Tax Planning
Final Test Solutions
Course Introduction
Tax Planning is a comprehensive course designed to equip students with the knowledge and skills needed to effectively manage and minimize tax liabilities through strategic financial planning within the framework of current tax laws and regulations. The course covers key topics such as tax compliance, tax avoidance and evasion, tax implications of business decisions, personal and corporate tax strategies, and the ethical considerations involved in tax planning. Students will analyze real-life scenarios, case studies, and current events to develop critical thinking and problem-solving abilities that can be applied in professional settings, ensuring optimal tax outcomes for individuals and organizations.
Recommended Textbook
Prentice Halls Federal Taxation 2015 Comprehensive 28th Edition by Timothy J. Rupert
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29 Chapters
3271 Verified Questions
3271 Flashcards
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Chapter 1: Tax Research
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Sample Questions
Q1) A citator is used to find
A)the judicial history of a case.
B)the cases that have cited a case subsequent to the issuance of the opinion.
C)whether a case has been overturned.
D)all of the above.
Answer: D
Q2) The tax statutes with the popular name "The Internal Revenue Code of 1986" are contained in which Title of the Code?
A)20
B)25
C)26
D)301
Answer: C
Q3) Explain the legislative reenactment doctrine.
Answer: Under the legislative reenactment doctrine,a Treasury Regulation is deemed to have been endorsed by Congress if the regulation was finalized before a related IRC provision was enacted,and during the interim,Congress did not amend the provision to which the regulation relates.
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Chapter 2 an Introduction to Taxation
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Sample Questions
Q1) Shaquille buys new cars for five of his friends.Each car cost $70,000.What is the amount of Shaquille's taxable gifts?
A)$0
B)$280,000
C)$336,000
D)$350,000
Answer: B
Q2) During the current tax year,Charlie Corporation generated gross income of $1,800,000 and had ordinary and necessary deductions of $1,300,000,resulting in taxable income of $500,000.If Charlie Corporation paid qualifying dividends of $200,000 to shareholders,all of whom are in the 25% marginal tax bracket,what is the total tax paid on both corporate income and the corporate dividends?
Answer: Taxable income is $1,800,000 - $1,300,000 = $500,000.Dividends are not tax deductible.The corporate income tax is $170,000 [$113,900 + .34 ($500,000 - 335,000)] and the shareholder tax on qualifying dividends is $30,000 ($200,000 × .15 maximum rate on qualifying dividends for taxpayers in 25% marginal tax bracket)for a total of $200,000.
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4
Chapter 3: Corporate Formations and Capital Structure
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Sample Questions
Q1) Frans and Arie own 75 shares and 25 shares of Vogel Corporation stock,respectively.There are no other owners.Frans transfers property with a $30,000 adjusted basis and a $50,000 FMV to Vogel Corporation in exchange for an additional 25 shares of Vogel stock.Does this property-for-stock exchange qualify for Sec.351 treatment?
Answer: Yes.Since Frans owned 80% (100 ÷ 125)of the Vogel stock and is in control of Vogel Corporation,Frans does not recognize any gain on the exchange.
Q2) Barry,Dan,and Edith together form a new corporation; Barry and Dan each contribute property in exchange for stock.Within two weeks after the formation,the corporation issues additional stock to Edith in exchange for property.Barry and Dan each hold 10,000 shares and Edith will receive 9,000 shares.Which transactions will qualify for nonrecognition?
A)Only the first transaction will qualify for nonrecognition.
B)Only the second transaction will qualify for nonrecognition.
C)Because of the step transaction doctrine,neither transaction will qualify.
D)Both transactions will qualify under Sec.351 if they are part of the same plan of incorporation.
Answer: D
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Chapter 4: I: Determination of Tax
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Sample Questions
Q1) When two or more people qualify to claim the same person as a dependent,a taxpayer who is entitled to the exemption through the qualified child rules has priority over a taxpayer who meets the requirements for other relatives.
A)True
B)False
Q2) Bill and Tessa have two children whom they support and who live in their home.Timmy is 17 and has earned income of $5,000 for the year.Their other child,Tommy,is 15.Tessa's mother also lives with them and may be claimed as their dependent.She is 89 years old.Their adjusted gross income is $130,000.
Required: Compute Bill and Tessa's taxable income for 2014 if they file a joint return and they do not itemize deductions.
