Taxation for Accountants Test Bank
Course Introduction
This course provides an in-depth exploration of taxation principles and their practical applications relevant to accounting professionals. Students will examine the structure of tax systems, including federal, state, and local levels, and learn to interpret and apply current tax laws affecting individuals, businesses, and other entities. The course covers essential topics such as income determination, tax liability calculations, tax planning strategies, reporting requirements, and ethical considerations in tax practice. Emphasis is placed on developing analytical skills and mastering the preparation of tax returns with the use of tax software, ensuring that graduates are well-equipped to offer informed tax advice and compliance services within their accounting careers.
Recommended Textbook
South Western Federal Taxation 2013 Individual Income Taxes 36th Edition by William H
Available Study Resources on Quizplus
20 Chapters
2435 Verified Questions
2435 Flashcards
Source URL: https://quizplus.com/study-set/3602
Page 2
Chapter 1: An Introduction to Taxation and Understanding
the Federal Tax Law
Available Study Resources on Quizplus for this Chatper
155 Verified Questions
155 Flashcards
Source URL: https://quizplus.com/quiz/71524
Sample Questions
Q1) For omissions from gross income in excess of 25% of that reported,there is no statute of limitations on additional income tax assessments by the IRS.
A)True
B)False
Answer: False
Q2) If the tax deficiency is attributable to fraud,the negligence penalty will not be imposed.
A)True
B)False
Answer: True
Q3) The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.
A)True
B)False Answer: True
Q4) A major disadvantage of a flat tax type of income tax is its complexity.
A)True
B)False
Answer: False
Page 3
To view all questions and flashcards with answers, click on the resource link above.
Chapter 2: Working With the Tax Law
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/71513
Sample Questions
Q1) Which Regulations have the force and effect of law?
A) Procedural Regulations.
B) Finalized Regulations.
C) Legislative Regulations.
D) Interpretive Regulations.
E) All of the above.
Answer: C
Q2) The research process should begin with a tax service.
A)True
B)False
Answer: False
Q3) A taxpayer must pay any tax deficiency assessed by the IRS and sue for a refund to bring suit in the U.S.District Court.Only in the Tax Court can jurisdiction be obtained without first paying the assessed tax deficiency.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Tax Formula and Tax Determination: an
Overview of Property Transactions
Available Study Resources on Quizplus for this Chatper
153 Verified Questions
153 Flashcards
Source URL: https://quizplus.com/quiz/71511
Sample Questions
Q1) Regarding the Tax Tables applicable to the Federal income tax,which of the following statements is correct?
A) For any one year, the Tax Tables are issued by the IRS after the Tax Rate Schedules.
B) The Tax Tables will yield the same amount of tax as the Tax Rate Schedules.
C) Taxpayers can elect as to whether the use the Tax Tables or the Tax Rate Schedules.
D) The Tax Tables can be used by an estate but not by a trust.
E) No correct answer given.
Answer: A
Q2) Stealth taxes are directed at higher income taxpayers.
A)True
B)False Answer: True
Q3) An increase in a taxpayer's AGI will increase the amount of medical expenses that can be deducted.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Gross Income: Concepts and Inclusions
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/71510
Sample Questions
Q1) In 2012,Todd purchased an annuity for $200,000.The annuity is to pay him $2,500 per month for the rest of his life.His life expectancy is 100 months.Which of the following is correct?
A) Todd is not required to recognize any income until he has collected 80 payments (80 ´ $2,500 = $200,000).
B) If Todd collects 30 payments and then dies in 2014, Todd's estate should amend his tax returns for 2012 and 2013 and eliminate all of the reported income from the annuity for those years.
C) For each $2,500 payment received in the first year, Todd must include $2,000 in gross income.
D) For each $2,500 payment received in the first year, Todd must include $500 in gross income.
E) None of the above.
Q2) Sarah,a widow,is retired and receives $20,000 interest income and dividends and $10,000 in Social Security benefits.Sarah is considering selling a stock at a $8,000 gain.What will be the increase in Sarah's gross income as a result of the sale of the stock?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Gross Income: Exclusions
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/71509
Sample Questions
Q1) Tommy,a senior at State College,receives free room and board as full compensation for working as a resident advisor at the university dormitory.The regular housing contract is $2,000 a year in total,$1,200 for lodging and $800 for meals in the dormitory.Tommy had the option of receiving the meals or $800 in cash.Tommy accepted the meals.What is Tommy's gross income from working as a resident advisor?
A) $1,800, the entire value of the contract is compensation.
B) $1,000, only the lodging contract must be included in gross income.
