Basic Income Tax Exam Preparation Guide
Course Introduction
This course provides an introduction to the fundamental principles of income taxation in the United States. Students will explore key concepts such as gross income, exclusions, deductions, credits, and the computation of taxable income. The course examines statutory provisions, Treasury regulations, and relevant case law, with an emphasis on understanding the policy rationale behind the rules and their practical application to individuals and businesses. By the end of the course, students will gain a foundational knowledge of income tax law, preparing them for advanced study or professional practice in tax compliance and planning.
Recommended Textbook Income Tax Fundamentals 2019 37th Edition by
Gerald E. Whittenburg
Available Study Resources on Quizplus
12 Chapters
1187 Verified Questions
1187 Flashcards
Source URL: https://quizplus.com/study-set/3208
Page 2
Chapter 1: The Individual Income Tax Return
Available Study Resources on Quizplus for this Chatper
117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/63492
Sample Questions
Q1) Taxpayers who do not qualify for married, head of household, or qualifying widow or widower filing status must file as single.
A)True
B)False
Answer: True
Q2) State two reasons why a person would want to e-file their return instead of mailing it.
Answer: A return that is e-filed has a smaller error rate than paper-filed returns.(Less than 1 percent versus more than 20 percent).E-filing also offers a faster refund because the IRS is able to process the return more quickly.
Q3) Partnership income is reported on:
A)Form 1040PTR.
B)Form 1120S.
C)Form 1040X.
D)Form 1065.
Answer: D
Q4) List two general objectives of the tax code.
Answer: The tax code promotes social goals, economic goals, and raising revenue.
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: Gross Income and Exclusions
Available Study Resources on Quizplus for this Chatper
151 Verified Questions
151 Flashcards
Source URL: https://quizplus.com/quiz/63493
Sample Questions
Q1) Amounts received as scholarships for books and tuition may be excluded from the recipient's taxable income.
A)True
B)False
Answer: True
Q2) Which of the following is correct for Qualified Tuition Programs?
A)Contributions are deductible and qualified educational expense distributions are tax-free.
B)Contributions are not deductible and qualified educational expense distributions are tax-free.
C)Contributions are deductible and qualified educational expense distributions are taxable.
D)Contributions are not deductible and qualified educational expense distributions are taxable.
Answer: B
Q3) Alimony from a 2016 divorce
Answer: a
Q4) Inheritances
Answer: b
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Additional Income Part 1
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/63494
Sample Questions
Q1) The IRS has approved two per diem methods to substantiate travel expenses, the standard federal method and the high-low method .
A)True
B)False
Answer: True
Q2) Curt is self-employed as a real estate salesman and drives his car frequently to take clients to see homes for sale.Curt drove his car 20,000 miles for business purposes and 25,000 miles in total.His actual expenses for operating the auto including depreciation are $10,000 since he drove it so much during the year.Curt has used the actual cost method since he started his business in 2015.How much is Curt's deductible auto expense for the year?
Answer: $8,000 (20,000 / 25,000 miles × $10,000).Since Curt has used the actual cost method in the previous tax year, he is not entitled to use the standard mileage method.
Q3) A gift to a foreman by a worker is considered business related and therefore subject to the $25 limit.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Additional Income Part 2
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/63495
Sample Questions
Q1) Currently, long-term capital gains are not afforded preferential tax treatment to individuals.
A)True
B)False
Q2) Wages are considered "active income."
A)True
B)False
Q3) If not entirely used in one sale, the unused portion of the $250,000 exclusion on the sale of a taxpayer's principal residence may be used to reduce the recognized gain on the sale of the taxpayer's next residence.
A)True
B)False
Q4) The adjusted basis of an asset may be determined by the:
A)Selling price + gain realized.
B)Selling price gain realized.
C)Selling price + capital improvements accumulated depreciation.
D)Original basis + capital improvements selling price.
E)None of the above.
Q5) What are capital assets?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Deductions and Adjustments to Income
Available Study Resources on Quizplus for this Chatper
135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/63496
Sample Questions
Q1) Sally and Jim purchased their personal residence in Santa Barbara 20 years ago for $150,000.The home has a fair market value today of $1,000,000.For the current year, they have a $10,000 first mortgage on their home, on which they paid $1,000 in interest.They also have a home equity loan secured by their home with a balance throughout the year of $110,000.The proceeds of the home equity loan were used to send their two children to college.They paid interest on the home equity loan of $5,500 for the year.Calculate the amount of their deduction for interest paid on qualified residence acquisition debt and qualified home equity debt for the current year.Qualified residence acquisition debt interest:Qualified home equity debt interest:
Q2) For an individual taxpayer with AGI of $65,000, private mortgage insurance (PMI)is deductible in 2018.
A)True
B)False
Q3) If real property is sold during the year, the property taxes must be allocated between the buyer and seller based on the number of days the property was held by each party.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Accounting Methods and Taxes
Available Study Resources on Quizplus for this Chatper
68 Verified Questions
68 Flashcards
Source URL: https://quizplus.com/quiz/63497
Sample Questions
Q1) Most partnerships, S corporations, and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.
A)True
B)False
Q2) The 0.9 percent Medicare tax applies to:
A)Earned income
B)Tax exempt income
C)Gain on the sale of a principal residence
D)IRA distributions
Q3) Under the cash basis of accounting, most expenses are generally deducted in the year they are paid.
A)True
B)False
Q4) Which of the following types of income is subject to the self-employment tax?
