Question 1

The primary liability for payment of the gift tax is imposed upon the donee.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is deductible as interest expense?

Accepted Answer

A)  personal credit card interest 
B)  bank service charges on personal account 
C)  interest to purchase tax- exempt bonds 
D)  None of the above. 
A)  personal credit card interest 
B)  bank service charges on personal account 
C)  interest to purchase tax- exempt bonds 
D)  None of the above.

Question 3

Martin Corporation granted a nonqualified stock option to employee Caroline on January 1, 2013. The option price was $150, and the FMV of the Martin stock was also $150 on the grant date. The option allowed Caroline to purchase 1,000 shares of Martin stock. The option itself does not have a readily ascertainable FMV. Caroline exercised the option on August 1, 2018, when the stock's FMV was $250. Caroline sells the stock on September 5, 2019, for $300 per share. Martin Corporation will be allowed a deduction of

Accepted Answer

A)  $100,000 in 2018 and $50,000 in 2019. 
B)  $100,000 in 2018. 
C)  $50,000 in 2019. 
D)  $150,000 in 2013. 
A)  $100,000 in 2018 and $50,000 in 2019. 
B)  $100,000 in 2018. 
C)  $50,000 in 2019. 
D)  $150,000 in 2013.

Question 4

A charitable contribution in excess of the deduction limit for one taxable year can be carried forward five years.

Accepted Answer

A) True 
 B)False

Question 5

In- home office expenses which are not deductible in the year in which the costs were incurred due to income limitations may be carried forward to subsequent years.

Accepted Answer

A) True 
 B)False

Question 6

A revenue ruling is issued by the Internal Revenue Service only in response to a verbal inquiry by a taxpayer.

Accepted Answer

A) True 
 B)False

Question 7

The Super Bowl is played in Tasha's home town. Tasha moves out of her house for 10 days and stays with her parents. She rents her house for a very high fee to a crew from ESPN. With respect to this rental activity, Tasha will

Accepted Answer

A)  report the rental income but be allowed a deduction from AGI for the related expenses (e.g., interest, taxes, utilities, depreciation). 
B)  report the rental income, but she will not be allowed any deductions other than the mortgage interest and property taxes. 
C)  not be required to report the income, but she will not take any deductions other than her normal mortgage interest and property taxes. 
D)  report the rental income but be allowed a deduction for AGI for the related expenses (e.g., interest, taxes, utilities, depreciation). 
A)  report the rental income but be allowed a deduction from AGI for the related expenses (e.g., interest, taxes, utilities, depreciation). 
B)  report the rental income, but she will not be allowed any deductions other than the mortgage interest and property taxes. 
C)  not be required to report the income, but she will not take any deductions other than her normal mortgage interest and property taxes. 
D)  report the rental income but be allowed a deduction for AGI for the related expenses (e.g., interest, taxes, utilities, depreciation).

Question 8

An individual is considered to materially participate in an activity if any of the following tests are met with the exception of

Accepted Answer

A)  the individual participates in the activity for 75 hours during the year, and that participation is more than any other individual's participation for the year. 
B)  the individual participates in the activity for more than 500 hours during the year. 
C)  the individual's participation in the activity for the year constitutes substantially all of the participation in the activity by all individuals. 
D)  the individual has materially participated in the activity in any five years during the immediate preceding 10 taxable years. 
A)  the individual participates in the activity for 75 hours during the year, and that participation is more than any other individual's participation for the year. 
B)  the individual participates in the activity for more than 500 hours during the year. 
C)  the individual's participation in the activity for the year constitutes substantially all of the participation in the activity by all individuals. 
D)  the individual has materially participated in the activity in any five years during the immediate preceding 10 taxable years.

Question 9

The value of health, accident, and disability insurance premiums paid by an employer are generally not included in an employee's gross income.

Accepted Answer

A) True 
 B)False

Question 10

The amount of cash fringe benefits received under a cafeteria plan is taxable to an employee.

