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Corporations are required to file a tax return only if their taxable income is greater than:
A. $0.
B. $1,000.
C. $600.
D. $750.
E. None of the choices are correct. Corporations are always required to file a tax return.
   
Which of the following is not a factor that determines whether an individual taxpayer is required to file a tax return?
A. Filing status.
B. Taxpayer's gross income.
C. Taxpayer's employment.
D. Taxpayer's age.
E. None of the choices are correct.
   
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.
e. None of these.
   
Which, if any, is not one of Adam Smith's canons of taxation?
a. Economy
b. Certainty
c. Convenience
d. Simplicity
e. Equality
   
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
   
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.
   
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.
   
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.
   
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.
   
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.
   
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.
   
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.
   
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.
   
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.
   
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 done annual exclusion.
d. To shift income to higher bracket donees.
e. None of these.
   
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.
   
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.
   
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.
   
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.
   
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.
   
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 stages to the marketplace.
d. Is a tax on consumption.
e. None of these.
   
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.
   
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.
   
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.
   
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.
   
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.
   
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.
   
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 the appearance of greater certainty is.
e. None of these.
   
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.
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.
   
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.
   
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.
   
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.
   
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.
   
Which, if any, of the following provisions of the tax law cannot be justified as promoting administrative feasibility.
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.
   
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.
   
The Internal Revenue Code was first codified in what year? a. 1913
b. 1923
c. 1939
d. 1954
e. 1986
   
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
   
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
   
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
  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.
   
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.
   
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.
   
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
   
Which of the following types of Regulations has the highest tax validity?
a. Temporary
b. Legislative
c. Interpretive
d. Procedural
e. None of these
   
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.
   
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.
   
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
   
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.
   
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
   
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
   
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.
   
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
   
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.
   
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.
   
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.
   
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
   
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
   
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
   
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
   
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.
   
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.
   
Dominic earned $1,500 this year, and his employer withheld $200 of federal income tax from
his salary. Assuming that Dominic is single, 30 years old, and will have zero tax liability this year, he:
A. is required to file a tax return.
B. is not required to file a tax return but should file a return anyway.
C. is required to file a tax return but should not file because he owes no tax.
D. is not required to file a tax return and should not file a return.
E. None of the choices are correct.
   
Greg earned $25,500 this year and had $1,500 of federal income taxes withheld from his salary.
Assuming that Greg is single, 25 years old, and will have a total tax liability of $1,430
(and thus will receive a $70 refund), he:
A. is required to file a tax return.
B. is not required to file a tax return but should file a return anyway.
C. is required to file a tax return but should not file because he owes no tax.
D. is not required to file a tax return and should not file a return.
E. None of the choices are correct.
   
Generally, if April 15 falls on a Saturday, individual tax returns will be due on:
A. April 14.
B. April 15.
C. April 16.
D. April 17.
E. None of the choices are correct.
   
If Lindley requests an extension to file her individual tax return, the latest she could pay her tax due without penalty is:
A. April 15
B. October 15
C. August 15
D. November 15
E. None of the choices are correct.
   
If Paula requests an extension to file her individual tax return, the latest she could file her return
without a failure-to-file penalty is:
A. September 15
B. October 15
C. August 15.
D. November 15
E. None of the choices are correct.
   
Bill filed his 2019 tax return on March 15, 2020. The statute of limitations for IRS assessment on
Bill's 2019 tax return should end:
A. March 15, 2022.
B. April 15, 2022.
C. March 15, 2023.
D. April 15, 2023.
E. None of the choices are correct.
   
Henry filed his 2019 tax return on May 15, 2020. The statute of limitations for IRS assessment on
Henry's 2019 tax return should end:
A. May 15, 2022.
B. April 15, 2022.
C. May 15, 2023.
D. April 15, 2023.
E. None of the choices are correct.
   
Allen filed his 2019 tax return on May 15, 2020 and underreported his gross income by 30 percent.
Assuming Allen's underreporting is not due to fraud, the statute of limitations for IRS assessment
on Allen's 2019 tax return should end:
A. May 15, 2022.
B. April 15, 2022.
C. May 15, 2023.
D. April 15, 2023.
E. None of the choices are correct.
   
