Question 1

When items of income are omitted because the cost of the time and effort of the taxpayer to accumulate the information, it is an application of the

Accepted Answer

A) Ability to Pay Concept. 
B) Administrative Convenience Concept. 
C) Arm's-Length Transaction Concept. 
D) Capital Recovery Concept. 
E) Pay-as-You-Go Concept. 
A) Ability to Pay Concept. 
B) Administrative Convenience Concept. 
C) Arm's-Length Transaction Concept. 
D) Capital Recovery Concept. 
E) Pay-as-You-Go Concept.

Question 2

Victor receives a $2,000 tax credit for childcare. The credit was earned because of Victor's expenditures for daycare for his son while Victor worked. What concept, construct, or doctrine helps explain why Victor receives this tax credit?

Accepted Answer

A) Ability to Pay Concept. 
B) Administrative Convenience Concept. 
C) Arm's-Length Transaction Concept. 
D) Capital Recovery Concept. 
E) Pay-as-You-Go Concept. 
A) Ability to Pay Concept. 
B) Administrative Convenience Concept. 
C) Arm's-Length Transaction Concept. 
D) Capital Recovery Concept. 
E) Pay-as-You-Go Concept.

Question 3

The administrative convenience concept explains why some items are not treated consistently when the cost of implementing a concept exceeds the benefit of using it.

Accepted Answer

A) True 
 B)False

Question 4

Under the all-inclusive income concept, the tax law always starts with the proposition that all receipts of cash are taxable.

Accepted Answer

A) True 
 B)False

Question 5

Baron pays $4,000 in legal fees. Under what conditions can Baron deduct the legal fees?

Accepted Answer

To be deductible, an expense must have a

Question 6

Guzman Corporation has its expenditure of $700,000 for salary to its president and sole shareholder disallowed as a deduction by the IRS. Comparable salaries for presidents of similarly sized firms in the same industry average $300,000. The IRS reclassified $400,000 as a nondeductible cash dividend. Which of the following form the basis for the IRS disallowance?
I.Lack of Business Purpose.
II.Administrative Convenience Concept.
III.Capital Recovery Concept.
IV.Substance over Form Doctrine.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement IV is correct. 
C) Statements I and IV are correct. 
D) Statements I, II, and IV are correct. 
E) Statements I, II, III, and IV are correct. 
A) Only statement I is correct. 
B) Only statement IV is correct. 
C) Statements I and IV are correct. 
D) Statements I, II, and IV are correct. 
E) Statements I, II, III, and IV are correct.

Question 7

Occasionally, realized gains are not recognized for tax purposes. These situations occur because
I.certain gains are excluded due to legislative grace.
II.gains are deferred on certain types of property transactions where the wherewithal-to-pay the tax resulting from the transaction is lacking.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 8

Match each term with the correct statement below.
-Fiscal year

Accepted Answer

A) Allocates income, losses, and deductions to its owners for inclusion in their personal returns. 
B) Each tax unit must keep separate records and report the results of its operations separate and apart from other tax units. 
C) Income from services must be taxed to the taxpayer rendering the service and income from property must be taxed to the owner of the property. 
D) Any tax year that ends on the last day of a month other than December. 
E) All taxpayers must report the results of their operations on an annual basis.
F)A tax year that ends on December 31.
G)A tax entity that is liable for the payment of tax. 
A) Allocates income, losses, and deductions to its owners for inclusion in their personal returns. 
B) Each tax unit must keep separate records and report the results of its operations separate and apart from other tax units. 
C) Income from services must be taxed to the taxpayer rendering the service and income from property must be taxed to the owner of the property. 
D) Any tax year that ends on the last day of a month other than December. 
E) All taxpayers must report the results of their operations on an annual basis.
F)A tax year that ends on December 31.
G)A tax entity that is liable for the payment of tax.

Question 9

Helen receives stock worth $1,000 from her grandfather as a graduation gift in May 2018 (her grandfather paid $100 for the stock many years ago). In December 2018, she receives a $100 cash dividend on the stock. Helen is not taxed on the value of the stock received in 2018, but she must include the $100 cash dividend in her 2018 gross income. Which of the following form the basis for this treatment?
I.Capital Recovery Concept.
II.Legislative Grace Concept.
III.All-inclusive Income Concept.
IV.Constructive Receipt Doctrine.
​

Accepted Answer

A) Statements II and III are correct. 
B) Statements I and IV are correct. 
C) Statements II, III, and IV are correct. 
D) Statements II and IV are correct. 
E) Only statement I is correct. 
A) Statements II and III are correct. 
B) Statements I and IV are correct. 
C) Statements II, III, and IV are correct. 
D) Statements II and IV are correct. 
E) Only statement I is correct.

Question 10

After buying a new sofa at the furniture store, Hilda finds a $1,000 bill in the parking lot near her car. What are the tax effects of this find?
I.Hilda must recognize $1,000 of income for this tax year.
II.The all-inclusive-income concept applies in this situation.
III.Hilda will not recognize the $1,000 because the IRS will never know about the windfall.
IV.Hilda will not recognize the $1,000 because there is not a specific tax law provision requiring it.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Only statement IV is correct. 
D) Statements I and II are correct. 
E) Statements II and III are correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Only statement IV is correct. 
D) Statements I and II are correct. 
E) Statements II and III are correct.

Question 11

When Kerri filed her 2018 tax return on April 15, 2019, she did not include a $2,000 bonus received from her employer on January 10, 2019 relating to her work performance during 2018. What concept, construct, or doctrine supports Kerri's actions?

Accepted Answer

A) Arms-length Transaction Concept. 
B) Substance Over Form Doctrine. 
C) Constructive Receipt Doctrine. 
D) Claim of Right. 
E) Entity Concept. 
A) Arms-length Transaction Concept. 
B) Substance Over Form Doctrine. 
C) Constructive Receipt Doctrine. 
D) Claim of Right. 
E) Entity Concept.

Question 12

Sam coaches a little league baseball team. He makes 15 copies of the team's schedule to give to the players on his employer's copy machine. The cost of the copies is not income to Sam due to the

Accepted Answer

A) Ability to Pay Concept. 
B) Administrative Convenience Concept. 
C) Arm's-Length Transaction Concept. 
D) Capital Recovery Concept. 
E) Pay-as-You-Go Concept. 
A) Ability to Pay Concept. 
B) Administrative Convenience Concept. 
C) Arm's-Length Transaction Concept. 
D) Capital Recovery Concept. 
E) Pay-as-You-Go Concept.

Question 13

Which of the following is a taxable entity?

Accepted Answer

A) Sole Proprietorship. 
B) Partnership. 
C) S Corporation. 
D) C Corporation. 
A) Sole Proprietorship. 
B) Partnership. 
C) S Corporation. 
D) C Corporation.

Question 14

Which of the following concepts/doctrines state(s) that items may be omitted from the tax base whenever the cost of implementing a concept exceeds the benefit of using it?

Accepted Answer

A) Ability-to-Pay. 
B) Administrative Convenience. 
C) Arm's-length Transaction. 
D) Substance-Over-Form. 
E) Tax Benefit Rule. 
A) Ability-to-Pay. 
B) Administrative Convenience. 
C) Arm's-length Transaction. 
D) Substance-Over-Form. 
E) Tax Benefit Rule.

Question 15

At what three points in time might a given expenditure be deductible?
a. ______________________
b. ______________________
c. ______________________

Accepted Answer

a. As paid or incurr

Question 16

Benji hired his three-year-old son to work in his engineering consulting firm. As long as Benji fills out all the forms and properly deposits the paychecks in his son's bank account, he will be able to deduct the expenditure as a business expense.

Accepted Answer

A) True 
 B)False

Question 17

Match each statement with the correct term below.
-Capital Recovery Concept

Accepted Answer

A) Taxpayer reports income when received in cash or its equivalent and takes deductions as they are paid. 
B) A deduction taken in one year that is recovered in a later year is reported as income in the year of recovery to the extent that the deduction reduced taxable income. 
C) Taxpayer reports income as earned and deductions as incurred. 
D) The result of an arms-length transaction. 
E) Exclusions and deductions result from specific acts of Congress that must be strictly applied and interpreted.
F)The taxability of a transaction is determined by the reality of the transaction rather than some contrived appearance.
G)The reporting of an item of income or expense on a tax return
H)No income is realized until the taxpayer's invested capital is recovered.
I)All income received is taxable unless some specific provision of the tax law allows exclusion of the item.
J)These taxpayers are not deemed to transact at arms-length. 
A) Taxpayer reports income when received in cash or its equivalent and takes deductions as they are paid. 
B) A deduction taken in one year that is recovered in a later year is reported as income in the year of recovery to the extent that the deduction reduced taxable income. 
C) Taxpayer reports income as earned and deductions as incurred. 
D) The result of an arms-length transaction. 
E) Exclusions and deductions result from specific acts of Congress that must be strictly applied and interpreted.
F)The taxability of a transaction is determined by the reality of the transaction rather than some contrived appearance.
G)The reporting of an item of income or expense on a tax return
H)No income is realized until the taxpayer's invested capital is recovered.
I)All income received is taxable unless some specific provision of the tax law allows exclusion of the item.
J)These taxpayers are not deemed to transact at arms-length.

