Question 1

Hilex Inc. structures a transaction to shift income from its California office to its Oregon office. This tax planning strategy may be taking advantage of the:

Accepted Answer

A) Character variable 
B) Time period variable 
C) Entity variable 
D) Jurisdiction variable 
A) Character variable 
B) Time period variable 
C) Entity variable 
D) Jurisdiction variable

Question 2

The time period variable reflects the fact that:

Accepted Answer

A) Federal income tax rules are not stable over time. 
B) A tax dollar paid this year cost more than a tax dollar paid in a future year. 
C) A taxpayer's marginal rate next year may be more or less than the current marginal rate. 
D) None of the above 
A) Federal income tax rules are not stable over time. 
B) A tax dollar paid this year cost more than a tax dollar paid in a future year. 
C) A taxpayer's marginal rate next year may be more or less than the current marginal rate. 
D) None of the above

Question 3

The assignment of income doctrine constraints tax deferral strategies.

Accepted Answer

A) True 
 B)False

Question 4

According to the assignment of income doctrine, income must be taxed to the person receiving the cash from an income-generating transaction.

Accepted Answer

A) True 
 B)False

Question 5

A strategy to shift income from one taxpayer to a different taxpayer reflects the entity variable, while a strategy to shift income from one year to a different year reflects the time period variable.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements about ordinary income and capital gain is true?

Accepted Answer

A) Income characterized as capital gain can have no additional tax characteristics. 
B) Individuals pay tax on their capital gains at a preferential rate. 
C) Corporations pay tax on both ordinary income and capital gain at their regular rate. 
D) Statements B.and C.are true. 
A) Income characterized as capital gain can have no additional tax characteristics. 
B) Individuals pay tax on their capital gains at a preferential rate. 
C) Corporations pay tax on both ordinary income and capital gain at their regular rate. 
D) Statements B.and C.are true.

Question 7

Hilex Inc. structures a transaction to shift income from one controlled subsidiary to another controlled subsidiary. This tax planning strategy may be taking advantage of the:

Accepted Answer

A) Jurisdiction variable 
B) Time period variable 
C) Entity variable 
D) Character variable 
A) Jurisdiction variable 
B) Time period variable 
C) Entity variable 
D) Character variable

Question 8

Sancel Inc. is planning a transaction that will generate $70,000 taxable income and cash inflow. The transaction is structured so that Sancel will receive the cash and report the income this year (year 0). Compute the increase in the NPV of the transaction if it can be restructured so that Sancel will receive the cash this year, but report the income two years later (year 2). Sancel's marginal tax rate is 30%, and it uses a 10% discount rate to compute NPV.

Accepted Answer

A) $3,654 
B) $5,318 
C) $8,526 
D) None of the above 
A) $3,654 
B) $5,318 
C) $8,526 
D) None of the above

Question 9

Mrs. Reid made a gift to her 19-year old daughter Susan. Mrs. Reid's marginal tax rate is 35%, and Susan's marginal tax rate is 10%. Which of the following statements is true?

Accepted Answer

A) The gift consisted of a corporate bond that paid $10,000 interest to Susan this year.Even though Susan is the owner of the bond, Mrs.Reid must include the $10,000 in her taxable income. 
B) The gift consisted of a $2,600 rent check written by tenants who lease a duplex owned by Mrs.Reid.Even though Susan cashed the check, Mrs.Reid must include the $2,600 in her taxable income. 
C) The gift consisted of a lottery ticket.Six weeks after the gift, the ticket was drawn as a winner.Even though Susan received the $50,000 taxable prize because she was the rightful owner of the ticket, Mrs.Reid must include $50,000 in her taxable income. 
D) None of the above 
A) The gift consisted of a corporate bond that paid $10,000 interest to Susan this year.Even though Susan is the owner of the bond, Mrs.Reid must include the $10,000 in her taxable income. 
B) The gift consisted of a $2,600 rent check written by tenants who lease a duplex owned by Mrs.Reid.Even though Susan cashed the check, Mrs.Reid must include the $2,600 in her taxable income. 
C) The gift consisted of a lottery ticket.Six weeks after the gift, the ticket was drawn as a winner.Even though Susan received the $50,000 taxable prize because she was the rightful owner of the ticket, Mrs.Reid must include $50,000 in her taxable income. 
D) None of the above

Question 10

The substance over form doctrine allows the IRS to look through the legal formalities of a transaction to determine its true economic nature.

Accepted Answer

A) True 
 B)False

Question 11

The tax character of an item of income can change when Congress amends the tax law.

Accepted Answer

A) True 
 B)False

Question 12

Mrs. Jax plans to pay $100,000 for one of three investment alternatives that have the same risk. The income from investment 1 would be taxed at Mrs. Jax's 30% regular tax rate, the income from investment 2 would be taxed at a 20% preferential rate, and the income from investment 3 is tax-exempt. The investments offer the following before-tax yields. Investment 1: 8.25%
Investment 2: 7.5%
Investment 3: 6.0%
Which investment should Mrs. Jax select?

Accepted Answer

A) Investment 1 
B) Investment 2 
C) Investment 3 
D) Mrs.Jax is neutral between investment 2 and investment 3. 
A) Investment 1 
B) Investment 2 
C) Investment 3 
D) Mrs.Jax is neutral between investment 2 and investment 3.

Hilex Inc. structures a transaction to shift income from its California office to its Oregon office. This tax planning strategy may be taking advantage of the:

The time period variable reflects the fact that:

The assignment of income doctrine constraints tax deferral strategies.

According to the assignment of income doctrine, income must be taxed to the person receiving the cash from an income-generating transaction.

A strategy to shift income from one taxpayer to a different taxpayer reflects the entity variable, while a strategy to shift income from one year to a different year reflects the time period variable.

Which of the following statements about ordinary income and capital gain is true?

Hilex Inc. structures a transaction to shift income from one controlled subsidiary to another controlled subsidiary. This tax planning strategy may be taking advantage of the:

Mrs. Reid made a gift to her 19-year old daughter Susan. Mrs. Reid's marginal tax rate is 35%, and Susan's marginal tax rate is 10%. Which of the following statements is true?

The substance over form doctrine allows the IRS to look through the legal formalities of a transaction to determine its true economic nature.

The tax character of an item of income can change when Congress amends the tax law.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, Llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process a Present Value of $1 B Present Value of Annuity of $1 C 2013 Income Tax Rates

Filters

Exam 4: Maxims of Income Tax Planning

Hilex Inc. structures a transaction to shift income from its California office to its Oregon office. This tax planning strategy may be taking advantage of the:

The time period variable reflects the fact that:

The assignment of income doctrine constraints tax deferral strategies.

According to the assignment of income doctrine, income must be taxed to the person receiving the cash from an income-generating transaction.

A strategy to shift income from one taxpayer to a different taxpayer reflects the entity variable, while a strategy to shift income from one year to a different year reflects the time period variable.

Which of the following statements about ordinary income and capital gain is true?

Hilex Inc. structures a transaction to shift income from one controlled subsidiary to another controlled subsidiary. This tax planning strategy may be taking advantage of the:

Mrs. Reid made a gift to her 19-year old daughter Susan. Mrs. Reid's marginal tax rate is 35%, and Susan's marginal tax rate is 10%. Which of the following statements is true?

The substance over form doctrine allows the IRS to look through the legal formalities of a transaction to determine its true economic nature.

The tax character of an item of income can change when Congress amends the tax law.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, Llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process a Present Value of $1 B Present Value of Annuity of $1 C 2013 Income Tax Rates

Filters