Question 1

Mike won $700 in a football pool. This amount is not taxable.

Accepted Answer

A) True 
 B)False

Question 2

Under the cash method of accounting, all of the following are true with the exception of

Accepted Answer

A)  income is reported in the tax year in which payments are actually or constructively received. 
B)  gross income includes the value of property received. 
C)  to some extent, a taxpayer may control the year in which an expense is deductible by choosing when to make the payment. 
D)  fixed assets are always expensed as the taxpayer pays for the assets. 
A)  income is reported in the tax year in which payments are actually or constructively received. 
B)  gross income includes the value of property received. 
C)  to some extent, a taxpayer may control the year in which an expense is deductible by choosing when to make the payment. 
D)  fixed assets are always expensed as the taxpayer pays for the assets.

Question 3

Punitive damages are taxable unless they are awarded for physical injuries.

Accepted Answer

A) True 
 B)False

Question 4

Gabby owns and operates a part- time art gallery, now in its fifth year. She views it as a business activity, but she is concerned that the IRS will challenge her classification and consider it a hobby. Her business results, using the cash method of accounting, were net losses in the first and fourth years and small profits in the second and third years. It is now almost year- end and based on projections, the business is showing a small profit of $6,000. Repairs to the security system and to the heating/cooling system were recently completed and these bills total $7,000. When should Gabby pay these bills?

Accepted Answer

A)  next year 
B)  before year- end to get the current year deduction 
C)  split into $6,000 this year and $1,000 next year 
D)  It does not matter when she pays the bills. The work was performed this year, so the costs will be deducted this year. 
A)  next year 
B)  before year- end to get the current year deduction 
C)  split into $6,000 this year and $1,000 next year 
D)  It does not matter when she pays the bills. The work was performed this year, so the costs will be deducted this year.

Question 5

Kyle sold land on the installment basis for $100,000. His basis in the land was $70,000. Kyle received a $40,000 down payment and a real estate installment sale contract calling for $60,000 in additional payments in future years. In addition, Kyle paid $6,000 in commissions on the sale. What is the gross profit to be recognized in the current year?

Accepted Answer

A)  $24,000 
B)  $12,000 
C)  $9,600 
D)  $0 
A)  $24,000 
B)  $12,000 
C)  $9,600 
D)  $0

Question 6

David has been diagnosed with cancer and is expected to live less than 18 months. David is covered by a life insurance policy with a $400,000 face amount. David cashes in the policy early under a special option and receives 80% of the face amount or $320,000. In the year of collection, David will report

Accepted Answer

A)  no income. 
B)  $400,000. 
C)  $320,000. 
D)  $80,000. 
A)  no income. 
B)  $400,000. 
C)  $320,000. 
D)  $80,000.

Question 7

According to the Statements on Standards for Tax Services, if a CPA believes that a client's prior- year tax return contains false information, the CPA should report this to the

Accepted Answer

A)  SEC. 
B)  IRS. 
C)  AICPA. 
D)  None of the above. The CPA does not report the false information to any external agencies, unless required by law. 
A)  SEC. 
B)  IRS. 
C)  AICPA. 
D)  None of the above. The CPA does not report the false information to any external agencies, unless required by law.

Question 8

Jamal, age 52, is a human resources manager for Triple W Company. His annual salary is $110,000 and he receiv following fringe benefits during the current year:
• Triple W pays for all employees' health and accident insurance. Triple W pays $7,000 for Jamal's health insura during the year.
• Triple W provides Jamal with group- term life insurance coverage of $200,000 during the year. The monthly in amount per $1,000 of coverage is $.23.
• Triple W has a flexible benefits plan in which employees may participate to pay any qualifying medical costs n reimbursed by their health insurance. Jamal has $1,600 withheld from his salary under the plan. During the year receives reimbursements of $1,300.
• Triple W pays parking costs for all management employees. Jamal's parking costs $ 300 per month.
• Triple W pays Jamal's annual membership dues of $450 to the Society of Human Resource Management Assoc The company also subscribes to several management journals for Jamal costing $650 a year.
• Jamal took a college class on financial accounting and Triple W reimbursed his tuition of $6,000 through its tui assistance program for all employees.
• Jamal's consumption of coffee provided by Triple W is estimated at $50 a year.
How much income must Jamal report from his job?

