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Which, if any, of the following statements best describes the history of the Federal income tax?
a. It did not exist during the Civil War.
b. The Federal income tax on corporations was held by the U.S. Supreme Court to be allowable under the U.S. Constitution.
c. The Federal income tax on individuals was held by the U.S. Supreme Court to be allowable under the U.S. Constitution.
d. Both the Federal income tax on individuals and on corporations was held by the U.S. Supreme Court to be contrary to the U.S. Constitution.
e. None of these.
Answer:           b
 
Which, if any, is not one of Adam Smith's canons of taxation?
a. Economy
b. Certainty
c. Convenience
d. Simplicity
e. Equality
Answer:           d
 
Which, if any, of the following taxes are proportional (rather than progressive)?
a. State general sales tax
b. Federal corporate income tax
c. Federal estate tax
d. Federal gift tax
e. All of these
Answer:           a
 
Which, if any, of the following transactions will increase a taxing jurisdiction's revenue from the ad valorem tax imposed on real estate?
a. A resident dies and leaves his farm to his church.
b. A large property owner issues a conservation easement as to some of her land.
c. A tax holiday issued 10 years ago has expired.
d. A bankrupt motel is acquired by the Red Cross and is to be used to
provide housing for homeless persons.
e. None of these.
Answer:           c
 
Which, if any, of the following transactions will decrease a taxing jurisdiction's ad valorem tax revenue imposed on real estate?
a. A tax holiday is granted to an out-of-state business that is searching for a new factory site.
b. An abandoned church is converted to a restaurant.
c. A public school is razed and turned into a city park.
d. A local university sells a dormitory that will be converted for use as an apartment building.
e. None of these.
Answer:           a
 
Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty?
a. Taxpayer compliance is greater for personal use property than for business use property.
b. The tax on automobiles sometimes considers the age of the vehicle.
c. Most states impose a tax on intangibles.
d. The tax on intangibles generates considerable revenue since it is difficult for taxpayers to avoid.
e. None of these.
Answer:           b
 
Federal excise taxes that are no longer imposed include:
a. Tax on air travel.
b. Tax on wagering.
c. Tax on the manufacture of sporting equipment.
d. Tax on alcohol.
e. None of these.
Answer:           e
 
Taxes not imposed by the Federal government include:
a. Tobacco excise tax.
b. Customs duties (tariffs on imports).
c. Tax on rent cars.
d. Gas guzzler tax.
e. None of these.
Answer:           c
 
Taxes levied by both states and the Federal government include:
a. General sales tax.
b. Custom duties.
c. Hotel occupancy tax.
d. Franchise tax.
e. None of these.
Answer:           e
 
Taxes levied by all states include:
a. Tobacco excise tax.
b. Individual income tax.
c. Inheritance tax.
d. General sales tax.
e. None of these.
Answer:           a
 
A use tax is imposed by:
a. The Federal government and all states.
b. The Federal government and a majority of the states.
c. All states and not the Federal government.
d. Most of the states and not the Federal government.
e. None of these.
Answer:           d
 
Burt and Lisa are married and live in a common law state. Burt wants to make gifts to their four children in 2014. What is the maximum amount of the annual exclusion they will be allowed for these gifts?
a. $14,000.
b. $28,000.
c. $56,000.
d. $112,000.
e. None of these.
Answer:           d
 
Property can be transferred within the family group by gift or at death. One motivation for preferring the gift approach is:
a. To take advantage of the higher unified transfer tax credit available under the gift tax.
b. To avoid a future decline in value of the property transferred.
c. To take advantage of the per donee annual exclusion.
d. To shift income to higher bracket donees.
e. None of these.
Answer:           c
 
Indicate which, if any, statement is incorrect. State income taxes:
a. Can piggyback to the Federal version.
b. Cannot apply to visiting nonresidents.
c. Can decouple from the Federal version.
d. Can provide occasional amnesty programs.
e. None of these.
Answer:           b
 
State income taxes generally can be characterized by:
a. The same date for filing as the Federal income tax.
b. No provision for withholding procedures.
c. Allowance of a deduction for Federal income taxes paid.
d. Applying only to individuals and not applying to corporations.
e. None of these.
Answer:           a
 
A characteristic of FICA is that:
a. It does not apply when one spouse works for the other spouse.
b. It is imposed only on the employer.
c. It provides a modest source of income in the event of loss of employment.
d. It is administered by both state and Federal governments.
e. None of these.
Answer:           e
 
A characteristic of FUTA is that:
a. It is imposed on both employer and employee.
b. It is imposed solely on the employee.
c. Compliance requires following guidelines issued by both state and Federal regulatory authorities.
d. It is applicable to spouses of employees but not to any children under age 18.
e. None of these.
Answer:           c
 
The U.S. (either Federal, state, or local) does not impose:
a. Franchise taxes.
b. Severance taxes.
c. Occupational fees.
d. Custom duties.
e. Export duties.
Answer:           e
 
The proposed flat tax:
a. Would eliminate the income tax.
b. Would simplify the income tax.
c. Would tax the increment in value as goods move through the production and manufacturing stages to the marketplace.
d. Is a tax on consumption.
e. None of these.
Answer:           b
 
A VAT (value added tax):
a. Is regressive in its effect.
b. Has not proved popular outside of the U.S.
c. Is not a tax on consumption.
d. Is used exclusively by third world (less developed) countries.
e. None of these.
Answer:           a
 
Characteristics of the "Fair Tax" (i.e., national sales tax) include which, if any, of the following:
a. Abolition of the Federal individual (but not the corporate) income tax.
b. Abolition of all Federal income taxes but retention of payroll taxes (including the self-employment tax).
c. Abolition of all Federal income taxes and payroll taxes but retention of the Federal estate and gift taxes.
d. Abolition of all Federal income and payroll taxes as well as the Federal estate and gift taxes.
e. None of these.
Answer:           d
 
In terms of probability, which of the following taxpayers would be least likely to be audited by the IRS?
a. Taxpayer owns and operates a check-cashing service.
b. Taxpayer is an employed electrician.
c. Taxpayer just received a $3 million personal injury award as a result
of a lawsuit.
d. Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino.
e. Taxpayer has been audited several times before.
Answer:           b
 
105. Which of the following is a characteristic of the audit process?
a. Most taxpayer audits involve "special" agents.
b. Self-employed taxpayers are less likely to be selected for audit than employed taxpayers.
c. Less important issues are handled by means of a correspondence audit.
d. If a taxpayer disagrees with the IRS auditor's finding, the only resort is to the courts.
e. None of these.
Answer:           c
 
David files his tax return 45 days after the due date. Along with the return, David remits a check for $40,000 which is the balance of the tax owed. Disregarding the interest element, David's total failure to file and to pay penalties are:
a. $400.
b. $3,600.
c. $4,000.
d. $4,400.
e. None of these.
Answer:           c
 
A characteristic of the fraud penalties is:
a. When negligence and civil fraud apply to a deficiency, the negligence penalty predominates.
b. Criminal fraud can result in a fine and a prison sentence.
c. The criminal fraud penalty is 75% of the deficiency attributable to the fraud.
d. The IRS has the same burden of proof in the case of criminal fraud than with civil fraud.
e. None of these.
Answer:           b
 
Regarding proper ethical guidelines, which (if any) of the following is correct?
a. The use of client estimates in preparing a return may be acceptable.
b. Under no circumstances should a question on a tax return be left unanswered.
c. If a client has made a mistake in a prior year's return and refuses to correct it, you should withdraw from the engagement.
d. If the exact amount of a deduction is not certain, it should be recorded as an odd amount so as to increase the appearance of greater certainty.
e. None of these.
Answer:           a
 
Both economic and social considerations can be used to justify:
a. Favorable tax treatment for accident and health plans provided for employees and financed by employers.
b. Disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g., fines, penalties, illegal kickbacks, bribes to government officials).
c. Various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.
d. Allowance of a deduction for state and local income taxes paid.
e. None of these.
Answer:           c
 
Social considerations can be used to justify:
a. Allowance of a credit for child care expenses.
b. Allowing excess capital losses to be carried over to other years.
c. Allowing accelerated amortization for the cost of installing pollution control facilities.
d. Allowing a Federal income tax deduction for state and local sales taxes.
e. None of these.
Answer:           a
 
Allowing a domestic production activities deduction for certain manufacturing income can be justified:
a. As mitigating the effect of the annual accounting period concept.
b. As promoting administrative feasibility.
c. By economic considerations.
d. Based on the wherewithal to pay concept.
e. None of these.
Answer:           c
 
Provisions in the tax law that promote energy conservation and more use of alternative (non-fossil) fuels can be justified by:
a. Political considerations.
b. Economic and social considerations.
c. Promoting administrative feasibility.
d. Encouragement of small business.
e. None of these.
Answer:           b
 
Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?
a. Nonrecognition of gain allowed for involuntary conversions.
b. Net operating loss carryback and carryover provisions.
c. Carry over of excess charitable contributions.
d. Use of the installment method to recognize gain.
e. Carry over of excess capital losses.
Answer:           a
 
Which, if any, of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS)?
a. Penalties are imposed for failure to file a return or pay a tax on time.
b. Prepaid income is taxed in the year received and not in the year earned.
c. Annual adjustments for indexation increases the amount of the
standard deduction allowed.
d. Casualty losses must exceed 10% of AGI to be deductible.
e. A deduction is allowed for charitable contributions.
Answer:           e
 
115. A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not made in lieu of rent. At the end of the lease, the value of the improvements are not income to the landlord. This rule is an example of:
a. A clear reflection of income result.
b. The tax benefit rule.
c. The arm's length concept.
d. The wherewithal to pay concept.
e. None of these.
Answer:           d
 
46. The Internal Revenue Code was first codified in what year? a. 1913
b. 1923
c. 1939
d. 1954
e. 1986
Answer:           c
 
Tax bills are handled by which committee in the U.S. House of Representatives?
a. Taxation Committee
b. Ways and Means Committee
c. Finance Committee
d. Budget Committee
e. None of these
Answer:           b
 
Federal tax legislation generally originates in what body?
a. Internal Revenue Service
b. Senate Finance Committee
c. House Ways and Means Committee
d. Senate Floor
e. None of these
Answer:           c
 
Subtitle A of the Internal Revenue Code covers which of the following taxes?
a. Income taxes
b. Estate and gift taxes
c. Excise taxes
d. Employment taxes
e. All of these
Answer:           a
 
In § 212(1), the number (1) stands for the:
a. Section number.
b. Subsection number.
c. Paragraph designation.
d. Subparagraph designation.
e. None of these.
Answer:           c
 
Which of these is not a correct citation to the Internal Revenue Code?
a. Section 211
b. Section 1222(1)
c. Section 2(a)(1)(A)
d. Section 280B
e. All of these are correct cites.
Answer:           e
 
Which of the following is not an administrative source of tax law?
a. Field Service Advice
b. Revenue Procedure
c. Technical Advice Memoranda
d. General Counsel Memorandum
e. All of these are administrative sources.
Answer:           e
 
53. Which of the following sources has the highest tax validity?
a. Revenue Ruling
b. Revenue Procedure
c. Regulations
d. Internal Revenue Code section
e. None of these
Answer:           d
 
54. Which of the following types of Regulations has the highest tax validity?
a. Temporary
b. Legislative
c. Interpretive
d. Procedural
e. None of these
Answer:           b
 
55. Which statement is not true with respect to a Regulation that interprets the tax law?
a. Issued by the U.S. Congress.
b. Issued by the U.S. Treasury Department.
c. Designed to provide an interpretation of the tax law.
d. Carries more legal force than a Revenue Ruling.
e. All of these statements are true.
Answer:           a
 
