1. The Sixteenth Amendment granted Congress the right to:
Incorrect
a. Create progressive tax rates
b. Create a value-added tax
c. Tax income from whatever source derived
d. Impose a national property tax
c. Tax income from whatever source derived
2. An attractive characteristic of the personal income tax is:
Incorrect
a. It does not tax the poor.
b. It is equitable.
c. It is free from loopholes.
d. It has the ability to raise a considerable amount of money.
d. It has the ability to raise a considerable amount of money.
3. The American Recovery and Reinvestment Act of 2009 did all of the following except:
Incorrect
a. Enhanced the child care credit
b. Expanded energy incentives
c. Created a homebuyer credit
d. Lowered personal income tax rates for the wealthy
d. Lowered personal income tax rates for the wealthy
4. Net Capital gains are:
Incorrect
a. Taxed at a maximum rate of 31 percent.
b. Taxed at a maximum rate of 28 percent.
c. Taxed at a maximum rate of 20 percent
d. Taxed at a maximum rate of 15 percent.
c. Taxed at a maximum rate of 20 percent
5. Which item listed below is not a capital asset?
Incorrect
a. Stocks
b. Pleasure automobile
c. Bonds
d. Depreciable property
d. Depreciable property
6. Which of the following is published in the Federal Register?
Incorrect
a. Technical Information Releases
b. Revenue Rulings
c. Revenue Procedures
d. Treasury Regulations
d. Treasury Regulations
7. Which of the following publications includes the memorandum decisions of the United States Tax Court?
Incorrect
a. Federal Register
b. Cumulative Bulletin
c. Internal Revenue Bulletin
d. Tax Court Memorandum Decisions (TCM) (published by Wolters Kluwer
d. Tax Court Memorandum Decisions (TCM) (published by Wolters Kluwer)
8. Anna's 2013 individual tax return was examined and the IRS proposed changes resulting in additional tax. Anna wishes to bypass the IRS's appeal system and file a refund suit in the United States Court of Federal Claims on contested income tax issues. Y
c. Pay all of the additional tax, then file a claim for refund and request in writing that the claim be immediately rejected
9. Peter's return was examined and the result was additional tax of $16,000 due to unreported lottery winnings. Peter has received a letter notifying him of his right to appeal the proposed changes within 30 days. Which of the following should Peter do in
c. Submit a written protest within the time limit specified
10. If a practitioner who is authorized to practice before the IRS knows that a client has not complied with the revenue laws of the United States with respect to a matter administered by the IRS, the practitioner is required to:
Incorrect
a. Advise the c
a. Advise the client of the noncompliance
11. Which of the following is not considered when determining the total support test for a child?
Incorrect
a. Fair rental value of lodging
b. Medical insurance premiums
c. Birthday presents
d. Scholarship
e. Recreation
d. Scholarship
12. To qualify for head of household rates, which of the following must be present?
Incorrect
a. You must be unmarried on the last day of your tax year.
b. You must maintain a household and contribute over 50 percent of the cost of maintaining the househo
e. All of the above.
13. In which of the following situations will the divorced custodial parent be entitled to the dependency exemption for the child?
Incorrect
a. The noncustodial parent provides $1,500 of support for the child and custodial parent provides $1,200.
b. The c
d. All of the above.
14. Each of the following would be one of the requirements for a payment to be alimony under instruments executed after 1984 except:
Incorrect
a. Payments are required by a divorce or separation instrument.
b. Payments can be a non-cash property settlemen
b. Payments can be a non-cash property settlement.
15. In December 2015, Mr. Stone cashed qualified Series EE U.S. Savings Bonds, which he had purchased In January 2007. The proceeds were used for his son's college education. All of the following statements are correct concerning the exclusion of the inte
b. Eligible expenses include room and board.
16. The following items were received as court awards and damage during 2015. All should be included in ordinary income for 2015 by the taxpayer who received them except:
Incorrect
a. Compensation for lost wages due to slander
b. Compensatory damages for
b. Compensatory damages for physical injury
17. An ordinary trade or business expenditure is one which is:
Incorrect
a. Reasonable in amount
b. Commonly incurred by other businesses
c. Appropriate for a particular business
d. Not a capital expenditure
b. Commonly incurred by other businesses
In 2015, the maximum amount of capital expenditures eligible for immediate expensing is:
Incorrect
a. $139,000
b. $25,000
c. $500,000
d. $2,000,000
b. $25,000
19. Benson Company experienced partial destruction of a warehouse from a tornado. The warehouse had a basis of $200,000 at the time of the casualty. Its fair market value before the accident was $1,000,000 and afterward, $600,000. How has this event chang
b. Decrease by $200,000
20. Netoperating losses can be increased by which of the following?
Incorrect
a. Personal casualty losses
b. Business casualty losses
c. Unreimbursed employee business expenses
d. All of the above
d. All of the above
21. Which of the following unreimbursed employee expenses is deductible for adjusted gross income?
Incorrect
a. Transportation expenses
b. Union dues
c. Travel expenses
d. None of the above
d. None of the above
22. If an employee makes an adequate accounting to the employer and employer reimbursement of employee expenses is less than the expenses, the excess expenses are:
Incorrect
a. Not deductible on the employee's tax return
b. Deductible as miscellaneous ite
b. Deductible as miscellaneous itemized deductions subject to the 2 percent nondeductible floor
23. Which of the following items is not an adjustment for the alternative minimum tax?
Incorrect
a. Taxes
b. Wagering losses
c. Personal exemption
d. Standard deduction
b. Wagering losses
24. What is the amount of dependent care credit before any income tax limitation for a couple with two children where they spend $6,500 for dependent care and the husband earns $25,000 for the year and the wife earns $4,500?
Incorrect
a. $1,755
b. $1,215
c. $90
25. If an employee does not make an adequate accounting to the employer and employer reimbursement of employee expenses exceeds the expenses, the employee business expenses are:
Incorrect
a. Not shown on the employee's tax return
b. Shown as miscellaneous
b. Shown as miscellaneous itemized deductions subject to the 2 percent nondeductible floor
1. The legislative process of a tax bill begins with the:
Incorrect
a. House Ways and Means Committee
b. President
c. Senate Finance Committee
d. Any of the above
a. House Ways and Means Committee
2. The value-added tax has great appeal to politicians because:
Incorrect
a. It has the potential to raise large sums of money.
b. It taxes the rich and not the poor.
c. It is progressive in nature.
d. All of the above.
a. It has the potential to raise large sums of money.
3. If the IRS revokes or modifies a published ruling, open tax years can be retroactively affected for all taxpayers.
Incorrect
a. True
b. False
a. True
4. The Tax Reform Act of 1986:
Incorrect
a. Amended the Internal Revenue Code of 1954
b. Replaced the Internal Revenue Code 1954 with the Internal Revenue Code of 1986
c. Replaced the Internal Revenue Code 1954 with the Internal Revenue Code of 1987
d. Wa
d. Was found to be unconstitutional by Supreme Court in 1987
5. When approving a tax bill and there are differences between the House and Senate versions, the differences are resolved by the:
Incorrect
a. President
b. Speaker of the House
c. President of the Senate
d. Joint Conference Committee
d. Joint Conference Committee
6. The American Taxpayer Relief Act of 2012 did all of the following except:
Incorrect
a. Permanently patched the Alternative Minimum Tax
b. Sunset the Bush-era tax cuts
c. Installed a maximum 20 percent capital gains tax rate
d. Extended the American Opp
b. Sunset the Bush-era tax cuts
7. Based upon the organization of the Internal Revenue Code, what general topic would be covered in Code Sec. 731?
Incorrect
a. Capital gains and losses
b. Partners and partnerships
c. Exempt organizations
d. Insurance companies
b. Partners and partnerships
8. To read an IRS Revenue Ruling that was issued within the past week which source should be used?
Incorrect
a. Internal Revenue Code
b. Cumulative Bulletin
c. Federal Register
d. IRS Toll Free Number
c. Federal Register
9. Which of the following publications includes the regular decisions of the United States Tax Court?
Incorrect
a. Federal Register
b. Internal Revenue Bulletin
c. United States Tax Court Reports
d. Tax Court Memorandum Decisions (TCM) (published by Wolte
c. United States Tax Court Reports
10. Which of the following statements is not correct in respect to tax return preparer penalties?
Incorrect
a. The penalty for an understatement due to the preparer's negligent or intentional disregard of one or more rules or regulations is $250; for will
c. The IRS has the burden of proof that a preparer has negligently or intentionally disregarded a rule or regulation.
11. Reginald filed his 2014 income tax return on January 15, 2015. On November 1, 2015, he learned that his investment of $10,000 in 1,000 shares of Ultimate Corp. had become worthless in 2014. What is the last day on which he must file an amended 2014 re
d. April 15, 2022
12. Mr. Smith died early in the year. Mrs. Smith remarried in December and, therefore, was unable to file a joint return with Mr. Smith. What is the filing status of the decedent, Mr. Smith?
Incorrect
a. Single
b. Married filing separate return
c. Married
b. Married filing separate return
13. Which relative does not have to live in the same household of the taxpayer claiming head of household filing status?
Incorrect
a. Aunt
b. Son
c. Granddaughter
d. Father
e. Brother
d. Father
Which of the following item(s) must be included in an individual's return as income
Incorrect
a. Compensation for services
b. Prizes and awards
c. Inheritance
d. (a) and (b)
e. All of the above
d. (a) and (b)
15. A distribution of stock or stock rights is generally considered a taxable dividend unless it is which of the following:
Incorrect
a. A distribution in lieu of money
b. A proportionate distribution
c. A distribution with respect to preferred stock
d. A
b. A proportionate distribution
16. The "fruit-of-the-tree" concept is associated with which doctrine regarding income:
Incorrect
a. Constructive Receipt Doctrine
b. Assignment of Income Doctrine
c. Economic Benefit Doctrine
d. All of the above
e. None of the above.
Assignment of Income Doctrine
17. All of the following fringe benefits can be excluded from the employee's income except:
Incorrect
a. Transportation up to $130 per month for combined commuter highway vehicle transportation and transit passes, and $250 per month for qualified parking.
d. Memberships to municipal athletic facilities for employees, their spouses, and their dependent children.
18. On January 4, 2015, Ralph Stuart, an employee of Hard Manufacturing Inc., enrolled for the spring semester at State University where he is a candidate for an undergraduate degree in accounting. His employer reimbursed him for the following expenses: $
c. $2,600
19. Jacob is 69 years old and elects group-term life insurance of $200,000. The employer pays 60 percent of the cost of the life insurance plan; and employees pay at a uniform rate of $0.35 per $1,000 per month to cover the other 40 percent of the plan co
b. $1,446
20. For an individual taxpayer, expenses connected with rents and royalties are normally deducted:
Incorrect
a. For AGI
b. From AGI
c. Either for or from AGI
d. For AGI but limited to a maximum percentage amount
a. For AGI
21. A necessary trade or business expenditure is one which is:
Incorrect
a. Reasonable in amount
b. Commonly incurred by other businesses
c. Appropriate for a particular business
d. Not a capital expenditure
c. Appropriate for a particular business
22. Which of the following is not a passive activity?
Incorrect
a. Owning a limited partnership interest in an oil and gas limited partnership
b. Having rental residential properties
c. Owning a business and not materially participating
d. Being a materia
d. Being a material participant in a small-tool rental business (averaging three days use)
23. Which of the following taxpayers would be least likely to qualify for a home office deduction?
Incorrect
a. Self-employed individual
b. Employee with an office on the employer's premises
c. Owner of property held for production of income
d. Employee w
b. Employee with an office on the employer's premises
Bob White owned a cabin in the Great Smoky Mountains. He used it for 16 days and rented it out for 190 days during the year. Which of the following is true?
Incorrect
a. All allocated expenses are deductible (subject to the passive loss rules).
b. Only al
All allocated expenses are deductible (subject to the passive loss rules).
Kearney Kramer donated to his church stock which he had held for five months. The stock had a fair market value of $1,000 at the Time of the gift, but had only cost Kearney $700. What is the amount deductible as a charitable contribution?
Incorrect
a. $1,
c. $700