Andy filed a fraudulent 2019 tax return on May 1, 2020. The statute of limitations for IRS assessment
on Andy's 2019 tax return should end:
A. May 1, 2023.
B. April 15, 2023.
C. May 1, 2026.
D. April 15, 2026.
E. None of the choices are correct.
   
Which of the following is not a common method that the IRS uses to select returns for audit?
A. DIF system.
B. Tax Select system.
C. Information matching.
D. Document perfection.
E. None of the choices are correct.
   
Tyrone claimed a large amount of charitable contributions as a tax deduction relative to taxpayers with
similar levels of income. If Tyrone's tax return is chosen for audit because of his large charitable contributions,
which audit program likely identified Tyrone's tax return for audit?
A. DIF System.
B. Deduction Detective.
C. Document perfection.
D. Information matching.
E. None of the choices are correct.
   
Leslie made a mathematical mistake in computing her tax liability. Which audit program will likely catch Leslie's mistake?
A. DIF System.
B. Mathematical correction.
C. Document perfection.
D. Information matching.
E. None of the choices are correct.
   
Which of the following audits is the most common and typically less comprehensive?
A. Correspondence.
B. Random.
C. Office.
D. Field.
E. None of the choices are correct.
   
Which of the following audits is the least common, broadest in scope, and typically most complex?
A. Correspondence.
B. Targeted.
C. Office.
D. Field.
E. None of the choices are correct.
D
   
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 letter.
E. None of the choices are correct.
   
Basu received a letter from the IRS that gave him the choice of (1) paying a proposed deficiency
or (2) filing a petition with the U.S. Tax Court. Basu received the:
A. 30-day letter.
B. 90-day letter.
C. Appeals letter.
D. Tax adjustment letter.
E. None of the choices are correct.
   
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 the choices are correct.
C
   
Rowanda could not settle her tax dispute 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 Appeals.
C. U.S. Court of Federal Claims.
D. Tax Court.
E. None of the choices are correct.
   
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. Tax Court only.
B. U.S. Court of Federal Claims only.
C. U.S. District Court only.
D. Tax Court or the U.S. District Court.
E. Tax Court or the U.S. Court of Federal Claims.
   
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 hear her case:
A. Tax Court only.
B. U.S. Court of Federal Claims only.
C. U.S. District Court only.
D. Tax Court or the U.S. District Court.
E. Tax Court or the U.S. Court of Federal Claims.
   
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 the choices are correct.
   
Josephine is considering taking a 6-month rotation in Paris for her job. Which type of authority may be
especially helpful in determining the tax consequences of Josephine's job in Paris?
A. Determination letter.
B. Private letter ruling.
C. Tax treaty.
D. Regulation.
E. Revenue procedure.
   
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 revenue rulings.
E. None of the choices are correct.
   
If the President vetoes tax legislation, Congress:
A. cannot override the President's veto.
B. can override the President's veto with a 50 percent positive vote in the House and Senate.
C. can override the President's veto with a 2/3rd positive vote in the House and Senate.
D. can override the President's veto with a 75 percent positive vote in the House and Senate.
E. None of the choices are correct.
   
Generally, code sections are arranged (grouped together):
A. chronologically.
B. by topic.
C. randomly.
D. by length.
E. None of the choices are correct.
   
Which of the following has the highest authoritative weight?
A. Legislative regulation.
B. Private letter ruling.
C. Revenue ruling.
D. Action on decision.
E. Revenue procedure.
A
   
The regulation with the lowest authoritative weight is the:
A. Procedural regulation.
B. Interpretative regulation.
C. Proposed regulation.
D. Legislative regulation.
E. None of the choices are correct.
   
Which of the following is a source of a tax practitioner's professional responsibilities?
A. AICPA Code of Professional Conduct.
B. Statements on Standards for Tax Services.
C. Circular 230.
D. State Board of Accountancy statutes.
E. All of the choices are correct.
   
Circular 230 was issued by:
A. AICPA.
B. State Boards of Accountancy.
C. American Bar Association.
D. IRS.
E. None of the choices are correct.
   
A taxpayer can avoid a substantial understatement of tax penalty:
A. if the position is frivolous and disclosed on the tax return.
B. if the position has a realistic possibility of being sustained by the IRS or courts.
C. if there is substantial authority to support the position.
D. if the position has a reasonable basis and is not disclosed on the tax return.
E. None of the choices are correct.
   
A taxpayer can avoid a substantial understatement of tax penalty:
A. if the position is frivolous and disclosed on the tax return.
B. if the position has a realistic possibility of being sustained by the IRS or courts.
C. if the position is not frivolous and disclosed on the tax return.
D. if the position has a reasonable basis and is disclosed on the tax return.
E. None of the choices are correct.
   
Which of the following is a correct statement? A taxpayer filing a fraudulent tax return:
A. is potentially subject to criminal penalties.
B. is potentially subject to civil penalties.
C. is potentially subject to fines and a prison sentence.
D. will have an unlimited statute of limitations for the fraudulent tax return.
E. All of the choices are correct.
   
For which of the following tax violations may a civil penalty be imposed on taxpayers?
A. Failure to file a tax return.
B. Failure to pay tax owed.
C. Fraud.
D. Failure to make estimated tax payments.
E. All of the choices are correct.
   
Which types of penalties are only imposed after normal due process including a trial?
A. Criminal penalties.
B. Civil penalties.
C. Criminal and civil penalties.
D. Failure-to-file penalty.
E. None of the choices are correct.
   
On Form W-4, an employee can only claim one allowance for each personal or dependency
exemption that will be claimed on the employee's income tax return.
false
   
The date on which stock options are given to the employee is called the grant date.
true
   
The date on which stock options are no longer subject to forfeiture is called the vesting date.
true
   
When stock options are exercised they are converted into actual employer stock.
true
   
Employees will always prefer to receive incentive stock options over nonqualified stock options.
true
   
Employers always prefer to award incentive stock options rather than nonqualified stock options.
true
   
The use of restricted stock is increasing relative to the use of stock options.
true
   
An employee's income with respect to restricted stock is the fair market value on the vesting date.
true  
 
For 2020, up to $300 of monthly transportation fringe benefits can be excluded from income.
false
   
Health insurance is an example of a nontaxable fringe benefit.
True
   
The taxpayer's spouse died at the beginning of 2018. He has no qualifying child.
Which status should the taxpayer select when filing his tax return for 2019?
Single
   
A legally divorced taxpayer maintains a household for himself and maintains a separate household that
is the principal place of abode of his dependent widowed mother.
What filing status should he use when filing his tax return?
Head of Household
   
For tax purposes, marital status is determined as of the __________ day of the year.
Last
   
Elisa is 21 years of age and a full-time student living with her parents.
She had wages of $680 ($75 of income tax withholding) for 2019.
Can Elisa file a tax return even though her parents will claim her as a dependent on their tax return?
Yes, Elisa can file a tax return.
   
On Form W-4, an employee can only claim one allowance for each personal or dependency exemption
that will be claimed on the employee's income tax return.
false
   
The date on which stock options are given to the employee is called the grant date.
true
   
The date on which stock options are no longer subject to forfeiture is called the vesting date.
true
   
When stock options are exercised they are converted into actual employer stock.
true
   
Employees will always prefer to receive incentive stock options over nonqualified stock options.
true
   
Employers always prefer to award incentive stock options rather than nonqualified stock options.
true
no deduction
   
The use of restricted stock is increasing relative to the use of stock options.
true
   
An employee's income with respect to restricted stock is the fair market value on the vesting date.
true
   
For 2020, up to $300 of monthly transportation fringe benefits can be excluded from income.
false
   
Health insurance is an example of a nontaxable fringe benefit.
true
   
Which of the following is an example of a regressive tax?
Social Security tax
   
Jake earned $15,000 and paid $1,500 of income tax, while Jill earned
$40,000 and paid $3,000 of income tax. The structure of the tax their
income is subject to is:
Regressive
   
Jordan and Paul, a married couple, have taxable income of $87,175, which is taxed as follows:
 
$19,400 × 10% =                               $1,940.00
$78,950 − $19,400 × 12% =          7,146.00
$87,175 − $78,950 × 22% =          1,809.50
Total tax liability:                              $10,895.50
 
Their marginal tax rate is:
 
22%
   
With respect to the income tax formula, which of the following statements is correct?
Certain deductions from income are permitted before calculating tax liability.
   
Victoria determined her tax liability was $6,145. Her employer withheld $6,451 from her paychecks
during the year. Victoria's tax return would show:
A refund of $306
   
For equivalent amounts of taxable income, the total tax liability of a single individual:
Will be more than married filing jointly
   
Under the provisions of Circular 230, paid tax preparers must: Inform the client if the client has made
an error in a document
submitted to the IRS
   
Paid tax preparers must comply with all of the following EXCEPT:
Charge a contingent fee
   
Sallie earned $25,000 and paid $2,000 of income tax; Theodore earned $35,000 and paid $2,900 of
income tax. The tax rate structure they are subject to is
Progressive
   
Sallie earned $85,000 and paid $5,950 of income tax; Theodore earned $33,000 and paid $2,310 of
income tax. The tax rate structure they are subject to is:
Proportional
   
Which of the following is not an example of a proportional tax?
Federal Income tax
  Tameka has taxable income of $97,075 that is taxed as follows:
 
$9,700 × 10% =                                 $970.00
($39,475 − $9,700) × 12% =          3,573.00
($84,200 − $39,475) × 22% =       9,839.50
($97,075 − $84,200) × 24% =       3,090.00
Total tax liability                                $17,472.50
 
Her marginal tax rate is:
 
24%
   
Which of the following statements is true?
Compensation for services includes bonuses and severance pay.
   
The tax liability for a single individual with taxable income of $58,312 is:
$8,690
   
Horace properly completed his Form 1040 tax return and received a refund from the IRS of $649.
Horace had income tax withholding during the year of $2,985. His tax liability for the year was:
$2 ,336
 
Which of the following statements is correct?
Temporary Regulations expire three years after issuance.
   
Victoria determined her tax liability was $6,451. Her employer withheld $6,145 from her paychecks during the year.
Victoria's tax return would show
Tax due of $306
   
The tax liability for a married couple with taxable income of $73,209 is:
$8,339
   
A taxpayer is married with a qualifying child (dependent), but she has been living separate from her spouse
for the last five months of the year. However, she paid for more than half of the cost of keeping up the
household. Her spouse does not want to file jointly. What filing status must she use when filing her tax return?
She wants to obtain the maximum legal benefit.
Married Filing Separately
   
Mirtha is 21 years of age and a full-time student living by herself.
She had wages of $25,000 for 2019 and provided more than half of her own support.
Can Mirtha be claimed as a dependent on her parent's tax return?
No, Mirtha cannot be claimed on her parents' tax return.
   
For a qualifying relative to be claimed as a dependent, a person must either be related to the taxpayer,
or be a member of the taxpayer's household for the entire year. Select the relative who must be part of
the taxpayer's household for the entire year.
Cousin
   
Robert, Fred and Lucas are supporting their mother who lives in a separate apartment.  Their contributions towards
her support are 10%, 40% and 50%, respectively. In a multiple support agreement, who would be entitled to claim
the mother as a dependent?
Fred or Lucas
   
The basic standard deduction in 2019 for a taxpayer, 67 and not blind,
filing head of household is:
$20,000
   
Luisa's parents can claim her as a dependent on their tax return. In 2019, her only source of income
was a part-time job as a medical clerk where she earned $2,600 during the year.
What is Luisa's standard deduction?
$2,950
   
Ed's parents can claim him as a dependent on their tax return. In 2019, his only source of income
was $1,100 of interest income received from Global Bank. What is Ed's standard deduction?
$1,100
   
John forgot to file his tax return by April 15. He did not file an extension.
John finally filed his tax return on June 30 and had a remaining tax liability of $1,500.
What is John's failure to file penalty? Assume he made all his payments on time.
$225
   
The taxpayer's spouse died at the beginning of 2019. He has no qualifying child.
Which status should the taxpayer select when filing his tax return?
Married Filing Jointly
   
George is 21 years of age and a full-time student living with his parents who are paying more
than 50% of his support. He had wages of $1,375 ($140 of income tax withholding) for 2019.
Can George's parents claim him on their tax return even though he will file a tax return to claim his
refund of $140?
Yes, George's parents can claim him as a dependent.
   