In addressing the importance of a Regulation, an IRS agent must:
a. Give equal weight to the Code and the Regulations.
b. Give more weight to the Code rather than to a Regulation.
c. Give more weight to the Regulation rather than to the Code.
d. Give less weight to the Code rather than to a Regulation.
e. None of these.
Answer:           a
 
Which item may not be cited as a precedent?
a. Regulations
b. Temporary Regulations
c. Technical Advice Memoranda
d. U.S. District Court decision
e. None of these
Answer:           c
 
What statement is not true with respect to Temporary Regulations?
a. May not be cited as precedent.
b. Issued as Proposed Regulations.
c. Automatically expire within three years after the date of issuance.
d. Found in the Federal Register.
e. All of these statements are true.
Answer:           a
 
What administrative release deals with a proposed transaction rather than a completed transaction?
a. Letter Ruling
b. Technical Advice Memorandum
c. Determination Letter
d. Field Service Advice
e. None of these
Answer:           a
 
Which of the following indicates that a decision has precedential value for future cases?
a. Stare decisis
b. Golsen doctrine
c. En banc
d. Reenactment doctrine
e. None of these
Answer:           a
 
A taxpayer who loses in a U.S. District Court may appeal directly to the:
a. U.S. Supreme Court.
b. U.S. Tax Court.
c. U.S. Court of Federal Claims.
d. U.S. Circuit Court of Appeals.
e. All of these.
Answer:           d
 
If a taxpayer decides not to pay a tax deficiency, he or she must go to which court?
a. Appropriate U.S. Circuit Court of Appeals
b. U.S. District Court
c. U.S. Tax Court
d. U.S. Court of Federal Claims
e. None of these
Answer:           c
 
63. A jury trial is available in the following trial court:
a. U.S. 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
 
A taxpayer may not appeal a case from which court:
a. U.S. District Court.
b. U.S. Circuit Court of Appeals.
c. U.S. Court of Federal Claims.
d. Small Case Division of the U.S. Tax Court.
e. None of these.
Answer:           d
 
The IRS will not acquiesce to the following tax decisions:
a. U.S. District Court.
b. U.S. Tax Court.
c. U.S. Court of Federal Claims.
d. Small Case Division of the U.S. Tax Court.
e. All of these.
Answer:           d
 
Which publisher offers the Standard Federal Tax Reporter?
a. Research Institute of America
b. Commerce Clearing House
c. Prentice-Hall
d. LexisNexis
e. None of these
Answer:           b
 
Which is presently not a major tax service?
a. Standard Federal Tax Reporter
b. Federal Taxes
c. United States Tax Reporter
d. Tax Management Portfolios
e. All of these are major tax services
Answer:           b
 
Which publisher offers the United States Tax Reporter?
a. Research Institute of America
b. Commerce Clearing House
c. LexisNexis
d. Tax Analysts
e. None of these
Answer:           a
 
When searching on an online tax service, which approach is more
frequently used?
a. Code section approach
b. Keyword approach
c. Table of contents approach
d. Index
e. All are about the same
Answer:           b
 
A researcher can find tax information on home page sites of:
a. Governmental bodies.
b. Tax academics.
c. Publishers.
d. CPA firms.
e. All of these.
Answer:           e
 
Tax research involves which of the following procedures:
a. Identifying and refining the problem.
b. Locating the appropriate tax law sources.
c. Assessing the validity of the tax law sources.
d. Follow-up.
e. All of these.
Answer:           e
 
Which tax-related website probably gives the best policy-orientation results?
a. taxalmanac.org.
b. irs.gov.
c. taxsites.com.
d. taxanalysts.com.
e. ustaxcourt.gov.
Answer:           d
 
Which court decision would probably carry more weight?
a. Regular U.S. Tax Court decision
b. Reviewed U.S. Tax Court decision
c. U.S. District Court decision
d. Tax Court Memorandum decision
e. U.S. Court of Federal Claims
Answer:           b
 
Which Regulations have the force and effect of law?
a. Procedural Regulations
b. Finalized Regulations
c. Legislative Regulations
d. Interpretive Regulations
e. All of these
Answer:           c
 
Which items tell taxpayers the IRS's reaction to certain court decisions?
a. Notices
b. Revenue Procedures
c. Revenue Rulings
d. Actions on Decisions
e. Legislative Regulations
Answer:           d
 
Which court decision carries more weight?
a. Federal District Court
b. Second Circuit Court of Appeals
c. U.S. Tax Court decision
d. Small Cases Division of U.S. Tax Court
e. U.S. Court of Federal Claims
Answer:           b
 
Which company does not publish citators for tax purposes?
a. John Wiley & Sons
b. Commerce Clearing House
c. Research Institute of America
d. Westlaw
e. Shepard's
Answer:           a
 
Which is not a primary source of tax law?
a. Notice 89-99, 1989-2 C.B. 422.
b. Estate of Harry Holmes v. Comm., 326 U.S. 480 (1946).
c. Rev. Rul. 79-353, 1979-2 C.B. 325.
d. Prop. Reg. § 1.7524T(f).
e. All of these are primary sources.
Answer:           d
 
Which statement is incorrect with respect to taxation on the CPA exam?
a. The CPA exam now has only four parts.
b. There are no longer case studies on the exam.
c. A candidate may not go back after exiting a testlet.
d. Simulations include a four-function pop-up calculator.
e. None of these are incorrect.
Answer:           b
 
In terms of the tax formula applicable to individual taxpayers, which, if any, of the following statements is correct?
a. In arriving at taxable income, a taxpayer must choose between the standard deduction and deductions from AGI.
b. In arriving at AGI, personal and dependency exemptions must be subtracted from gross income.
c. In arriving at taxable income, a taxpayer must choose between the standard deduction and claiming personal and dependency exemptions.
d. The formula does not apply if a taxpayer elects to claim the standard deduction.
e. None of these.
Answer:           a
 
In terms of the tax formula applicable to individual taxpayers, which, if any, of the following statements is correct?
a. In arriving at AGI, a taxpayer must elect between claiming deductions for AGI and deductions from AGI.
b. In arriving at taxable income, a taxpayer must elect between claiming deductions for AGI and deductions from AGI.
c. If a taxpayer has deductions for AGI, the standard deduction is not available.
d. In arriving at taxable income, a taxpayer must elect between deductions for AGI and the standard deduction.
e. None of these.
Answer:           e
 
Regarding the tax formula and its relationship to Form 1040, which, if any, of the following statements is correct?
a. Most exclusions from gross income are reported on page 2 of Form 1040.
b. An "above the line deduction" refers to a deduction from AGI.
c. A "page 1 deduction" refers to a deduction for AGI.
d. The taxable income (TI) amount appears both at the bottom of page 1 and at the top of page 2 of Form 1040.
e. None of these.
Answer:           c
 
Which of the following items, if any, is deductible?
a. Parking expenses incurred in connection with jury duty—taxpayer is a dentist.
b. Substantiated gambling losses (not in excess of gambling winnings) from state lottery.
c. Contributions to mayor's reelection campaign.
d. Speeding ticket incurred while on business.
e. Premiums paid on personal life insurance policy.
Answer:           b
 
Which, if any, of the following is a deduction for AGI?
a. Contributions to a traditional Individual Retirement Account.
b. Child support payments.
c. Funeral expenses.
d. Loss on the sale of a personal residence.
e. Medical expenses.
Answer:           a
 
Which, if any, of the following is a deduction for AGI?
a. State and local sales taxes
b. Interest on home mortgage
c. Charitable contributions
d. Unreimbursed moving expenses of an employee
e. None of these
Answer:           d
 
Which, if any, of the statements regarding the standard deduction is correct?
a. Some taxpayers may qualify for two types of standard deductions.
b. Not available to taxpayers who choose to deduct their personal and dependency exemptions.
c. May be taken as a for AGI deduction.
d. The basic standard deduction is indexed for inflation but the additional standard deduction is not.
e. None of these.
Answer:           a
 
Which, if any, of the following statements relating to the standard deduction is correct?
a. If a taxpayer dies during the year, his (or her) standard deduction must be prorated.
b. If a taxpayer is claimed as a dependent of another, his (or her) additional standard deduction is allowed in full (i.e., no adjustment is necessary).
c. If spouses file separate returns, both spouses must claim the standard deduction (rather than itemize their deductions from AGI).
d. If a taxpayer is claimed as a dependent of another, no basic standard deduction is allowed.
e. None of these.
Answer:           b
 
During 2014, Marvin had the following transactions:
Salary $50,000
Bank loan (proceeds used to buy personal auto) 10,000
Alimony paid 12,000
Child support paid 6,000
Gift from aunt 20,000
Marvin's AGI is:
a. $32,000.
b. $38,000.
c. $44,000.
d. $56,000.
e. $64,000.
Answer:           b
 
During 2014, Esther had the following transactions:
Salary $70,000
Interest income on Xerox bonds 2,000
Inheritance from uncle 40,000
Contribution to traditional IRA 5,500
Capital losses 2,500
Esther's AGI is:
a. $62,000.
b. $64,000.
c. $67,000.
d. $102,000.
e. $104,000.
Answer:           b
 
During 2014, Sarah had the following transactions:
Salary $ 80,000
Interest income on City of Baltimore bonds 1,000
Damages for personal injury (car accident) 100,000
Punitive damages (same car accident) 200,000
Cash dividends from Chevron Corporation stock 7,000
Sarah's AGI is:
a. $185,000.
b. $187,000.
c. $285,000.
d. $287,000.
e. $387,000.
Answer:           d
 
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 2010 (includes no interest) 20,000
State income taxes (5,000)
Cindy's AGI is:
a. $114,000.
b. $103,000.
c. $98,000.
d. $94,000.
e. $83,000.
Answer:           e
 
Sylvia, age 17, is claimed by her parents as a dependent. During 2014, she had interest income from a bank savings account of $2,000 and income from a parttime job of $4,200. Sylvia's taxable income is:
a. $4,200 - $4,550 = $0.
b. $6,200 - $5,700 = $500.
c. $6,200 - $4,550 = $1,650.
d. $6,200 - $1,000 = $5,200.
e. None of these.
Answer:           c
 
Tony, age 15, is claimed as a dependent by his grandmother. During 2014, Tony had interest income from Boeing Corporation bonds of $1,000 and earnings from a parttime job of $700. Tony's taxable income is:
a. $1,700.
b. $1,700 - $700 - $1,000 = $0.
c. $1,700 - $1,050 = $650.
d. $1,700 - $1,000 = $700.
e. None of these.
Answer:           c
 
Merle is a widow, age 80 and blind, who is claimed as a dependent by her son. During 2014, she received $4,800 in Social Security benefits, $2,500 in bank interest, and $1,800 in cash dividends from stocks. Merle's taxable income is:
a. $4,300 - $1,000 - $3,100 = $200.
b. $4,300 - $3,100 = $1,200.
c. $4,300 - $1,000 - $1,550 = $1,750.
d. $9,100 - $1,000 - $3,100 = $5,000.
e. None of these.
Answer:           a
 
Wilma, age 70 and single, is claimed as a dependent on her daughter's tax return. During 2014, she had interest income of $2,500 and $800 of earned income from babysitting. Wilma's taxable income is:
a. $750.
b. $900.
c. $1,750.
d. $2,200.
e. None of these.
Answer:           e
 