Q3) A corporation has revenue of $350,000 and deductible business expenses of $240,000.What is the federal income tax,before credits?
A)$16,500
B)$22,500
C)$26,150
D)$42,900
Q4) Discuss reasons why a married couple may choose not to file a joint return.
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Page 6
Chapter 5: The Corporate Income Tax
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Sample Questions
Q1) Identify which of the following is false.
A)Corporations that sell real property at a gain must report an additional 20% of the entire gain as ordinary income.
B)Corporations selling real property that previously had been depreciated using an accelerated method are subject to Sec.291.
C)Section 291 reduces the amount of net Sec.1231 gains that can be offset by corporate capital losses.
D)Section 291 recapture applies to Sec.1250 property.
Q2) 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.
Q3) What are some of the advantages and disadvantages of filing a consolidated return?
Q4) For corporations,what happens to excess charitable contributions?
Q5) Discuss the estimated tax filing requirements for a C corporation.
Q6) Describe the domestic production activities deduction.
Page 7
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Chapter 6: Gross Income: Inclusions
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Sample Questions
Q1) Jan purchased an antique desk at auction.For two years,the desk sat in Jan's garage until she decided to restore it.This year,while cleaning and restoring the desk,Jan discovered $1,500 in a hidden compartment inside one drawer.With respect to the $1,500,Jan must
A)report nothing.
B)amend her previous tax return and report the $1,500.
C)report only $750 due to the statute of limitations.
D)report $1,500 on this year's tax return.
Q2) Aaron found a prototype of a new pair of glasses with Internet service and other computing capabilities while in a bar one evening. He offered the prototype to the owner of a magazine and blog that reviews new digital devices. The owner paid Aaron $10,000 in return for the prototype. What tax issues should Aaron consider?
Q3) Billy,age 10,found an old baseball glove while exploring his new home. His father,Al,took the glove to a dealer in baseball memorabilia who verified that the glove belonged to Babe Ruth. Al sold the glove for $75,000. What tax issues should Al consider?
Q4) Social Security benefits are excluded from taxation for all taxpayers.
A)True
B)False
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Page 8
Chapter 7: Corporate Nonliquidating Distributions
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Sample Questions
Q1) In the current year,Pearl Corporation has $300,000 of current and accumulated E&P.On June 3,Pearl Corporation distributes a parcel of land (a capital asset)worth $120,000 to Betty,a shareholder.The land has a $60,000 adjusted basis to Pearl Corporation and is subject to a $16,000 mortgage,which Betty assumes.Assume a 34% marginal corporate tax rate.
a)What is the amount and character of the income recognized by Betty as a result of the distribution?
b)What is Betty's basis for the land?
c)What is the amount and character of Pearl's gain or loss as a result of the distribution? d)What effect does the distribution have on Pearl's E&P?
Q2) Gould Corporation distributes land (a capital asset)worth $90,000 to Gerry,a shareholder.The land has a $30,000 basis to Gould.What is the amount and character of the gain or loss recognized by Gould?
Q3) Corporations recognize gains and losses on the distribution of property to shareholders if the property's fair market value differs from its basis.
A)True B)False
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Chapter 8: Gross Income: Exclusions
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Sample Questions
Q1) "No additional cost" benefits are excluded from an employee's gross income if the services are the same type that are sold to customers and in the line of business in which the employee works.
A)True
B)False
Q2) All of the following fringe benefits paid for by the employer may be excluded from an employee's gross income except
A)discounts on services of 25 percent.
B)subscriptions to professional publications.
C)recreational facilities on employer's premises.
D)unused airline seats for airline employees where the employee is required to fly "standby."
Q3) After he was denied a promotion,Daniel sued his employer claiming sex discrimination.He was awarded $20,000 to cover medical bills he incurred because of the related emotional distress,$80,000 to punish his employer for discrimination,and $50,000 to compensate him for lost wages.What is the amount that must be included in Daniel's gross income for the year?
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Chapter 9: Other Corporate Tax Levies
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Sample Questions
Q1) What is the effect of the two-pronged test that allows the exclusion from PHCI of certain AIR (adjusted income from rents)?
Q2) A corporation can be subject to both the accumulated earnings tax and the personal holding company tax in the same year.
A)True
B)False
Q3) Life insurance proceeds are a positive adjustment for adjusted current earnings (ACE),but not alternative minimum taxable income (AMTI).
A)True
B)False
Q4) The personal holding company tax
A)may be imposed regardless of the number of equal stockholders in a corporation.
