Tax Research and Procedure
Test Preparation
Course Introduction
Tax Research and Procedure is an advanced course that explores the methodologies and resources used to interpret and apply tax laws in practice. Students will develop skills in identifying tax issues, conducting research using primary and secondary sources, and effectively communicating research findings through written memoranda and oral presentations. The course covers procedural aspects such as regulations, revenue rulings, court cases, IRS procedures, and ethical considerations in tax practice. Emphasis is placed on critical analysis, proper citation techniques, and understanding the administrative processes involved in addressing tax controversies.
Recommended Textbook
South Western Federal Taxation 2013 Comprehensive Edition by William H. Hoffman
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Chapter 1: An Introduction to Taxation and Understanding
the Federal Tax Law
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) For the negligence penalty to apply, the underpayment must be caused by intentional disregard of rules and regulations without intent to defraud.
A)True
B)False
Answer: True
Q2) As it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize gain in the years the proceeds from the installment sale are collected.
A)True
B)False
Answer: True
Q3) In preparing a tax return, all questions on the return must be answered.
A)True
B)False
Answer: False
Q4) Stealth taxes have the effect of generating additional taxes from all taxpayers.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Working With the Tax Law
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Sample Questions
Q1) Determination letters usually involve proposed transactions.
A)True
B)False
Answer: False
Q2) Which of these is not a correct citation to the Internal Revenue Code?
A)Section 211.
B)Section 1222(1).
C)Section 2(a)(1)(A).
D)Section 280B.
E)All of above are correct cites.
Answer: E
Q3) Which items tell taxpayers the IRS's reaction to certain court decisions?
A)Notices.
B)Revenue Procedures.
C)Revenue Rulings.
D)Actions on Decisions.
E)Procedural Regulations.
Answer: D
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Chapter 3: Computing the Tax
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Sample Questions
Q1) Under the income tax formula, a taxpayer must choose between deductions from AGI and the standard deduction.
A)True
B)False
Answer: True
Q2) Kyle, whose wife died in December 2009, filed a joint tax return for 2009.He did not remarry, but has continued to maintain his home in which his two dependent children live.What is Kyle's filing status as to 2012?
A)Head of household.
B)Surviving spouse.
C)Single.
D)Married filing separately.
E)None of the above.
Answer: A
Q3) The filing status of a taxpayer (e.g., single, head of household) must be identified before taxable income is determined.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Gross Income: Concepts and Inclusions
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Sample Questions
Q1) Ted earned $150,000 during the current year.He paid Alice, his former wife, $75,000 in alimony.Under these facts, the tax is paid by the person who benefits from the income rather than the person who earned the income.
A)True
B)False
Q2) In January 2012, Tammy purchased a bond due in 24 months.The cost of the bond is $857 and its maturity value is $1,000.No interest is paid each year, but the compound interest rate on the bond is 8%.Tammy also purchased a Series EE United States Government bond for $558, with a maturity value in 10 years of $1,000.This is the only Series EE bond she has ever owned.The Series EE bond is sold to yield 6% interest.Tammy is 13 years old and has no other source of income.She is claimed as a dependent by her parents.Compute Tammy's gross income from the bond and Series EE bond for 2012.
Q3) If a lottery prize winner transfers the prize to a qualified government unit or nonprofit organization, then the prize is excluded from the winner's gross income if the amount of the prize does not exceed 30% of the winner's AGI.
A)True
B)False
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Chapter 5: Gross Income: Exclusions
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Sample Questions
Q1) When Betty was diagnosed as having a terminal illness, she sold her life insurance policy to Insurance Purchase, Inc., a company that is licensed to invest in these types of contracts.Betty sold the policy for $32,000 and Insurance Purchase, Inc., became the beneficiary.She had paid total premiums of $19,000.Betty died 8 months after the sale.Insurance Purchase, Inc., collected $50,000 on the policy.The company had paid additional premiums of $4,000 on the policy.Betty is not required to recognize a $13,000 gain from the sale of her life insurance policy and Insurance Purchase, Inc., is required to recognize a $14,000 gain from the insurance policy.
