Question 1

A proposed regulation can be relied on when planning a transaction.

Accepted Answer

A) True 
 B)False

Question 2

What is the after-tax net present value of a project costing $600,000 that Plud Corporation can invest in if the project has the following estimated revenues and expenses?
   Plud uses an 8 percent discount rate for evaluation and expects a 21 percent marginal tax rate in the relevant years.

Accepted Answer

$174,713; Year 1: $550,000 x (1 - .21) x

Question 3

The Internal Revenue Service has the burden of proof when it is asserting fraud with the intent to evade taxes on the part of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 4

Jury trials are only available in

Accepted Answer

A)  Court of Appeals 
B)  Supreme Court 
C)  Regular Tax Court 
D)  Federal District Court 
E)  None of the above 
A)  Court of Appeals 
B)  Supreme Court 
C)  Regular Tax Court 
D)  Federal District Court 
E)  None of the above

Question 5

What effect does an increased discount rate have on project evaluations?

Accepted Answer

A)  Increases net cash flow 
B)  Decreases net cash flow 
C)  Increases the probability that a project will be accepted 
D)  It has no effect on project evaluation 
A)  Increases net cash flow 
B)  Decreases net cash flow 
C)  Increases the probability that a project will be accepted 
D)  It has no effect on project evaluation

Question 6

Merced Company has invested $200,000 in a project. It had before tax net income of $100,000 in year 1, $150,000 in year 2, and $125,000 in year 3. What is the net present value of this project's after-tax net cash flow if Merced's discount rate is 8 percent and its marginal tax rate is 21 percent in all years?

Accepted Answer

A)  $53,116 
B)  $120,000 
C)  $253,116 
D)  $320,400 
A)  $53,116 
B)  $120,000 
C)  $253,116 
D)  $320,400

Question 7

The IRS must pay interest on

Accepted Answer

A)  tax refunds paid later than 30 days after the due date. 
B)  tax refunds paid later than 45 days after the due date. 
C)  all tax refunds. 
D)  The IRS never pays interest on tax refunds. 
A)  tax refunds paid later than 30 days after the due date. 
B)  tax refunds paid later than 45 days after the due date. 
C)  all tax refunds. 
D)  The IRS never pays interest on tax refunds.

Question 8

James can invest in a project that will cost $70,000. The project is expected to pay him $95,000 after-tax in 5 years. What is the maximum discount rate, as a whole number, that he could use to evaluate the project that would yield a positive cash flow?

Accepted Answer

A)  5% 
B)  6% 
C)  7% 
D)  8% 
A)  5% 
B)  6% 
C)  7% 
D)  8%

Question 9

A citator

Accepted Answer

A)  provides a history of a court case 
B)  provides lists of other decisions that cite a particular case 
C)  provides an alphabetical listing of court cases 
D)  provides a numerical listing of Revenue Rulings 
E)  All of the above 
A)  provides a history of a court case 
B)  provides lists of other decisions that cite a particular case 
C)  provides an alphabetical listing of court cases 
D)  provides a numerical listing of Revenue Rulings 
E)  All of the above

Question 10

Place in order the steps in the tax legislative process from the list below:
-The bill is referred to the House Ways and Means Committee
b. The bill is referred to the Joint Conference Committee
c. A member of the House introduces the tax bill
d. The bill is forwarded to the President for his signature
e. The Senate votes on the bill
f. The House votes on the bill
g. The bill is referred to the Senate Finance Committee
h. The Conference Committee sends the bill back to the House and the Senate

Accepted Answer

Order of s

Question 11

Acquiescence by the Internal Revenue Service's Commissioner means that the IRS will follow the decision in the future.

Accepted Answer

A) True 
 B)False

Question 12

How long after receiving a Statutory Notice of Deficiency does the taxpayer have to file a petition with the Tax Court?

Accepted Answer

A)  30 days 
B)  60 days 
C)  90 days 
D)  6 months 
A)  30 days 
B)  60 days 
C)  90 days 
D)  6 months

Question 13

Which of the following is not a requirement to qualify for innocent spouse relief?

Accepted Answer

A)  The individual electing innocent spouse relief must have been abandoned by her spouse for more than 6 months. 
B)  The individual establishes that she did not know and had no reason to know that there was an understatement 
C)  It would be inequitable to hold the individual liable for the deficiency attributable to the understatement when all facts and circumstances are considered 
D)  The individual elects innocent spouse relief within the time period that the statute of limitation is open for collection activities. 
A)  The individual electing innocent spouse relief must have been abandoned by her spouse for more than 6 months. 
B)  The individual establishes that she did not know and had no reason to know that there was an understatement 
C)  It would be inequitable to hold the individual liable for the deficiency attributable to the understatement when all facts and circumstances are considered 
D)  The individual elects innocent spouse relief within the time period that the statute of limitation is open for collection activities.

Question 14

The statute of limitations for an error overstating expenses by more than 25 percent is 3 years.

Accepted Answer

A) True 
 B)False

Question 15

What is the purpose of Treasury Regulations?

Accepted Answer

Treasury regulations explain,

Question 16

A transaction for which there is no legitimate business purpose is automatically assessed a 50% penalty.

Accepted Answer

A) True 
 B)False

Question 17

How much tax can be saved if John shifts $2,000 of income to his 18 year old dependent son? John is in the 22 percent tax bracket and his son has no other income that is taxable in 2018.