Kyle and Liza are married and under 65 years of age. During 2014, they furnish more than half of the support of their 19-year old daughter, May, who lives with them. She graduated from high school in May 2013. May earns $15,000 from a part-time job, most of which she sets aside for future college expenses. Kyle and Liza also provide more than half of the support of Kyle's cousin who lives with them. Liza's father, who died on January 3, 2014, at age 90, has for many years qualified as their dependent. How many personal and dependency exemptions should Kyle and Liza claim?
a. Two
b. Three
c. Four
d. Five
e. None of these
Answer:           c
 
Evan and Eileen Carter are husband and wife and file a joint return for 2014. Both are under 65 years of age. They provide more than half of the support of their daughter, Pamela (age 25), who is a full-time medical student. Pamela receives a $5,000 scholarship covering her tuition at college. They furnish all of the support of Belinda (Evan's grandmother), who is age 80 and lives in a nursing home. They also support Peggy (age 66), who is a friend of the family and lives with them. How many dependency exemptions may the Carters claim?
a. Two
b. Three
c. Four
d. Five
e. None of these
Answer:           b
 
In which, if any, of the following situations may the individual not be claimed as a dependent of the taxpayer?
a. A former spouse who lives with the taxpayer (divorce took place last year).
b. A stepmother who does not live with the taxpayer.
c. A married daughter who lives with the taxpayer.
d. A half-brother who does not live with the taxpayer and is a citizen and resident of Canada.
e. A cousin who does not live with the taxpayer.
Answer:           e
 
A qualifying child cannot include:
a. A nonresident alien.
b. A married son who files a joint return.
c. A daughter who is away at college.
d. A brother who is 28 years of age and disabled.
e. A grandmother.
Answer:           e
 
Ellen, age 12, lives in the same household with her father, grandfather, and uncle. The cost of maintaining the household is provided by her grandfather (40%) and her uncle (60%). Disregarding tie-breaker rules, Ellen is a qualifying child as to:
a. Only her father.
b. Only her grandfather and uncle.
c. Only her uncle.
d. All parties involved (i.e., father, grandfather, and uncle).
e. None of these.
Answer:           d
 
92. Millie, age 80, is supported during the current year as follows:
Percent of Support
Weston (a son) 20%
Faith (a daughter) 35%
Jake (a cousin) 25%
Brayden (unrelated close family friend) 20%
During the year, Millie lives in an assisted living facility. Under a multiple support agreement, indicate which parties can qualify to claim Millie as a dependent.
a. Weston and Faith.
b. Faith.
c. Weston, Faith, Jake, and Brayden.
d. Faith, Jake, and Brayden.
e. None of these.
Answer:           a
 
The Hutters filed a joint return for 2014. They provide more than 50% of the support of Carla, Melvin, and Aaron. Carla (age 18) is a cousin and earns $2,800 from a part-time job. Melvin (age 25) is their son and is a full-time law student. He received from the university a $3,800 scholarship for tuition. Aaron is a brother who is a citizen of
Israel but resides in France. Carla and Melvin live with the Hutters.
How many personal and dependency exemptions can the Hutters claim on their Federal income tax return?
a. Two
b. Three
c. Four
d. Five
e. None of these
Answer:           c
 
Which of the following characteristics correctly describes the procedure for the phaseout of exemptions?
a. The threshold amounts are different and depend on filing status.
b. The threshold amounts are indexed for inflation each year.
c. The phaseout procedure is known as a "stealth tax."
d. For the phaseout procedure to be applied, a taxpayer's AGI must exceed the threshold amount.
e. All of these.
Answer:           e
 
Regarding the rules applicable to filing of income tax returns, which, if any, of the following is an incorrect statement:
a. Married persons who file joint returns cannot later (after the due date of the return) substitute separate returns.
b. Married persons who file separate returns can later (after the due date of the return) substitute a joint return.
c. The usual test as to when a taxpayer must file a return is based on the total of the following: personal exemption + basic standard deduction + both additional standard deductions.
d. Special filing requirement rules exist for taxpayers who are claimed as dependents of another.
e. None of these.
Answer:           c
 
Kyle, whose wife died in December 2011, filed a joint tax return for 2011. He did not remarry, but has continued to maintain his home in which his two dependent children live. What is Kyle's filing status as to 2014?
a. Head of household
b. Surviving spouse
c. Single
d. Married filing separately
e. None of these
Answer:           a
 
Emily, whose husband died in December 2013, maintains a household in which her dependent mother lives. Which (if any) of the following is her filing status for the tax year 2014? (Note: Emily is the executor of her husband's estate.)
a. Single
b. Married, filing separately
c. Surviving spouse
d. Head of household
e. Married, filing jointly
Answer:           d
 
Which of the following taxpayers may file as a head of household in 2014?
Ron provides all the support for his mother, Betty, who lives by herself in an apartment in Fort Lauderdale.
Ron pays the rent and other expenses for the apartment and properly claims his mother as a dependent.
Tammy provides over one-half the support for her 18-year old brother, Dan.
Dan earned $4,200 in 2014 working at a fast food restaurant and is saving his money to attend college in 2015.
Dan lives in Tammy's home.
Joe's wife left him late in December of 2013. No legal action was taken and Joe has not heard from her in 2014.
Joe supported his 6-year-old son, who lived with him throughout 2014.
a. Ron only
b. Tammy only
c. Joe only
d. Ron and Joe only
e. Ron, Tammy, and Joe
Answer:           e
 
Nelda is married to Chad, who abandoned her in early June of 2014. She has not seen or communicated with him since then. She maintains a household in which she and her two dependent children live. Which of the following statements about Nelda's filing status in 2014 is correct?
a. Nelda can use the rates for single taxpayers.
b. Nelda can file a joint return with Chad.
c. Nelda can file as a surviving spouse.
d. Nelda can file as a head of household.
e. None of these statements is appropriate.
Answer:           d
 
Arnold is married to Sybil, who abandoned him in 2013. He has not seen or communicated with her since April of that year. He maintains a household in which their son, Evans, lives. Evans is age 25 and earns over $6,000 each year. For tax year 2014, Arnold's filing status is:
a. Married, filing jointly.
b. Head of household.
c. Married, filing separately.
d. Surviving spouse.
e. Single.
Answer:           c
 
Regarding the Tax Tables applicable to the Federal income tax, which of the following statements is correct?
a. For any one year, the Tax Tables are issued by the IRS after the Tax Rate Schedules.
b. The Tax Tables will always yield the same amount of tax as the Tax Rate Schedules.
c. Taxpayers can elect as to whether the use the Tax Tables or the Tax Rate Schedules.
d. The Tax Tables can be used by an estate but not by a trust.
e. No correct answer given.
Answer:           a
 
In which, if any, of the following situations will the kiddie tax not apply?
a. The child is married but does not file a joint return.
b. The child has unearned income of $2,000 or less.
c. The child has unearned income that exceeds more than half of his (or her) support.
d. The child is under age 24 and a full-time student.
e. None of these.
Answer:           b
 
Ethics refers to the beliefs, values, and principles that guide a person's life and decisions.
True
 
If something is seriously wrong, the law will prohibit it. Consequently, it's enough to rely on the law for deciding what's right or wrong.
False
 
A skeptical challenge to business ethics is that there is no common rational basis for making ethical judgments.
True
 
Gatekeepers are those people and institutions whose role is to provide checks on illegal and unethical behavior.
True
 
The major reason to study ethics is to be able to answer questions such as "what should I do?" or "what type of person should I be?" or "how shall I live in my community?"
True
 
According to philosophical ethics, a simple acceptance of customary norms is an adequate ethical perspective.
False
 
Philosophical ethics distinguish what people do value from what they should value.
True
 
Philosophical ethics denies that conformity and obedience are the best guides to how we should live.
False
 
Ethics and ethos are the same thing.
False
 
Business ethics is concerned more with reasoning than answers.
True
 
The unexamined life, according to Socrates, is not worth living.
True
 
Which of the following statements is decisive in determining whether or not to study business ethics?
Ethical concerns are as unavoidable in business as are concerns of marketing, accounting, finance, and human resources. Formal study of business ethics helps address these concerns so that businesses can integrate ethics in their decision-making.
 
Ethical behavior and an ethical reputation can provide a competitive advantage in the marketplace and with customers, suppliers, and employees.
True
 
In a society that values individual freedom, everything that is legal is ethically right and everything that is ethically wrong is illegal.
False
 
The role of an ethics course should be to convey information to a passive audience, while treating students as passive learners.
False
 
Utilitarian ethics has played a prominent role in forming public policy and laws governing finance, employment, consumerism, and world trade.
True
 
A version of utilitarian ethics invoking the tradition of Adam Smith claims that competitive markets are the best means for attaining utilitarian goals. This is "market" utilitarianism.
True
 
Virtue ethics reminds us to examine how character traits are formed and conditioned.
True
 
Because utilitarianism focuses on consequences, producing the greatest happiness for the greatest number as the sole criterion for determining ethical right and wrong, no action is ever right or wrong in itself, in all cases, in every situation—even, perhaps, lying.
True
 
Which proposition correctly describes the concept of a right?
Rights protect a person's interests.
 
According to Kant, any action's maxim that cannot be universalized is ethically wrong and should not be performed.
True
 
Which of the following statements is true of virtue ethics?
Virtue ethics directs us to consider how various character traits can contribute to, or obstruct, a worthy and good human life.
 
Rights are sometimes described as "trumps" that override the collective will. Rights function to protect certain interests that are more important and central in human well-being than the mere happiness of others.
True
 
Principle-based ethics, also called rights-based ethics, refers to the concept that the correct path to ethical decision making is determined by duties, such as obligations, commitments, and responsibilities, and not by consequences.
True
 
According to principle-based ethics, individuals possess certain basic rights that should not be violated even if doing so would increase the overall good or social happiness.
True
 
Jeremy Bentham argued that only the absence of pain is intrinsically valuable.
False
 
According to John Stuart Mill, people need to be educated and experienced in a variety of pleasures before they are competent to judge.
True
 
Unlike utilitarians, policy makers are not concerned with the well-being of the whole community.
False
 
The condition of plenty or surplus and competition allows everyone to get what they want; this is a condition of free market capitalism.
False
 
The theory of virtue ethics focuses on a full and detailed description of those character traits that would constitute a good and human life.
Egoism is simply not a factor in the ethical decision making of caring, empathetic, charitable, and sympathetic persons.
True
 
Which of the following ethical traditions implies that a greedy person who does distasteful and selfish things will not lead a fulfilling and good human life?
Virtue ethics
 
Market failures occur in a variety of situations in which the pursuit of profit will not result in a net increase in consumer satisfaction because in these situations markets fail to do what they were designed to do.
True
 
A wider interpretation of the meaning of a stakeholder as any affected party places an impossible burden on managers who would have to account for everyone who might be affected by a business decision.
True
 
According to the private property defense of the economic model of corporate social responsibility, any use of a corporation's resources for any purpose other than maximizing profits is a violation of the owners' property rights and amounts to theft.
True
 
The stakeholder theory of corporate social responsibility is totally incompatible with the utilitarian ethical theory because the stakeholder concept requires balancing the interests of all the parties affected by business decisions.
False
 
The free market, or neoclassical, theory of corporate social responsibility relies on utilitarianism and the concepts of individual rights to freedom and property for its ethical justification.
True
 
In which of the following ideas are the ethical roots of the economic model of corporate social responsibility found? Managers are ethically obliged to make as much money as possible for their stockholders because to do otherwise would undermine the very
foundations of our free society.
 