A)Interest income
B)Gain on sale of real estate
C)Income from a sole proprietor's law practice
D)Dividends from stock
E)None of the above
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Tax Credits
Available Study Resources on Quizplus for this Chatper
73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/63498
Sample Questions
Q1) A taxpayer with earned income of $50,000 is not eligible to claim the credit for child and dependent care expenses.
A)True
B)False
Q2) The foreign tax credit applies only to foreign corporations.
A)True
B)False
Q3) For 2018, Beatrice qualifies for the earned income credit.She has one daughter who is 7 years old.Her earned income and adjusted gross income for 2018 are $6,200.
a.Using the EIC tables, calculate the amount of her 2018 earned income credit.
b.Calculate the amount of Beatrice's 2018 earned income credit assuming her earned income for 2018 is $8,500 and her adjusted gross income is $10,000.
Q4) Which of the following is not a requirement to claim an earned income credit?
A)Social Security number
B)At least one child claimed as a dependent
C)At least $1 of earned income
D)US citizenship or resident alien status
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Depreciation and Sale of Business Property
Available Study Resources on Quizplus for this Chatper
122 Verified Questions
122 Flashcards
Source URL: https://quizplus.com/quiz/63499
Sample Questions
Q1) Taxpayers must use the straight-line method of depreciation for all productive assets.
A)True
B)False
Q2) Perry acquired raw land as an investment 16 years ago.The land cost $50,000.In the current year, the land is sold for a total sales price of $120,000, consisting of $10,000 cash and the buyer's note for $110,000.Assume that Perry uses the installment method to recognize the gain and receives only the $10,000 down payment in the year of sale.How much gain should Perry recognize in the current year?
A)$4,166
B)$5,833
C)$7,000
D)$9,000
E)None of the above
Q3) Taxpayers may expense the cost of depreciable personal property placed in service during the year and used in a trade or business in an amount up to a maximum of $2,500,000 annually.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Payroll, Estimated Payments, and Retirement Plans
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/63500
Sample Questions
Q1) For 2018, the maximum base for the Social Security portion of the FICA tax is:
A)$128,700
B)$127,200
C)$128,400
D)$132,900
E)None of the above
Q2) In 2018, Willow Corporation had three employees.Two of the employees worked full-time and earned salaries of $25,000 each.The third employee worked part-time and earned $4,000.The employer timely paid state unemployment tax equal to 5.4 percent of each employee's wages up to $7,000.How much unemployment tax was paid to the state from Willow Corporation for 2018?
A)$136
B)$168
C)$918
D)$972
E)$1,134
Q3) If a husband and wife both work, they must divide their withholding allowances equally on their W-4 Forms.
A)True
B)False
Page 11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Partnership Taxation
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/63501
Sample Questions
Q1) The "at-risk" rule applies, with limited exceptions, to all taxable activities.
A)True
B)False
Q2) Jennifer has a 25 percent interest in the Aspen Aircraft partnership.Her basis in her partnership interest is $10,000 at the beginning of the year.The partnership reported the following activity for the year: \(\begin{array}{llcc}
\text {Ordinary income } &\$40,000 \\
\text { Section 1231 gain} &\$10,000\\
\text {Charitable contribution } &\$12,000\\
\text {Total distributions to partners } &\$28,000\\ \end{array}\)
What is Jennifer's basis in her partnership interest at the end of the year?
Q3) Losses on transactions between a partnership and its partners are always disallowed.
A)True
B)False
Q4) The tax year of a partnership generally closes upon entry of a new 20% partner.
A)True
B)False
Q5) List three benefits of an LLC.
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: The Corporate Income Tax
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/63502
Sample Questions
Q1) Which of the following is true with respect to capital gains and losses of a corporation?
A)A corporation can offset ordinary income with capital losses.
B)A corporation pays 15 percent long-term capital gains rate, just like an individual.
C)A corporation can carry a capital loss back 5 years.
D)A corporation can carry a capital loss forward 5 years.
Q2) What is the purpose of Schedule M-1?
Q3) The Great Gumball Corporation is a gumball producer.The corporation has accumulated earnings of $425,000 and it can establish a reasonable need for $360,000.Calculate the amount of the accumulated earnings tax, if any, that will be imposed on the corporation.
Q4) What is the maximum amount of accumulated earnings that a corporation is allowed to accumulate, without regard to business needs, before the accumulated earnings tax is imposed?
A)$150,000 for all corporations
B)$150,000 for nonservice corporations only
C)$250,000 for all corporations
D)$250,000 for nonservice corporations only
E)None of the above
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Tax Administration and Tax Planning
Available Study Resources on Quizplus for this Chatper
66 Verified Questions
66 Flashcards
Source URL: https://quizplus.com/quiz/63503
Sample Questions
Q1) What is the difference between tax avoidance and tax evasion?
Q2) The IRS charges a fixed 10 percent interest rate on underpayments of taxes.
A)True
B)False
Q3) If a taxpayer makes all of his income from his job and various investments, which office of the IRS would likely investigate his return if it were audited?
A)Wage & Investment Division (W&I)
B)Large & Midsize Business Office
C)Small Business Office
D)Criminal Investigation Office
E)None of the above offices would perform the audit
Q4) For the following independent situations, list who (the IRS, the taxpayer, the party who initiates the case, or both sides)has the burden of proof in most civil tax cases:
a.The tax case involves a penalty.
b.The tax case involves a trust with net worth of $8.3 million.
c.The taxpayer has credible evidence, maintains records, and cooperates with reasonable IRS requests.
d.The IRS uses statistics to reconstruct an individual's income.
To view all questions and flashcards with answers, click on the resource link above.
Page 14