C) $800, only the meal contract must be included in gross income.
D) $0, the entire value of the contract is excluded from gross income.
E) None of the above.
Q2) Meg's employer carries insurance on its employees that will pay an employee his or her regular salary while the employee is away from work due to illness.The premiums for Meg's coverage were $1,200.Meg was absent from work for two months as a result of a kidney infection.Meg's employer's insurance company paid Meg's regular salary of $8,000 while she was away from work.Meg also collected $2,000 on a wage continuation policy she had purchased.Meg is not taxed on any of the above amounts.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Deductions and Losses: in General
Available Study Resources on Quizplus for this Chatper
154 Verified Questions
154 Flashcards
Source URL: https://quizplus.com/quiz/71508
Sample Questions
Q1) Emelie and Taylor are employed by the Federal government and own their home in Washington,
Q2) Beulah's personal residence has an adjusted basis of $450,000 and a fair market value of $390,000.Beulah converts the property to rental use on November 1,2012.The vacation home rules that limit the amount of the deduction to the rental income will apply and the adjusted basis for depreciation is $390,000.
A)True
B)False
Q3) If an item such as property taxes and home mortgage interest exceed the income from a hobby,the excess amount of this item over the hobby income cannot be deducted if the taxpayer itemizes deductions.
A)True
B)False
Q4) Which of the following is not deductible?
A) Moving expenses in excess of reimbursement.
B) Tax return preparation fees of an individual.
C) Expenses incurred associated with investments in stocks and bonds.
D) Allowable hobby expenses in excess of hobby income.
E) None of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/71507
Sample Questions
Q1) If a taxpayer has an NOL in 2012 of $20,000,of which $8,000 is attributable to a theft of rental use property,the taxpayer may:
A) Carry all of the NOL of $20,000 back 5 years.
B) Carry all of the NOL of $20,000 back 3 years.
C) Carry $8,000 of the NOL back 3 years and the remainder of the NOL of $12,000 back 2 years.
D) All of the above.
E) None of the above.
Q2) Depreciation on a building used for research may be a research and experimental expense.
A)True B)False
Q3) Sally is an employee of Blue Corporation.Last year,she purchased a very expensive computer with her own funds.She used the computer 100% for business purposes.During the current year,the computer was completely destroyed in a fire.Blue Corporation did not reimburse her for her loss.Discuss whether Sally's loss will create or increase Sally's net operating loss.
Q4) Discuss the treatment,including the carryback and carryforward periods,of casualty losses incurred with personal use property.
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Depreciation, cost Recovery, amortization, and Depletion
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/71506
Sample Questions
Q1) On July 10,2012,Ariff places in service a new sports utility vehicle that cost $70,000 and weighed 6,300 pounds.The SUV is used 100% for business.Determine Ariff's maximum deduction for 2012,assuming Ariff's § 179 business income is $110,000.Ariff does not take additional first-year depreciation.
A) $2,960.
B) $25,000.
C) $34,000.
D) $70,000.
E) None of the above.
Q2) Residential rental real estate includes property where 80% or more of the net rental revenues are from nontransient dwelling units.
A)True
B)False
Q3) Jim acquires a new seven-year class asset on September 20,2012,for $80,000.He placed the asset in service on October 5,2012.He does not elect to expense any of the asset under § 179 or elect straight-line,cost recovery.He takes additional first-year depreciation.He sells the asset on August 25,2013.This is the only asset he acquires in 2012.Determine Jim's cost recovery in 2012 and 2013.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Deductions: Employee and
Self-Employed-Related Expenses
Available Study Resources on Quizplus for this Chatper
140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/71505
Sample Questions
Q1) Lloyd,a practicing CPA,pays tuition to attend law school.Since a law degree involves education leading to a new trade or business,the tuition is not deductible.
A)True
B)False
Q2) 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
Q3) In some cases it may be appropriate for a taxpayer to report work-related expenses by using both Form 2106 and Schedule C.
A)True
B)False
Q4) If the cost of uniforms is deductible,their maintenance cost (e.g.,laundry,dry cleaning,alterations)also is deductible.
A)True
B)False
Q5) When is a taxpayer's work assignment in a new locale temporary? Permanent? What difference does it make?
11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Deductions and Losses: Certain Itemized
Deductions
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/71523
Sample Questions
Q1) John gave $1,000 to a family whose house was destroyed by fire.John may claim a charitable deduction of $1,000 on his tax return for the current year.