The significance of the moral minimum approach lies in its recognition that compliance with the law is insufficient for being an ethically responsible business.
True
 
Bowie's Kantian model of corporate social responsibility obliges managers to do no harm, but they must also be prepared at times to do some good or prevent some harm.
False
 
Which statement is true of Bowie's Kantian approach to business ethics?
While it is ethically good for managers to prevent harm or do some good, their duty to stockholders overrides these concerns.
 
Which of the following statements is true of the stakeholder model of corporate social responsibility?
It begins with the insight that every business decision affects a wide variety of people, benefiting some and imposing costs on others.
 
Which statement does not support the claim that an unconditioned ethical directive such as the one the economic model of corporate social responsibility demands of business management is inappropriate for utilitarian theory?
A more precise formulation of a utilitarian-based principle would be to maximize profit whenever doing so produces the greatest good for the greatest number, with the proviso that managers must consider the impact a decision will have in many ways other than merely financial.
 
The management of an online retailer is mostly interested in implementing strategies and pushing policies that result in the utilization of their stockholders' property to serve the interests of its employees and the local community. The defenders of which of the following models are likely to consider these actions as theft?
The economic model of corporate social responsibility
 
To use a company's resources for a project that does not contribute to maximizing profits is sometimes acceptable and even sometimes required under the economic model of corporate social responsibility.
False
 
Efficient markets guarantee that an ethically worthy outcome has been achieved.
False
 
Which statement represents a challenge to Evan and Freeman's defense of the stakeholder theory against the economic model of corporate social responsibility?
The stakeholder theory cannot answer the question as to how, exactly, a manager should go about balancing the diverse and competing claims of all parties.
 
In an organization, codes and rules prove to be meaningless if ethical behavior is not enforced.
True
 
Which of the following statements is true of corporate cultures?
An organization's culture offers it direction and stability during challenging times.
 
In a study of the nature of ethical leadership, if leaders strongly demonstrated individual traits of receptivity, listening, openness, and caring for people, these traits were found to impede their success and employees' perception of them as ethical leaders.
False
 
Before having an impact on the culture via a code of conduct or a statement of values, a company must first determine its mission and articulate its mission statement.
True
 
Which of these is not a requirement of internal mechanisms for reporting wrongdoing within an organization?
They must report to legal authorities.
 
Which of the following is a difference between the Federal Emergency Management Agency (FEMA) and the United States Coast Guard?
Unlike FEMA, the United States Coast Guard empowers front-line individuals to solve problems without waiting for superiors to give directions.
 
Which of the following is true of an ethical organizational culture?
An ethical culture empowers employees to act in ethically responsible ways even when the law does not require it.
 
Which of these is true regarding assessment and monitoring of the ethics of a corporate culture?
Ongoing ethics audits can and do serve all of these functions within an organization.
 
"Whistleblowing" can harm the business and the whistleblower, but has not been known to end the unethical behavior it exposes.
False
 
Ethical business leaders not only act ethically on a personal level, but also allocate corporate resources to support and promote ethical behavior in the workplace.
True
 
The critics of work-life balance practices believe that work can be a central part of an individual's identity and it can have significant benefits for people.
True
 
The Greek philosopher Aristotle disparaged work because of its very necessary, and therefore slavish, nature.
True
 
The human fulfillment model of work believes that work is the primary means for developing human potential.
True
 
A job might be described simply as work in which self-identity and the activity are independent of each other.
True
 
Karl Marx was sure that industrial capitalism inevitably, necessarily, alienates workers from the product of their work, from the creative process of work, and from their very essence as social creatures.
True
 
Which of the following is a true expression of Marx's concept of alienation? Alienation is the result of work that prevents the full development of
human potential.
 
Both liberals who believe that the ethical assessment of work should be based on how work affects the workers' ability to make free and autonomous decisions about their lives and the human fulfillment school that makes that judgment on the basis of what makes a good meaningful human life are saying essentially the same thing.
False
 
The value of housework and child care have systematically been undervalued by social programs such as Social Security, unemployment insurance, and many public policies concerned with marriage and divorce.
True
 
Indicate the statement that is not consistent with Bowie's liberal theory of work.
It is a simple enough task to find a justification for any objective, normative definition of meaningful work.
 
To the degree that work can be intellectual, leisurely, and free, it can be meaningful; employment and wage labor are as likely to attain these conditions.
False
 
In the context of the meaning of work, which of the following statements is true?
Work means activities that involve perseverance, discipline, toil, usually performed with a degree of seriousness and concentration.
 
According to the human fulfillment model, the psychological and social benefits of work do not reduce to merely subjective and personal values.
True
 
It is its potential to be intimately connected to our deepest values that makes the meaning and value of work have important implications for the structure and operation of the workplace.
True
 
The idea that the meaning and value of work is whatever the workers determine that it is simply doesn't challenge in any significant way Bowie's contention that employers have an obligation to provide meaningful work.
False
 
Which of the following would be a moral right of an individual?
The right to free speech
 
Which of the following statements is true of work?
Work is necessary to acquire many central human goods.
 
Identify the proposition that challenges the argument for mandatory union membership.
Bargaining between employers and employees will be equal only if the employees bargain for wages and benefits as individuals.
 
It is simply too much to ask of employers to provide an ideally safe workplace.
true
 
A modified version of the right to a job claims that the government should be the last resort for people who are able to work but unable to find jobs in the private sector.
true
 
Information about employees that is gathered through such technologies as polygraphs, drug-testing, surveillance, psychological tests, or electronic monitoring may sometimes have to include information that is not ordinarily job-relevant and legitimately knowable by the employer if the employer thinks the overall good of the business might someday require it.
false
 
According to the free market and classical models of corporate social responsibility, individual bargaining between employees and employers would be the best approach to workplace health and safety. Which statement does not support this approach?
The means the market uses to gather information about risks is by observing the harms done to the first generation exposed to imperfect market transactions and market failures.
 
In the context of workplace safety, risks are defined as the probability of harm, and relative risks would entail comparing the probabilities of harm involved in various activities.
true
 
Identify a moral right from the following options.
The right to work
 
Without collective bargaining, employers would have a stronger incentive to compromise with individual employees on levels of wages and benefits.
false
 
Rather than specifying every acceptable and unacceptable reason for dismissing an employee, due process refers to the procedures employers must go through before dismissing workers.
true
 
In the United States, civil rights laws do not protect employees from being fired on the basis of race and sex.
false
 
Some observers argue that insider trading is an efficient means to disseminate accurate information about the market and that it moves the markets in the direction of equilibrium. The challenge to this argument is, however, that this is accomplished by unfair and unethical means.
true
 
The Kantian tradition in principle-based ethics argues that dishonesty treats others as a means to our own ends and thus disrespects the dignity of other persons.
true
 
Personal interests of managers that interfere with their responsibilities as managers constitute an unethical conflict for them.
true
 
The fact that employees take on special role-specific responsibilities within an economic system that benefits everyone is one reason offered for the claim that these responsibilities override other ethical considerations.
true
 
Which of the following statements accurately represents philosopher Ronald Duska's views on loyalty in business?
Employees have no responsibility of loyalty to their employees as the overriding goal of business is profit.
 
While it is plausible that some dishonest acts, like bluffing a person in a business transaction, can have beneficial social consequences that do not threaten the stability of underlying social practices, it would be harder to claim that routine dishonesty would not erode the trust that does seem essential to social cooperation.
true
 
Ensuring that markets function within the law, assume full information, and must be free from fraud and deception is an important internal function for market-based economic systems.
true
 
Which statement is not true of the agency concept?
The primary responsibilities in the employer-agent relationship lie with the employer.
 
According to Richard DeGeorge, even if a whistle-blower does not have documented evidence that will convince impartial observers of a firm's role in causing harm, he or she is nevertheless obligated to blow the whistle.
false
 
One reason why a blanket obligation for all employees to obey their employers no matter what is unreasonable is that the choice of obeying someone's command or jeopardizing one's job is fundamentally coercive, and, thus, the consent involved is not fully free.
true
 
 
For Don Marquis, the generalizations relied upon by both those who oppose and those who favor abortion are
accidental
 
Which is not a method of inducing abortion?
Carbon monoxide
 
Law and morality
can differ with regard to abortion
 
Quickening" means that the mother
can feel fetal movement
 
Which of the following is an abortion drug that induces uterine contractions and expulsion of the embryo if used within seven weeks of a missed menstrual period?
RU486
 
What are the two ways to reduce abortion rates, according to Manninen?
By preventing unplanned pregnancies and by changing certain aspects of society so that women aren't coerced into choosing abortion because having a child will compromise other important goals.
 
When does viability occur?
At approximately the fifth month.
 
Why don't act utilitarians concern themselves with the personhood of the fetus?
It is the effects on the mother, child, and others that concern utilitarians, not the moral status of the fetus.
 
According to Don Marquis, why is killing (and therefore abortion) wrong?
Killing deprives the victim of valued future projects, activities, and experiences.
 
According to Manninen, what stereotype of prochoice advocates have antichoice advocates seized upon to advance their cause?
They are callous toward fetal life.
 
The linguist Deborah Tannen claims that the Golden Rule doesn't work when people have different visions of correct behavior
True
 
What does the film Eat Drink Man Woman illustrate? Select the most likely to answer
The Asian tradition of the duty of taking care of one's parents
 
While showing gratitude is something many must learn, receiving gratitude is not difficult at all
False
 
The vice of excess corresponding to compassion is cold-heartedness
False
 
Jane English uses the "debt-metaphor" to advocate the idea that grown children owe a debt to their parents for raising them
False
 
Taoism is a philosophy that advocates that the superior person must try to affect change in order to improve life for others
False
 
For Philip Hallie, institutionalized cruelty had the psychological effect that the victim comes to believe the cruelty is justified
True
 
The Good Samaritan is the story of a man in ancient Israel who stopped to help an accident victim and was himself mugged by thieves
False
 
Mencius and Rousseau agreed that humans are good by nature but have been corrupted by the circumstances of life
True
 
What is institutionalized cruelty, according to Philip Hallie?
A systematic physical and psychological breakdown of victims by victimizers
 
According to Aristotle, courage is a virtue when the individual making a decision apprises the situation carefully, to avoid unnecessary harm, before actually acting
True
 
All courage is of the physical kind
False
 
Trevor in Pay It Forward most connects to or represents which theoretical position from Chapter 4?
Reciprocal altruism
 
Confucius identifies a man of virtue as having three specific characteristics. Which of the following is not one of those characteristics?
A good head for business
 
In Huckleberry Finn, Huck helps the runaway slave Jim, and Jonathan Bennett thinks Huck is doing the wrong thing
False
 
Scientists like Damasio and Hauser would agree that "nature precedes nurture"
True
 
English suggests that parents ought to say to their grown children, "If you love us, you'll do X"
True
 
Hallie believes that the best antidote against institutionalized cruelty is to show kindness to the victim
False
 
In Senator John McCain's "Why Courage Matters," he contends, we as Americans, have a true understanding of the term "courage" because we have had so many heroes fight for the United States
False
 
Philip Hallie considers the virtue of compassion as an emotion and; therefore, essential for the moral make-up of a decent human being
True
 
For English there are only duties when there are favors, but there are no duties or obligations between friends
False
 
Which ethical element does NOT appear or function in Sen. McCain's argument about Courage?
Universal military draft
 
Imagine you come across a seven-year-old child torturing a puppy. There are several possible arguments you might use that are aimed at dissuading someone from hurting someone else. Which one might Taylor advocate
Appeal to his or her compassion: "How do you think the puppy feels?"
 
Taylor's three stores of atrocities show that what counts are the dreadful consequences of these acts, not the intentions behind them
False