A)True
B)False
Q2) Brooke works part-time as a waitress in a restaurant. For groups of 7 or more customers, the customer is charged 15% of the bill for Brooke's services. For parties of less than 7, the tips are voluntary. Brooke received $11,000 from the groups of 7 or more and $7,000 in voluntary tips from all other customers. Using the customary 15% rate, her voluntary tips would have been only $6,000.Brooke must include $18,000 ($11,000 + $7,000) in gross income.
A)True
B)False
Q3) What Federal income tax benefits are provided for college students?
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Page 7
Chapter 6: Deductions and Losses: in General
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Sample Questions
Q1) The portion of property tax on a vacation home that is attributable to personal use is an itemized deduction.
A)True
B)False
Q2) Under no circumstance can a loss on the sale of a personal use asset be deducted.
A)True
B)False
Q3) Bruce owns several sole proprietorships.Must Bruce use the same accounting method for each of these businesses?
Q4) Which of the following is not a related party for constructive ownership purposes under § 267?
A)The taxpayer's cousin.
B)The taxpayer's brother.
C)The taxpayer's grandmother.
D)A corporation owned more than 50% by the taxpayer.
E)None of the above.
Q5) What losses are deductible by an individual taxpayer?
Q6) Can a trade or business expense be deductible if it is necessary but not ordinary?
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Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
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Sample Questions
Q1) A father cannot claim a casualty on his daughter's personal use property.
A)True
B)False
Q2) Two years ago, Gina loaned Tom $50,000. Tom signed a note the terms of which called for monthly payments of $2,000 plus 6% interest on the outstanding balance. Last year, when the balance owing on the loan was $18,000, Tom defaulted on the note. As of the end of last year, there appeared to be no reasonable prospect of Gina recovering the $18,000. As a consequence, Gina claimed the $18,000 as a nonbusiness bad debt. Last year, Gina had AGI of a negative $6,000 which included $5,000 net long-term capital gains and $4,000 of qualified dividends. Gina did not itemize her deductions.
During the current year, Tom paid Gina $13,000 in final settlement of the loan. How should Gina account for the payment in the current year?
A)File an amended tax return for last year.
B)Report no income for the current year.
C)Report $8,000 of income for the current year.
D)Report $12,000 of income for the current year.
E)None of the above.
Q3) Why was the domestic production activities deduction (DPAD) enacted by Congress?
Q4) Discuss the effect of alimony in computing a net operating loss.
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Chapter 8: Depreciation, Cost Recovery, Amortization, and Depletion
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Sample Questions
Q1) White Company acquires a new machine (seven-year property) on January 10, 2012, at a cost of $600,000.White makes the election to expense the maximum amount under § 179.No election is made to use the straight-line method. White does take additional first-year depreciation.Determine the total deductions in calculating taxable income related to the machine for 2012 assuming White has taxable income of $800,000.
A)$71,593.
B)$128,610.
C)$204,877.
D)$385,296.
E)None of the above.
Q2) The concept of depreciation assumes that the asset has a determinable useful life. A)True
B)False
Q3) The cost of a covenant not to complete for 20 years incurred in connection with the acquisition of a business is amortized over 20 years.
A)True
B)False
Q4) Discuss the reason for the inclusion amount with respect to leased automobiles.
Page 10
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Chapter 9: Deductions: Employee and Self-Employed
Related Expenses
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Sample Questions
Q1) The Federal per diem rates that can be used for "deemed substantiated" purposes are not the same for all locations in the country.
A)True
B)False
Q2) Tom owns and operates a lawn maintenance company. He does not concern himself with employment taxes because he considers all the persons who work for him to be independent contractors. He bases this assumption of the fact that several of his friends who operate similar businesses follow the same approach. Comment on Tom's situation.
Q3) Joyce, age 39, and Sam, age 40, who have been married for seven years, are both active participants in qualified retirement plans.Their total AGI for 2012 is $120,000.Each is employed and earns a salary of $65,000.What are their combined deductible contributions to traditional IRAs?
A)$0.
B)$3,000.
C)$4,000.
D)$8,000.
E)None of the above.
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Chapter 10: Deductions and Losses: Certain Itemized
Deductions
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Sample Questions
Q1) If certain conditions are met, a buyer may deduct seller-paid points in the tax year in which they are paid.
A)True
B)False
Q2) Jerry pays $5,000 tuition to a parochial school run by his church in order to enable his daughter to attend. This is the amount the school charges all students. Part of the tuition payments can be claimed as a charitable contribution.