B)may be eliminated by the payment of a deficiency dividend.
C)qualifies as a tax credit,which may be used by the shareholders to reduce their individual income taxes.
D)applies to any corporation whose shareholders satisfy the stock ownership requirement.
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11
Chapter 10: Property Transactions: Capital Gains and Losses
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Sample Questions
Q1) On January 31 of this year,Mallory pays $800 for an option to acquire 100 shares of Mesa Corporation common stock for $85 per share.As a result of an increase in the market value of the Mesa stock,the market price of the option increases and Mallory sells the option for $1,000 on August 4.As a result of the sale,Mallory must recognize A)$200 STCG.
B)$800 STCG.
C)$200 ordinary income.
D)$800 ordinary income.
Q2) On July 25,2013,Marilyn gives stock with a FMV of $7,500 and a basis of $5,000 to her nephew Darryl.Marilyn had purchased the stock on March 18,2013.Darryl sold the stock on April 18,2014 for $7,800.As a result of the sale,what will Darryl report on his 2014 tax return?
A)$300 STCG
B)$300 LTCG
C)$2,800 STCG
D)$2,800 LTCG
Q3) What type of property should be transferred to heirs at a decedent's death and why? Should estate planning also mean that some property is transferred prior to death? Why?
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Chapter 1: Corporate Liquidating Distributions
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Sample Questions
Q1) Identify which of the following statements is true.
A)A parent corporation cannot liquidate a subsidiary corporation (having but a single class of stock)and avoid recognizing its realized gain unless the parent corporation owns at least 80% of the subsidiary's stock.
B)The liquidation of a subsidiary corporation must be completed within one tax year to receive nonrecognition treatment.
C)The provisions permitting a tax-free liquidation of a subsidiary corporation apply to both corporate and noncorporate shareholders of the subsidiary.
D)All of the above are false.
Q2) Lake City Corporation owns all of the stock in Columbia Corporation.Pursuant to a plan of complete liquidation,Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake City.Lake City's basis in the land will be
A)0)
B)$200,000.
C)$500,000.
D)cannot be determined from the facts presented
Q3) Are liquidation and dissolution the same? Explain your answer.
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Page 13
Chapter 12: Deductions and Losses
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Sample Questions
Q1) At the election of the taxpayer,a current deduction is allowed for the lesser of actual business start-up expenditures incurred or $5,000 with the remainder capitalized and amortized over 180 months. A phaseout of the current deduction applies in the case of start-up expenditures exceeding $50,000.
A)True
B)False
Q2) Pat,an insurance executive,contributed $1,000,000 to the re-election campaign of Governor Stephens,in hopes that Stephens will appoint her to a coveted position on the State Board of Insurance. How much of the contribution can Pat deduct?
A)$0
B)$100,000
C)$500,000
D)$1,000,000
Q3) If property that qualifies as a taxpayer's residence is rented for less than 15 days per year,the taxpayer includes no rental income in gross income and similarly may claim no expenses related to the property other than interest and taxes.
A)True
B)False
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Page 14
Chapter 13: Corporate Acquisitions and Reorganizations
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Sample Questions
Q1) 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?
Q2) Florida Corporation is 100% owned by Lawton Chiles.Georgia Corporation is 100% owned by Zell Miller.Georgia Corporation acquires on December 31 of the previous year all of Florida Corporation's stock for $5,000,000 in a cash purchase transaction.Both corporations use the calendar year as their tax year.At the time of the acquisition,Florida Corporation had a $500,000 NOL.During the current year,the two corporations file separate tax returns and Florida Corporation reports $700,000 of taxable income.The long-term tax-exempt rate for the period,including the acquisition date is 6%.What is Florida Corporation's taxable income for the current year?
Q3) Tax attributes of the target corporation are lost when a Sec.338 deemed liquidation election is made.
A)True
B)False
Q4) What are the advantages of a triangular merger?
Q5) Briefly describe A,B,C,D,and G reorganization types.
Q6) What are the advantages and disadvantages of a merger transaction?
Page 15
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Chapter 14: Itemized Deductions
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Sample Questions
Q1) A personal property tax based on the weight of the property is deductible.
A)True
B)False
Q2) Self-employed individuals may deduct the full self-employment taxes paid as a for AGI deduction.