Accepted Answer

A) True 
 B)False

Question 11

Juanita, who is single, lives in an area that suffered a major hurricane which was declared a federal disaster. Her car sustained $6,200 in damages. Juanita does not expect to recover any of the loss from her insurance company. Juanita's 2018 AGI is $31,000, and she deducts a $3,000 loss after applying limitations on her 2018 tax return. Her other itemized deductions in 2018 exceed $12,000. In 2019, Juanita's insurance company reimburses her $2,800. Juanita's 2019 AGI is $28,000. As a result, Juanita must

Accepted Answer

A)  do nothing and simply keep the $2,800. 
B)  amend 2018 to show a $200 loss. 
C)  do nothing to the 2018 return but report $2,800 of income on her 2019 return. 
D)  amend the 2018 return to show $0 loss and file her 2019 return to show a $200 loss. 
A)  do nothing and simply keep the $2,800. 
B)  amend 2018 to show a $200 loss. 
C)  do nothing to the 2018 return but report $2,800 of income on her 2019 return. 
D)  amend the 2018 return to show $0 loss and file her 2019 return to show a $200 loss.

Question 12

Partnerships and S corporations must classify their business and rental activities by applying the passive activity rules at the partnership or S corporation level and then must report the results of their operations by activity to the partners or shareholders.

Accepted Answer

A) True 
 B)False

Question 13

Taxable income for an individual is defined as

Accepted Answer

A)  AGI reduced by itemized deductions and tax credits. 
B)  AGI reduced by tax credits. 
C)  AGI reduced by the greater of the standard deduction or itemized deductions. 
D)  gross income reduced by itemized deductions. 
A)  AGI reduced by itemized deductions and tax credits. 
B)  AGI reduced by tax credits. 
C)  AGI reduced by the greater of the standard deduction or itemized deductions. 
D)  gross income reduced by itemized deductions.

Question 14

Nate and Nikki have two dependent children ages 12 and 15. Their modified AGI is $410,000. What is the amount of the child credit to which they are entitled?

Accepted Answer

A)  $500 
B)  $0 
C)  $3,500 
D)  $4,000 
A)  $500 
B)  $0 
C)  $3,500 
D)  $4,000

Question 15

A personal property tax based on the weight of the property is deductible.

Accepted Answer

A) True 
 B)False

Question 16

In December of this year, Jake and Stockard, a married couple, redeemed qualified Series EE U.S. Savings Bonds. The proceeds were used to help pay for their daughter's college tuition. Jake and Stockard received proceeds of $8,000 representing principal of $5,000 and interest of $3,000. The qualified higher educational expenses they paid this year totaled $6,000. Their AGI is below the threshold for phase- out of the exclusion. What is the amount of interest income Jake and Stockard can exclude from their income this year?

Accepted Answer

A)  $5,000 
B)  $2,500 
C)  $3,000 
D)  $2,250 
A)  $5,000 
B)  $2,500 
C)  $3,000 
D)  $2,250

Question 17

Sanjay is single and has taxable income of $23,000 without considering the sale of a capital asset in November of 2018 for $15,000. That asset was purchased six years earlier and has a tax basis of $5,000. The tax liability applicable to only the capital gain is

Accepted Answer

A)  $1,200. 
B)  $1,500. 
C)  $0. 
D)  $500. 
A)  $1,200. 
B)  $1,500. 
C)  $0. 
D)  $500.

Question 18

Miranda is not a key employee of AB Corporation. AB provides Miranda with group term life insurance coverage of $140,000. The premiums attributable to the excess coverage are $1,300. The uniform one- month group- term premium is one dollar per $1,000 of coverage. How much must Miranda include in income?

Accepted Answer

A)  $1,680 
B)  $1,300 
C)  $0 
D)  $1,080 
A)  $1,680 
B)  $1,300 
C)  $0 
D)  $1,080

Question 19

In 2018, Rita is divorced with one child. She has AGI of $20,000 resulting in a federal income tax liability of $200 and an earned income credit of $3,247. She has had $550 of federal income taxes withheld from her pay. Rita will receive a federal income refund of

Accepted Answer

A)  $2,697. 
B)  $3,597. 
C)  $3,047. 
D)  $550. 
A)  $2,697. 
B)  $3,597. 
C)  $3,047. 
D)  $550.

Question 20

Bud and Stella are married, file a joint return, and have one child, age 3. Their combined AGI is $35,000. Bud and Stella incur $3,500 of child care expenses during the current year. The child and dependent care credit is

Accepted Answer

A)  $600. 
B)  $700. 
C)  $875. 
D)  $750. 
A)  $600. 
B)  $700. 
C)  $875. 
D)  $750.

The primary liability for payment of the gift tax is imposed upon the donee.

Which of the following is deductible as interest expense?

A charitable contribution in excess of the deduction limit for one taxable year can be carried forward five years.

In- home office expenses which are not deductible in the year in which the costs were incurred due to income limitations may be carried forward to subsequent years.

A revenue ruling is issued by the Internal Revenue Service only in response to a verbal inquiry by a taxpayer.

The Super Bowl is played in Tasha's home town. Tasha moves out of her house for 10 days and stays with her parents. She rents her house for a very high fee to a crew from ESPN. With respect to this rental activity, Tasha will

An individual is considered to materially participate in an activity if any of the following tests are met with the exception of

The value of health, accident, and disability insurance premiums paid by an employer are generally not included in an employee's gross income.

The amount of cash fringe benefits received under a cafeteria plan is taxable to an employee.

Partnerships and S corporations must classify their business and rental activities by applying the passive activity rules at the partnership or S corporation level and then must report the results of their operations by activity to the partners or shareholders.

Taxable income for an individual is defined as

Nate and Nikki have two dependent children ages 12 and 15. Their modified AGI is $410,000. What is the amount of the child credit to which they are entitled?

A personal property tax based on the weight of the property is deductible.

Sanjay is single and has taxable income of $23,000 without considering the sale of a capital asset in November of 2018 for $15,000. That asset was purchased six years earlier and has a tax basis of $5,000. The tax liability applicable to only the capital gain is

In 2018, Rita is divorced with one child. She has AGI of $20,000 resulting in a federal income tax liability of $200 and an earned income credit of $3,247. She has had $550 of federal income taxes withheld from her pay. Rita will receive a federal income refund of

Bud and Stella are married, file a joint return, and have one child, age 3. Their combined AGI is $35,000. Bud and Stella incur $3,500 of child care expenses during the current year. The child and dependent care credit is

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

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

The primary liability for payment of the gift tax is imposed upon the donee.

Which of the following is deductible as interest expense?

A charitable contribution in excess of the deduction limit for one taxable year can be carried forward five years.

In- home office expenses which are not deductible in the year in which the costs were incurred due to income limitations may be carried forward to subsequent years.

A revenue ruling is issued by the Internal Revenue Service only in response to a verbal inquiry by a taxpayer.

The Super Bowl is played in Tasha's home town. Tasha moves out of her house for 10 days and stays with her parents. She rents her house for a very high fee to a crew from ESPN. With respect to this rental activity, Tasha will

An individual is considered to materially participate in an activity if any of the following tests are met with the exception of

The value of health, accident, and disability insurance premiums paid by an employer are generally not included in an employee's gross income.

The amount of cash fringe benefits received under a cafeteria plan is taxable to an employee.

Partnerships and S corporations must classify their business and rental activities by applying the passive activity rules at the partnership or S corporation level and then must report the results of their operations by activity to the partners or shareholders.

Taxable income for an individual is defined as

Nate and Nikki have two dependent children ages 12 and 15. Their modified AGI is $410,000. What is the amount of the child credit to which they are entitled?

A personal property tax based on the weight of the property is deductible.

Sanjay is single and has taxable income of $23,000 without considering the sale of a capital asset in November of 2018 for $15,000. That asset was purchased six years earlier and has a tax basis of $5,000. The tax liability applicable to only the capital gain is

In 2018, Rita is divorced with one child. She has AGI of $20,000 resulting in a federal income tax liability of $200 and an earned income credit of $3,247. She has had $550 of federal income taxes withheld from her pay. Rita will receive a federal income refund of

Bud and Stella are married, file a joint return, and have one child, age 3. Their combined AGI is $35,000. Bud and Stella incur $3,500 of child care expenses during the current year. The child and dependent care credit is

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