Graduate Taxation Seminar
Exam Review
Course Introduction
The Graduate Taxation Seminar is an advanced course designed for students to critically examine complex topics in tax law and policy. Through a combination of in-depth readings, case studies, and interactive discussions, the seminar explores contemporary issues such as tax planning, corporate taxation, international taxation, and the ethical responsibilities of tax practitioners. Students are expected to engage in research, present findings on specialized topics, and participate in debates that challenge traditional and emerging perspectives in the field. The course aims to develop analytical skills and foster a nuanced understanding of the role of taxation in economic and social policy.
Recommended Textbook
South Western Federal Taxation 2012 Corporations Partnerships Estates and Trusts Professional
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20 Chapters
2539 Verified Questions
2539 Flashcards
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Chapter 1: Understanding and Working With the Federal Tax Law
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Sample Questions
Q1) Which trial court has 19 judges?
A) U.S. Tax Court.
B) U.S. Court of Federal Claims.
C) U.S. Supreme Court.
D) U.S. Court of Appeals.
E) None of the above.
Answer: A
Q2) The CPA examination is now computer-based with increased emphasis on information technology.
A)True
B)False Answer: True
Q3) Proposed Regulations are not published in the Federal Register.
A)True
B)False Answer: False
Q4) Subchapter K refers to the "Partners and Partnerships" section of the Code.
A)True
B)False Answer: True
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Chapter 2: Corporations: Introduction and Operating Rules
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Sample Questions
Q1) Heron Corporation, a calendar year C corporation, had an excess charitable contribution for 2010 of $5,000. In 2011, Heron made a further charitable contribution of $20,000. Heron's 2011 deduction is limited to $15,000 (10% of taxable income). The current year's contribution must be applied first against the $15,000 limitation.
A)True
B)False
Answer: True
Q2) A corporation may elect to amortize startup expenditures over the 60-month period beginning with the month in which the corporation begins business.
A)True
B)False Answer: False
Q3) Canary Corporation, which sustained a $5,000 net capital loss during the year, will enter $5,000 as a addition item on Schedule M-1.
A)True
B)False Answer: True
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4
Chapter 3: Corporations: Special Situations
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Sample Questions
Q1) DPGR - Allowable Indirect Costs = QPAI. Is this formula correct?
A)True
B)False Answer: False
Q2) For purposes of the DPAD wage limitation, amounts paid to independent contractors can be considered.
A)True
B)False Answer: False
Q3) DPAD for 2011 is 9% of the greater of QPAI or TI, but not to exceed the W-2 wages limitation.
A)True
B)False Answer: False
Q4) ATI = Taxable Income - Adjustments - Dividends paid - Accumulated earnings credit.
A)True
B)False Answer: False
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Chapter 4: Corporations: Organization and Capital Structure
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Sample Questions
Q1) When incorporating her sole proprietorship, Samantha transfers all of its assets and liabilities. Included in the $30,000 of liabilities assumed by the corporation is $500 that relates to a personal expenditure. Under these circumstances, the entire $30,000 will be treated as boot.
A)True
B)False
Q2) Lark City donates land worth $300,000 and cash of $100,000 to Orange Corporation as an inducement to locate in the city. Four months later, Orange purchases additional land and a building at a cost of $500,000 and moves its operations to Lark City. Ann, the sole shareholder, contributes equipment (basis of $70,000 and fair market value of $200,000) to help Orange in its new operations. What are the tax consequences of these transfers to Orange Corporation?
Q3) If a corporation is thinly capitalized, all debt is reclassified as equity.
A)True
B)False
Q4) Similar to like-kind exchanges, the receipt of "boot" under § 351 can cause loss to be recognized.
A)True
B)False
Page 6
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Chapter 5: Corporations: Earnings Profits and Dividend
Distributions
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Sample Questions
Q1) Falcon Corporation has $200,000 of current E & P and a deficit in accumulated E & P of $90,000. If Swan pays a $300,000 distribution to its shareholders on July 1, how much dividend income do the shareholders report?
A) $0.
