Exam 1: Federal Income Taxation-An Overview

Phyllis is an electrician employed by Bogie Company. Phil is a self-employed electrician. During the current year, Phyllis's salary is $75,000 and Phil's net self-employment income is $75,000. Which of the following statements about the Social Security and self-employment taxes paid is/are correct? I.Phil's self-employment tax is greater than the Social Security tax paid on Phyllis's income. II.Phil pays more self-employment tax than Phyllis pays in Social Security tax. III.Phil and Phyllis pay the same amount of tax. IV.Phil's self-employment tax is equal to the Social Security tax paid on Phyllis's income. ​

A CPA may prepare tax returns using estimates provided by the taxpayer if it is impracticable to obtain exact data and the estimates are reasonable.

Frank and Fran are married and have a 2018 taxable income of $280,000. They also received $20,000 of tax-exempt income. Their average tax rate is:

Match each term with the correct statement below. -Based on the value of the property being taxed.

All tax practitioners are governed by the AICPA's Code of Professional Conduct.

Adjusted gross income (AGI) I.is used to provide limitations on certain deductions from AGI.II.is unique to the individual income tax formula. III.is the result before subtracting certain allowable personal expenditures from gross income. ​

Match each term with the correct statement below. -Increases in wealth and recoveries of capital that Congress has decided should not be subject to income tax.

On January 4, 2018, Owen died and left ranch land with a value of $300,000 to his brother, Victor. This transfer was purely donative with no expectation of anything in return. Victor transferred all of this land to his corporation, Circle C Ranch, Inc. Victor is the president and an active employee of the corporation. Victor's salary from the corporation is $40,000 per year. The ranch land is located in Torrent County, Texas. The Torrent Appraisal District appraises the property. ? From the above facts name six different types of federal, state, or local taxes that might have to be paid and name the entity that is liable to pay them.

The term "tax law" as used in your textbook includes I.Treasury regulations. II.College textbooks (i.e. "Concepts in Federal Income Taxes"). III.Internal Revenue Code of 1986. IV.Tax related decisions of a U.S. Circuit Court of Appeals. ​

An annual loss results from an excess of allowable deductions for a tax year over the reported income.

Amy hired Carey, a CPA, to prepare her 2018 federal income tax return. Amy had prepared her own 2017 return. In reviewing her records, Carey discovered that Amy had recorded $5,000 of consulting income she received by check in December 2017 as though it had been received in 2018. What should Carey do about this situation?

Betty hires Sam, a C.P.A., to prepare her current federal income tax return. In preparing the return, Sam incorrectly computes the total of her charitable contributions by accidentally adding the same amount twice. This overstates her deductions and understates her tax liability. I.Sam is subject to a penalty for the preparation of a fraudulent tax return. II.Sam is subject to a penalty for having taken an unrealistic tax position. ​

Harriet and Harry are married and have total gross income of $65,000. Their allowable deductions for adjusted gross income total $1,500 and they have $4,400 of allowable itemized deductions. What are Harriet and Harry's taxable income and income tax liability for 2018?

Sonya owes a deductible expense that she can pay either (and deduct) this year or next year. She is in the 24% marginal tax rate bracket. Which of the following statements about this payment is/are correct? I.Deductions should always be taken as soon as possible. Sonya should pay the expense this year. II.If Sonya expects to be in the 32% marginal tax rate bracket next year, she should pay the expense this year. III.If Sonya expects to be in the 12% marginal tax rate bracket next year, she should pay the expense this year. IV.If Sonya expects to be in the 24% marginal tax rate bracket next year, she should pay the expense this year. ​

Which of the following statements is/are correct? I.There is a minimum allowable standard deduction from adjusted gross income of individuals. II.Corporations are allowed deductions from adjusted gross income. III.Corporations are allowed a standard deduction. IV.Personal exemptions of individuals are deductible for adjusted gross income. ​

Tax planning involves the timing of income and deductions. General rules of thumb to follow when planning include I.putting income into the year with the lowest marginal tax rate. II.deferring deductions. ​

Based on the definition given in Chapter 1 of the text, which of the following is a tax? I.A registration fee paid to the state to get a car license plate. II.2% special sales tax for funding public education. III.A special property tax assessment for installing sidewalks in the taxpayer's neighborhood. IV.An income tax imposed by Chicago on persons living or working within the city limits.

Match each term with the correct statement below. -Fraudulent methods are used to reduce the actual tax liability.

Which of the following is/are categorized as itemized deduction(s)? I.Trade or business expenses. II.Rental expenses. III.Property taxes on personal residence. IV.Investment interest expense. ​

Which of the following is an example of tax evasion?