Question 18

Match each statement with the correct term below.
-Wherewithal-to-Pay Concept

Accepted Answer

A) Income is subject to tax when it is received without restrictions as to its use or disposition. 
B) Income is considered received when it is credited to the taxpayer's account or made unconditionally available to the taxpayer. 
C) A concept that is fundamental to the progressive tax rate structure. 
D) To be deductible, an expenditure must be made for a business or economic purpose that is greater than any tax avoidance motive of the taxpayer. 
E) The amount of a deduction may not exceed its cost.
F)Income should be recognized and a tax paid when the taxpayer has the resources to pay the tax.
G)A type of deductible expenditure that embodies the profit motive requirement.
H)Allows the omission of items from the tax base for which the costs of compliance exceeds the revenue generated.
I)A category of expenses that is specifically disallowed. 
A) Income is subject to tax when it is received without restrictions as to its use or disposition. 
B) Income is considered received when it is credited to the taxpayer's account or made unconditionally available to the taxpayer. 
C) A concept that is fundamental to the progressive tax rate structure. 
D) To be deductible, an expenditure must be made for a business or economic purpose that is greater than any tax avoidance motive of the taxpayer. 
E) The amount of a deduction may not exceed its cost.
F)Income should be recognized and a tax paid when the taxpayer has the resources to pay the tax.
G)A type of deductible expenditure that embodies the profit motive requirement.
H)Allows the omission of items from the tax base for which the costs of compliance exceeds the revenue generated.
I)A category of expenses that is specifically disallowed.

Question 19

The IRS has a penalty for underpayment of estimated taxes. This penalty exists because of which of the following concepts, constructs, or doctrines?

Accepted Answer

A) Pay-As-You-Go. 
B) Tax Benefit Rule. 
C) Substance-Over-Form. 
D) Administrative Convenience. 
E) Ability-To-Pay. 
A) Pay-As-You-Go. 
B) Tax Benefit Rule. 
C) Substance-Over-Form. 
D) Administrative Convenience. 
E) Ability-To-Pay.

Question 20

Match each statement with the correct term below.
-Accrual Method

Accepted Answer

A) Taxpayer reports income when received in cash or its equivalent and takes deductions as they are paid. 
B) A deduction taken in one year that is recovered in a later year is reported as income in the year of recovery to the extent that the deduction reduced taxable income. 
C) Taxpayer reports income as earned and deductions as incurred. 
D) The result of an arms-length transaction. 
E) Exclusions and deductions result from specific acts of Congress that must be strictly applied and interpreted.
F)The taxability of a transaction is determined by the reality of the transaction rather than some contrived appearance.
G)The reporting of an item of income or expense on a tax return
H)No income is realized until the taxpayer's invested capital is recovered.
I)All income received is taxable unless some specific provision of the tax law allows exclusion of the item.
J)These taxpayers are not deemed to transact at arms-length. 
A) Taxpayer reports income when received in cash or its equivalent and takes deductions as they are paid. 
B) A deduction taken in one year that is recovered in a later year is reported as income in the year of recovery to the extent that the deduction reduced taxable income. 
C) Taxpayer reports income as earned and deductions as incurred. 
D) The result of an arms-length transaction. 
E) Exclusions and deductions result from specific acts of Congress that must be strictly applied and interpreted.
F)The taxability of a transaction is determined by the reality of the transaction rather than some contrived appearance.
G)The reporting of an item of income or expense on a tax return
H)No income is realized until the taxpayer's invested capital is recovered.
I)All income received is taxable unless some specific provision of the tax law allows exclusion of the item.
J)These taxpayers are not deemed to transact at arms-length.

When items of income are omitted because the cost of the time and effort of the taxpayer to accumulate the information, it is an application of the

Victor receives a $2,000 tax credit for childcare. The credit was earned because of Victor's expenditures for daycare for his son while Victor worked. What concept, construct, or doctrine helps explain why Victor receives this tax credit?

The administrative convenience concept explains why some items are not treated consistently when the cost of implementing a concept exceeds the benefit of using it.

Under the all-inclusive income concept, the tax law always starts with the proposition that all receipts of cash are taxable.

Baron pays $4,000 in legal fees. Under what conditions can Baron deduct the legal fees?

Occasionally, realized gains are not recognized for tax purposes. These situations occur because I.certain gains are excluded due to legislative grace. II.gains are deferred on certain types of property transactions where the wherewithal-to-pay the tax resulting from the transaction is lacking.

Match each term with the correct statement below. -Fiscal year

When Kerri filed her 2018 tax return on April 15, 2019, she did not include a $2,000 bonus received from her employer on January 10, 2019 relating to her work performance during 2018. What concept, construct, or doctrine supports Kerri's actions?

Sam coaches a little league baseball team. He makes 15 copies of the team's schedule to give to the players on his employer's copy machine. The cost of the copies is not income to Sam due to the

Which of the following is a taxable entity?

Which of the following concepts/doctrines state(s) that items may be omitted from the tax base whenever the cost of implementing a concept exceeds the benefit of using it?

At what three points in time might a given expenditure be deductible? a. b. c. __

Benji hired his three-year-old son to work in his engineering consulting firm. As long as Benji fills out all the forms and properly deposits the paychecks in his son's bank account, he will be able to deduct the expenditure as a business expense.

Match each statement with the correct term below. -Capital Recovery Concept

Match each statement with the correct term below. -Wherewithal-to-Pay Concept

The IRS has a penalty for underpayment of estimated taxes. This penalty exists because of which of the following concepts, constructs, or doctrines?

Match each statement with the correct term below. -Accrual Method

Federal Income Taxation-An Overview

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, Depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Exam 2: Income Tax Concepts

When items of income are omitted because the cost of the time and effort of the taxpayer to accumulate the information, it is an application of the

Victor receives a $2,000 tax credit for childcare. The credit was earned because of Victor's expenditures for daycare for his son while Victor worked. What concept, construct, or doctrine helps explain why Victor receives this tax credit?

The administrative convenience concept explains why some items are not treated consistently when the cost of implementing a concept exceeds the benefit of using it.

Under the all-inclusive income concept, the tax law always starts with the proposition that all receipts of cash are taxable.

Baron pays $4,000 in legal fees. Under what conditions can Baron deduct the legal fees?

Occasionally, realized gains are not recognized for tax purposes. These situations occur because I.certain gains are excluded due to legislative grace. II.gains are deferred on certain types of property transactions where the wherewithal-to-pay the tax resulting from the transaction is lacking. ​

Match each term with the correct statement below. -Fiscal year

When Kerri filed her 2018 tax return on April 15, 2019, she did not include a $2,000 bonus received from her employer on January 10, 2019 relating to her work performance during 2018. What concept, construct, or doctrine supports Kerri's actions?

Sam coaches a little league baseball team. He makes 15 copies of the team's schedule to give to the players on his employer's copy machine. The cost of the copies is not income to Sam due to the

Which of the following is a taxable entity?

Which of the following concepts/doctrines state(s) that items may be omitted from the tax base whenever the cost of implementing a concept exceeds the benefit of using it?

At what three points in time might a given expenditure be deductible? a. ______________________ b. ______________________ c. ______________________

Benji hired his three-year-old son to work in his engineering consulting firm. As long as Benji fills out all the forms and properly deposits the paychecks in his son's bank account, he will be able to deduct the expenditure as a business expense.

Match each statement with the correct term below. -Capital Recovery Concept

Match each statement with the correct term below. -Wherewithal-to-Pay Concept

The IRS has a penalty for underpayment of estimated taxes. This penalty exists because of which of the following concepts, constructs, or doctrines?

Match each statement with the correct term below. -Accrual Method

Federal Income Taxation-An Overview

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, Depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Occasionally, realized gains are not recognized for tax purposes. These situations occur because I.certain gains are excluded due to legislative grace. II.gains are deferred on certain types of property transactions where the wherewithal-to-pay the tax resulting from the transaction is lacking.

At what three points in time might a given expenditure be deductible? a. b. c. __