A)True
B)False
Q3) Interest expense incurred in the taxpayer's trade or business is deductible as a for AGI deduction without limitation if the taxpayer materially participates in the business.
A)True
B)False
Q4) Investment interest expense which is disallowed because it exceeds the taxpayer's net investment income may be carried over and treated as incurred in subsequent years.
A)True
B)False
Q5) May an individual deduct a charitable contribution for services rendered to a charitable organization?
Q6) When are points paid on a loan deductible as interest expense?
Page 16
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Chapter 15: Consolidated Tax Returns
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Sample Questions
Q1) Identify which of the following statements is false.
A)A corresponding item includes the income,gain,deduction,or loss amount reported by the buyer from an intercompany transaction,or from property acquired in an intercompany transaction.
B)Affiliated groups of corporations filing a consolidated tax return are not eligible for the small corporation exemption from the corporate alternative minimum tax.
C)An intercompany transaction generally results in the selling member and buying member in a property transaction being treated as divisions of a single corporation.
D)Intercompany dividends and undistributed subsidiary earnings do not create temporary differences for affiliated companies filing a consolidated return.
Q2) Intercompany dividends and undistributed subsidiary earnings do not create temporary differences for affiliated companies filing a consolidated return.
A)True
B)False
Q3) Define intercompany transactions and explain the two types of transactions.
Q4) What are the five steps in calculating consolidated taxable income?
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Chapter 16: Losses and Bad Debts
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Sample Questions
Q1) Businesses can recognize a loss on abandoned property.What types of factors would indicate that property had been abandoned?
Q2) If a taxpayer suffers a loss attributable to a disaster in an area subsequently declared a disaster area,the casualty loss may be deducted in the year preceding the year in which the loss actually occurs.
A)True
B)False
Q3) A theft loss is deducted in the year in which the theft is discovered.
A)True
B)False
Q4) When the taxpayer anticipates a full recovery on a casualty loss of personal-use property but receives less than full recovery in a subsequent year,the unrecovered portion may be deducted.
A)True
B)False
Q5) If a loan has been made to a related party,what are some considerations for determining whether the loan is a bona fide debt or is,in fact,merely a gift?
Q6) What are some factors which indicate that a debt may be worthless?
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Chapter 17: Partnership Formation and Operation
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Sample Questions
Q1) No gain is recognized on the sale of property between a partnership and a more-than-50% partner.
A)True
B)False
Q2) Identify which of the following statements is true.
A)The Fisher Partnership is owned equally by four individual partners.Two of the partners have fiscal years ending March 31 and two partners have fiscal years ending June 30.The partnership has a natural business year.The partnership must adopt a calendar year for tax reporting purposes unless a Sec.444 election is made.
B)Partnerships make most of the tax elections for the partnership rather than the partners.
C)A partner can elect the depreciation method to be applied to the partner's share of the partnership's depreciable assets.
D)All of the above are false.
Q3) A partner's basis for his or her partnership interest is increased by his share of the partnership's tax-exempt income.
A)True
B)False
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Chapter 18: Employee Expenses and Deferred Compensation
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Sample Questions
Q1) Johanna is single and self-employed as a technology consultant.She wants to set money aside for her retirement.What tax and financial issues should she consider?
Q2) What two conditions are necessary for moving expenses to be deductible?
Q3) If an employee incurs travel expenditures and is fully reimbursed by the employer,neither the reimbursement nor the deduction is reported on the employee's tax return if reporting is pursuant to an accountable plan.
A)True
B)False
Q4) All taxpayers are allowed to contribute funds to Health Savings Accounts to supplement their health insurance.
A)True
B)False
Q5) In addition to the general requirements for in-home office expenses,employees must also prove that the exclusive use of the office is for the convenience of the employer.
A)True
B)False
Q6) Discuss the tax treatment of a nonqualified stock option plan.
Page 20
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Chapter 19: Special Partnership Issues
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Sample
Questions
Q1) Mirabelle contributed land with a $5,000 basis and a $9,000 FMV to MS Partnership four years ago.This year the land is distributed to Sergio,another partner in the partnership.At the time of distribution,the land had a $12,000 FMV.What is the impact of the distribution on Mirabelle's partnership basis?
A)0
B)$4,000 increase
C)$4,000 decrease
D)$7,000 increase
Q2) For purposes of Sec.751,inventory includes all of the following except A)capital assets or 1231 property.
B)items held for sale in the ordinary course of business.
C)accounts receivable.