Accepted Answer

A)  $1,000 
B)  $500 
C)  $345 
D)  $100 
A)  $1,000 
B)  $500 
C)  $345 
D)  $100

Question 18

If a tax return preparer prepares a return that involves a "listed transaction," the preparer can avoid all penalties if

Accepted Answer

A)  the position is not unreasonable. 
B)  the position has a possibility of success. 
C)  the preparer has substantial authority for the position 
D)  the position has no support but there is no evidence of fraud. 
A)  the position is not unreasonable. 
B)  the position has a possibility of success. 
C)  the preparer has substantial authority for the position 
D)  the position has no support but there is no evidence of fraud.

Question 19

Ryan filed his tax return 40 days after the due date and included a check for the $1,800 balance due with the return. Ryan's failure-to-file penalty is

Accepted Answer

A)  25% 
B)  20% per month (or partial month) 
C)  5% per month (or partial month) up to a maximum of 25% 
D)  0.5% per month (or partial month) up to a maximum of 25% 
A)  25% 
B)  20% per month (or partial month) 
C)  5% per month (or partial month) up to a maximum of 25% 
D)  0.5% per month (or partial month) up to a maximum of 25%

Question 20

According to the Statements on Standards for Tax Services, if a CPA discovers an error in a prior return prepared by another tax return preparer, the CPA

Accepted Answer

A)  is required to notify IRS immediately 
B)  should notify the client of the error and request permission to disclose the error to the IRS 
C)  must immediately withdraw from the engagement 
D)  is required to correct the error on the prior year's return even if it does not affect the current year's tax return 
A)  is required to notify IRS immediately 
B)  should notify the client of the error and request permission to disclose the error to the IRS 
C)  must immediately withdraw from the engagement 
D)  is required to correct the error on the prior year's return even if it does not affect the current year's tax return

A proposed regulation can be relied on when planning a transaction.

What is the after-tax net present value of a project costing $600,000 that Plud Corporation can invest in if the project has the following estimated revenues and expenses? Plud uses an 8 percent discount rate for evaluation and expects a 21 percent marginal tax rate in the relevant years.

The Internal Revenue Service has the burden of proof when it is asserting fraud with the intent to evade taxes on the part of the taxpayer.

Jury trials are only available in

What effect does an increased discount rate have on project evaluations?

The IRS must pay interest on

James can invest in a project that will cost $70,000. The project is expected to pay him $95,000 after-tax in 5 years. What is the maximum discount rate, as a whole number, that he could use to evaluate the project that would yield a positive cash flow?

A citator

Acquiescence by the Internal Revenue Service's Commissioner means that the IRS will follow the decision in the future.

How long after receiving a Statutory Notice of Deficiency does the taxpayer have to file a petition with the Tax Court?

Which of the following is not a requirement to qualify for innocent spouse relief?

The statute of limitations for an error overstating expenses by more than 25 percent is 3 years.

What is the purpose of Treasury Regulations?

A transaction for which there is no legitimate business purpose is automatically assessed a 50% penalty.

How much tax can be saved if John shifts $2,000 of income to his 18 year old dependent son? John is in the 22 percent tax bracket and his son has no other income that is taxable in 2018.

If a tax return preparer prepares a return that involves a "listed transaction," the preparer can avoid all penalties if

Ryan filed his tax return 40 days after the due date and included a check for the $1,800 balance due with the return. Ryan's failure-to-file penalty is

According to the Statements on Standards for Tax Services, if a CPA discovers an error in a prior return prepared by another tax return preparer, the CPA

Introduction to Taxation

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters

Exam 2: The Tax Practice Environment

A proposed regulation can be relied on when planning a transaction.

What is the after-tax net present value of a project costing $600,000 that Plud Corporation can invest in if the project has the following estimated revenues and expenses? Plud uses an 8 percent discount rate for evaluation and expects a 21 percent marginal tax rate in the relevant years.

The Internal Revenue Service has the burden of proof when it is asserting fraud with the intent to evade taxes on the part of the taxpayer.

Jury trials are only available in

What effect does an increased discount rate have on project evaluations?

The IRS must pay interest on

James can invest in a project that will cost $70,000. The project is expected to pay him $95,000 after-tax in 5 years. What is the maximum discount rate, as a whole number, that he could use to evaluate the project that would yield a positive cash flow?

A citator

Acquiescence by the Internal Revenue Service's Commissioner means that the IRS will follow the decision in the future.

How long after receiving a Statutory Notice of Deficiency does the taxpayer have to file a petition with the Tax Court?

Which of the following is not a requirement to qualify for innocent spouse relief?

The statute of limitations for an error overstating expenses by more than 25 percent is 3 years.

What is the purpose of Treasury Regulations?

A transaction for which there is no legitimate business purpose is automatically assessed a 50% penalty.

How much tax can be saved if John shifts $2,000 of income to his 18 year old dependent son? John is in the 22 percent tax bracket and his son has no other income that is taxable in 2018.

If a tax return preparer prepares a return that involves a "listed transaction," the preparer can avoid all penalties if

Ryan filed his tax return 40 days after the due date and included a check for the $1,800 balance due with the return. Ryan's failure-to-file penalty is

According to the Statements on Standards for Tax Services, if a CPA discovers an error in a prior return prepared by another tax return preparer, the CPA

Introduction to Taxation

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters