Tax Research
Exam Answer Key
Course Introduction
Tax Research is an advanced course designed to equip students with the knowledge and skills necessary to effectively identify, analyze, and resolve complex tax issues. The course focuses on the use of authoritative sources, including the Internal Revenue Code, Treasury regulations, IRS rulings, and relevant case law, as well as state and international tax guidance. Students will learn to conduct tax research using both online and print resources, document findings, and communicate technical conclusions clearly through written reports and memoranda. Emphasis is placed on applying research strategies to practical scenarios, fostering critical thinking, and understanding the ethical considerations inherent in the tax research process.
Recommended Textbook
South Western Federal Taxation 2012 Comprehensive by William H. Hoffman
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28 Chapters
3533 Verified Questions
3533 Flashcards
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Chapter 1: An Introduction to Taxation and Understanding
the Federal Tax Law
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Q1) Can a taxpayer start the 3-year statute of limitations on additional assessments by the IRS by filing his income tax return early (i.e.,before the due date)? Can the period be shortened by filing late (i.e.,after the due date)?
Answer: The answer is no in both cases.When filing early,the statute starts to run on the due date of the return.When filing late however,the filing date controls.
Q2) Congress has enacted a provision to allow a deduction for state and local sales taxes.Such a provision can be justified on social grounds.
A)True
B)False
Answer: False
Q3) To lessen,or eliminate,the effect of multiple taxation,a taxpayer who is subject to both foreign and U.S.income taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.
A)True
B)False
Answer: True
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Chapter 2: Working With the Tax Law
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Sample Questions
Q1) The Internet provides a wealth of tax information in several popular forms,sometimes at no direct cost to the researcher.
A)True
B)False
Answer: True
Q2) Which tax source may override a Regulation section?
A) Revenue Ruling.
B) Revenue Procedure.
C) U.S. tax treaty.
D) Technical Advice Memoranda.
E) None of the above.
Answer: C
Q3) In a U.S.District Court,a jury can decide both questions of fact and questions of law.
A)True
B)False
Answer: False
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Chapter 3: Tax Determination: Personal and Dependency
Exemptions: an Overview of Property Transactions
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Q1) When separate income tax returns are filed by married taxpayers,one spouse cannot claim the other spouse as an exemption.
A)True
B)False
Answer: False
Q2) Even if the individual does not spend funds that have been received from another source (e.g.,interest on municipal bonds),the unexpended amounts are considered for purposes of the support test.
A)True
B)False
Answer: False
Q3) Under the income tax formula,a taxpayer must choose between deductions for AGI and the standard deduction.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Gross Income: Concepts and Inclusions
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Q1) Harry and Wanda were married in Texas,a community property state,but moved to Virginia,a common law state.The calculation of their income on a joint return:
A) Will increase as a result of changing their state of residence.
B) Will decrease as a result of changing their state of residence.
C) Will not change as a result of changing their state of residence.
D) Will not be permitted.
E) None of the above.
Q2) Dick and Jane are divorced in 2010.At the time of the divorce,Dick had a lawsuit pending.He had filed suit against a former employer for overtime pay.As part of a divorce agreement,Dick agreed to pay Jane one-half of the proceeds from the lawsuit.In 2011,Dick collected $250,000 from the former employer and paid Jane $125,000.What are the tax consequences for Dick receiving the $250,000 and then paying Jane the $125,000?
Q3) If the employer provides all employees with group term life insurance equal to twice the employee's annual salary,an employee with a salary of $50,000 has no gross income from the life insurance protection provided by the employer.
A)True
B)False
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Chapter 5: Gross Income: Exclusions
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Q1) A U.S.citizen worked in a foreign country for the period July 1,2010 through August 1,2011.Her salary was $10,000 per month.Also,in 2010 she received $5,000 in dividends from foreign corporations (not qualified dividends).No dividends were received in 2011.Which of the following is correct?
A) The taxpayer can exclude $60,000 from U.S. gross income for 2010 because the total salary earned in the foreign country in 2010 was less than the annual foreign earned income exclusion, but the dividends of $5,000 must be included in gross income.
B) The taxpayer can exclude a portion of the compensation income from U.S. gross income in 2010 and 2011, but must include the dividend income of $5,000 in gross income.
C) The taxpayer can exclude from U.S. gross income $60,000 salary in 2010, but in 2010 the taxpayer will exceed the twelve month limitation and, therefore, all of the 2011 compensation must be included in gross income. All of the dividends must be included in 2010 gross income.
