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True/False Questions (two points each) 1. S corpo...




True/False Questions (two points each) 1. S corporations offer advantages of passing profits, deductions, and credits through to shareholders but protect their investors from personal liability. a. True b. False 2. Decisions made by a Court of Appeals carry great weight because each Court of Appeals is independent from the others and can be overruled only by the U.S. Supreme Court, which agrees to hear very few tax cases each year. a. True b. False 3. If a group of partners that collectively owns more than a 50-percent interest in the partnership's capital and profits has the same year-end, the partners' tax year is the required tax year of the partnership. a. True b. False 4. The IRS does not need to approve a change to a different tax year for a business to compute its taxable income and file its income tax returns. a. True b. False 5. Only individuals and C corporations actually pay income taxes to the federal government. a. True b. False 6. The definition of gross income varies among the various types of tax-paying entities. a. True b. False Multiple Choice Questions (three points each) 1. A tax structure in which the average tax rate stays constant as the tax base fluctuates is called a proportional tax, which is also commonly called: a. an alternative tax. b. a proactive tax. c. a flat tax. d. None of the above. 2. A tax on the consumption, use, or storage of goods and services otherwise not subject to sales tax is known as: a. consumption tax. b. use tax. c. marginal tax. d. none of the above. 3. Which notion recognizes that mere appreciation in value does not necessarily mean that the owner has the resources to pay the tax associated with the appreciation? a. cash-on-delivery principle. b. wherewithal-to-pay concept. c. capital recovery doctrine. d. None of the above. 4. Which of the following is an example of a consideration the government takes into account when creating a tax? a. Equity. b. Administrative convenience. c. Redistribution of wealth. d. Both a and b. e. All of the above. 5. What are the two Congressional Committees that have primary responsibility for the drafting of tax bills? a. Senate Ways and Means Committee and the House Finance Committees. b. House Ways and Means and the Senate Finance Committees. c. House Tax Committee and the Senate Tax Committees. d. House Revenue Committee and the Senate Revenue Committees. 6. Which of the following is an example of a primary source of law? a. Citators. b. Periodicals. c. Commercial tax services. d. None of the above. 7. Which of the following best describes tax treaties? a. Bilateral agreements between two countries to promote tax enforcement and prevent double taxation of income. b. Long dissertations on tax law written by legal experts. c. Special payments made to foreign countries to help promote trade with the United States. d. Foreign Income Tax Regulations. 8. Which of the following is not true with respect to a determination letter? a. Applies the principles and precedents previously announced by the IRS to a specific set of facts. b. Issued at the request of a taxpayer. c. Issued only when the question presented is specifically answered by a statute, a tax treaty, the regulations, a conclusion stated in a revenue ruling, or an opinion or court decision that represents the IRS's position. d. Issued if a question involves a novel issue. 9. Which of the following statements is not true with respect to IRS/taxpayer litigation? a. The appeal of decisions rendered by the Federal Court of Claims is heard by the Federal Circuit Court of Appeals. b. The U.S. Tax Court is a special court established to provide a forum to dispute tax deficiencies determined by the IRS and unlike other federal courts, the Tax Court hears only federal tax cases. c. When litigating a dispute in the U.S. Tax Court, a taxpayer first must pay the full amount of taxes, interest, and penalties that the IRS has determined that the taxpayer owes and then the taxpayer must sue the IRS for a refund. d. Of the three types of opinions issued by the Tax Court, regular opinions are those that the Tax Court considers important or expressive of some new point not previously covered by one of its published opinions. 10. Which one of the following statements about GAAP is not true? a. GAAP provides a series of rules that businesses must follow that are intended to fairly present a business's accounting income. b. GAAP does provide some flexibility. c. GAAP sometimes allows businesses to choose among various acceptable accounting methods. d. GAAP provides a series of rules that are intended to fairly present a business's taxable income. 11. Which one of the following statements about flow-through entities is accurate? a. Owners of flow-through entities are considered to have recognized all profits or losses from a flow-through entity on the last day of the flow-through entity's tax year. b. When a flow-through entity uses a year-end that is different from the year-end of its owners, a deferral of income results. c. Both a. and b are accurate statements. d. None of the above. 