Jane, Joseph and John are supporting their father who lives in a separate apartment.
Their contribution towards his support is 10%, 35% and 55%, respectively. In a multiple support
agreement, who would be entitled to claim the father as a dependent?
Joseph or John
   
Which of the following items would not be considered as support for a dependency exemption?
Life insurance programs
   
Peter forgot to file his tax return by April 15. He did not file an extension. Peter finally filed his
tax return on July 31 and had a remaining tax liability of $3,500. What is Peter's failure to file
penalty? Assume he made all his payments on time.
$700
   
On December 31, 2019, a taxpayer received the notification that he was legally divorced.
However, he lived with his spouse for 8 months during 2019. He has no dependent children.
What status should he select when filing his tax return for 2019?
Single
   
Severin, who is 20 years old and a full- time student, is claimed by his parent as a dependent.
However, in 2019, he earned $3,350. What is his standard deduction?
$3,700
   
The taxpayer's spouse died at the beginning of 2019. She has a qualifying child.
Which status should the taxpayer select when filing her tax return for 2019?
Married Filing Jointly
   
For tax purposes, one of the requirements to recognize income is:
There must be an economic benefit
   
If an attorney performs some estate tax work for a client and the client agrees to pay $6,000 to him and
$5,000 to a local financial institution for a debt the attorney owes, the attorney has income of:
$11,000
   
Pedro agreed to repair a house for a client and started to work on December 30, 2017. On January 2, 2019,
he completed the job and received payment from the client. Pedro must record the income in:
2019
   
If Janelle, an accountant, agrees to provide accounting services to Fred, a friend, in exchange for Fred fixing
Janelle's office floor, then:
Both of them must report income on their tax returns
   
When filing their tax returns, almost all individuals use:
The cash receipts and disbursements method.
   
Constructive receipt means the taxpayer has:
Control of the income for his or her use.
   
When an individual's taxable income is $70,000, the tax rate on qualified dividends is
15%
   
An individual must complete Schedule B if the following situation occurs:
Received tax-exempt interest of $700.
   
Tom and Betsy, who are married filing jointly, reported a standard deduction of $24,000 on their 2018
tax return. They paid $500 to the state for income taxes in 2018. In 2019, they received a $125 refund of
state taxes paid in 2018. What is the amount that Tom and Betsy need to report on their 2019 tax return?
$0
   
What item should not be included in income?
Worker's compensation payments
   
The following fringe benefit provided by the employer is not taxable to the employee:
Employer-paid premiums on group-term life insurance with coverage of
$40,000 per person.
   
If a student must perform certain services for the educational institution (e.g., graduate assistantships),
the amount paid for services is considered:
Wages
   
Which one of the following items is not exempt under the umbrella of compensation for injuries or sickness?
Employer-provided adoption assistance
   
On December 30, 2019, Robert agreed to repair a damaged house wall and started to work on that date.
He will finish and get paid for the job in January of 2020. Robert needs to record the income received from
his work in the year:
2020
   
Interest income on Series EE and Series E U.S. Savings Bonds can be reported:
either at the maturity date or on an annual basis
   
An individual must complete Schedule B if the following situation occurs:
Received interest income of $1,750.
   
Corporate distributions to shareholders that represent a nontaxable return of capital are those that are:
made from the excess over earnings and profits of the corporation.
   
The following are not taxable to shareholders:
Stock split
   
Raphael, a roofer, decides to fix the roof of his neighbor, Angela, in
exchange for Angela providing bookkeeping services for his business. Who
must report income on their tax return?
Raphael and Angela
   
Laura is a student at a state university. In 2019, she received a
scholarship of $6,000 for tuition and fees and an assistantship for
$3,000. What is the amount that Laura must report in income?
$3,000
   
Beth is a freshman in the UC-Davis degree program in veterinary medicine. In 2019, Beth paid $3,000
in tuition, $500 for books, and $250 for supplies for class. Beth also paid room and board of $3,500.
What is the total qualifying education expense for the student loan interest deduction for Beth in 2019?
$7,250
   
In 2015 through 2018, Shana borrowed a total of $30,000 for higher education expenses on
qualified education loans. In 2019, while still living at home and being claimed by her parents
as a dependent, she began making payments on the loan. The first year interest on the loan
was reported as $1,750. The amount that Shana can claim on her tax return is:
$0
   
In 2018, Carlos, who is single, received his Bachelor's degree and
started working. In 2019, he began paying interest on qualified
education loans and had modified AGI of $75,000. He paid interest of
$1,200 in 2019. Which of the following statements is correct?
Due to the phase-out rules, only a portion of the $1,200 will be deductible
   
Rachelle, a major in the Air Force, moved from Washington State to South Carolina, as a result of
military orders and met all the requirements to deduct moving expenses. Which of the following
expenses that she incurred is not deductible as qualified moving expenses?
Home improvements to sell her home in Oregon
   
For the deduction of self-employment taxes, which of the following statements is correct?
They are 50% deductible as a for AGI deduction.
   
The determination for the deduction of the self-employment tax is based
upon the:
net earnings of the business
   
The percentage of self-employed health insurance premiums that could be deductible as a for AGI deduction is:
100%
   
Under a non-revised divorce decree executed in 2018, Pillar is required to pay her ex-husband,
Miguel, $4,750 a month until their youngest son, whose is now 10, turns age 18. At that time, the
required payments are reduced to $2,100 per month. How much of each payment is deductible by
Pillar as alimony for 2019?
$2,100
   
All of the following are requirements for a payment to be considered alimony except,
Payments can either be in cash or property.
   
Which of the following items are considered alimony?
Payments made to a third party on behalf of the former spouse for the
former spouse's dental expenses.
   
Sumiko files her tax return married filing separately. She has not lived with her husband for over two years.
Beginning in January 2019, by court ordered decree, she is to pay her husband $600 per month as
separate maintenance. For 2019 how much will she be able to deduct as alimony?
$0
   
Qualification under the 900-hour working test for the educator's expense deduction is measured by:
The academic year
   
For family coverage in 2019, the maximum deductible and out-of-pocket expense to a
Health Savings Account is:
$13,500
   
Which of the following is deductible as a military personnel moving expense?
The cost of moving household goods
   
Which of the following types of income is subject to the self-employment tax?
Income from a sole proprietor's coffee shop.
   
The Sharps were granted a decree of divorce effective January 1, 2018. In accordance with the decree,
Susan Sharp is to pay her spouse $24,000 a year until their only child, Melanie now 11, turns 18, and
then the payments will decrease by $11,000 per year. For 2019, how much can Susan deduct as alimony?
$13,000
   
Due to a military base closing, Major Le Tran is transferred from Boston to San Diego as a  permanent
change of station. Under a new job description, he is reclassified from division  commander to a
General's staff member. His moving expenses, which are not reimbursed, are as follows:
 
Transportation $                                              1,200
Meals                                                                    300
Lodging                                                                400
Cost of moving household goods               4,000
Pre-move house hunting costs                   2,500
 
Major Tran's deductible moving expense is:
 
$5,600
   
Jena is a self-employed fitness trainer who had net earnings from self-employment of $53,500.
She paid $525 per month for health insurance over the entire last year. Jena is entitled to a for
AGI deduction for health insurance of:
$6,300
   
Which of the following is not a requirement for an allowable alimony deduction?
The payee must have a dependent child.
   
Rick and Lenora were granted a divorce in 2017. In accordance with the decree, Rick made the following
total payments to Lenora in 2019:
 
Child support payments contingent on the age of the child            $4,000
Annual cash payments other than child support                                  $6,000
 
How much should Lenora include in her 2019 taxable income as alimony?
 
$6,000
   
Which of the following may not be deducted either totally or partially as medical expenses?
(Disregard any limitations which may apply.)
$300 for maternity clothes.
   
During 2019 Yoko paid the following expenses:
Prescription medicines                  $525
Doctors and dentists                       1,050
Vitamins and ibuprofen                 275
Health club membership fee       450
What is the total amount of medical expenses (before application of the adjusted gross income limitation)
that would enter into the calculation of itemized deductions on Yoko's 2019 income tax return?
$1,575
   
Which of the following expenses is not deductible as medical expense?
Joining a tennis club to become more active upon recommendation of a doctor.
   
During 2019, Belen paid the following taxes:
Property taxes on residence (paid from escrow account)                $              1,550
Property tax portion of car registration (based on value)                                 400
Property taxes on land held for long-term appreciation                                   350
What amount can Belen deduct as property taxes in calculating her itemized deductions for 2019?
$2,300
   
For investment interest expense in 2019, the deduction by a taxpayer is:
Limited to the taxpayer's net investment income for 2019.
   
For 2019, Miram, a single mother, reported the following amounts relating to her investments:
Net investment income from interest                                                                                                      $7,000
Interest expense on a loan to purchase stocks                                                                                     2,000
Interest expense on funds borrowed in 2018 to purchase land for investment                      6,000
What is the maximum amount that Miriam can deduct in 2019 as investment interest expense?
$7,000
   
Which of the following organizations do not qualify for deductible charitable contributions?
A political party
   
Sonia's car was completely destroyed in an accident that was her fault. Her loss was $8,500 and her insurance company
reimbursed her $6,500. What amount of casualty loss can Sonia claim on her return (before deduction limitations)?
$0
   
Which one of the following items is considered an other itemized deduction subject to a built in limitation?
Gambling losses up to the amount of gambling winnings.
   
Generally, the taxpayer may deduct the cost of medical expenses on Schedule A for which of the following?
Doctor prescribed birth control pills.
   
Which of the following costs are potentially deductible on Form 1040, Schedule A as taxes for 2019?
1. Property tax on principal residence.
2. Garbage pickup itemized on the real estate bill.
3. Real estate tax on property owned as an investment.
4. Sales tax paid on the purchase of a personal car.
   
Akule paid the following amounts of interest in 2019:
$150 on his personal credit card
$9,500 on his home mortgage
$750 on a personal car loan, which was not used for business
$350 on funds borrowed to purchase tax-exempt securities
What is his deductible interest for 2019?
$9 ,500
 
Which of the following organizations generally qualify for deductible charitable contributions?
Churches
   
In 2019, the U.S. President declared a federal disaster due to the flooding in Louisiana.
Danielle lives in that area and lost her home in the flood. What choice does she have regarding
when she can claim the loss on her tax return?
It may be claimed in 2018 or 2019.
   
To qualify for a medical expense deduction as a taxpayer's dependent, a
person must be a dependent either at the time the medical services were
provided or at the time the expenses were paid. A person generally
qualifies as a dependent for purposes of the medical expense deduction
if the person:
Would qualify as a dependent except for the amount of gross income.
   
During 2019, Remy paid the following expenses:
Prescription medicines $640
Aspirin, vitamins, and cold medicine 165
Hospital and treatment fees 1,050
Health insurance premiums 250
What is the total amount of medical expenses (before considering the
limitation based on adjusted gross income) that would enter into the
calculation of itemized deductions on Remy's 2019 income tax return?
$1,940
   
Isaiah, an NBA point guard, is advised by his physician to install a Jacuzzi in his residence since he is afflicted
with a back problem incurred after years of running up and down the court. The cost of installing the Jacuzzi
is $6,500. He installs the Jacuzzi in January of 2019, and it increases the value of his residence by $3,500.
Disregarding the limitation based on adjusted gross income, how much of the cost of the Jacuzzi may Isaiah
take into account in determining his medical expense deduction for 2019?
$3,000
   
For the year ended December 31, 2019, Terrance, a single professional, reported the following:
Net investment income from interest, $14,000 Other expenses unrelated to the generation of interest,
$6,000 Investment interest expense on funds borrowed in 2018 to purchase stocks and bonds, $15,000
What is the maximum amount that Terrance can deduct in 2019 as investment interest expense?
$14,000
   
During 2019, Manuel and Gloria, who are not married and live in Beverly Hills, incurred acquisition debt
on their new residence of $2,150,000. On their individual tax returns, what is the amount of qualified
acquisition debt on which they can each deduct interest in 2019?
$750,000
   
Robert and Becky (husband and wife) are both lawyers and they contribute money to various organizations
each year. They file a joint return and their adjusted gross income for 2019 is $100,000.
They contributed to the following organizations in 2019:
$5,000 to Shangri La country club
$10,000 to the ASPCA
$2,000 to State Bar Association Political Action Committee
$12,000 to a juvenile diabetes research foundation
Donated clothing to Goodwill. (Robert originally purchased the items for $400, but the fair market
value of the same items at a thrift store is equal to $50.)
   
How much can Robert and Becky deduct as charitable contributions for the year 2019?
$22,050