D) The taxpayer can exclude a portion of the salary from U.S. gross income in 2010 and 2011, and all of the dividend income.
E) None of the above.
Q2) 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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Q1) Graham,a CPA,has submitted a proposal to do the annual audit for a municipality.Owen,the city treasurer,tells Graham that for a $1,000 fee,he will use his influence to have the audit awarded to Graham.What factors are relevant in determining if Graham can deduct the $1,000 payment assuming he pays the fee to Owen?
Q2) For an expense to be deducted,the amount must be paid by the taxpayer.
A)True
B)False
Q3) Under what circumstances may a taxpayer deduct the expenses of investigating a possible business acquisition,if (1)the business is not acquired; and (2)the business is acquired?
Q4) Tommy,an automobile mechanic employed by an auto dealership,is considering opening a fast food franchise.If Tommy decides not to acquire the fast food franchise,any investigation expenses are:
A) A deduction for AGI.
B) A deduction from AGI, subject to the 2 percent floor.
C) A deduction from AGI, not subject to the 2 percent floor.
D) Deductible up to $5,000 in the current year with the balance being amortized over a 180-month period.
E) Not deductible.
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Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
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Sample Questions
Q1) Ivory,Inc.,has taxable income of $600,000 and qualified production activities income (QPAI)of $400,000 in 2011.Ivory's domestic production activities deduction is:
A) $24,000.
B) $36,000.
C) $40,000.
D) $54,000.
E) None of the above.
Q2) Identify the factors that should be considered in determining whether a transaction is a business bad debt or a nonbusiness bad debt.
Q3) A father cannot claim a casualty on his daughter's personal use property.
A)True
B)False
Q4) "Other casualty" means casualties similar to those associated with fires,storms,or shipwrecks.
A)True
B)False
Q5) Discuss the treatment of casualty and theft losses incurred with property in a transaction entered into for profit.
9
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Chapter 8: Depreciation, cost Recovery, amortization, and Depletion
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Sample Questions
Q1) Augie purchased one used asset during the year (five-year property)on November 10,2011,at a cost of $650,000.She made the § 179 election.The income from the business before the cost recovery deduction and the § 179 deduction was $400,000.Determine the total cost recovery deduction with respect to the asset for 2011.
A) $7,500.
B) $92,500.
C) $392,500.
D) $500,000.
E) None of the above.
Q2) On February 21,2011,Joe purchased new farm equipment for $600,000.Joe has made an election to not have the uniform capitalization rules apply to his farming business.He elects not to take additional first-year depreciation.If Joe elects § 179,what is the maximum write-off for this purchase for 2011?
Q3) The basis of cost recovery property must be reduced by the cost recovery allowed.
A)True
B)False
Q4) Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.
Page 10
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Chapter 9: Deductions: Employee and
Self-Employed-Related Expenses
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Q1) If an individual is subject to the direction or control of another only to the extent of the end result but not as to the means of accomplishment,an employer-employee relationship does not exist.
A)True
B)False
Q2) Janet,who lives and works in Newark,travels to Atlanta for a Thursday-Friday business conference.She stays over after the conference and visits relatives and friends on Saturday.Under certain circumstances,the meals and lodging expenses for Saturday can be considered as business related.
A)True
B)False
Q3) Amy lives and works in St.Louis.In the morning she flies to Boston,has a three-hour business meeting,and returns to St.Louis that evening.For tax purposes,Amy was away from home.
A)True
B)False
Q4) Ashley and Matthew are husband and wife and both are practicing CPAs.On a joint return,Ashley gets to deduct her professional dues but Matthew does not.Explain.
Page 11
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Chapter 10: Deductions and Losses: Certain Itemized
Deductions
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Q1) Georgia contributed $2,000 to a qualifying Health Savings Account in 2011.The entire amount qualifies as a medical expense and is potentially deductible as an itemized deduction.
A)True
B)False
Q2) The City of Ogden was devastated by a tornado in April 2011,leaving many families in need of food,clothing,shelter,and other necessities.Betty contributed $500 to a family whose home was completely destroyed by the tornado.Jack contributed $700 to the family's church,which gave the money to the family.Discuss the deductibility of these contributions.
