01. Taxes influence which of the following decisions?
A. business decisions
B. personal decisions
C. political decisions
D. investment decisions
E. all of these
E. all of these
02. Margaret was issued a $150 speeding ticket. This is:
A. A tax because payment is required by law
B. A tax because the payment is not related to any specific benefit received from the
government agency collecting the ticket
C. Not a tax because it is c
C. Not a tax because it is considered a fine intended to punish illegal behavior
03. Earmarked taxes are:
A. Taxes assessed only on certain taxpayers
B. Taxes assessed to fund a specific purpose
C. Taxes assessed for only a specific time period
D. Taxes assessed to discourage less desirable behavior
E. None of these
B. Taxes assessed to fund a specific purpose
04. Sin taxes are:
A. Taxes assessed by religious organizations
B. Taxes assessed on certain illegal acts
C. Taxes assessed to discourage less desirable behavior
D. Taxes assessed to fund a specific purpose
E. None of these
C. Taxes assessed to discourage less desirable behavior
05. To calculate a tax, you need to know:
I. the tax base
II. the taxing agency
III. the tax rate
IV. the purpose of the tax
A. Only I is correct
B. Only IV is correct
C. Only III is correct
D. Items I through IV are correct
E. I and III are correct
E. I and III are correct
06. Which of the following is not an example of a graduated tax rate structure?
A. Progressive tax rate structure
B. Proportional tax rate structure
C. U.S. Federal Income Tax
D. Regressive tax rate structure
E. None of these
B. Proportional tax rate structure
07. The difficulty in calculating a tax is typically in the determination of:
A. The correct tax rate
B. Where to file the tax return
C. The tax base
D. The due date for the return
E. None of these
C. The tax base
08. Which of the following is not one of the basic tax rate structures?
A. Proportional
B. Equitable
C. Regressive
D. Progressive
E. All of these are different kinds of the basic tax rate structures
B. Equitable
09. The state of Georgia recently increased its tax on a carton of cigarettes by $2.00. What type of tax is this?
A. A sin tax
B. An excise tax
C. It is not a tax; it is a fine
D. A sin tax and An excise tax are correct
E. None of these is correct
D. A sin tax and An excise tax are correct
10. The ultimate economic burden of a tax is best captured by:
A. The marginal tax rate
B. The effective tax rate
C. The average tax rate
D. The proportional tax rate
E. None of these is correct
B. The effective tax rate
11. Which of the following taxes represents the largest portion of U.S. Federal Tax revenues?
A. Employment taxes
B. Corporate income taxes
C. Individual income taxes
D. Estate and gift taxes
E. None of these
C. Individual income taxes
12. Which of the following is true regarding use taxes?
A. A use tax is relatively easy to enforce compared to a sales tax.
B. Use taxes attempt to eliminate any tax advantage of purchasing goods out of state.
C. Use taxes encourage taxpayers to buy goods
B. Use taxes attempt to eliminate any tax advantage of purchasing goods out of state.
13. Which of the following is true regarding real property taxes and personal property taxes?
A. Personal property taxes are assessed on permanent structures and land
B. Real property taxes are assessed on cars and boats
C. All U.S. states currently impos
D. Real property taxes are generally easier to administer than personal property taxes
14. Congress recently approved a new, bigger budget for the IRS. What taxation concept evaluates the cost of administering our tax law?
A. Convenience
B. Economy
C. Certainty
D. Equity
E. None of these
B. Economy
15. Employers often withhold federal income taxes directly from worker's paychecks. This is an example of which principle in practice?
A. Convenience
B. Certainty
C. Economy
D. Equity
E. None of these
A. Convenience
16. If Lindley requests an extension to file her individual income tax return, the latest she could pay her tax due without penalty is:
A. April 15th.
B. October 15th.
C. August 15th.
D. November 15th.
E. None of these.
A. April 15th.
17. Andy filed a fraudulent 2015 tax return on May 1, 2016. The statute of limitations for IRS assessment on Andy's 2015 tax return should end:
A. May 1st, 2018.
B. April 15th, 2018.
C. May 1st, 2019.
D. April 15th, 2019.
E. None of these.
E. None of these.
18. Dan received a letter from the IRS that gave him the choice of (1) requesting a conference with an Appeals Officer or (2) agreeing to a proposed tax adjustment. Dan received the:
A. 30-day letter.
B. 90-day letter.
C. Appeals letter.
D. Tax adjustment
A. 30-day letter.
19. Which of the following courts is the only court that provides for a jury trial?
A. Tax Court.
B. U.S. Court of Federal Claims.
C. U.S. District Court.
D. U.S. Circuit Court of Appeals.
E. None of these.
C. U.S. District Court.
20. Lavonda discovered that the 5th Circuit (where Lavonda resides) has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case:
A.
D. Tax Court or the U.S. District Court.
21. Lavonda discovered that the U.S. Circuit Court of Appeals for the Federal Circuit has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to
B. U.S. Court of Federal Claims only
22. Rowanda could not settle with the IRS at the appeals conference. If she wants to litigate the issue but does not have sufficient funds to pay the proposed tax deficiency, Rowanda should litigate in the:
A. U.S. District Court.
B. U.S. Circuit Court of
D. Tax Court.
23. Which of the following is not considered a primary authority?
A. Tax Court case.
B. Regulation.
C. Revenue Ruling.
D. Tax service.
E. None of these.
D. Tax service.
24. Which of the following is not considered a secondary authority?
A. Text book.
B. Private Letter Ruling.
C. Tax article.
D. Tax service.
E. None of these.
B. Private Letter Ruling.
25. Which of the following has the highest authoritative weight?
A. Text book.
B. Private letter ruling.
C. Revenue ruling.
D. Tax service.
E. Tax article.
C. Revenue ruling.
26. Generally, code sections are arranged (grouped together):
A. chronologically.
B. by topic.
C. randomly.
D. by length.
E. None of these.
B. by topic.
27. Which judicial doctrine means that a court will rule consistently with its previous rulings and the rulings of higher courts with appellate jurisdiction?
A. judicial hierarchy.
B. the Goldman rule.
C. judicial consistency.
D. stare decisis.
E. None of
D. stare decisis.
28. Which of the following committees typically initiates tax legislation?
A. House Ways and Means Committee.
B. Joint Conference Committee.
C. Senate Finance Committee.
D. Senate Tax Committee.
E. None of these.
A. House Ways and Means Committee.
29. Edie would like to better understand a new code section enacted four weeks ago. Which of the following authorities will help Edie understand the newly enacted code section?
A. IRS regulations.
B. U.S. Tax Court cases.
C. Committee reports.
D. IRS reve
C. Committee reports.
30. Jeremy has a new client. He has identified a research question that relates to a transaction that the client completed several months ago. This type of research question will primarily involve:
A. open facts.
B. new facts.
C. old facts.
D. closed fact
D. closed facts.
31. In a planning context,
A. closed facts are preferred to open facts.
B. new facts are preferred to old facts.
C. old facts are preferred to new facts.
D. open facts are preferred to closed facts.
E. None of these.
D. open facts are preferred to closed facts.
32. Circular 230 was issued by:
A. AICPA.
B. State Boards of Accountancy.
C. American Bar Association.
D. IRS.
E. None of these.
D. IRS.
33. Princess, who resides in the 2nd Circuit, recently found a circuit court case that is favorable to her research question. Which of the following circuits would she prefer to have issued the opinion?
A. 2nd Circuit.
B. Federal Circuit.
C. 1st Circuit.
D. 2nd Circuit or the Federal Circuit.
34. The goal of tax planning generally is to:
A. Minimize taxes.
B. Minimize IRS scrutiny.
C. Maximize after-tax wealth.
D. Support the Federal government.
E. None of these.
C. Maximize after-tax wealth.
35. Which is not a basic tax planning strategy?
A. income shifting.
B. timing.
C. conversion.
D. arms length transaction.
E. None of these.
D. arms length transaction.
36. Which of the following strategies is based on the present value of money?
A. timing.
B. tax avoidance.
C. income shifting.
D. conversion.
E. None of these.
A. timing.
37. If tax rates are decreasing:
A. taxpayers should accelerate income.
B. taxpayers should defer deductions.
C. taxpayers should defer income.
D. taxpayers should defer deductions and accelerate income.
E. None of these.
C. taxpayers should defer income.
38. A common income shifting strategy is to:
A. shift income from low tax rate taxpayers to high tax rate taxpayers.
B. shift deductions from low tax rate taxpayers to high tax rate taxpayers.
C. shift deductions from high tax rate taxpayers to low tax ra
B. shift deductions from low tax rate taxpayers to high tax rate taxpayers.
39. Which of the following is an example of the conversion strategy?
A. A corporation paying its shareholders a $20,000 dividend.
B. A corporation paying its owner a $20,000 salary.
C. A high tax rate taxpayer investing in tax exempt municipal bonds.
D. A
C. A high tax rate taxpayer investing in tax exempt municipal bonds.
40. The income shifting and timing strategies are examples of:
A. tax avoidance.
B. tax evasion.
C. illegal taxpayer strategies.
D. All of these.
E. None of these
A. tax avoidance.
41. A taxpayer earning income in "cash" and not reporting it as taxable income is an example of:
A. tax avoidance.
B. tax evasion.
C. conversion.
D. income shifting.
E. None of these.
B. tax evasion.
42. Assuming a positive interest rate, the present value of money suggests:
A. $1 today = $1 in one year.
B. $1 today > $1 in one year.
C. $1 today < $1 in one year.
D. $1 today <= $1 in one year.
E. None of these.
B. $1 today > $1 in one year.
43. If tax rates are increasing:
A. taxpayers should accelerate income.
B. taxpayers should defer deductions.
C. taxpayers should defer income.
D. you need more information to make a recommendation.
E. None of these.
D. you need more information to make a recommendation.
44. Sally received $50,000 of compensation from her employer and she received $400 of interest from a corporate bond. What is the amount of Sally's gross income from these items?
A. $0
B. $400
C. $50,000
D. $50,400
D. $50,400
Joanna received $60,000 compensation from her employer, the value of her stock in ABC company appreciated by $5,000 during the year (but she did not sell any of the stock), the received $30,000 of life insurance proceeds from the death of her husband. Wha
A. $60,000
46. Which of the following statements regarding tax deductions is false?
A. Taxpayers are not entitled to any deductions unless specific provisions in the tax code allow the deductions.
B. Deductions can be labeled as deductions above the line or deductio
C. From AGI deductions tend to be associated with business activities while for AGI deductions tend to be associated with personal activities.
47. Lebron received $50,000 of compensation from his employer and he received $400 of interest from a municipal bond. What is the amount of Lebron's gross income from these items?
A. $0
B. $400
C. $50,000
D. $50,400
C. $50,000
48. Which of the following series of inequalities is generally most accurate?
A. Gross income is greater than or equal to adjusted gross income which is greater than or equal to taxable income
A. Gross income is greater than or equal to adjusted gross income which is greater than or equal to taxable income
49. Which of the following statements regarding for AGI tax deductions is true?
A. Taxpayers subtract for AGI deductions from gross income to determine AGI.
B. A taxpayer may deduct for AGI deductions only if the deductions exceed the taxpayer's standard
A. Taxpayers subtract for AGI deductions from gross income to determine AGI.
50. All of the following are for AGI deductions except:
A. Moving expenses
B. Rental and royalty expenses.
C. Business expenses for a self-employed taxpayer.
D. Charitable contributions.
D. Charitable contributions.
51. Which of the following is not an itemized deduction?
A. Alimony paid.
B. Medical expenses
C. Personal property taxed paid on a personal use automobile.
D. Charitable contributions.
A. Alimony paid.
52. Which of the following shows the correct relationship among standard deduction amounts for the respective filing statuses? from highest deduction amount to least deduction amount.
Married filing jointly
Head of household
Single
53. Which of the following statements regarding exemptions is correct?
A. Personal exemptions are more valuable than dependency exemptions.
B. Taxpayers filing a married filing joint return are limited to two exemptions on their tax returns.
C. Exemption
D. Taxpayers subtract exemption deductions from adjusted gross income in determining taxable income.
54. Which of the following types of income are not considered ordinary income?
A. Compensation income.
B. Net long-term capital gains (in excess of short-term capital losses).
C. Qualified dividend income.
D. Both compensation income and qualified dividen
E. Both net long-term capital gains (in excess of short-term capital losses) and qualified dividend income.
55. All of the following represents a type or character of income except:
A. Tax exempt
B. Capital
C. Qualified dividend.
D. Normal
D. Normal
56. Which of the following statements is true?
A. Income character determines the tax year in which the income is taxed.
B. Income character depends on the taxpayer's filing status.
C. Qualified dividend income is taxed at a lower rate than the same amoun
C. Qualified dividend income is taxed at a lower rate than the same amount of ordinary income.
57. Jamison's gross tax liability is $7,000. Jamison had $2,000 of available credits and he had $4,000 of taxes withheld by his employer. What is Jamison's taxes due (or taxes refunded) with his tax return?
A. $5,000 taxes due
B. $1,000 taxes due
C. $1,00
B. $1,000 taxes due
58. Madison's gross tax liability is $9,000. Madison had $3,000 of tax credits available and she had $8,000 of taxes withheld by her employer. What is Madison's taxes due (or tax refunded) with her tax return?
