Tax Practice and Procedures Study Guide
Questions
Course Introduction
This course provides an in-depth examination of the principles and practices involved in tax compliance and the administration of tax laws. Students will learn about the roles and responsibilities of tax professionals, procedural rules governing tax filings, deadlines, audits, assessments, and appeals. The curriculum covers the structure of tax authorities, ethical considerations, taxpayer rights, and problem-solving strategies for resolving disputes with tax agencies. By exploring real-world cases and practical applications, students will acquire the skills necessary to navigate complex tax practice environments and ensure effective representation of clients before tax authorities.
Recommended Textbook Fundamentals of Taxation 9th Edition 2016 by Ana Cruz
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15 Chapters
1631 Verified Questions
1631 Flashcards
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Chapter 1: Introduction to Taxation, the Income Tax
Formula, and Form 1040ez
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) What are Revenue Rulings and Revenue Procedures?
Answer: Revenue Rulings (Rev. Rul.) and Revenue Procedures (Rev. Proc.) are issued by the IRS and are excellent sources of information for taxpayers and tax preparers. With Revenue Rulings, the IRS is reacting to an area of the tax law that is confusing to many taxpayers and/or has material tax implications to many taxpayers. The Rev. Rul. lists a fact situation, the relevant tax authority, and the IRS's conclusion on the manner in which the item should be treated.
A Rev. Proc. is a proactive document and is issued by the IRS to illustrate the manner in which it wants something reported.
Q2) The simplified tax formula can only be used by individuals with simple income tax returns.
A)True
B)False
Answer: False
Q3) The tax liability of a single individual with taxable income of $89,542 is $18,175.
A)True
B)False
Answer: True
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Chapter 2: Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) A qualifying relative must be related to the taxpayer (as listed by the IRS), or be a member of the taxpayer's household for the entire year.
A)True
B)False
Answer: True
Q2) The basic standard deduction in 2015 for a taxpayer, 69 and not blind, filing head of household is:
A) $6,300.
B) $9,250.
C) $10,800.
D)$10,300.
Answer: C
Q3) To be a qualifying child, the taxpayer must meet three general tests and five specific tests. Which one is not part of the five specific tests?
A) Gross income test.
B) Relationship test.
C) Residency test.
D)Special test for qualifying child of more than one taxpayer.
Answer: A
Page 4
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Chapter 3: Gross Income: Inclusions and Exclusions
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120 Flashcards
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Sample Questions
Q1) Marie is a graduate student at a state university. In 2015, she received a scholarship of $9,000 ($7,000 for tuition and fees and $2,500 for campus housing) and a graduate assistantship that pays $6,000. What is the amount that she must report on her tax return?
A) $2,500.
B) $8,500.
C) $6,000.
D)$8,000.
Answer: B
Q2) Imputed interest rules do not apply to the following:
A) Sale of property for $3,000 or less.
B) Sale of a personal residence.
C) Sale of a farm for $1 million or less.
D)Both sale of property for $3,000 or less and sale of a personal residence.
Answer: A
Q3) Receipt of property or services does not trigger income recognition for tax purposes.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Adjustments for Adjusted Gross Income
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) Charde, who is single, had a student loan for qualified education expenses on which interest was due. For 2015, the total interest payments were $2,000. Assuming she has AGI under $65,000, how much may she deduct in arriving at adjusted gross income for 2015?
A) $2,500.
B) $2,000.
C) $1,700.
D)$0.
Q2) Unreimbursed qualifying moving expenses are an above-the-line deduction for 2015.
A)True
B)False
Q3) Jena is a self-employed fitness trainer who had net earnings from self-employment of $23,500. She paid $525 per month for health insurance over the entire last year. Jena is entitled to a for AGI deduction for health insurance of:
A) $0.
B) $5,250.
C) $6,300.
D)$6,500.
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Page 6
Chapter 5: Itemized Deductions
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115 Verified Questions
115 Flashcards
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Q1) For the current year, Sheila Jones had adjusted gross income of $100,000. During the year, she contributed $6,000 to her church and an additional $3,000 to qualified charities. She also contributed religious artwork with a fair market value of $60,000 and a basis of $20,000 to her church. The church intends to display the religious artwork in the church foyer. If Sheila chooses to itemize her deductions, what is the amount of her deductible charitable contribution?
A) $9,000.
B) $20,000.
C) $39,000.
D)$49,000.
Q2) In 2015, Alan was required by his employer to use his car for work. His employer's mileage reimbursement was $0.25 per mile. If Alan's actual expenses are more than the reimbursement, he can deduct the excess amount on Schedule C.