Q3) In 2004,Ross,who is single,purchased a personal residence for $170,000 and took out a mortgage of $100,000 on the property.In May of the current year,when the residence had a fair market value of $220,000 and Ross owed $70,000 on the mortgage,he took out a home equity loan for $110,000.He used the funds to purchase a BMW for himself and a Lexus SUV for his wife.For both vehicles,100% of the use is for personal activities.What is the maximum amount on which Ross can deduct home equity interest?
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Page 12
Chapter 11: Investor Losses
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Sample Questions
Q1) In the current year,Rich has a $40,000 loss from a business he owns.His at-risk amount at the end of the year,prior to considering the current year loss,is $24,000.He will be allowed to deduct the $40,000 loss this year if he is a material participant in the business.
A)True
B)False
Q2) Bruce owns a small apartment building that produces a $25,000 loss during the year.His AGI before considering the rental loss is $85,000.Bruce must be an active participant with respect to the rental activity in order to deduct the $25,000 loss under the real estate rental exception.
A)True
B)False
Q3) Wolf Corporation has active income of $55,000 and a passive loss of $33,000 in the current year.Wolf cannot deduct the $33,000 loss if it is a closely held C corporation that is not a personal service corporation.
A)True
B)False
Q4) Explain how a taxpayer's at-risk amount in a business venture is adjusted periodically.
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Chapter 12: Tax Credits and Payments
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Sample Questions
Q1) Jermaine and Kesha are married,file a joint tax return,have AGI of $82,500,and have two children.Devona is beginning her freshman year at State University during Fall 2011,and Arethia is beginning her senior year at Northeast University during Fall 2011 after having completed her junior year during the spring of that year.Both Devona and Arethia are claimed as dependents on their parents' tax return.Devona's qualifying tuition expenses and fees total $4,000 for the fall semester,while Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2011.Full payment is made for the tuition and related expenses for both children during each semester.The American Opportunity credit available to Jermaine and Kesha for 2011 is:
A) $2,500.
B) $3,000.
C) $5,000.
D) $6,000.
E) None of the above.
Q2) Some foreign taxes do not qualify for the foreign tax credit.
A)True
B)False
Q3) Discuss the treatment of unused general business credits.
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Page 14
Chapter 13: Property Transactions
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Q1) Lois received nontaxable stock rights with a fair market value of $4,000.The fair market value of the stock on which the rights were received is $24,000 (cost $14,000).Assume the rights are exercised by paying $31,000 plus the rights.Discuss how to calculate the basis of the old stock and the basis of the new stock.
Q2) When a property transaction occurs,what four questions should be considered with respect to the sale or other disposition?
Q3) Albert is considering two options for selling land for which he has an adjusted basis of $70,000 and on which there is a mortgage of $100,000.Under the first option,Albert will sell the land for $150,000 with a stipulation in the sales contract that he liquidate the mortgage before the sale is complete.Under the second option,Albert will sell the land for $50,000 and the buyer will assume the mortgage.Calculate Albert's recognized gain under both options.
Q4) Why is it generally undesirable to pass property by death when its fair market value is less than basis?
Q5) Discuss the treatment of realized gains from involuntary conversions.
Q6) Define a bargain purchase of property and discuss the related tax consequences.
Q7) Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.
Page 15
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Chapter 14: Property Transactions: Capital Gains and Losses
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Sample Questions
Q1) An individual taxpayer received a valuable antique vase from his aunt,a famous collector.The collector purchased the vase.After the taxpayer held the vase for two years,he sold it for a $400,000 gain.The gain is a long-term capital gain.
A)True
B)False
Q2) Phil's father died on January 10,2011.The father had owned stock for 20 years with a basis of $45,000 that was transferred to Phil as a gift on August 10,2010,when the stock was worth $430,000.His father paid gift tax of $31,000.This stock was worth $566,000 at the date of the father's death.Phil sold the stock for $545,000 net of commissions on February 23,2011.What is the amount and nature of Phil's gain or loss from disposition of this property?
Q3) The only things that the grantee of an option may do with an option are to exercise it or sell or to exchange it.
A)True
B)False
Q4) Is it generally better to have a net § 1231 loss year followed by a net § 1231 gain year rather than a net § 1231 gain year followed by a net § 1231 loss year?
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Chapter 15: Alternative Minimum Tax
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Q1) The AMT does not apply to qualifying "small corporations."
A)True
B)False
Q2) Prior to the effect of tax credits,Brent's regular income tax liability is $160,000 and his tentative AMT is $145,000.Brent has nonrefundable business tax credits of $31,000.Brent's tax liability is $129,000.
A)True
B)False
Q3) Keosha acquires 10-year personal property to use in her business in 2011 and takes the maximum cost recovery deduction for regular income tax purposes.As a result of this,Keosha will have a positive AMT adjustment in 2011.
A)True
B)False
Q4) If the AMT base is greater than $175,000,the AMT rate for an individual taxpayer is the same as the AMT rate for a C corporation.
A)True
B)False
Q5) Why is there no AMT adjustment for charitable contributions?
Q6) Discuss the tax year in which an AMT adjustment is first required for an ISO.
Page 17
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Chapter 16: Accounting Periods and Methods
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Q1) A C corporation in the manufacturing business must use a calendar year as its tax year unless the corporation has a business reason for using a tax year that is not a calendar year.
A)True
B)False
Q2) The DEF Partnership had three equal partners when it was formed.Partners D and E were calendar year taxpayers and Partner F's tax year ended on June 30th before he joined the partnership.Partner F was required to change his tax year to end on December 31st upon joining the partnership.
A)True
B)False
Q3) In 2011,Cashmere Construction Company enters into a contract to build a beach cottage for Martha and Rob for a total price of $500,000.Cashmere estimates the total cost to complete the cottage to be $400,000.In 2011,Cashmere incurred $300,000 of costs on the contract,and in 2012 the contract was completed at a total cost of $425,000.Cashmere is not required to recognize any income from the contract until 2012. A)True
B)False
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Chapter 17: Corporations: Introduction and Operating Rules
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Q1) Nancy is a 40% shareholder and president of Robin Corporation,a regular corporation.The board of directors of Robin has decided to pay Nancy a $250,000 bonus for the year based on her outstanding performance.The directors want to pay the $250,000 as salary,but Nancy would prefer to have it paid as a dividend.If both Robin Corporation and Nancy are in a 35% marginal tax bracket irrespective of the treatment of the bonus,discuss which form of payment would be most beneficial for each party.(Ignore any employment tax considerations.)
Q2) Which of the following statements is incorrect about LLCs and the check-the-box Regulations?
A) A limited liability company with one owner can elect to be taxed as a corporation.
B) All 50 states have passed laws that allow LLCs.
C) An entity with more than one owner and formed as a corporation cannot elect to be taxed as a partnership.
D) If a limited liability company with one owner does not make an election, the entity is taxed as a sole proprietorship.
E) If a limited liability company with more than one owner does not make an election, the entity is taxed as a corporation.
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Chapter 18: Corporations: Organization and Capital Structure
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Q1) In a § 351 transfer,the receipt of boot is not taxed if the shareholder has a realized loss.
A)True
B)False
Q2) A taxpayer transfers assets and liabilities to a corporation in return for its stock.If the liabilities exceed the basis of the assets transferred,the taxpayer will recognize gain to avoid having a negative basis in the stock.
A)True
B)False
Q3) Trudy forms Oak Corporation by transferring land with a basis of $150,000 (fair market value of $800,000),subject to a mortgage of $450,000.Two weeks prior to incorporating Oak,Trudy borrows $10,000 for personal purposes and gives the lender a second mortgage on the land.Oak Corporation issues stock worth $340,000 to Trudy and assumes the two mortgages on the land.What are the tax consequences to Trudy and to Oak Corporation?
Q4) Julio exchanges property,basis of $100,000 and fair market value of $1.8 million,for 75% of the stock of Lime Corporation.The other 25% is owned by Gloria who acquired it several years ago.What are the tax consequences to the parties involved?
Page 20
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Chapter 19: Corporations: Distributions Not in Complete
Liquidation
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Q1) On January 1,Tulip Corporation (a calendar year taxpayer)has accumulated E & P of $300,000.Its current E & P for the year is $90,000 (before considering dividend distributions).During the year,Tulip distributes $600,000 ($300,000 each)to its equal shareholders,Anne and Tom.Anne has a basis in her stock of $65,000,while Tom's basis is $120,000.What is the effect of the distribution by Tulip Corporation on Anne and Tom?
Q2) At a time when Blackbird Corporation had E & P of $700,000 and 1,000 shares of stock outstanding,the corporation distributed $300,000 to redeem 400 shares of its stock.The transaction qualified as a disproportionate redemption for the shareholder.Blackbird's E & P is reduced by $280,000 as a result of the distribution.
