·
Question
1
2
out of 2 points
If the employer provides all employees with group
term life insurance equal to twice the employeeâs annual salary, an employee
with a salary of $50,000 has no gross income from the life insurance
protection provided by the employer.
·
Question
2
0
out of 2 points
Freddy purchased a certificate of deposit for
$20,000 on July 1, 2013. The certificateâs maturity value in two years (June
30, 2015) is $21,218, yielding 3% before-tax interest.
·
Question
3
2
out of 2 points
Daniel purchased a bond on July 1, 2013, at par
of $10,000 plus accrued interest of $300. On December 31, 2013, Daniel
collected the $600 interest for the year. On January 1, 2014, Daniel sold the
bond for $10,200.
·
Question
4
2
out of 2 points
Rhonda has a 30% interest in the capital and
profits of the ABC Partnership. In the first year of the partnership, 2013,
it earned $150,000. However, the partners agreed that nothing would be distributed
until after the end of March 2014, before Rhonda filed her 2013 tax
return. The distributions were to be delayed because it was unclear as
to whether business conditions would remain good in 2014. Things were
going well in 2014 and therefore the partnership distributed $30,000 to
Rhonda at the end of March, as a portion of her share of the partnershipâs
2013 earnings. The partnershipâs income for 2014 was $60,000. As a
result, Rhonda must recognize $30,000 of gross income in 2013 and $18,000 in
2014.
·
Question
5
2
out of 2 points
Nicholas owned stock that decreased in value by
$20,000 during the year, but he did not sell the stock. He earned $45,000
salary, but received only $34,000 because $11,000 in taxes were withheld. Nicholas
saved $10,000 of his salary and used the remainder for personal living
expenses. Nicholasâs economic income for the year exceeded his gross income
for tax purposes.
·
Question
6
2
out of 2 points
The Green Company, an accrual basis taxpayer,
provides business-consulting services. Clients generally pay a retainer at
the beginning of a 12-month period. This entitles the client to no more than 40
hours of services. Once the client has received 40 hours of services, Green
charges $500 per hour. Green Company allocates the retainer to income based
on the number of hours worked on the contract. At the end of the tax year,
the company had $50,000 of unearned revenues from these contracts. The
company also had $10,000 in unearned rent income received from excess office
space leased to other companies. Based on the above, Green must include in
gross income for the current year:
·
Question
7
2
out of 2 points
Normaâs income for 2013 is $27,000 from part-time
work and $9,000 of Social Security benefits. Norma is not married. A portion
of her Social Security benefits must be included in her gross income.
·
Question
8
2
out of 2 points
Gordon, an employee, is provided group term life
insurance coverage equal to twice his annual salary of $125,000 per
year. According to the IRS Uniform Premium Table (based on Gordonâs
age), the amount is $12 per year for $1,000 of protection. The cost of an
individual policy would be $15 per year for $1,000 of protection. Since
Gordon paid nothing towards the cost of the $250,000 protection, Gordon must
include in his 2012 gross income which of the following amounts?
·
Question
9
2
out of 2 points
Our tax laws encourage taxpayers to ____ assets
that have appreciated in value and ____ assets that have declined in value.
·
Question
10
2
out of 2 points
In the case of a person with other income of
$300,000, 15% of his or her Social Security benefits received are excluded
from gross income.
·
Question
11
0
out of 2 points
In terms of the tax formula applicable to
individual taxpayers, which, if any, of the following statements is correct?
·
Question
12
0
out of 2 points
Regarding the Tax Tables applicable to the
Federal income tax, which of the following statements is correct?
·
Question
13
2
out of 2 points
During 2013, Sarah had the following transactions:
Salary
$
80,000
Interest income on City of
Baltimore bonds
1,000
Damages for personal injury
(car accident)
100,000
Punitive damages (same car accident)
200,000
Cash dividends from Chevron
Corporation stock
7,000
Sarahâs AGI is:
·
Question
14
2
out of 2 points
When the kiddie tax applies, the child need not file
an income tax return because the childâs income will be reported on the
parentsâ return.
