Tax Research and Practice
Practice Questions
Course Introduction
Tax Research and Practice is designed to equip students with the essential skills to identify, interpret, and apply tax laws and regulations to various real-world scenarios. The course emphasizes the research process in federal, state, and international taxation, including the use of authoritative tax resources, advanced research databases, and critical analysis of tax issues. Students will develop practical expertise in preparing research memos, communicating findings, and providing well-supported tax planning and compliance advice to clients. The curriculum blends theoretical foundations with practical, hands-on exercises, case studies, and ethical considerations, preparing students for professional tax practice in corporate, public accounting, or legal environments.
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) Horace properly completed his Form 1040EZ tax return and received a refund from the IRS of $649. Horace had income tax withholding during the year of $2,985. His tax liability for the year was:
A) $3,634
B) $2,985
C) $2,336
D)$649
Answer: C
Q2) Which of the following refers to an income tax regulation?
A) Reg. §1.162-5.
B) Reg. §20.2032-1.
C) Reg. §25.2503-4.
D)Reg. §31.3301-1.
Answer: A
Q3) The simplified tax formula can only be used by individuals with simple income tax returns.
A)True
B)False
Answer: False
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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) George is 21 years of age and a full-time student living with his parents. He had wages of $1,375 ($140 of income tax withholding) for 2015. Can George claim his exemption on his return even though his parents will claim him as a dependent on their tax return?
A) No, George cannot claim the exemption.
B) George and his parents can both claim the exemption.
C) No one can claim the exemption for George.
D)Yes, George can claim the exemption.
Answer: A
Q2) To qualify for head of household status, a taxpayer must maintain a household that is the principal place of abode of a qualifying person for more than half the year.
A)True
B)False
Answer: True
Q3) A couple who is legally married on the last day of the tax year cannot file married filing separately.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Gross Income: Inclusions and Exclusions
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) A stock dividend in which a shareholder has the option to receive cash is not taxable.
A)True
B)False
Answer: False
Q2) If a taxpayer is economically better off because of a transaction, the person must normally record income.
A)True
B)False
Answer: True
Q3) Working condition fringes include:
A) Professional organization dues paid by the employer.
B) Bonus earned by the employee.
C) The use of an employer-provided vehicle for business purposes.
D)Professional organization dues paid by the employer and the use of an employer-provided vehicle for business purposes.
Answer: D
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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) What is a Health Savings Account (HSA)?
Q2) What is the amount of self-employment tax that self-employed individuals must pay and what is the proper treatment on their tax return?
Q3) In 2014, Robert, who is single, received his Bachelor's degree and started working. In 2015, he began paying interest on qualified education loans and had modified AGI of $70,000. He paid interest of $1,200 in 2015. Which of the following statements is correct?
A) The full $1,200 is deductible in arriving at adjusted gross income.
B) Taxpayers are not allowed a deduction for education loan interest in 2014.
C) If his modified AGI had been $75,000, the phase-out rules would have reduced his deductible interest to zero.
D)Due to the phase-out rules, only a portion of the $1,200 will be deductible.
Q4) The qualified tuition and fees deduction is $4,000 for all eligible taxpayers.
A)True B)False
Q5) There is an employment test, a distance test, and a time test that must be met in order to deduct qualifying moving expenses.
A)True B)False
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Chapter 5: Itemized Deductions
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Which of the following statements is true regarding documentation requirements for charitable contributions?
A) If the total deduction for all noncash contributions for the year is more than $500, Section A of Form 8283, Noncash Charitable Contributions, must be completed.
B) A noncash contribution of less than $250 must be supported by a cancelled check, or a receipt, or other written acknowledgement from the charitable organization.
C) A contribution charged to a credit card is considered a cash contribution for purposes of documentation requirements.
D)All of these are true.
Q2) When performing services for a charitable organization, is any charitable deduction allowed? If so, explain.
Q3) The threshold amount for the deductibility of allowable medical expenses for those under 65 in 2015 is:
A) 10% of AGI.
B) 10% of taxable income.
C) 7.5% of AGI.
D)7.5% of taxable income.
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Chapter 6: Self-Employed Business Income
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Sample Questions
Q1) The standard mileage rate includes parking fees, tolls, and property taxes on the vehicle.
A)True
B)False
Q2) A sole proprietor's trade or business income or loss is reported on Schedule C, Form 1040.
A)True
B)False
Q3) When business property is lost in a fire, storm, shipwreck, theft, or other casualty, the taxpayer normally receives a capital loss deduction.
A)True
B)False
Q4) On November 30, 2015, Constance purchased an apartment building for $750,000. Determine her cost recovery deduction for 2015 rounded to the nearest dollar.
A) $0.
B) $2,400.
C) $3,413.
D)$26,138.
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) Demetrius had a $4,000 short-term loss and a $3,000 long-term gain from a collectible, a $2,000 gain from Section 1250 unrecaptured property. What is the netting effect of these gains and losses on his 1040?
A) $4,000 short-term loss is offset against the $3,000 collectible first, then the remaining $1,000 against the Section 1250 property, with a $1,000 gain taxed at 25%.
B) The $4,000 short-term loss is allowed to be taken in total as an ordinary loss, and the net long-term gain of $5,000 is added to his 1040 and taxed at 0%, 15%, or 20% depending on his regular tax bracket.
C) $2,000 short-term loss is offset against the Section 1250 property first, then the remaining $2,000 against the collectible gain leaving $1,000 taxed at 28%.
D)As each of these gains and losses are taxed at different rates, there is no netting of short-term and long-term gains or losses.
Q2) Which one of the following is a capital asset?
A) Household furnishings.
B) Business inventory.
C) A non-musical copyright created by the taxpayer.
D)Rental property.
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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) What criteria determine a personal and rental use property as personal/rental? How is net income or loss treated for tax purposes for a personal/rental property?
Q2) A security deposit for a rental property is not reported as income.
A)True
B)False
Q3) A property that has been rented for 120 days and used for personal use for 40 days should be categorized as:
A) Primarily rental.
B) Primarily personal.
C) Personal/rental.
D)All of these are correct.
Q4) All rental properties are depreciated using the straight-line method over 39 years.
A)True B)False
Q5) A personal/rental property (that is not a trade or business) may report its income and expenses on Schedule A.
A)True
B)False
10
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Chapter 9: Tax Credits
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Sample Questions
Q1) Which of the following statements regarding adoption credits is not true?
A) There is a dollar limit to the maximum credit allowed per adopted child.
B) Form 8839 must be filed to claim the credit.
C) Adoption of foreign country children does not qualify for the credit.
D)Adoption of a child of taxpayer's spouse does not qualify.
Q2) The retirement savings contributions credit is available for married filing joint taxpayers only.
A)True
B)False
Q3) Tyson is single and cannot be claimed by anyone as a dependent. He is a full-time law student at a local university. His tuition bill was $8,000. He paid the bill by withdrawing $2,000 from his savings account and borrowing the remainder from a local bank. For purposes of the education tax credits, what is the amount of Tyson's qualifying expenses?
Q4) The maximum allowable American opportunity tax credit for the current tax year is $2,500 per eligible student.
A)True
B)False
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Page 11
Chapter 10: Payroll Taxes
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122 Flashcards
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Sample Questions
Q1) Employers withhold income tax only on tips claimed by employees who are tipped.
A)True
B)False
Q2) Form W-4 is used by employees to indicate the filing status and number of withholding allowances claimed on Form 1040.
A)True
B)False
Q3) Ben has 2 jobs and both employers withhold FICA taxes. From his first job, Ben earned $85,034 and from his second job, he earned $34,496. How much can Ben claim as additional payment on his Form 1040 as excess social security tax paid in 2015?
A) $0.
B) $32.86.
C) $63.86.
D)$94.86.