A)True
B)False
Q3) When computing current E & P,taxable income is not adjusted for the deferred gain in a § 1031 like-kind exchange.
A)True
B)False
Q4) What are the tax consequences of a qualifying stock redemption to the distributing corporation?
Q5) Explain the stock attribution rules that apply in the case of stock redemptions.
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Chapter 20: Corporations: Distributions in Complete
Liquidation and an Overview of Reorganizations
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Q1) Discuss the role of letter rulings in corporate reorganizations.
Q2) One advantage of acquiring a corporation via an asset purchase instead of a stock purchase is that an asset purchase avoids the transfer of the acquired corporation's liabilities.
A)True
B)False
Q3) In 1916,the Supreme Court decided that corporate reorganizations were substantially continuations of the prior entities and thus should not be subject to taxation.
A)True
B)False
Q4) The built-in loss limitation in a complete liquidation does not apply to losses attributable to a decline in a property's fair market value after its transfer to the corporation.
A)True
B)False
Q5) The text discusses four different limitations on loss recognition by liquidating corporations.Provide a brief description of each of these loss limitations.
Page 22
Q6) Describe the requirements for and tax consequences of a § 338 election.
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Chapter 21: Partnerships
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Q1) Michelle receives a proportionate liquidating distribution when the basis of her partnership interest is $50,000.The distribution consists of $58,000 cash and noninventory property (adjusted basis to the partnership of $10,000 and fair market value of $12,000).The partnership has no hot assets.How much gain or loss does Michelle recognize,and what is her basis in the distributed property?
A) $0 gain or loss; $0 basis in property.
B) $0 gain or loss; $50,000 basis in property.
C) $8,000 ordinary income; $0 basis in property.
D) $8,000 capital gain; $10,000 basis in property.
E) $8,000 capital gain; $0 basis in property.
Q2) The MNO Partnership,a calendar year taxpayer,was formed on July 1 of the current year and started business on October 1.MNO incurred $30,000 in startup costs.MNO may deduct $5,000 and amortize the remaining $25,000 over 120 months starting in July. A)True B)False
Q3) The MOP Partnership is involved in leasing heavy equipment under long-term leases of five years or more.Patricia has an adjusted basis for her partnership interest on January 1 of the current year of $600,000,consisting of the following:
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Page 23
Chapter 22: S Corporations
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Q1) An S corporation can take advantage of the dividends received deduction.
A)True
B)False
Q2) An S corporation is entitled to a deduction for its NOL carryovers.
A)True
B)False
Q3) On January 2,2010,Tim loans his S corporation $10,000.By the end of 2010,Tim's stock basis is zero,and the basis in his note has been reduced to $8,000.During 2011,the company's operating income is $10,000.The company also makes distributions to Tim of $8,000.Which statement is correct?
A) Loan basis is now $10,000.
B) $8,000 LTCG.
C) Stock basis is $2,000.
D) $2,000 LTCG.
E) None of the above statements is correct.
Q4) Depletion in excess of basis in property causes a(n)____________________ adjustment to an S shareholder's basis. or
Q5) An S corporation may have ____________________ class(es)of stock.
Page 24
Q6) What are the characteristics of an S corporation's straight debt?
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Chapter 23: Exempt Entities
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Q1) Which of the following statements regarding exempt organization filing requirements is incorrect?
A) Churches are required to file Form 990 (Return of Organization Exempt from Income Tax) only if its annual gross receipts exceed $50,000.
B) The due date for Form 990 (Return of Organization Exempt from Income Tax) is the fifteenth day of the fifth month after the end of the taxable year whereas for private foundations the due date for Form 990-PF (Return of Private Foundation) is the fifteenth day of the fourth month after the end of the tax year.
C) All exempt organizations whose annual gross receipts do not exceed $50,000 can file Form 990-N (the "e-Postcard").
D) Only a. and b. are incorrect.
E) a., b., and c. are incorrect.
Q2) The unrelated business income tax (UBIT)is designed to treat the entity as if it were subject to the corporate income tax on its unrelated business taxable income,with the highest corporate tax rate (35%)applying.
A)True B)False
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Page 25
Chapter 24: Multistate Corporate Taxation
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Q1) An ad valorem property tax is based on the asset's current ____________________.
Q2) A state sales/use tax is designed to be collected by the ____________________ (seller/purchaser)of the product and then remitted to the state.
Q3) A state sales tax usually falls upon:
A) Sales of groceries.
B) Sales made to out-of-state customers.
C) Sales made to the U.S. Department of Education.
D) Sales made to the ultimate consumer of the product or service.
Q4) A(n)____________________ business operates its separate companies as a whole.It cannot be segregated into independently operating divisions or branches.
Q5) Under _____________________,a state is prohibited from taxing a business if the only connection with the state is the solicitation of orders for sales of tangible personal property that are sent outside the state for approval or rejection and,if approved,are filled and shipped by the business from a point outside of the state.
Q6) States collect the most tax dollars from the corporate income tax.
A)True
B)False
Q7) Summarize the principles of multistate tax planning.
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Chapter 25: Taxation of International Transactions
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Q1) Monika,a nonresident alien,is employed by GlobalCo,a foreign corporation.Monika works in the United States for 32 days during the year,receiving a gross salary of $2,900 for this period.GlobalCo is not engaged in a U.S.trade or business.Under the "commercial traveler" exception,the $2,900 is not classified as U.S.-source income.
A)True
B)False
Q2) Which of the following statements is false in regard to the U.S.income tax treaty program?
A) There are over 50 income tax treaties between the U.S. and other countries.
B) Tax treaties generally provide for primary taxing rights that require the other treaty partner to allow a credit for the taxes paid on the twice-taxed income.
C) Residence of the taxpayer is an important consideration in applying tax treaties, while the presence of a permanent establishment is not.
D) None of the above statements is false.
Q3) Unused foreign tax credits are carried back one year and then forward 10 years.
A)True
B)False
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Page 27
Chapter 26: Tax Practice and Ethics
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147 Verified Questions
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Sample Questions
Q1) Henrietta has hired Gracie,a CPA,to complete this year's Form 1040.Henrietta uses software to keep the books for her business.She tells Gracie that a $5,000 amount for business supplies is "close enough" to constitute the deduction.Gracie can use this estimate in completing the Form 1040.
A)True
B)False
Q2) A penalty can be assessed from an appraiser who knew that his/her improper appraisal would be used as part of a tax computation,in the amount of the lesser of ____________________% of the tax understatement or ____________________ % of the appraisal fee collected. or
Q3) The rules of Circular 230 need not be followed by which of the following paid tax preparers?
A) A CPA.
B) A Wal-Mart cashier who e-files 15 tax returns for her paying clients per filing season.
C) An enrolled agent.
D) All of the above are subject to the Circular 230 rules.
Q4) How is the tax law affected by Federal criminal statutes?
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Page 28
Chapter 27: The Federal Gift and Estate Taxes
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Sample Questions
Q1) Two brothers,Sam and Bob,acquire real estate as equal tenants in common.Of the purchase price of $200,000,Sam furnished $80,000 while Bob provided the balance.If Sam dies first ten years later when the real estate is worth $600,000,his estate includes $240,000 as to the property.
A)True
B)False
Q2) Joint tenancies and tenancies by the entirety avoid probate,while tenancies in common and community property do not.Why?
Q3) A Federal gift tax return may have to be filed even if no gift tax is payable.
A)True
B)False
Q4) Sandy pays a local college for her non-dependent boyfriend's tuition.The payment is not subject to the Federal gift tax.
A)True
B)False
Q5) The current Federal transfer tax rate of 35% is as low as any top rate that ever has been imposed.
A)True
B)False
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Chapter 28: Income Taxation of Trusts and Estates
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140 Verified Questions
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Sample Questions
Q1) The Whitmer Trust operates a manufacturing business.When Whitmer incurs a net operating loss,the current-year deduction passes through to the income beneficiaries.
A)True
B)False
Q2) Your client Ming is a complex trust that operates exclusively in the U.S.Make a list of five or more tax planning opportunities that you might suggest to Ming.
Q3) With respect to a timely filed Form 1041 for a trust based in Delaware,the IRS will accept:
A) Only paper returns.
B) Only e-filed returns.
C) Returns either on paper or in electronic form.
D) Returns only at its Ogden, Utah office.
Q4) Your client Pryce is one of the income beneficiaries of the Santiago Trust.Pryce says to you,"I want all of the exempt interest income from Santiago to be allocated to me,as I am the income beneficiary who is subject to the highest marginal Federal income tax rate." How do you respond to Pryce's request?
Q5) How is entity accounting income computed? What role does it play in Subchapter J?
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