A)True
B)False
Q2) In the year of her death,Maria made significant charitable contributions of capital gain property.In fact,the amount of the contributions exceeds 30% of her AGI.Maria's executor can elect to deduct charitable contributions of up to 50% of Maria's AGI on Maria's final income tax return.
A)True
B)False
Q3) In applying the percentage limitations,carryovers of charitable contributions must be claimed after contributions in the current year are considered (FIFO rule).
A)True
B)False
Q4) Taxes assessed for local benefits,such as a new sidewalk,are not deductible as real property taxes.
A)True
B)False
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Investor Losses
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/71522
Sample Questions
Q1) List the taxpayers that are subject to the passive loss rules and summarize the general impact of these rules on these taxpayers.
Q2) Kathy is a full-time educator,but she owns an apartment building and devotes 550 hours to managing the activity.All losses from the rental activity will be considered nonpassive and deductible against active income because she is a real estate professional.
A)True
B)False
Q3) All of a taxpayer's tax credits relating to a passive activity can be utilized when the activity is sold at a loss.
A)True
B)False
Q4) Jack owns a 10% interest in a partnership (not real estate)in which his at-risk amount is $42,000 at the beginning of the year.During the year,the partnership borrows $80,000 on a nonrecourse note and incurs a loss of $60,000 from operations.Jack's at-risk amount at the end of the year is $44,000.
A)True
B)False
Q5) What special passive loss treatment is available to real estate activities?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Alternative Minimum Tax
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/71521
Sample
Questions
Q1) Celia and Amos,who are married filing jointly,have one dependent and do not itemize deductions.They have taxable income of $82,000 and tax preferences of $53,000 in 2012.What is their AMT base for 2012?
A) $0.
B) $85,925.
C) $94,450.
D) $158,300.
E) None of the above.
Q2) All of a C corporation's AMT is available for carryover as a minimum tax credit regardless of whether the adjustments and preferences originate from timing differences or AMT exclusions.
A)True
B)False
Q3) The amount of the deduction for medical expenses under the regular income tax may be different than for AMT purposes.
A)True
B)False
Q4) Discuss the tax year in which an AMT adjustment is first required for an ISO.
Q5) What is the relationship between taxable income and AMTI?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Tax Credits and Payment Procedures
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/71520
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 2012,and Arethia is beginning her senior year at Northeast University during Fall 2012 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 2012.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 2012 is:
A) $2,500.
B) $3,000.
C) $5,000.
D) $6,000.
E) None of the above.
Q2) In May 2008,Cindy incurred qualifying rehabilitation expenditures of $500,000 on a certified historic structure and properly claimed the tax credit for rehabilitation expenditures.In March 2012,she sold the building at a loss.Calculate the rehabilitation expenditures credit recapture that she must report in 2012.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Property Transactions: Determination of Gain or
Loss and Basis Considerations
Available Study Resources on Quizplus for this Chatper
154 Verified Questions
154 Flashcards
Source URL: https://quizplus.com/quiz/71519
Sample Questions
Q1) Since wash sales do not apply to gains,it may be desirable to engage in this type of transaction before the end of the tax year.
A)True
B)False
Q2) Milton owns a bond (face value of $25,000)for which he paid $28,000.Which of the following statements is correct?
A) If the bond is taxable, Milton must amortize the $3,000 premium over its remaining life.
B) The adjusted basis of the taxable bond remains at $28,000, as the amortized amount is deducted as interest.
C) If the bond is tax-exempt, Milton can elect to amortize the $3,000 premium over the remaining life of the bond.
D) The adjusted basis of the tax-exempt bond remains at $28,000, as the amortized amount cannot be deducted as interest.
E) None of the above is correct.
Q3) Define fair market value as it relates to property transactions.
Q4) Identify two tax planning techniques that can be used to avoid the wash sale disallowance of loss.
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Property Transactions: Nontaxable Exchanges
Available Study Resources on Quizplus for this Chatper
139 Verified Questions
139 Flashcards
Source URL: https://quizplus.com/quiz/71518
Sample Questions
Q1) Paula inherits a home on July 1,2012,that had a basis in the hands of the decedent at death of $290,000 and a fair market value of $500,000 at the date of the decedent's death.She decides to sell her old principal residence,which she has owned and occupied for 9 years,with an adjusted basis of $125,000 and move into the inherited home.On September 16,2012,she sells the old residence for $600,000.Paula incurs selling expenses of $30,000 and legal fees of $2,000.She decides to add a pool,deck,pool house,and recreation room to the inherited home at a cost of $100,000.These additions are completed and paid for on November 1,2012.What is her recognized gain on the sale of her old principal residence and her basis in the inherited home?