Accepted Answer

@#IMG-DLM& The health insurance premiums are exclu

Question 9

Jeffrey, a T.V. news anchor, is concerned about the wrinkles around his eyes. Because it is job- related, the cost of a face lift to eliminate these wrinkles is a deductible medical expense.

Accepted Answer

A) True 
 B)False

Question 10

Except in a few specific circumstances, once adopted, an accounting period may be changed without IRS approval.

Accepted Answer

A) True 
 B)False

Question 11

Mr. and Mrs. Lewis have an alternative minimum tax base of $312,000 in 2018. Their tentative minimum tax will be

Accepted Answer

A)  $52,676. 
B)  $81,120. 
C)  $87,360. 
D)  $83,530. 
A)  $52,676. 
B)  $81,120. 
C)  $87,360. 
D)  $83,530.

Question 12

Mike, a dealer in securities and calendar- year taxpayer, purchased a security for inventory on November 18, 2017 for $15,000. The FMV on December 31, 2017 was $16,000. The security was sold on December 19, 2018 for $16,500. These transactions result in

Accepted Answer

A)  $1,000 ordinary income in 2017; $500 LTCG in 2018. 
B)  $0 ordinary income in 2017; $1,500 LTCG in 2018. 
C)  $0 ordinary income in 2017; $1,500 ordinary income in 2018. 
D)  $1,000 ordinary income in 2017; $500 ordinary income in 2018. 
A)  $1,000 ordinary income in 2017; $500 LTCG in 2018. 
B)  $0 ordinary income in 2017; $1,500 LTCG in 2018. 
C)  $0 ordinary income in 2017; $1,500 ordinary income in 2018. 
D)  $1,000 ordinary income in 2017; $500 ordinary income in 2018.

Question 13

Ellen, a CPA, prepares a tax return for Frank, a plumber, in exchange for installing a new sink. Since no cash changed hands, neither taxpayer is required to report any income.

Accepted Answer

A) True 
 B)False

Question 14

Pierce sold his home this year. He had owned and lived in the house for 10 years. Pierce signed a contract on Ma sell his home.   Based on these facts, what is the amount of his recognized gain?

Accepted Answer

A)  $40,000 
B)  $0 
C)  $275,000 
D)  $25,000 
A)  $40,000 
B)  $0 
C)  $275,000 
D)  $25,000

Question 15

A net operating loss (NOL) occurs when taxable income for any year is negative because itemized deductions exceed business income.

Accepted Answer

A) True 
 B)False

Question 16

Partnerships, limited liability partnerships, limited liability companies, and C corporations are considered flow- through entities for tax purposes.

Accepted Answer

A) True 
 B)False

Question 17

Ross purchased a building in 1985, which he uses in his manufacturing business. Ross used the ACRS statutory rates to determine the cost- recovery deduction for the building. Ross's original cost for the building is $500,000 and cost- recovery deductions allowed are $500,000. If the building is sold for $340,000, the tax results to Ross are

Accepted Answer

A)  $340,000 Sec. 1250 ordinary income. 
B)  $340,000 LTCG. 
C)  $340,000 Sec. 1231 gain. 
D)  $340,000 Sec. 1245 ordinary income. 
A)  $340,000 Sec. 1250 ordinary income. 
B)  $340,000 LTCG. 
C)  $340,000 Sec. 1231 gain. 
D)  $340,000 Sec. 1245 ordinary income.

Question 18

Accrual- basis corporations may accrue a charitable contribution deduction in the year preceding payment if the payment is authorized by the board of directors prior to year- end and the contribution is made within 2 1/2 months following year- end.

Accepted Answer

A) True 
 B)False

Question 19

In the case of loans between related parties, without proper documentation the lender faces the risk that the IRS will reclassify the loan as a bonus.