A)True
B)False
Q3) Herbert is the sole proprietor of a furniture store. He can deduct real property taxes on his store building but he cannot deduct state income taxes related to his net income from the furniture store as a business deduction.
A)True
B)False
Q4) In January 2013, Pam, a calendar year cash basis taxpayer, made an estimated state income tax payment for 2012. The payment is deductible in 2012.
A)True
B)False
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Chapter 11: Investor Losses
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Sample Questions
Q1) Tonya owns an interest in an activity (not real estate) that converted recourse financing to nonrecourse financing.Recapture of previously allowed losses is required if Tonya's at-risk amount is reduced below zero as a result of the debt restructuring.
A)True
B)False
Q2) Joyce, an attorney, earns $100,000 from her law practice in the current year.In addition, she receives $35,000 in dividends and interest during the year.Further, she incurs a loss of $35,000 from an investment in a passive activity.What is Joyce's AGI for the year after considering the passive investment?
Q3) Gail exchanges passive Activity A, which has suspended losses of $15,000, for passive Activity B in a nontaxable exchange.The new owner of passive Activity A can offset the $15,000 suspended losses against passive income in the future.
A)True
B)False
Q4) In 2012, Emily invests $100,000 in a limited partnership that is not a passive activity.During 2012, her share of the partnership loss is $70,000.In 2013, her share of the partnership loss is $50,000.How much can Emily deduct in 2012 and 2013?
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Chapter 12: Tax Credits and Payments
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Sample Questions
Q1) During 2012, Eleanor earns $120,000 in wages as an employee of an accounting firm.She also earns $26,000 in gross income from an outside consulting service she operates.Deductible expenses paid in connection with the consulting service amount to $6,000.Eleanor also has a recognized long-term capital gain of $1,000 from the sale of a stock investment.She must pay a self-employment tax on:
A)$0.
B)$20,000.
C)$26,000.
D)$27,000.
E)None of the above.
Q2) Cardinal Company incurs $800,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours.Assuming Cardinal claims the credit for employer-provided child care this year, its basis in the newly constructed facility is $640,000.
A)True
B)False
Q3) Discuss the treatment of unused general business credits.
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Page 14
Chapter 13: Property Transactions: Determination of Gain or
Loss, Basis Considerations, and Nontaxable
Exchanges-Part 2
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Sample Questions
Q1) Butch sells land with an adjusted basis of $88,000 and a fair market value of $160,000 to Cynthia, his wife, for $160,000.Discuss how the tax consequences would differ if Butch and Cynthia had never been married.
Q2) Lynn transfers her personal use automobile to her business (a sole proprietorship).The car's adjusted basis is $35,000 and the fair market value is $12,000.No cost recovery had been deducted by Lynn, since she held the car for personal use.Determine the adjusted basis of the car to Lynn's sole proprietorship including the basis for cost recovery.
Q3) What is a deathbed gift and what tax consequences apply?
Q4) Boyd acquired tax-exempt bonds for $430,000 in December 2012.The bonds, which mature in December 2017, have a maturity value of $400,000.Boyd does not make any elections regarding the amortization of the bond premium.Determine the tax consequences to Boyd when he redeems the bonds in December 2017.
Q5) Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.
Q7) Can related parties take advantage of the like-kind exchange provisions? Page 15
Q6) Discuss the logic for mandatory deferral of realized gain or loss for a § 1031 like-kind exchange.
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Page 16
Chapter 13: A: Property Transactions:
Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1
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Sample Questions
Q1) Lily exchanges a building she uses in her rental business for a building owned by Kendall, her brother, which she will use in her rental business.The adjusted basis of Lily's building is $120,000 and the fair market value is $170,000.Which of the following statements is correct?
A)Lily's recognized gain is $50,000 and her basis for the building received is $120,000.
B)Lily's recognized gain is $50,000 and her basis for the building received is $170,000.
C)Lily's recognized gain is $0 and her basis for the building received is $120,000.
D)Lily's recognized gain is $0 and her basis for the building received is $170,000.
E)None of the above is correct.
Q2) The nonrecognition treatment on realized gains of an indirect involuntary conversion of a factory building under § 1033 is elective, while a like-kind exchange of computers under § 1031 is mandatory.
A)True
B)False
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Chapter 14: Property Transactions: Capital Gains and Losses,
1231, Recapture Provisions
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Q1) A retail building used in the business of a sole proprietor is sold on March 10, 2012, for $342,000. The building was acquired in 2002 for $400,000 and straight-line depreciation of $104,000 had been taken on the building. What is the maximum unrecaptured § 1250 gain from the disposition of this building?
A)$400,000.
B)$322,000.
C)$104,000.
D)$26,000.
E)None of the above.
Q2) A business taxpayer sells depreciable business property with an adjusted basis of $40,000 for $32,000. The taxpayer held the property for more than a year. The taxpayer has an $8,000 § 1231 loss.
A)True
B)False
Q3) As a general rule, the sale or exchange of an option to buy or sell property results in capital gain or loss if the property subject to the option is (or would be) a capital asset in the hands of the option holder.
A)True
B)False
Page 18
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Chapter 15: Alternative Minimum Tax
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Q1) For regular income tax purposes, Yolanda, who is single, is in the 35% tax bracket.Her AMT base is $220,000.Her tentative AMT is:
A)$57,200.
B)$58,100.
C)$61,600.
D)$77,000.
E)None of the above.
Q2) Joel placed real property in service in 2012 that cost $900,000 and used MACRS for regular income tax purposes.He is required to make a positive adjustment for AMT purposes in 2012 for the excess of depreciation calculated for regular income tax purposes over the depreciation calculated for AMT purposes.
A)True
B)False
Q3) Nell has a personal casualty loss deduction of $14,500 for regular income tax purposes. The deduction would have been $26,600, but it had to be reduced by $100 and by $12,000 (10% ´ $120,000 AGI). For AMT purposes, the casualty loss deduction is $26,600.
A)True
B)False
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Chapter 16: Accounting Periods and Methods
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Q1) Red Corporation and Green Corporation are equal partners in the R & G Partnership.Red Corporation's tax year ends September 30th, and Green Corporation is a calendar year taxpayer.R & G Partnership must use September 30th as its tax year, unless it has a business purpose for using a different tax year.
A)True
B)False
Q2) Pedro, not a dealer, sold real property that he owned with an adjusted basis of $120,000 and encumbered by a mortgage for $56,000 to Pat in 2010.The terms of the sale required Pat to pay $28,000 cash, assume the $56,000 mortgage, and give Pedro eleven notes for $12,000 each (plus interest at the Federal rate).The first note was payable two years from the date of sale and each succeeding note became due at two-year intervals.Pedro did not "elect out" of the installment method for reporting the transaction.If Pat pays the 2012 note as promised, what is the recognized gain to Pedro in 2012 (exclusive of interest)?
A)$12,000.
B)$7,200.
C)$4,800.
D)$0.
E)None of the above.
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Page 20
Chapter 17: Corporations: Introduction and Operating Rules
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Q1) Azure Corporation, a C corporation, had a long-term capital gain of $50,000 in the current year. The maximum amount of tax applicable to the capital gain is $7,500 ($50,000 ´ 15%).
A)True
B)False
Q2) Donald owns a 60% interest in a partnership that earned $230,000 in the current year. He also owns 60% of the stock in a C corporation that earned $230,000 during the year. Donald received $50,000 in distributions from each of the two entities during the year. With respect to this information, Donald must report $188,000 of income on his individual income tax return for the year.
A)True
B)False
Q3) Rajib is the sole shareholder of Robin Corporation, a calendar year S corporation.Robin earned net profit of $350,000 ($520,000 gross income - $170,000 operating expenses) and distributed $80,000 to Rajib.Rajib must report Robin Corporation profit of $350,000 on his Federal income tax return.
A)True
B)False
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Chapter 18: Corporations: Organization and Capital Structure
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Q1) Rita forms Finch Corporation by transferring land (basis of $125,000; fair market value of $750,000) which is subject to a mortgage of $375,000. Two weeks prior to incorporating Finch, Rita borrows $125,000 for personal purposes and gives the lender a second mortgage on the land. Finch Corporation issues stock worth $250,000 to Rita and assumes the two mortgages on the land. What are the tax consequences to Rita and to Finch Corporation?
Q2) Because services are not considered property under § 351, a taxpayer must report as income the fair market value of stock received for such services.
A)True
B)False
Q3) Three individuals form Skylark Corporation with the following contributions: Cliff, cash of $50,000 for 50 shares; Brad, land worth $20,000 (basis of $11,000) for 20 shares; and Ron, cattle worth $9,000 (basis of $6,000) for 9 shares and services worth $21,000 for 21 shares.
A)These transfers are fully taxable and not subject to § 351.
B)Ron's basis in his stock is $27,000.
C)Ron's basis in his stock is $6,000.
D)Brad's basis in his stock is $20,000.
E)None of the above.
Page 22
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Chapter 19: Corporations: Distributions Not in Complete
Liquidation
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Q1) Tungsten Corporation, a calendar year cash basis taxpayer, made estimated tax payments of $800 each quarter in 2012, for a total of $3,200.Tungsten filed its 2012 tax return in 2013 and the return showed a tax liability $4,200.At the time of filing, March 15, 2013, Tungsten paid an additional $1,000 in Federal income taxes.How does the additional payment of $1,000 impact Tungsten's E & P?
A)Increase by $1,000 in 2012.
B)Increase by $1,000 in 2013.
C)Decrease by $1,000 in 2012.
D)Decrease by $1,000 in 2013.
E)None of the above.
Q2) Constructive dividends do not need to satisfy the legal requirements for a dividend as set forth by applicable state law.
A)True
B)False
Q3) During the year, Blue Corporation distributes land to its sole shareholder.If the fair market value of the land is less than its adjusted basis, Blue will recognize a loss on the distribution.
A)True
B)False
Page 23
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Chapter 20: Corporations: Distributions in Complete
Liquidation and an Overview of Reorganizations
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Q1) As a general rule, a liquidating corporation recognizes gains but not losses on the distribution of property in complete liquidation.
A)True
B)False
Q2) Section 332 does not apply to a parent-subsidiary liquidation if the subsidiary corporation is insolvent on the date of the liquidation.
A)True
B)False
Q3) Cocoa Corporation is acquiring Milk Corporation in a "Type A" reorganization by exchanging 40% of its voting stock and $50,000 for all of Milk's assets (value of $850,000 and basis of $600,000) and liabilities ($200,000).The shareholders of Milk are Elsie (650 shares) and Ferdinand (350 shares).They bought their stock for $500 per share.What is the value of the stock that Elsie and Ferdinand received from Cocoa? What is the amount of gains or losses they will recognize due to the reorganization and what is their basis in the Cocoa stock?
Q4) The text discusses four different limitations on loss recognition by liquidating corporations. Provide a brief description of each of these loss limitations.
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Chapter 21: Partnerships
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Q1) One of the disadvantages of the partnership form is that the partner's share of the partnership's taxable income is taxed to the partner, regardless of whether or not distributed.
A)True
B)False
Q2) Sharon and Sue are equal partners in the S&S Partnership.On January 1 of the current year, each partner's adjusted basis in S&S was $80,000 (including each partner's $20,000 share of the partnership's $40,000 of liabilities).During the current year, S&S repaid $30,000 of the debt and borrowed $20,000 for which Sharon and Sue are equally liable.In the current year ended December 31, S&S also sustained a net operating loss of $40,000 and earned $10,000 of interest income from investments.If liabilities are shared equally by the partners, on January 1 of the next year how much is each partner's basis in her interest in S&S?
Q3) A gain will only arise on a distribution of cash that exceeds the partner's basis in the partnership interest.For this purpose, only cash, checks, and credit card charges are treated as cash.
A)True
B)False
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25
Chapter 22: S: Corporations
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Q1) Which equity arrangement cannot be used by an S corporation?
A)Phantom stock.
B)Stock appreciation rights.
C)Warrants.
D)Straight debt.
E)An insurance company structure.
Q2) Grams, Inc., a calendar year S corporation, reports $20,000 DPGR and $15,000 of wages, and the S corporation's QPAI is $5,000.Janet has a 40% interest in the S corporation.All expenses that reduce DPGR are from wages, and all wages paid relate to DPGR.How much QPAI and wages are allocated to Janet?
A)None.
B)$2,000 and $6,000.
C)$5,000 and $15,000.
D)$5,000 and $20,000.
Q3) All tax preference items flow through the S corporation, to be included in the shareholders' AMT calculations.
A)True
B)False
Q4) How may an S corporation manage its liability for the built-in gains tax?
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Chapter 23: Exempt Entities
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Q1) Revenue generated by an exempt organization from the distribution of low-cost items is not income from an unrelated trade or business.
A)True
B)False
Q2) An exempt organization that otherwise would be classified as an unrelated trade or businesses will not be subject to the unrelated business income tax if the individuals performing substantially all the work of the trade or business do so without compensation.
A)True
B)False
Q3) To maintain exempt status, an organization must do which of the following:
A)Satisfy only an organizational test.
B)Satisfy only an operational test.
C)Satisfy both an organizational test and an operational test.
D)Satisfy a financial test.
E)Once exempt status is granted, it will continue regardless of whether the organizational test and the operational test are satisfied.
Q4) Are organizations that qualify for exempt organization status completely exempt from Federal income taxation?
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Chapter 24: Multistate Corporate Taxation
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Q1) By making a water's edge election, the multinational taxpayer can limit the reach of unitary principles to the apportionment factors and income of its U.S.and E.U.affiliates.
A)True
B)False
Q2) In unitary states, a(n) ____________________ provision permits a multinational corporation to elect to limit the reach of the state's taxing jurisdiction to activities occurring within the boundaries of the United States.
Q3) When a _________________________ is in effect, out-of-state sales that are not subject to tax in the destination state are pulled back into the sales factor numerator of the origination state.
Q4) A state sales tax usually falls upon:
A)Sales of groceries.
B)Sales of widgets made to out-of-state customers.
C)Sales of widgets made to the ultimate consumer of the product or service.
D)Sales of real estate.
Q5) The ____________________ tax usually is applied at the city or county level, as its main source of revenue.
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Chapter 25: Taxation of International Transactions
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Q1) In allocating interest expense between U.S.and foreign sources, a taxpayer must use the tax basis of the income-producing assets.
A)True
B)False
Q2) Income tax treaties may provide for either higher or lower withholding tax rates on interest income than the rate provided under U.S.statutory law.
A)True B)False
Q3) Kipp, a U.S.shareholder under the CFC provisions, owns 40% of a CFC.If the CFC's Subpart F income for the taxable year is $200,000, Kipp is not taxed on receipt of a constructive dividend of $80,000 because he doesn't own more than 50% of the CFC.
A)True
B)False
Q4) When a business taxpayer "goes international," the first step usually is to create an overseas branch sales office.
A)True B)False
Q5) Discuss the primary purposes of income tax treaties.
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Chapter 26: Tax Practice and Ethics
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Q1) A ____________________% penalty may result when a taxpayer overstates by 150% or more the value of an asset contributed to a charity. or
Q2) Yang, a calendar year taxpayer, did not file a tax return for 2005 because she honestly believed that no additional tax was due.In 2012, Yang is audited by the IRS and the agent assesses a deficiency of $17,000 for 2005.Yang need not pay this deficiency, since the statute of limitations expired on April 15, 2009.
A)True
B)False
Q3) As part of a tax return engagement for XYZ Partnership, Enrolled Agent Wang can draft an amendment to the XYZ partnership agreement.
A)True
B)False
Q4) When a tax dispute is resolved, interest is paid by or to the government. List three or more features of the interest computations that arise when a tax return is audited.
Q5) For purposes of tax penalties, a VITA volunteer is not classified as a tax
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Chapter 28: Income Taxation of Trusts and Estates
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Q1) Which of the following restrictions applies concerning distributions to trust beneficiaries?
A)Special allocations are not allowed under Subchapter J.
B)Special allocations are allowed, but only in the trust's termination year.
C)Special allocations are allowed, but only for portfolio income items.
D)Special allocations of income types are allowed, assuming that they carry substantial economic effect.
Q2) A gift to charity from its 2012 income is deductible on an estate's Form 1041 if it is made by the end of the ____________________ tax year.
Q3) This year, the Nano Trust reported $50,000 entity accounting income and $40,000 distributable net income (DNI). Nano distributed $30,000 cash to Horatio, its sole income beneficiary. Nano is a complex trust. Nano's distribution deduction is:
A)$50,000.
B)$40,000.
C)$30,000.
D)$0. Because the distributions of a complex trust are discretionary, no deduction is allowed.
Q4) The Form 1041 of a calendar-year trust is due on ____________________ 15.
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