A) $0; $500,000.
B) $193,000; $600,000.
C) $443,000; $600,000.
D) $475,000; $600,000.
E) None of the above.
Q2) The basis of boot received in a like-kind exchange is its fair market value,unless the realized gain is a smaller amount.
A)True
B)False
Q3) Define an involuntary conversion.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Property Transactions: Capital Gains and Losses
Available Study Resources on Quizplus for this Chatper
76 Verified Questions
76 Flashcards
Source URL: https://quizplus.com/quiz/71517
Sample Questions
Q1) Since the Code section that defines "capital asset" says what is not a capital asset,other Code sections have to help determine what is and what is not a capital gain or loss.
A)True
B)False
Q2) Seamus had $16,000 of net short-term capital loss in 2011.In 2012,Seamus has $17,000 of long-term capital loss and $26,000 of long-term capital gain.Which of the following statements is correct?
A) Seamus had a $13,000 short-term capital loss carryover to 2012.
B) Seamus has an $9,000 2012 net long-term capital gain.
C) Seamus has a $4,000 2012 net short-term capital loss.
D) a. and c.
E) None of the above.
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
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Property Transactions: Section 1231 and Recapture Provisions
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/71516
Sample Questions
Q1) Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.
A)True
B)False
Q2) Copper Corporation sold machinery for $27,000 on December 31,2012.The machinery had been purchased on January 2,2009,for $30,000 and had an adjusted basis of $21,000 at the date of the sale.For 2012,what should Copper Corporation report?
A) Ordinary income of $6,000.
B) A § 1231 gain of $3,000 and $3,000 of ordinary income.
C) A § 1231 gain of $6,000.
D) A § 1231 gain of $6,000 and $3,000 of ordinary income.
E) None of the above.
Q3) Nonrecaptured § 1231 losses from the seven prior tax years may cause current year net § 1231 gain to be treated as ordinary income.
A)True
B)False
Q4) Describe the circumstances in which the potential § 1245 depreciation recapture is extinguished.
Page 19
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Accounting Periods and Methods
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/71515
Sample Questions
Q1) In the case of an accrual basis taxpayer,an item of income:
A) Is not recognized until cash is received.
B) From services is never recognized until the services are performed.
C) Is not recognized if the customer can return the goods.
D) Is recognized when all the events have occurred to fix the taxpayer's right to receive the income and the amount of the income can be determined with reasonable accuracy.
E) None of the above.
Q2) Related-party installment sales include all of the following except the first seller's:
A) Brothers and sisters.
B) Controlled corporations.
C) Lineal descendants and ancestors.
D) Partnerships in which the seller has an interest.
E) All of the above would be considered related parties.
Q3) A partnership cannot elect to use a tax year other than a calendar year merely because the partnership's CPA is too busy to prepare a calendar year return.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Deferred Compensation
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/71514
Sample Questions
Q1) Dianna participates in a defined benefit plan that uses a fixed formula providing an employee with a benefit of 2% for each year of service,up to a maximum of 30 years.The total percentage accumulated before retirement is applied to the average of her three highest years of salary.Dianna works for 21 years,and the average of her three highest years of salary is $290,000.Calculate the amount of retirement benefits she will receive each year.
A) $0.
B) $102,800.
C) $110,000.
D) $250,000.
E) None of the above.
Q2) Contributions to a qualified pension plan are immediately deductible by the employer.
A)True
B)False
Q3) A participant has an adjusted basis of $0 in any nondeductible contributions to a traditional IRA.
A)True
B)False
Q4) What is a highly compensated employee?
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Corporations and Partnerships
Available Study Resources on Quizplus for this Chatper
165 Verified Questions
165 Flashcards
Source URL: https://quizplus.com/quiz/71512
Sample Questions
Q1) In computing the taxable income (or loss)of an S corporation,an NOL carryover from a prior year is allowed.
A)True
B)False
Q2) Madison,a calendar year individual taxpayer,has the following results for 2012: profit from operations of $200,000 and long-term capital loss from investments of $20,000.As to the capital loss,Madison may:
A) Carry back the loss for three years to offset any capital gains.
B) Deduct $3,000 and carry forward $17,000 for five years as a long-term capital loss.
C) Deduct $3,000 and carry forward $17,000 indefinitely as a short-term capital loss.
D) Deduct $3,000 and carry forward $17,000 indefinitely as a long-term capital loss.
E) None of the above.
Q3) In the formation of a corporation under § 351,the shareholder's basis in the stock received is decreased by loss recognized and boot received.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 22