Question 1

Interest is not imputed on a gift loan between two individuals totaling $100,000 except when the borrowed funds are used to purchase income-producing property.

Accepted Answer

A) True 
 B)False

Question 2

Imputation of interest could be required on all of the following loans with the exception of

Accepted Answer

A)  a loan between a partnership and a 55% partner. 
B)  a loan between a mother and son. 
C)  a loan between an employer and employee. 
D)  a loan between two best friends. 
A)  a loan between a partnership and a 55% partner. 
B)  a loan between a mother and son. 
C)  a loan between an employer and employee. 
D)  a loan between two best friends.

Question 3

A taxpayer who uses the LIFO method of inventory valuation may use the lower of cost or market method.

Accepted Answer

A) True 
 B)False

Question 4

On May 18,of last year,Yuji sold non-publicly traded stock with a cost of $12,000 for $30,000.Yuji collected $10,000 initially and is scheduled to receive $5,000 each year for four years starting this year plus an acceptable rate of interest.After receiving the first scheduled $5,000 payment,Yuji was unable to collect any further payments.After incurring legal fees of $500,Yuji recovered a portion of the stock valued at $13,000.Yuji's basis in the recovered stock is

Accepted Answer

A)  $6,500. 
B)  $7,000. 
C)  $12,500. 
D)  $13,000. 
A)  $6,500. 
B)  $7,000. 
C)  $12,500. 
D)  $13,000.

Question 5

Alvin,a practicing attorney who also owns an office supplies store,may use the cash basis for his legal practice and the accrual basis for his office supplies store.

Accepted Answer

A) True 
 B)False

Question 6

Under UNICAP,all of the following overhead costs are included in inventory except

Accepted Answer

A)  factory utilities, rent, insurance and depreciation. 
B)  officers' salaries related to production and factory administration. 
C)  research and experimentation. 
D)  All of the above are included in inventory under UNICAP. 
A)  factory utilities, rent, insurance and depreciation. 
B)  officers' salaries related to production and factory administration. 
C)  research and experimentation. 
D)  All of the above are included in inventory under UNICAP.

Question 7

Which of the following statements regarding UNICAP is incorrect?

Accepted Answer

A)  The UNICAP rules result in more costs being included in inventory for tax purposes than for financial accounting. 
B)  Taxpayers with gross receipts averaging more than $10,000,000 or more for the prior three years must apply the UNICAP provisions. 
C)  Interest must be included in inventory if the property produced is real property or long-lived property. 
D)  UNICAP requires that advertising and selling costs be allocated between inventory and cost of sales. 
A)  The UNICAP rules result in more costs being included in inventory for tax purposes than for financial accounting. 
B)  Taxpayers with gross receipts averaging more than $10,000,000 or more for the prior three years must apply the UNICAP provisions. 
C)  Interest must be included in inventory if the property produced is real property or long-lived property. 
D)  UNICAP requires that advertising and selling costs be allocated between inventory and cost of sales.

Question 8

In 2017,Modern Construction Company entered into a contract to construct a building for $5,000,000.The estimated cost to complete the building is $4,000,000 and the project will be completed in 2018.Modern incurred actual construction costs of $1,600,000 and $1,800,000 in 2017 and 2018,respectively.How much gross profit is recognized using the percentage-of-completion method in 2017 and 2018?

Accepted Answer

@#IMG-DLM& 2017: (1,600,000 / 4,000,000)

Question 9

Taxpayers who change from one accounting period to another must annualize their income for the resulting short period.

Accepted Answer

A) True 
 B)False

Question 10

On May 18,of last year,Carter sells unlisted stock with a cost of $24,000 for $60,000.Carter collects $20,000 initially and is scheduled to receive $10,000 each year for four years starting this year plus an acceptable rate of interest.After receiving the first $10,000 scheduled installment payment,Carter is unable to collect any further payments.After incurring legal fees of $1,000,Carter recovers a portion of the stock valued at $26,000.As a result of the repossession,Carter must report

Accepted Answer

A)  ordinary income of $9,000. 
B)  capital gain of $9,000. 
C)  ordinary income of $13,000. 
D)  capital gain of $13,000. 
A)  ordinary income of $9,000. 
B)  capital gain of $9,000. 
C)  ordinary income of $13,000. 
D)  capital gain of $13,000.

Question 11

Which of the following partnerships can elect the cash-basis method of accounting?

Accepted Answer

A)  a CPA firm with average revenues of $20 million 
B)  a chocolate manufacturer with average revenues of $3 million 
C)  a cleaning service partnership generating average revenues of $5.5 million whose partners are Joe, Larry and Smith Inc. 
D)  None of the above. 
A)  a CPA firm with average revenues of $20 million 
B)  a chocolate manufacturer with average revenues of $3 million 
C)  a cleaning service partnership generating average revenues of $5.5 million whose partners are Joe, Larry and Smith Inc. 
D)  None of the above.

Question 12

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

Accepted Answer

A)  fixed assets are always expensed as the taxpayer pays for the assets. 
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)  income is reported in the tax year in which payments are actually or constructively received. 
A)  fixed assets are always expensed as the taxpayer pays for the assets. 
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)  income is reported in the tax year in which payments are actually or constructively received.

Question 13

Contracts for services including accounting,legal and architectural services do not qualify for long-term contract treatment.

Accepted Answer

A) True 
 B)False

Question 14

In year 1 a contractor agrees to build a building for $2,500,000 by the end of year 2.The builder's cost is estimated to be $1,800,000.The actual costs year 1 are $900,000 and year 2's actual costs are $1,100,000.Under the percentage of completion method year 2's gross profit is

Accepted Answer

A)  $150,000. 
B)  $500,000. 
C)  $700,000. 
D)  $350,000. 
A)  $150,000. 
B)  $500,000. 
C)  $700,000. 
D)  $350,000.

Question 15

For purposes of the accrual method of accounting,the economic performance test is met when

Accepted Answer

A)  the property or services are actually provided. 
B)  the amount of the item can be reasonably estimated. 
C)  all events have occurred that establish the fact of a liability. 
D)  all events have occurred that fix the taxpayer's right to receive income. 
A)  the property or services are actually provided. 
B)  the amount of the item can be reasonably estimated. 
C)  all events have occurred that establish the fact of a liability. 
D)  all events have occurred that fix the taxpayer's right to receive income.

Question 16

Inventory may be valued on the tax return at the lower of cost or market unless

Accepted Answer

A)  replacement cost is higher than historical cost. 
B)  the taxpayer determines inventory cost using the LIFO method. 
C)  the taxpayer determines inventory cost using the FIFO method. 
D)  the cash method of accounting is used by the taxpayer. 
A)  replacement cost is higher than historical cost. 
B)  the taxpayer determines inventory cost using the LIFO method. 
C)  the taxpayer determines inventory cost using the FIFO method. 
D)  the cash method of accounting is used by the taxpayer.

Question 17

Under the cash method of accounting,income is reported for the tax year in which payments are actually or constructively received.

Accepted Answer

A) True 
 B)False

Question 18

Which entities may elect a fiscal year? Discuss how certain tax entities may circumvent the requirement of using a calendar year.

Accepted Answer

C CORPORATIONS,OTHER THAN PERSONAL SERVI

Question 19

Under the accrual method of accounting,the two tests to determine when income must be reported and expenses deducted are the all-events test and the economic performance test.

Accepted Answer

A) True 
 B)False

Question 20

Arnie is negotiating the sale of land to Phil.Arnie's basis in the land is $3,000,000,and it currently has a fair market value of $5,000,000.Phil wants to pay the purchase price over three years.Arnie suggests that Phil pays $2,000,000 at closing,then pay $1,200,000 each of the next three years.Arnie would not require that Phil pay any interest under these terms.Discuss the tax issues that Arnie should consider.

Accepted Answer

The IRS may argue that Arnie i

Interest is not imputed on a gift loan between two individuals totaling $100,000 except when the borrowed funds are used to purchase income-producing property.

Imputation of interest could be required on all of the following loans with the exception of

A taxpayer who uses the LIFO method of inventory valuation may use the lower of cost or market method.

Alvin,a practicing attorney who also owns an office supplies store,may use the cash basis for his legal practice and the accrual basis for his office supplies store.

Under UNICAP,all of the following overhead costs are included in inventory except

Which of the following statements regarding UNICAP is incorrect?

Taxpayers who change from one accounting period to another must annualize their income for the resulting short period.

Which of the following partnerships can elect the cash-basis method of accounting?

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

Contracts for services including accounting,legal and architectural services do not qualify for long-term contract treatment.

In year 1 a contractor agrees to build a building for $2,500,000 by the end of year 2.The builder's cost is estimated to be $1,800,000.The actual costs year 1 are $900,000 and year 2's actual costs are $1,100,000.Under the percentage of completion method year 2's gross profit is

For purposes of the accrual method of accounting,the economic performance test is met when

Inventory may be valued on the tax return at the lower of cost or market unless

Under the cash method of accounting,income is reported for the tax year in which payments are actually or constructively received.

Which entities may elect a fiscal year? Discuss how certain tax entities may circumvent the requirement of using a calendar year.

Under the accrual method of accounting,the two tests to determine when income must be reported and expenses deducted are the all-events test and the economic performance test.

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters

Exam 11: Accounting Periods and Methods

Interest is not imputed on a gift loan between two individuals totaling $100,000 except when the borrowed funds are used to purchase income-producing property.

Imputation of interest could be required on all of the following loans with the exception of

A taxpayer who uses the LIFO method of inventory valuation may use the lower of cost or market method.

Alvin,a practicing attorney who also owns an office supplies store,may use the cash basis for his legal practice and the accrual basis for his office supplies store.

Under UNICAP,all of the following overhead costs are included in inventory except

Which of the following statements regarding UNICAP is incorrect?

Taxpayers who change from one accounting period to another must annualize their income for the resulting short period.

Which of the following partnerships can elect the cash-basis method of accounting?

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

Contracts for services including accounting,legal and architectural services do not qualify for long-term contract treatment.

In year 1 a contractor agrees to build a building for $2,500,000 by the end of year 2.The builder's cost is estimated to be $1,800,000.The actual costs year 1 are $900,000 and year 2's actual costs are $1,100,000.Under the percentage of completion method year 2's gross profit is

For purposes of the accrual method of accounting,the economic performance test is met when

Inventory may be valued on the tax return at the lower of cost or market unless

Under the cash method of accounting,income is reported for the tax year in which payments are actually or constructively received.

Which entities may elect a fiscal year? Discuss how certain tax entities may circumvent the requirement of using a calendar year.

Under the accrual method of accounting,the two tests to determine when income must be reported and expenses deducted are the all-events test and the economic performance test.

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters