Tax Research and Practice
Pre-Test Questions
Course Introduction
Tax Research and Practice is a course designed to equip students with essential skills for navigating the complexities of tax law and policy. The course introduces methods and resources for researching federal, state, and international tax issues, including the use of primary and secondary sources, databases, and tax research tools. Students will learn to interpret and apply tax statutes, regulations, and case law to real-world scenarios, with an emphasis on documenting research findings and providing supportable recommendations. Practical exercises and case studies will hone analytical abilities and enhance understanding of ethical considerations in tax practice, preparing students for effective problem-solving in professional tax environments.
Recommended Textbook
Concepts in Federal Taxation 2018 25th Edition by Kevin E. Murphy
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16 Chapters
2096 Verified Questions
2096 Flashcards
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Chapter 1: Conceptual Foundations of Tax Law
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150 Flashcards
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Sample Questions
Q1) A deferral is like an exclusion in that it does not have a current tax effect,but it differs in that an exclusion is never subject to taxation,whereas a deferral will be subject to tax at some point of time in the future.
A)True
B)False
Answer: True
Q2) Lee's 2017 taxable income is $88,000 before considering charitable contributions.Lee is a single individual.She makes a donation of $10,000 to the American Heart Association in December 2017.By how much did Lee's marginal tax rate decline simply because of the donation?
A)0%
B)10%
C)3%
D)5%
E)8%
Answer: A
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Chapter 2: Income Tax Concepts
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153 Flashcards
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Sample Questions
Q1) An individual can legally assign income to another individual,and the assignment relieves the owner of the income from paying tax on the income.
A)True
B)False
Answer: False
Q2) Bethany bought a new suit to wear to work.She will not be able to deduct the cost of the suit even though she wears it to work.
A)True
B)False
Answer: True
Q3) Under the Wherewithal to Pay concept,income should be recognized and a tax paid on the income when the taxpayer has the resources to pay the tax.
A)True
B)False
Answer: True
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4
Chapter 3: Income Sources
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154 Flashcards
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Sample Questions
Q1) Southview Construction Company enters into a contract to build a 30 mile cross country ski trail for $36,000 in the current year.Southview estimates the cost of building the trail to be $12,000.During the first year,Southview completes 10 miles of trail at a cost of $5,000.Southview receives $13,000 in advanced payments on the contract price in the first year.How much gross income must Southview recognize from the construction project in the first year?
A)$- 0 -
B)$5,000
C)$12,000
D)$13,000
E)$15,000
Answer: E
Q2) Which of the following items is not a capital asset in the hands of the taxpayer?
A)Taxpayer has a set of wrenches he uses to work on his personal auto.
B)Taxpayer has a $6,000 wedding dress she keeps as a remembrance of her wedding.
C)Taxpayer owns city of Topeka bonds.
D)Taxpayer is an amateur golfer but has a set of championship golf clubs
E)All of the above items are capital assets.
Answer: E
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Page 5
Chapter 4: Income Exclusions
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Sample Questions
Q1) Jerry's wife dies in September.His wife had paid $20,000 of premiums on a $150,000 face value whole life insurance policy.Jerry elects to receive the life insurance policy proceeds in 20 annual installments of $10,000.Jerry receives his first $10,000 payment this year.How much of the payment should Jerry report as gross income?
A)$- 0 -
B)$2,500
C)$5,000
D)$7,500
E)$10,000
Q2) Michelle's employer pays for her graduate school classes.Tuition during the year totals $2,500 (her employer does not have a qualified plan).
A)Fully excluded from gross income.
B)Fully included in gross income.
C)Partially excluded from gross income.
Q3) Jeane's employer pays his medical premiums each month ($130/month).
A)Fully excluded from gross income.
B)Fully included in gross income.
C)Partially excluded from gross income.
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Chapter 5: Introduction to Business Expenses
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167 Verified Questions
167 Flashcards
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Sample Questions
Q1) Indicate which of the following statements is/are correct:
I.An accrual basis taxpayer who gives a creditor his note payable in payment of a claim may deduct the related expense when the note is given.
II.When a cash basis taxpayer uses a credit card to pay for an expense it can deduct the expense when the expense is charged to the credit card..
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q2) An ordinary expense
I.is an expense commonly incurred in an income-producing activity.
II.is an expenditure that provides future benefits to an income-producing activity.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
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Chapter 6: Business Expenses
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Which of the following best describes the tax treatment of losses from uncollectible business debts?
A)Such losses are not deductible.