A)True
B)False
Q3) A taxpayer receives a deduction for services rendered to a charitable organization. A)True
B)False
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Chapter 6: Self-Employed Business Income
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73 Flashcards
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Q1) The luxury auto limits on depreciation must be reduced if business use is less than 100%.
A)True
B)False
Q2) Katherine earned $100,000 from her job at a local business in 2015. She also had $42,000 in self-employed consulting income. What is the amount of her self-employment tax rounded to the nearest dollar?
A) $0.
B) $3,419.
C) $6,333.
D)$6,426.
Q3) Which of the following individuals can deduct his or her education expenses?
A) An accountant who attends law school to get a law degree.
B) A medical doctor who attends a review course to obtain a financial consultant license.
C) A lawyer who goes to law school to get a specialized tax degree.
D)An accounting bookkeeper that takes a CPA review course to pass the CPA exam and become a CPA.
Q4) List and define the criteria for an expenditure to be deductible on Schedule C.
Q5) Describe each of the depreciation conventions and when each is applicable.
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Chapter 7: Capital Gains and Other Sales of Property
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Which of the following statements is correct regarding the sale of ordinary assets?
A) the sale of inventory for a profit is considered to be a sale of an ordinary asset.
B) the sale of an asset outside the normal course of a trade or business is a sale of an ordinary asset.
C) the sale of business property held for more than a year is a sale of an ordinary asset.
D)the sale of any business property regardless of holding period is a sale of an ordinary asset.
Q2) Majoo inherited property from his uncle on August 15, 2015. His uncle purchased the property on December 10, 2013 for $100,000. At the date of his death, the property's FMV was $102,000. Majoo sold the property on September 30, 2015 for $105,000.
a. What is the gain on the sale of the property?
b. What is the nature of the gain?
Q3) Any Section 1245 gain is recognized as "ordinary" to the extent of the depreciation taken.
A)True
B)False
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Chapter 8: Rental Property, Royalties, Income From
Flow-Through Entities
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Which of the following entity(ies) is(are) considered flow-through entity(ies)?
A) C corporation.
B) Sole proprietorship.
C) Non-profit corporations.
D)Estates.
Q2) Assume the same facts as #71, but Meredith rented her house (at fair value) to her brother and his family for 9 days (in addition to her personal use) and total days rented was 180 days. How is the cabin categorized now? Explain your answer.
Q3) Explain what is considered personal use of a rental property.
Q4) Royalties can be earned from allowing others the right to use:
A) patents.
B) plays.
C) songs.
D)all of these.
Q5) Flow-through entities include, but are not limited to, LLCs, S Corporations, trusts and estates.
A)True
B)False
Q6) What are the different types of income that may be reported on Schedule E?
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Chapter 9: Tax Credits
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140 Flashcards
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Sample Questions
Q1) Kobe is a single dad with two dependent children, Lizzie, age 7 and Leslie, age 3. He has AGI of $51,000 and paid $6,300 to a qualified day care center. What amount of credit can Kobe receive for the child and dependent care credit?
A) $600.
B) $1,200.
C) $1,260.
D)$6,300.
Q2) Which of the following is not a qualifying child for purposes of calculating the EIC?
A) Son or daughter.
B) Grandson or granddaughter.
C) Foster child.
D)All of these qualify.
Q3) A taxpayer may become ineligible for earned income credit if he/she has excessive disqualified income such as dividends or interest.
A)True
B)False
Q4) Taxpayers can claim a child tax credit for each qualifying child. How is a qualifying child defined?
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Chapter 10: Payroll Taxes
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122 Flashcards
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Sample Questions
Q1) Supplemental wages are only subject to FICA taxes and federal withholding taxes and are not subject to SUTA or FUTA taxes.
A)True
B)False
Q2) Angie earned $120,000 during 2015. She is single, claims two withholding allowances, and is paid monthly. How much will Angie's employer withhold in Medicare taxes for 2015?
A) $1,680.00.
B) $1,711.00.
C) $1,718.25.
D)$1,740.00.
Q3) Failure to furnish a correct TIN to a requester (payer) can result in a penalty to the payee of:
A) $0, it is the responsibility of the payer (requester) to have the correct information.
B) $50 for each failure to complete the W-9.
C) $500 maximum for failure to complete any W-9 forms as required.
D)$0, but the taxpayer can be subject to fines and/or imprisonment if caught by an IRS agent.
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Chapter 11: Retirement and Other Tax-Deferred Plans and Annuities:
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) What is the maximum deductible contribution that can be made to one or more deductible IRAs in each of the following instances?
a. A single person, age 51, who is an active participant in an employer-sponsored retirement plan with AGI of $37,000.
b. A single person, age 59, who is an active participant in an employer-sponsored retirement plan with AGI of $67,000.
c. A single person, age 26, who is an active participant in an employer-sponsored retirement plan with AGI of $63,000.
Q2) In order to obtain and retain qualified status, a pension or profit-sharing plan must not discriminate in favor of highly compensated employees which include:
A) Employees who own more than 5% of the corporation's stock.
B) Employees who received over $100,000 compensation in the previous year.
C) Employees who were in the top 25% of employees based on compensation.
D)None of these.
Q3) An annuity is a series of payments made pursuant to a contract.
A)True
B)False
Q4) What is an annuity contract? Who are the parties to an annuity contract?
Page 13
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Chapter 12: Special Property Transactions
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Sample Questions
Q1) Samantha exchanges a truck used in her business with Phyllis for another truck. The basis of Samantha's old truck is $25,000, FMV is $33,000, and she gives Phyllis cash of $7,000. Phyllis's basis in her truck is $35,000 and its FMV is $40,000. What is Samantha's adjusted basis in the new truck she receives?
A) $25,000.
B) $32,000.
C) $33,000.
D)$40,000.
Q2) On July 1, 2015, DJ sold equipment used in her business and reported the gain using the installment method. Her adjusted basis in the equipment was $150,000. The equipment was subject to $30,000 of depreciation recapture. DJ sold the property for $250,000, with $100,000 due on the date of the sale and $150,000 (plus interest at the Federal rate) due on August 1, 2016. What is the amount of gain recognized in 2015?
Q3) On December 28, 2015, Misty sold 300 shares of Low Grade, Inc. (a publicly traded company) at a loss of $8,500. On January 5, 2016, thinking that the stock price would rebound, Misty purchased 200 shares of Low Grade, Inc. for $7,000. What is the amount of the recognized loss on the December 28, 2015 sale and what is Misty's basis in the 200 shares she purchased on January 5, 2016?
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Chapter 13: At-Riskpassive Activity Loss Rules and the
Individual Alternative Minimum Tax
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70 Verified Questions
70 Flashcards
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Sample Questions
Q1) After computing all tax preferences and AMT adjustments, Adam and his wife Cindy have AMTI of $290,000. If Adam and Cindy file a joint tax return, what exemption amount can they claim for AMT for 2015?
A) $0.
B) $50,625.
C) $53,600.
D)$83,400.
Q2) In 2015, Ethan contributes cash of $50,000 and property with a fair market value of $100,000 and basis of $20,000 in exchange for a 20% interest in the EFP Partnership. The partnership is not a passive activity. For 2015, his share of partnership items were an ordinary loss of $80,000, interest income of $2,000, dividends of $5,000, and capital gains of $4,000. How much of the current year loss is deductible by Ethan and what is Ethan's at-risk amount on December 31, 2015?
Q3) Which of the following decreases a taxpayer's at-risk amount?
A) Cash distributions.
B) Increases in liabilities.
C) Income items.
D)Cash contributions.
Q4) Identify factors that increase or decrease the at-risk amount.
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Chapter 14: Partnership Taxation
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Sample Questions
Q1) Sabrina has a $12,000 basis in her S&B partnership interest. Sabrina receives a current cash distribution of $10,000 and equipment with a $5,000 basis (FMV $6,000).
What is Sabrina's recognized gain or loss?
A) $0.
B) $3,000.
C) $4,000.
D)$16,000.
Q2) A partnership has $23,000 of depreciation expense and $25,000 of Section 179 expense. How are the depreciation and Section 179 expenses reported?
A) Both as separately stated items.
B) As a $48,000 ordinary expense item.
C) Depreciation is treated as a $23,000 ordinary expense and the $25,000 Section 179 expense is separately stated.
D)Section 179 is treated as a $25,000 ordinary expense and the $23,000 depreciation is separately stated.
Q3) Guaranteed payments are always determined with regard to partnership income.
A)True
B)False
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Chapter 15: Corporate Taxation
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Sample Questions
Q1) The basis of property received by a corporation is equal to the basis in the hands of the shareholder plus any gain recognized by the shareholder.
A)True
B)False
Q2) Which of the following will disqualify a corporation from electing Subchapter S status?
A) The corporation has 80 shareholders.
B) The corporation has one class of stock.
C) The election form is signed by 80% of the shareholders.
D)All shareholders are U.S. citizens except for 10% who are resident aliens.
Q3) Benedict transfers land with a FMV of $900,000 to a newly-formed corporation in exchange for all of the stock. The land has a basis of $500,000 and debt of $300,000. The basis of the land, in the hands of the corporation is:
A) $300,000.
B) $400,000.
C) $500,000.
D)$900,000.
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Page 17