D)All of the above are inventory per Sec.751.
Q3) For Sec.751 purposes,"substantially appreciated inventory" means property held for sale to customers whose market value exceeds its adjusted basis.
A)True
B)False
Q4) What are some advantages and disadvantages of making a Section 754 election?
Q5) Do most distributions made by a partnership require a Sec.751 calculation?
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Chapter 20: Depreciation cost Recovery amortization and Depletion
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Sample Questions
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) A taxpayer owns an economic interest in an oil and gas property. She is allowed to deduct the smaller of cost depletion or percentage depletion.
A)True
B)False
Q3) Fred purchases and places in service in 2014 personal property costing $221,000.What is the maximum Sec.179 deduction that Fred can deduct,ignoring any taxable income limitation?
A)$25,000
B)$21,000
C)$4,000
D)$200,000
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Chapter 21: S Corporations
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Q1) Shamrock Corporation has two classes of common stock outstanding.The Class A and Class B common stock give the shareholders identical rights and interests in the profits and assets of the corporation.Class A has one vote per share.Class B is nonvoting.Can Shamrock Corporation make an S corporation election?
Q2) On June 30 of the current year,the S election of Great Corporation is terminated,thus creating a six-month S short year and a six-month C short year.Great Corporation is a calendar-year taxpayer.The S short-year return is due
A)September 15.
B)December 15.
C)March 15 of the next year.
D)June 30 of the next year.
Q3) Even if the termination of an S election is considered to be inadvertent,the election to terminate is irrevocable.
A)True
B)False
Q4) Garret and Hans own all the stock of GH Corporation.Garret sells all his GH stock to Olga on February 12.The next day,GH makes an S election.For the election to apply to the current year,who must consent to the election?
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Page 23
Chapter 22: Accounting Periods and Methods
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Q1) This year,Hamilton,a local manufacturer of off-shore drilling platforms,entered into a contract to construct a drilling platform that will be placed in the North Atlantic Ocean.The total contract price is $5,000,000,and Hamilton estimates the total construction cost at $3,000,000.Actual costs incurred this year are $600,000.If Hamilton uses the percentage of completion method,the gross profit for this year is A)$0.
B)$400,000.
C)$600,000.
D)$2,000,000.
Q2) When accounting for long-term contracts (other than those for services),all of the following accounting methods may be acceptable with the exception of A)the cash method of accounting.
B)the completed contract method.
C)the percentage of completion method.
D)the modified percentage of completion method.
Q3) Under the cash method of accounting,all expenses are deductible when paid.
A)True
B)False
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Chapter 23: The Gift Tax
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Q1) In November 1976,Grant uses $30,000 of the specific exemption available at that time.The unified credit available to Grant for post-1976 transfers is reduced by A)$0.
B)$6,000.
C)$15,000.
D)$30,000.
Q2) Identify which of the following statements is true.
A)Cash paid directly to a medical school for room and board is a "qualified transfer" and not subject to the gift tax.
B)Transfers by an individual to a political party constitute a gift subject to the gift tax rules.
C)A statutory exemption from the gift tax is available for property transfers between divorced individuals when the divorce occurs during a three-year period beginning one year before the transfer agreement is made.
D)All of the above are false.
Q3) Abby transfers $10,000 to a political organization to promote her favorite candidate for president.Does Abby's transfer qualify as a gift?
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Chapter 24: Property Transactions: Nontaxable Exchanges
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Q1) Vector Inc.'s office building burns down on October 31,2014. Vector,a calendar year taxpayer,finally settles with the insurance company on February 3,2015. In order to defer the gain realized on the building,Vector must acquire another office building by February 3,2017.
A)True
B)False
Q2) The taxpayer must be occupying the residence at the time of the sale in order for Sec.121 to apply.
A)True
B)False
Q3) If property is involuntarily converted into similar property,the basis and holding period of the converted property carry over to the basis and holding period of the replacement property.
A)True
B)False
Q4) The exchange of a personal-use automobile for stock in an automobile manufacturer held as an investment qualifies for like-kind treatment.
A)True
B)False
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Chapter 25: The Estate Tax
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Q1) Identify which of the following statements is true.
A)If spouses are the only joint owners,only one-half of the value of the jointly owned property is included in the gross estate,regardless of the relative amount of consideration provided by either spouse.
B)Special powers of appointment give the power holder less restricted powers than a general power of appointment.