·
Question
15
2
out of 2 points
In which, if any, of the following situations
will the kiddie tax not apply?
·
Question
16
2
out of 2 points
During 2013, Jackson had the following capital gains and losses:
·
Question
17
2
out of 2 points
An increase in a taxpayerâs AGI could decrease
the amount of charitable contribution that can be claimed.
·
Question
18
2
out of 2 points
Which of the following items, if any, is
deductible?
·
Question
19
2
out of 2 points
Darren, age 20 and not disabled, earns $4,000
during 2013. Darrenâs parents cannot claim him as a
dependent unless he is a full-time student.
·
Question
20
2
out of 2 points
Since an abandoned spouse is treated as single
and has one or more dependent children, he or she qualifies for the standard
deduction available to head of household.
·
Question
21
2
out of 2 points
A company has a medical reimbursement plan for
officers that covers all costs that the insurer will not pay. However,
for all employees who are not officers, the medical reimbursement plan
applies only after the employee has paid $1,000 from his or her own
funds. An officer incurred $1,500 in medical expenses and was
reimbursed for that amount. An hourly worker also incurred $1,500 in
medical expense and was reimbursed $500.
·
Question
22
2
out of 2 points
Heather is a full-time employee of the Drake
Company and participates in the companyâs flexible spending plan that is
available to all employees. Which of the following is correct?
.
.
·
Question
23
2
out of 2 points
Theresa sued her former employer for age, race,
and gender discrimination. She claimed $200,000 in damages for loss of
income, $300,000 for emotional harm, and $500,000 in punitive damages. She settled
the claim for $700,000. As a result of the settlement, Theresa must
include in gross income:
·
Question
24
2
out of 2 points
Employees of the Valley Country Club are allowed
to use the golf course without charge before and after working hours on
Mondays, when the number of players on the course is at its lowest. Tom, an employee
of the country club played 40 rounds of golf during the year at no charge
when the non-employee charge was $20 per round.
·
Question
25
2
out of 2 points
Peggy is an executive for the Tan Furniture
Manufacturing Company. Peggy purchased furniture from the company for $9,500,
the price Tan ordinarily would charge a wholesaler for the same items. The retail
price of the furniture was $12,500, and Tanâs cost was $9,000. The company
also paid for Peggyâs parking space in a garage near the office. The parking
fee was $600 for the year. All employees are allowed to buy furniture at a
discounted price comparable to that charged to Peggy. However, the company
does not pay other employeesâ parking fees. Peggyâs gross income from the
above is:
·
Question
26
2
out of 2 points
In 2013, Khalid was in an automobile accident and
suffered physical injuries. The accident was caused by Rashadâs negligence.
Khalid threatened to file a lawsuit against Amber Trucking Company, Rashadâs
employer, claiming $50,000 for pain and suffering, $90,000 for loss of
income, and $70,000 in punitive damages. Amberâs insurance company will not
pay punitive damages; therefore, Amber has offered to settle the case for
$100,000 for pain and suffering, $90,000 for loss of income, and nothing for
punitive damages. Khalid is in the 35% marginal tax bracket. What is
the after-tax difference to Khalid between Khalidâs original claim and
Amberâs offer?
·
Question
27
2
out of 2 points
Betty received a graduate teaching assistantship
that was awarded on the basis of academic achievement. The payments
must be included in her gross income.
·
Question
28
2
out of 2 points
Agnes receives a $5,000 scholarship which covers
her tuition at Parochial High School. She may not exclude the $5,000 because
the exclusion applies only to scholarships to attend college.
·
Question
29
2
out of 2 points
·
Question
30
2
out of 2 points
A scholarship recipient at State University may
exclude from gross income the scholarship proceeds used to pay for:
·
Question
31
0
out of 2 points
Heatherâs interest and gains on investments for 2013 were as follows:
Interest on Bland County
school bonds
$600
Interest on U.S. government
bonds
700
Interest on a Federal income
tax refund
200
Gain on the sale of Bland
County school bonds
500
Heatherâs gross income from the above is:
·
Question
32
2
out of 2 points
Like the Federal counterpart, the amount of the
state excise taxes on gasoline varies from state to state.
·
Question
33
2
out of 2 points
On transfers by death, the Federal government
relies on an estate tax, while states impose an estate tax, an inheritance
tax, both taxes, or neither tax.
·
Question
34
2
out of 2 points
The tax law provides various tax credits,
deductions, and exclusions that are designed to encourage taxpayers to obtain
additional education. These provisions can be justified on both economic and
equity grounds.
·
Question
35
2
out of 2 points
The IRS agent auditing the return willissue
an RAR even if the taxpayer owes no additional taxes.
·
Question
36
2
out of 2 points
An inheritance tax is a tax on a decedentâs right
to pass property at death.
·
Question
37
2
out of 2 points
Property can be transferred within the family
group by gift or at death. One motivation for preferring the gift approach
is:
·
Question
38
2
out of 2 points
One of the major reasons for the enactment of the
Federal estate tax was to prevent large amounts of wealth from being
accumulated within the family unit.
·
Question
39
0
out of 2 points
A safe and easy way for a taxpayer to avoid local
and state sales taxes is to make the purchase in a state that levies no such
taxes.
·
Question
40
2
out of 2 points
Using the choices provided below, show the
justification for each provision of the tax law listed.
·
Question
41
2
out of 2 points
If an income tax return is not filed
by a taxpayer, there is no statute of limitations on assessments of tax by
the IRS.
·
Question
42
2
out of 2 points
Which Regulations have the force and effect of
law?
·
Question
43
2
out of 2 points
Subchapter D refers to the âCorporate
Distributions and Adjustmentsâ section of the Internal Revenue Code.
·
Question
44
2
out of 2 points
Revenue Procedures deal with the internal
management practices and procedures of the IRS.
·
Question
45
2
out of 2 points
The test for whether a child qualifies for
dependency status is first conducted under the qualified child requirement.
·
Question
46
2
out of 2 points
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.
·
Question
47
2
out of 2 points
A taxpayer who loses in a U.S. District Court may
appeal directly to the:
·
Question
48
2
out of 2 points
Which court decision carries more weight?
·
Question
49
2
out of 2 points
Subtitle A of the Internal Revenue Code covers
which of the following taxes?
·
Question
50
2
out of 2 points
The term âpetitionerâ is a synonym for
âdefendant.â
·
Question
51
2
out of 2 points
Which items tell taxpayers the IRSâs reaction to
certain court decisions?
·
Question
52
0
out of 2 points
Taxpayerâs home was destroyed by a storm in the
current year and the area was declared a disaster area. If the taxpayer
elects to treat the loss as having occurred in the prior year, it will be
subject to the 10%-of-AGI reduction based on the AGI of the current year.
·
Question
53
2
out of 2 points
A personal casualty loss deduction may be allowed
for losses resulting from termites.
·
Question
54
2
out of 2 points
·
Question
55
2
out of 2 points
Several years ago, John purchased 2,000 shares of
Red Corporation § 1244 stock from Mark for $40,000. Last year, John
sold one-half of his Red Corporation stock to Mike for $12,000. During
the current year, John sold the remaining Red Corporation stock for
$3,000. John has a $17,000 ($3,000 â $20,000) ordinary loss for the
current year.
·
Question
56
2
out of 2 points
Research and experimental expenditures do not include
the cost of consumer surveys.
·
Question
57
2
out of 2 points
An individual may deduct a loss on rental
property even if it does not meet the definition of a casualty loss.