Q4) Safe harbor is a term used to describe a provision in the Internal Revenue Code that protects taxpayers from penalty under certain situations.
A)True
B)False
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Page 12
Chapter 11: Retirement and Other Tax-Deferred Plans and Annuities:
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123 Flashcards
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Sample Questions
Q1) Which of the following statements is incorrect?
A) Roth IRA distributions are never taxable.
B) Taxpayers can roll over plan assets from one plan to another tax-free if certain rules are followed.
C) If distributions from a Coverdell Education Savings Account are used for qualified education expenses, the distributions are tax-free.
D)For traditional IRA distributions, the date on which minimum payments must begin is April 1 of the calendar year following the year in which the taxpayer reaches age 70½.
Q2) Paolo is age 77. He paid $240,000 for a single life annuity contract that will pay him $43,200 per year for life. The tax-free amount of the first $43,200 payment is
A) $11,321.
B) $19,835.
C) $21,771.
D)$21,429.
Q3) In the case of defined-contribution plans, in 2015 what are the maximum contribution limits by an employee under the age of 50 to a qualified pension plan, a 401(k) plan, a Keogh plan, SEP, and SIMPLE plan?
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Page 13
Chapter 12: Special Property Transactions
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Sample Questions
Q1) Depreciation recapture on an asset sold using the installment method is recognized ratably as payments are received.
A)True
B)False
Q2) On an involuntary conversion in which the taxpayer does not buy replacement property within the replacement period, the gain on the involuntary conversion and any tax due must be reported:
A) In the year the replacement period expires.
B) In the year the involuntary conversion occurred.
C) Never, because the tax year of the conversion would be closed.
D)As soon as the taxpayer knows replacement property will not be purchased.
Q3) To postpone any gain on an involuntary conversion, the taxpayer must purchase qualifying replacement property that is "similar or related in service or use" to the property involuntarily converted.
A)True
B)False
Q4) The like-kind exchange provisions are elective provisions.
A)True
B)False
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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) The Tara Partnership (not involved in real estate) generated income of $75,000 during the year. Since the partnership is involved in an activity that is subject to the at-risk rules, all of Tara's partners must file Form 6198 with their individual income tax returns.
A)True
B)False
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 itemized deductions is not allowed for AMT?
A) Miscellaneous deductions.
B) Depreciation.
C) Medical expenses.
D)Charitable contributions.
Q4) Identify factors that increase or decrease the at-risk amount.
Page 15
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Chapter 14: Partnership Taxation
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Sample Questions
Q1) Cameron has a basis in his partnership interest of $5,000. Cameron's share of partnership income is $5,000. He also receives a cash distribution from the partnership of $13,000. What is his gain or loss as a result of the distribution?
A) $13,000.
B) $5,000.
C) $3,000.
D)$0.
Q2) Which of the following items decreases a partner's basis in his or her partnership interest?
A) A cash distribution from the partnership.
B) A nondeductible expense that flows through from the partnership.
C) A release from partnership liabilities.
D)All of these.
Q3) When a partner increases his or her share of the partnership's liabilities, the liability increase is treated as a:
A) Money distribution.
B) Money contribution.
C) Recognition of income.
D)Has no effect on the partner.
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Page 16
Chapter 15: Corporate Taxation
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Sample Questions
Q1) The corporate alternative minimum tax exemption begins to phase out for AMT income of _______, and is completely phased out at AMT income of _______ or more.
A) $40,000; $150,000
B) $40,000; $310,000
C) $150,000; $300,000
D)$150,000; $310,000
Q2) QRS Corporation has a fiscal year-end that ends on September 30. It is required to make quarterly estimated payments. The first estimated payment will be due on the 15<sup>th</sup> of:
A) November.
B) December.
C) January.
D)February.
Q3) Schedule M-1 reconciles from taxable income to book income.
A)True
B)False
Q4) Corporations are not subject to alternative minimum tax.
A)True
B)False
Page 17
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