, explore tax planning and compliance strategies, and analyze current issues in tax policy and reform. Emphasis is placed on interpreting legislative materials, case law, and administrative guidance to develop practical skills in advising clients and resolving tax disputes.
Recommended Textbook
McGraw Hills Taxation of Individuals 2017 8th Edition
By Brian C. Spilker
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14 Chapters
1609 Verified Questions
1609 Flashcards
Source URL: https://quizplus.com/study-set/3064 Page 2
Chapter 1: An Introduction to Tax
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) If Leonardo and his wife file married filing jointly in 2014, what would be their average tax rate (rounded)?
A) 15.00%
B) 25.00%
C) 18.63%
D) 23.73%
E) None of these
Answer: C
Q2) In considering the "economy" criterion in evaluating tax systems, one must consider this criterion from both the taxpayer and the government's perspective.
A)True
B)False
Answer: True
Q3) Margaret recently received a parking ticket. This is a common example of a local tax.
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) Which of the following is not considered a primary authority?
A) Tax Court case
B) Regulation
C) Revenue ruling
D) Tax service
E) None of these.
Answer: D
Q2) Rowanda could not settle with the IRS at the appeals conference. If she wants to litigate the issue but does not have sufficient funds to pay the proposed tax deficiency, Rowanda should litigate in the:
A) U.S. District Court.
B) U.S. Circuit Court of Appeals.
C) U.S. Court of Federal Claims.
D) U.S. Tax Court.
E) None of these.
Answer: D
Q3) Proposed and Temporary Regulations have the same authoritative weight.
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) Rolando's employer pays year-end bonuses each year on December 31. Rolando, a cash basis taxpayer, would prefer to not pay tax on his bonus this year. So, he leaves town on December 31, 2014 and doesn't pick up his check until January 2nd, 2015. When should Rolando report his bonus?
A) 2015
B) 2014
C) Rolando can choose the year to report the income
D) It does not matter
E) None of these
Answer: B
Q2) The timing strategy becomes more attractive as tax rates decrease.
A)True
B)False
Answer: False
Q3) If tax rates will be higher next year, taxpayers should accelerate their deductions regardless of their after-tax rate of return.
A)True
B)False
Answer: False
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Page 5
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) It is generally more advantageous from a nontax perspective for a married couple to file separately than it is for them to file jointly.
A)True
B)False
Q2) Which of the following statements is true:
A) Income character determines the tax year in which the income is taxed.
B) Income character depends on the taxpayer's filing status.
C) Qualified dividend income is taxed at a lower rate than the same amount of ordinary income.
D) A taxpayer selling a capital asset at a gain recognizes ordinary income.
Q3) Taxpayers are allowed to deduct more for each personal exemption they claim than for each dependency exemption they claim.
A)True
B)False
Q4) Doug and Lisa have determined that their tax liability on their joint return is $3,700. They have made prepayments of $1,000 and also are entitled to child tax credits of $2,000. What is the amount of their tax refund or taxes due?
Q5) What is the couple's taxable income?
Page 6
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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) This year Kelsi received a $1,900 refund of state income taxes that she paid last year. Last year Kelsi claimed itemized deductions of $7,200 including $2,800 of state income taxes. How much of the refund, if any, must Kelsi include in gross income if the standard deduction last year was $6,100?
Q2) Earnings from 529 plans and Coverdell education savings accounts are excluded from gross income as long as they use the earnings to pay for qualifying educational expenditures.
A)True
B)False
Q3) Charles purchased an annuity from an insurance company that promised to pay him $20,000 per year for the next 12 years. Charles paid $180,000 for the annuity. How much of the first $20,000 payment should Charles include in gross income?
Q4) Interest earned on a Federal Treasury bond is excluded from gross income (for federal tax purposes).
A)True
B)False
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Page 7
Chapter 6: Individual Deductions
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent to attend a post-secondary institution of higher education.
A)True
B)False
Q2) The deduction for medical expenses is limited to the amount of unreimbursed qualifying medical expenses paid during the year reduced by five percent of the taxpayer's AGI.
A)True B)False
Q3) Taxpayers generally deduct the lesser of their standard deduction or their itemized deductions.
A)True B)False
Q4) This year Kelly bought a new auto for $20,000 plus $1,650 in state and local sales taxes. Besides this sales tax, Kelly also paid $5,260 in state income taxes and had other itemized deductions (e.g., mortgage interest) of $3,500. If Kelly files single with AGI of $56,000, what amount of itemized deductions will she be eligible to claim?
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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) Which of the following could explain why large number of taxpayers are subject to (or could become subject to) AMT?
A) Regular tax rates have decreased since the AMT was enacted
B) The AMT exemption amount is indexed to increase with inflation
C) Property values are decreasing
D) The personal and dependency exemption amounts are not increasing as fast as the AMT exemption is decreasing
Q2) Jack paid $5,000 in daycare expenses for his five-year-old daughter so he could work. His AGI for the year was $37,500 (all earned income). What is the amount of his child and dependent care credit?
Q3) Depending on the year, the original (unextended) due date for an individual's tax return may be after April 15.
A)True
B)False
Q4) Selene made $54,300 in 2014 working at the local burger joint, Moon Café. How much should her employer withhold from her paycheck for FICA taxes if the calculation is made correctly?
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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) Which of the following types of expenditures is not subject to capitalization under the UNICAP rules?