·
Question
58
2
out of 2 points
If qualified production activities income (QPAI)
cannot be used in the calculation of the domestic production activities
deduction in 2013 because of the taxable income limitation, the product of
the amount not allowed multiplied by 9% can be carried over for 5 years.
·
Question
59
2
out of 2 points
On September 3, 2012, Able, a single individual,
purchased § 1244 stock in Red Corporation from his friend Al for $60,000. On
December 31, 2012, the stock was worth $85,000. On August 15, 2013, Able was
notified that the stock was worthless. How should Able report this item on
his 2013 tax return?
·
Question
60
2
out of 2 points
Normâs car, which he uses 100% for personal
purposes, was completely destroyed in an accident in 2013. The carâs adjusted
basis at the time of the accident was $13,000. Its fair market value was $10,000.
The car was covered by a $2,000 deductible insurance policy. Norm did not
file a claim against the insurance policy because of a fear that reporting
the accident would result in a substantial increase in his insurance rates.
His adjusted gross income was $14,000 (before considering the loss). What is
Normâs deductible loss?
·
Question
61
2
out of 2 points
A theft loss is taken in the year of the theft.
·
Question
62
2
out of 2 points
Jed is an electrician. Jed and his wife are
accrual basis taxpayers and file a joint return. Jed wired a new house
for Alison and billed her $15,000. Alison paid Jed $10,000 and refused
to pay the remainder of the bill, claiming the fee to be exorbitant.
Jed took Alison to Small Claims Court for the unpaid amount and was awarded a
$2,000 judgement. Jed was able to collect the judgement but not the
remainder of the bill from Alison. What amount of loss may Jed deduct
in the current year?
·
Question
63
2
out of 2 points
On February 20, 2012, Bill purchased stock in
Pink Corporation (the stock is not small business stock) for $1,000. On May
1, 2013, the stock became worthless. During 2013, Bill also had an $8,000 loss
on § 1244 small business stock purchased two years ago, a $9,000 loss on a
nonbusiness bad debt, and a $5,000 long-term capital gain. How should Bill
treat these items on his 2013 tax return?
·
Question
64
0
out of 2 points
Which of the following is not a
âtrade or businessâ expense?
·
Question
65
2
out of 2 points
Fines and penalties paid for violations of the
law (e.g., illegal dumping of hazardous waste) are deductible only if they
relate to a trade or business.
·
Question
66
2
out of 2 points
A baseball team that pays a star player an annual
salary of $25 million can deduct the entire $25 million as salary expense. If
the same amount is paid to the CEO of IBM, only $1 million is deductible.
·
Question
67
2
out of 2 points
Which of the following is a deduction for AGI
(itemized deduction)?
·
Question
68
2
out of 2 points
Nikeya sells land (adjusted basis of $120,000) to
her adult son, Shamed, for its appraised value of $95,000. Which of the
following statements is correct?
·
Question
69
2
out of 2 points
The cost of legal advice associated with the
preparation of an individualâs Federal income tax return is not deductible
because it is a personal expense.
·
Question
70
2
out of 2 points
Marsha is single, had gross income of $50,000, and incurred the
following expenses:
Charitable contribution
$2,000
Taxes and interest on home
7,000
Legal fees incurred in a tax
dispute
1,000
Medical expenses
3,000
Penalty on early withdrawal
of savings
250
Her AGI is:
·
Question
71
2
out of 2 points
Benita incurred a business expense on December
10, 2013, which she charged on her bank credit card. She paid the credit card
statement which included the charge on January 5, 2014. Which of the
following is correct?
·
Question
72
0
out of 2 points
Ordinary and necessary business expenses, other
than cost of goods sold, of an illegal drug trafficking business do not reduce
taxable income.
·
Question
73
2
out of 2 points
A hobby activity can result in all of the hobby
income being included in AGI and no deductions being allowed.
·
Question
74
2
out of 2 points
If a vacation home is determined to be a
personal/rental use residence, which of the following statements is correct?
·
Question
75
0
out of 2 points