B)Such losses are limited to $3,000 per year.
C)Such losses are treated as short-term capital losses.
D)Such losses are deductible without limitation as an ordinary loss.
Q2) To be deductible,employee compensation must be for services actually performed by the employee and the amount must be reasonable.
A)True
B)False
Q3) Entertainment,auto,travel,and gift expenses are subject to strict documentation requirements.Taxpayers are required to keep records that show
I.The business purpose of the event.
II.The time and place of the event.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
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Page 8
Chapter 7: Losses -- Deductions and Limitations
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) The wash sale provisions apply to which of the following?
I.Jim bought 500 additional shares of Alfa Gamma stock for $4,000 on December 2,2017.Jim owned 2,500 shares after that purchase.On December 26,2017,Jim realizes a loss of $1,500 on the sale of 250 shares of Alfa Gamma stock.
II.Calvin realizes a $8,000 loss on the December 29,2017,sale of Sloan corporate bonds.Each bond has a face value of $1,000.He replaces the Sloan corporate bonds with the same number of Jackson corporate bonds,each with a face value of $1,000 on January 16,2018.The Jackson bonds have a different interest rate and maturity date then the Sloan bonds but have the same bond rating (AAA).
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q2) Why did Congress enact the at-risk rules?
Q3) An operating loss occurs when an entity's deductions exceeds the income generated for the period.
A)True
B)False
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Page 9
Chapter 8: Taxation of Individuals
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163 Flashcards
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Sample Questions
Q1) Anita receives a state income tax refund of $550 in May 2017.When she filed her 2016 federal income tax return,she used the standard deduction amount.Although the all-inclusive income concept would require Anita to report the $550 in her federal gross income for 2017,she may exclude it.What tax concept explains why the exclusion is permitted in this case?
A)Wherewithal to pay.
B)Tax benefit rule.
C)Ability to pay.
D)Assignment of income.
E)Administrative convenience.
Q2) Chad pays $2,000 of interest on $20,000 of debt incurred for the purchase of municipal bonds and corporate bonds.Chad receives $800 of interest on the municipal bonds and $800 of interest on the corporate bonds.What is his allowable deduction on the $2,000 of interest? Explain your answer and show all calculations.
Q3) Unreimbursed meals and entertainment paid by employees are subject to the 2-percent of adjusted gross income annual limitation on miscellaneous deductions
A)True
B)False
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Chapter 9: Acquisitions of Property
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Sample Questions
Q1) Tony died on April 5,2017.As part of his will,he leaves land that he paid $6,000 for in 2003 to his son Philip.On April 5,2017,the land is worth $11,000.However,due to local real estate conditions,the land continues to decline in value.On July 28 it is worth only $10,000;it declines further to $9,000 on October 5 and plunges to $7,000 on December 18.
I.In the absence of any special elections,Philip's basis in the land is $6,000.
II.If the executor distributes the land to Philip on July 28,Philip's basis in the land will be $10,000.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q2) Whenever the donor's adjusted basis is used to compute a gain or loss on the donee's disposition of property received by gift,the donee's holding period is always the period of time the property was owned by the donee only.
A)True
B)False
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Chapter 10: Cost Recovery on Property: Depreciation, depletion,
and Amortization
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) Which of the following assets would be allowed a depreciation deduction?
I.A truck used to provide transportation to a job site.
II.A car used for personal purposes.
III.An apartment building rented out for the production of rental income.
IV.A personal-use computer of the taxpayer.
A)Only statement II is correct.
B)Statements II and IV are correct.
C)Only statement I is correct.
D)Statements I and III are correct.
E)All of the assets are depreciable.
Q2) Aaron purchases a taxicab (5-year MACRS property)for $20,000 on December 3,2017.This is the only business asset Aaron acquires in 2017.He does not desire to use the Section 179 election.What is the maximum amount of depreciation that he can deduct in 2017?
A)$1,000
B)$3,000
C)$4,000
D)$10,500
E)$14,000
Page 12
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Chapter 11: Property Dispositions
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139 Flashcards
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Sample Questions
Q1) Section 1250 recapture
A)Stocks,bonds,options.
B)Depreciable real property.
C)All or part of any gain on sale is excluded.
D)Taxed at a maximum rate of 25%.
E)Gain or loss on the sale of artwork.
F)Depreciable tangible personal property.
G)Subject to full recapture as ordinary income of all depreciation taken.
H)Gain on real property attributable to excess depreciation is ordinary income.