Accepted Answer

A) True 
 B)False

Question 20

Title 26 of the U.S. Code includes

Accepted Answer

A)  gift tax and estate tax legislation only. 
B)  alcohol and tobacco tax legislation only. 
C)  income tax legislation only. 
D)  all of the tax legislation mentioned above. 
A)  gift tax and estate tax legislation only. 
B)  alcohol and tobacco tax legislation only. 
C)  income tax legislation only. 
D)  all of the tax legislation mentioned above.

Mike won $700 in a football pool. This amount is not taxable.

Under the cash method of accounting, all of the following are true with the exception of

Punitive damages are taxable unless they are awarded for physical injuries.

According to the Statements on Standards for Tax Services, if a CPA believes that a client's prior- year tax return contains false information, the CPA should report this to the

Jeffrey, a T.V. news anchor, is concerned about the wrinkles around his eyes. Because it is job- related, the cost of a face lift to eliminate these wrinkles is a deductible medical expense.

Except in a few specific circumstances, once adopted, an accounting period may be changed without IRS approval.

Mr. and Mrs. Lewis have an alternative minimum tax base of $312,000 in 2018. Their tentative minimum tax will be

Mike, a dealer in securities and calendar- year taxpayer, purchased a security for inventory on November 18, 2017 for $15,000. The FMV on December 31, 2017 was $16,000. The security was sold on December 19, 2018 for $16,500. These transactions result in

Ellen, a CPA, prepares a tax return for Frank, a plumber, in exchange for installing a new sink. Since no cash changed hands, neither taxpayer is required to report any income.

Pierce sold his home this year. He had owned and lived in the house for 10 years. Pierce signed a contract on Ma sell his home. Based on these facts, what is the amount of his recognized gain?

A net operating loss (NOL) occurs when taxable income for any year is negative because itemized deductions exceed business income.

Partnerships, limited liability partnerships, limited liability companies, and C corporations are considered flow- through entities for tax purposes.

Accrual- basis corporations may accrue a charitable contribution deduction in the year preceding payment if the payment is authorized by the board of directors prior to year- end and the contribution is made within 2 1/2 months following year- end.

In the case of loans between related parties, without proper documentation the lender faces the risk that the IRS will reclassify the loan as a bonus.

Title 26 of the U.S. Code includes

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Filters

Exam 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

Mike won $700 in a football pool. This amount is not taxable.

Under the cash method of accounting, all of the following are true with the exception of

Punitive damages are taxable unless they are awarded for physical injuries.

According to the Statements on Standards for Tax Services, if a CPA believes that a client's prior- year tax return contains false information, the CPA should report this to the

Jeffrey, a T.V. news anchor, is concerned about the wrinkles around his eyes. Because it is job- related, the cost of a face lift to eliminate these wrinkles is a deductible medical expense.

Except in a few specific circumstances, once adopted, an accounting period may be changed without IRS approval.

Mr. and Mrs. Lewis have an alternative minimum tax base of $312,000 in 2018. Their tentative minimum tax will be

Mike, a dealer in securities and calendar- year taxpayer, purchased a security for inventory on November 18, 2017 for $15,000. The FMV on December 31, 2017 was $16,000. The security was sold on December 19, 2018 for $16,500. These transactions result in

Ellen, a CPA, prepares a tax return for Frank, a plumber, in exchange for installing a new sink. Since no cash changed hands, neither taxpayer is required to report any income.

Pierce sold his home this year. He had owned and lived in the house for 10 years. Pierce signed a contract on Ma sell his home. Based on these facts, what is the amount of his recognized gain?

A net operating loss (NOL) occurs when taxable income for any year is negative because itemized deductions exceed business income.

Partnerships, limited liability partnerships, limited liability companies, and C corporations are considered flow- through entities for tax purposes.

Accrual- basis corporations may accrue a charitable contribution deduction in the year preceding payment if the payment is authorized by the board of directors prior to year- end and the contribution is made within 2 1/2 months following year- end.

In the case of loans between related parties, without proper documentation the lender faces the risk that the IRS will reclassify the loan as a bonus.

Title 26 of the U.S. Code includes

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Filters