12. Which one of the following statements about the "natural business tax year" is correct? a. Demonstrating a natural business is impossible for a business that has been in existence for only two years. b. A natural business year can be demonstrated by satisfying the "25-percent gross receipts test" for five consecutive years. c. The "25-percent gross receipts test" requires a calculation of the percentage of gross receipts that comes from the last three months of the requested tax year. d. Both a. and c. e. Both b. and c. 13. Which one of the following statements about the cash receipts and disbursements method is correct? a. Partnerships that have a C corporation as a partner cannot use the cash receipts and disbursements method of accounting. b. The cash receipts and disbursements method of accounting is popular because it requires a minimum of recordkeeping and allows taxpayers to postpone recognition of income by refusing to accept cash receipts. c. Sole proprietors must use the cash receipts and disbursements method of accounting to account for their businesses if they use it to account for their other (personal) items of income and expense. d. All of the above. 14. Which one of the following statements about accounting for expenses is incorrect? a. Under the cash method of accounting, businesses ordinarily may not deduct (or capitalize) an expense until the year during which the expense actually is paid. b. An expense may be deducted the year payment is made, even though payment is made with borrowed funds. c. Amounts paid by check are considered paid when the check is mailed or delivered, provided that the bank honors the check. d. Amounts paid by credit card are considered paid when the business pays the credit card bill. 15. Under the all-events test, a business has to include an amount in its income when any one of the following events occurs other than: a. Required performance is completed. b. Payment of income becomes due. c. Payment is received. d. Economic performance has occurred with respect to the liability. 16. A corporation's taxable income before the dividends received deduction (DRD) is $70,000. Included in this amount is dividend income of $60,000 from another corporation in which the taxpayer owns 85 percent of its stock outstanding. The corporation's taxable income after the DRD is: a. $70,000. b. $10,000. c. $19,000. d. $22,000. e. none of the above. 17. Rachelle Earhart had $60,000 in profits from her sole proprietorship, $5,000 in dividends, and $3,000 in interest. She deducted $3,000 for health insurance premiums, $6,000 for real property taxes, $4,239 for self-employment taxes, $10,000 for mortgage loan interest, and $2,500 for state income taxes. Based on this information, what is Rachelle's adjusted gross income? a. $42,261 b. $60,761 c. $65,000 d. $68,000 18. Judith Beane had a regular tax liability of $20,000 and a tentative minimum tax of $23,000. What is the amount of her alternative minimum tax? a. $0 b. $3,000 c. $20,000 d. $23,000 19. Which one of the following items has to be included in gross income (unless an exception applies)? a. The amount by which property has increased in value during the year. b. The proceeds of a loan. c. Discharge of a debt. d. The amount of adjusted basis when property is sold. 20. Which one of the following statements regarding LIFO is not correct? a. LIFO is a method of assigning cost to products sold during the year. b. When prices are declining, LIFO produces a higher cost of goods sold than FIFO. c. A taxpayer can use LIFO for tax purposes but FIFO for financial accounting purposes. d. During inflationary times, LIFO decreases a business's profits. 21. Each of the following is an above-the-line deduction EXCEPT: a. Self-employed health insurance deduction. b. Health savings account deduction. c. Contributions to traditional IRAs. d. Medical expenses. 22. Bethell Management performed consulting services for one client and was paid $3,000. It performed consulting services for another client in exchange for tax preparation services for which it normally would be billed $2,000. It purchased from a third client a computer whose retail price was $1,000 but which was on sale for $750. How much of these amounts received does it have to include in its gross income? a. $3,000 b. $3,250 c. $5,000 d. $5,250 Essay Questions (eleven points each) 1. Melissa Wimberley sold 100 shares of ABC stock with an adjusted basis of $1,000 for $2,000. She also sold 500 shares of XYZ stock with an adjusted basis of $20,000 for $12,000. She had no other sales of capital assets for the year. Her ordinary income for the year was $50,000. The previous tax year she had a capital gain of $2,000 and $45,000 of ordinary income. How should Melissa report her loss on the sale of XZY stock? 2. William Nowland?s filing status is qualifying surviving spouse. His taxable income for 2009 is $76,000. Included in that amount is $5,000 of qualified dividends. How much federal income tax does he have to pay for the year?,Hello, I can't open the file attached. Please help. Thank you.


Paper#7974 | Written in 18-Jul-2015

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