Q2) Joyce receives investment property from her mother as a gift in 2017.Her mother paid $15,000 for the property in 2011,and it is valued at $18,000 on the date of the gift.Joyce sells the property eight months later for $16,000.Joyce's realized gain or loss is
A)$1,000 loss
B)$2,000 loss
C)$1,000 gain
D)$2,000 gain
E)$16,000 gain
Q3) Discuss the general differences between Section 1245 and Section 1250 property.
Q4) What incentive provisions or preferential treatments exist for capital gains?
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Chapter 12: Nonrecognition Transactions
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120 Flashcards
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Sample Questions
Q1) Land held as an investment for an office building and land used in a business.
A)qualifies as a like-kind exchange
B)does not qualify as a like-kind exchange
Q2) For a transaction to qualify as a third-party exchange,
I.The exchange must be completed within 1 year of the first exchange.
II.The property exchanged must be identified within 45 days of the first exchange.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q3) Commonalties of nonrecognition transactions include that
I.deferring a loss is mandatory on like-kind exchanges.
II.deferring a loss is mandatory on involuntary conversions.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
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Chapter 13: Choice of Business Entity -- General Tax and
Nontax Factorsformation
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101 Flashcards
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Sample Questions
Q1) A corporation in which the performance of personal activities is the principal pursuit,services are performed by owner-employees,and the owner-employees own 95% or more of the stock is taxed at a flat rate of 35%.
A)True
B)False
Q2) Franco and Melanie start a new business called F&M Delivery.Franco contributes $50,000 in cash and Melanie contributes a fleet of vans worth $80,000.The business assumes Melanie's $30,000 debt on the van.The business borrows $500,000 to purchase necessary buildings and for working capital.They anticipate that the business will suffer losses for at least three years before it becomes profitable.Which entity forms would be appropriate for Franco and Melanie's new business?
Q3) Limited liability refers to
A)whether the entity ceases to exist with a change in ownership.
B)who manages the entity.
C)whether the owners are risking any more than they invested in the firm.
D)the ease with which ownership can be transferred.
Q4) Corporations generally are required to use the accrual method of accounting. A)True
B)False
Page 15
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Chapter 14: Choice of Business Entity -- Operations and Distributions
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Sample Questions
Q1) Separate entity that never pays income taxes
A)Sole Proprietorship.
B)Partnership.
C)Corporation.
D)S Corporation.
Q2) Higlo Paints is a partnership that reports an operating income of $50,000 in the current year.Higlo also has a $20,000 Section 1231 gain from the sale of a building and $10,000 in nondeductible expenses.Bernice owns 20% of Higlo and withdraws $5,000 from the partnership during the current year.Bernice's basis will increase by:
A)$5,000
B)$7,000
C)$9,000
D)$10,000
E)$12,000
Q3) A sole proprietor may deduct investment interest and investment expense without limitations if investments are made in the name of the business.
A)True
B)False
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Chapter 15: Choice of Business Entity -- Other
Considerations
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Sample Questions
Q1) Any structure over 100 years old is eligible for the rehabilitation tax credit.
A)True
B)False
Q2) The tax advantage of a Roth IRA is that although the contributions are not deductible,the distributions of contribution and income are tax-free.
A)True
B)False
Q3) Peter opened his IRA in 2003 and withdrew money to purchase a house in 2017.Since the distribution qualified as a "qualified first-time-homebuyer expenses," it is not subject to the 10% early withdrawal penalty.
A)True
B)False
Q4) The maximum contribution that can be made on behalf of an employee in a Keogh defined contribution money purchase plan is:
A)The lower of 15% of employee's taxable compensation or $54,000
B)The lower of 13.0435% of employee's taxable compensation or $54,000
C)The lower of 20% of employee's taxable compensation or $54,000
D)The lower of 25% of employee's taxable compensation or $54,000
Page 17
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Chapter 16: Tax Research
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Sample Questions
Q1) A tax treaty with a foreign country negotiated by the president is considered a legislative source of tax law.
A)True
B)False
Q2) The Internal Revenue Service is a branch of
A)Congress
B)The Secret Service
C)The Federal Reserve Bank
D)The Treasury Department
E)The Federal Bureau of Investigation
Q3) If the House and the Senate both approve similar but not identical tax bills,any differences between the two pieces of legislation are resolved by the
A)Joint Conference Committee
B)Ways and Means Committee
C)Finance Committee
D)House Appropriations Committee.
Q4) Citators provide the full text of court decisions.
A)True
B)False
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