C)The gross estate does not include the value of life insurance policies on the decedent if the proceeds are receivable by the executor or for the benefit of the estate.
D)All of the above are false.
Q2) An executor can value each asset in an estate at the lower of its FMV at death or the alternate valuation date.
A)True
B)False
Q3) The alternate valuation date is generally
A)3 months after the date of death.
B)6 months after the date of death.
C)9 months after the date of death.
D)12 months after the date of death.
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Chapter 26: Property Transactions: Section 1231 and Recapture
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Q1) When a donee disposes of appreciated gift property,the recapture amount for the donee is computed by including the recapture amount attributable to the donor.
A)True
B)False
Q2) The purpose of Sec.1245 is to eliminate the advantage taxpayers would have if they were able to reduce ordinary income by depreciation deductions and also receive favorable Sec.1231 treatment when the asset was sold.
A)True
B)False
Q3) Section 1250 could convert a portion of Sec.1231 gain into ordinary income if the real property was placed in service prior to 1987 and accelerated depreciation was used.
A)True
B)False
Q4) For a business,Sec.1231 property does not include
A)timber,coal,or domestic iron ore.
B)inventory purchased 24 months ago.
C)an office building purchased five years ago.
D)land used in the business that was purchased two years ago.
Page 28
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Chapter 27: Income Taxation of Trusts and Estates
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105 Verified Questions
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Sample Questions
Q1) In the current year,a trust has distributable net income (DNI)of $30,000.During the year,the trust makes a mandatory distribution to Sarah of $5,000 and a discretionary distribution of $10,000 to Kyle.The trust has no tax-exempt income.The distribution deduction of the trust is
A)$30,000.
B)$15,000.
C)$10,000.
D)$5,000.
Q2) Identify which of the following statements is false.
A)The personal exemption for a trust provides a tax savings when some income is allocated to principal.
B)Distributable net income (DNI)sets the ceiling on the amount of distributions taxed to the beneficiaries.
C)A complex trust must distribute all its income annually.
D)The beneficiaries of a simple trust are taxed on their share of DNI irrespective of the amount they receive.
Q3) Briefly discuss the reasons for establishing a trust.
Q4) What is the benefit of the 65-day rule?
Q5) Describe the tier system for trust beneficiaries.
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Chapter 28: Special Tax Computation Methods, tax Credits, and
Payment of Tax
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117 Verified Questions
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Sample Questions
Q1) Discuss the tax planning techniques available to a U.S.citizen who is on a foreign job assignment.
Q2) Mark and Stacy are married,file a joint return,and have one child,age 3.Their combined AGI is $55,000.Mark and Stacy incur $3,500 of child-care expenses during the current year.Mark's employer reimburses him $1,500 under a qualified dependent care assistance plan.The child and dependent care credit is
A)$300.
B)$600.
C)$700.
D)$1,200.
Q3) Nonrefundable credits may offset tax liability but may not result in additional payments to the taxpayer.
A)True
B)False
Q4) Sam and Megan are married with two dependent children.Both Sam and Megan work,earning $50,000 and $55,000,respectively.Their AGI totals $110,000.They incur $6,500 of qualifying child care expenses of which $2,500 is reimbursed by Megan's dependent care program at work.
What is the amount of their child and dependent care credit?
Page 30
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Chapter 29: Administrative Procedures
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Sample Questions
Q1) Identify which of the following statements is true.
A)Form 870-AD is used if the taxpayer and IRS representative agree to a lesser tax liability than that originally proposed by the Service.
B)Signing of Form 870-AD by the taxpayer does not generally preclude the subsequent filing of a refund claim.
C)The IRS will issue a 90-day letter (a Statutory Notice of Deficiency)if the taxpayer does not file a protest letter within 10 days of the date of the 30-day letter.
D)All of the above are false.
Q2) The taxes shown on Kate's tax returns for 2012 and 2013 were $6,000 and $9,000,respectively.Kate's withholding tax for 2009 was $7,000 and she paid no estimated taxes.Kate filed her 2013 return on April 3,2014,but she did not have sufficient funds to pay the balance due.She pays the $2,000 balance due on June 19,2014.Kate's AGI for 2013 did not exceed $150,000.Calculate the penalties Kate owes on her 2013 tax return.
Q3) A taxpayer who fails to file and fails to pay taxes is subject to a combined 5% monthly penalty on the underpayment.
A)True
B)False
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