A) selling expenditures
B) cost of manufacturing labor
C) compensation of managers who supervise production
D) cost of raw materials
E) All of these are subject to capitalization under the UNICAP rules.
Q2) Joe is a self employed electrician who operates his business on the accrual method. This year Joe purchased a shop for his business and at year end he received a bill for $4,500 of property taxes on his shop. Joe didn't pay the taxes until after year end. Which of the following is a true statement?
A) If he elects to treat the taxes as a recurring item, Joe can accrue and deduct $4,500 of taxes on the shop this year.
B) The taxes are a payment liability.
C) The taxes would not be deductible if Joe's business was on the cash method.
D) Unless Joe makes an election, the taxes are not deductible this year.
E) All of these are true.
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Page 10
Chapter 9: Property Acquisition and Cost Recovery
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) If a machine (seven-year property) being depreciated using the half-year convention is disposed of during the seventh year, a taxpayer must multiply the appropriate depreciation percentage from the MACRS table percentage by 50 percent to calculate the depreciation expense properly.
A)True
B)False
Q2) Jasmine started a new business in the current year. She incurred $10,000 of start-up costs. How much of the start-up costs can be immediately expensed for the year?
A) $0
B) $2,500
C) $5,000
D) $10,000
E) None of these
Q3) Tax depreciation is currently calculated under what system?
A) Sum of the years digits
B) Accelerated cost recovery system
C) Modified accelerated cost recovery system
D) Straight line system
E) None 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) For corporations, §291 recaptures 20 percent of the lesser of depreciation taken or the realized gain as ordinary income.
A)True
B)False
Q2) Leesburg sold a machine for $2,200 on November 10th of the current year. The machine was purchased for $2,600. Leesburg had taken $1,200 of depreciation deductions on the machine through the date of the sale. What is Leesburg's gain or loss realized on the machine?
A) $800 gain.
B) $1,000 gain.
C) $1,200 loss.
D) $1,400 loss.
E) None of these.
Q3) Depreciation recapture changes both the amount and character of a gain.
A)True
B)False
Q4) A net §1231 gain becomes ordinary while a net §1231 loss becomes long-term capital gain.
A)True
B)False
Page 12
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Chapter 11: Investments
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) The investment interest expense deduction is limited to the amount of net investment income for the year.
A)True
B)False
Q2) An investment's time horizon does not affect after-tax rates of return on investments taxed annually.
A)True
B)False
Q3) When electing to include long-term capital gains and qualified dividends in net investment income, taxpayers must include all long-term capital gains and dividends recognized for that year.
A)True
B)False
Q4) A passive activity is any activity that involves a trade or business or rental activity in which the taxpayer does not materially participate.
A)True
B)False
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Chapter 12: Compensation
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102 Verified Questions
102 Flashcards
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Sample Questions
Q1) For 2014, up to $300 of qualified transportation fringe benefits can be excluded from income.
A)True
B)False
Q2) Tom recently received 2,000 shares of restricted stock from his employer, Independence Corporation, when the share price was $10 per share. Tom's restricted shares vested three years later when the market price was $14. Tom held the shares for a little more than a year and sold them when the market price was $12. What is the amount of Tom's income or loss on the sale?
A) $0
B) $2,000 loss
C) $4,000 gain
D) $4,000 loss
Q3) Which of the following benefits cannot be excluded as a no additional cost service fringe benefit?
A) Free tax return preparation from a client.
B) Complementary dry cleaning for employees at a laundry company.
C) A car wash at an automobile dealership.
D) Free local phone service for phone company employees.
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Page 14
Chapter 13: Retirement Savings and Deferred Compensation
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Daniela retired at the age of 65. The current balance in her Roth IRA is $200,000. Daniela established the Roth IRA 10 years ago. Through a rollover and annual contributions Daniela has contributed $80,000 to her account. If Daniela receives a $50,000 distribution from the Roth IRA, what amount of the distribution is taxable?
A) $0
B) $20,000
C) $30,000
D) $50,000
Q2) Which of the following statements regarding Roth 401(k) accounts is false?
A) Employees can make contributions to a Roth 401(k).
B) Employers can make contributions to Roth accounts on behalf of their employees.
C) Contributions to Roth 401(k) plans are not deductible.
D) Qualified distributions from Roth 401(k) plans are not taxable.
Q3) Individual 401(k) plans generally have higher contribution limits than SEP IRAs.
A)True
B)False
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Page 15
Chapter 14: Tax Consequences of Home Ownership
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Brady owns a second home that he rents to others. During the year, he used the second home for 50 days for personal use and for 100 days for rental use. Brady collected $20,000 of rental receipts during the year. Brady allocated $7,000 of interest expense and property taxes, $10,000 of other expenses, and $4,000 of depreciation expense to the rental use. What is Brady's net income from the property and what type and amount of expenses will he carry forward to next year, if any?
A) $0 net income. $1,000 depreciation expense carried forward to next year.
B) ($1,000) net loss. $0 expenses carried over to next year.
C) $0 net income. $1,000 of other expense carried over to next year.
D) $0 net income. $1,000 of interest expense and property taxes carried over to next year.
Q2) A tax loss from a rental home is a passive activity loss.
A)True
B)False
Q3) The ownership test for excluding gain on the sale of a principal residence requires the taxpayer to have owned the property for three or more years during the five year period ending on the date of sale.
A)True
B)False
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