A. $0 taxes due and $0 tax refund.
B. $6,000
C. $2,000 tax refund.
59. Which of the following statements regarding personal and dependency exemptions is false?
A. A married couple filing jointly may claim two personal exemptions.
B. To qualify as a dependent of another, an individual must be a resident of the United Stat
B. To qualify as a dependent of another, an individual must be a resident of the United States.
60. Which of the following relationships does NOT pass the relationship test for a qualifying child?
A. Stepsister's daughter
B. Half-brother
C. Cousin
D. Stepsister
C. Cousin
61. Which of the following is not a necessary condition for income to be included in gross income.
A. Income must be realized.
B. Income must be paid in cash.
c. Income cannot be excluded by law.
D. Income must be made available to a taxpayer on the cash
B. Income must be paid in cash.
62. Sally is a cash basis taxpayer and a member of the Valley Barter club. This year Sally provided 100 hours of sewing services to the barter club in exchange for two football playoff tickets. Which of the following is a true statement?
A. Sally need not
C. Sally is taxed on the value of the football tickets even if she cannot attend the game.
63. This year Barney purchased 500 shares of Bell common stock for $20 per share. At year-end the Bell shares were only worth $2 per share. What amount can Barney deduct as a loss this year?
A. $10,000
B. $9,000
C. $1,000
D. Barney can deduct $10,000 only
E. None of these-Barney is not entitled to a loss deduction.
64. Identify the rule that determines whether a taxpayer must include a refund of an amount deducted in a previous year.
A. Tax refund rule.
B. Constructive receipt.
C. Return of capital principle.
D. Tax benefit rule.
E. None of these.
D. Tax benefit rule.
65. Identify the rule dictating that on a sale of an asset a taxpayer need only include the incremental gain in gross income rather than the entire proceeds from the sale:
A. Tax benefit rule.
B. Constructive receipt.
C. Return of capital principle.
D. Wh
C. Return of capital principle.
66. Identify the rule that income has been realized when a taxpayer receives the income and there are no restrictions on the taxpayer's use o the income (e.g., no obligation to repay the amount):
A. Claim of right
B. Constructive receipt
C. Return of capi
A. Claim of right
67. Dave is a plumber who uses the cash method of accounting. This year Dave requested that his clients make their checks payable to his son, Steve. This year Steve received checks in the amount of $62,000 for Dave's plumbing services. Which of the follow
A. Dave is taxed on $62,000 of plumbing income this year
B. Steve is taxed on $62,000 of plumbing income this year
68. Kevin provided services to several clients this year who paid with different types of property. Which of the following payments is not included in Kevin's gross income?
A. Cash
B. Shares of stock listed on the New Year Stock Exchange.
C. A used car.
D
E. All of these are included in gross income.
69. This year Mary received a $200 refund of state income taxes that she deducted on her tax return last year. Mary included a total of $4,000 of state income taxes when she itemized deductions last year. What amount of the refund, if any, should Mary inc
B. $200 is included if itemized deductions exceeded the standard deduction by $200.
70. Which of the following is a true statement about the first payment received from a purchased annuity?
A. The payment is included in gross income.
B. A portion of the payment is a return of capital.
C. The payment can only be taxed in the year after th
B. A portion of the payment is a return of capital.
71. Which of the following is a description of how the annuity exclusion ration is calculated for an annuity paid over a fixed period?
A. The expected return is dividend by the number of payments.
B. The original investment is divided by the prevailing in
C. The original investment is divided by the number of payments.
72. In year 1, Harold Weston's wife died. Since her death, he has maintained a household for their son Frank (age 3), his qualifying child. Which is the most advantageous filing status available to Harold in year 4?
A. Married filing joint
B. Surviving sp
D. Head of Household
73. To calculate a gain or loss on the sale of an asset, the proceeds from the sale are reduced by which of the following?
A. Tax basis of the property.
B. Selling expenses.
C. Amount realized.
D. Tax basis of the property and selling expenses.
E. All of
D. Tax basis of the property and selling expenses.
74. During the current tax year, Esther had the following transactions:
Salary $50,000
Bank Loan
(proceeds to buy personal auto) $10,000
Alimony received $6,000
Child support received $12,000
Gift from aunt $20,000
Esther's AGI is:
A. $32,000
B. $38,000
C
D. $56,000
75. In 2014, Cindy had the following transactions:
Salary $90,000
Short-term capital gain from a stock investment
$4,000
Moving expense to change jobs (11,000)
Received repayment of $20,000 loan she made to her sister in 2009 (includes no interest) $20,00
E. $83,000
{90,000 + 4,000 - 11,000}