B) $10,000.
C) $110,000.
D) $200,000.
E) None of the above.
Q2) Gold Corporation has accumulated E & P of $2 million as of January 1 of the current year. During the year, it expects to have earnings from operations of $1,680,000 and to distribute $900,000 in cash to shareholders. Gold Corporation also expects to sell an asset for a loss of $2 million. Thus, it anticipates incurring a deficit of $320,000 for the year. What can Gold do to minimize the amount of dividend income to its shareholders?
Q3) Cash distributions received from a corporation with a positive balance in accumulated E & P at the beginning of the year will be taxed as dividend income.
A)True
B)False
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Page 7
Chapter 6: Corporations: Redemptions and Liquidations
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Sample Questions
Q1) Hazel, Emily, and Frank, unrelated individuals, own all of the stock in Wren Corporation (E & P of $1.2 million) as follows: Hazel, 1,300 shares; Emily, 400 shares; and Frank, 300 shares. Wren redeems 300 of Hazel's shares (basis of $60,000) for $450,000. With respect to the distribution in redemption of the stock:
A) Hazel has a capital gain of $390,000.
B) Hazel has dividend income of $450,000.
C) Hazel has dividend income of $390,000.
D) Hazel has a capital gain of $450,000.
E) None of the above.
Q2) In the current year, Loon Corporation made a distribution in redemption of some of its shares. Loon incurred expenditures in connection with the redemption totaling $35,000 (accounting fees of $9,000, legal fees of $20,000, and brokerage fees of $6,000).
The distribution was a qualifying stock redemption. How much of the $35,000 is deductible in the current year?
A) $6,000.
B) $9,000.
C) $29,000.
D) $35,000.
E) None of the above.
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Chapter 7: Corporations: Reorganizations
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Sample Questions
Q1) The yearly § 382 limitation is computed by multiplying the ____________________ of the loss corporation's stock on the ____________________ date by the ____________________. For the ____________________, the § 382 limitation must be multiplied by the fraction equal to the number of days remaining in the year divided by days in the year.
Q2) Explain how the tax treatment for parties involved in a tax-free reorganization almost exactly parallels the treatment under the like-kind exchange provisions of § 1031.
Q3) Liabilities generally are not considered boot in corporate reorganizations, except in an acquisitive "Type D" when cash or other property is also used in the transaction. A)True B)False
Q4) In a ____________________ reorganization the creditors rather than the shareholders are considered when testing the continuity of ____________________ doctrine.
Q5) The ____________________ doctrine treats several transactions as if they were one transaction when they are all integrated. The ____________________ doctrine ensures that the restructuring has a purpose beyond tax avoidance or evasion.
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Page 9
Chapter 8: Consolidated Tax Returns
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Sample Questions
Q1) Which of the following tax effects becomes more restrictive if an election is made to file a group's Federal corporate income tax returns on a consolidated basis?
A) Choice of members' tax year ends.
B) Use of the lower tax rate brackets.
C) Use of the $40,000 AMT exemption.
D) Choice of members' tax accounting methods
Q2) An affiliated group aggregates its separate charitable contributions, deductions for which then are subject to an annual limitation of 10% of consolidated taxable income.
A)True
B)False
Q3) In computing consolidated taxable income, the domestic production activities deduction (DPAD) is removed from the taxable incomes of the group members and determined on a group basis.
A)True
B)False
Q4) List three "intercompany transactions" of a Federal consolidated income tax group. ParentCo owns all of the stock of both SubOne and SubTwo.
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Chapter 9: Taxation of International Transactions
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Sample Questions
Q1) Gains on the sale of U.S. real property held directly or indirectly through U.S. stock ownership by NRAs and foreign corporations are subject to taxation under FIRPTA.
A)True
B)False
Q2) BlueCo, a domestic corporation, incorporates its foreign branch in a § 351 exchange, creating GreenCo, a wholly owned foreign corporation. BlueCo transfers $200 in inventory (basis = $50) and $900 in land (basis = $950) to GreenCo. GreenCo uses these assets in carrying on a trade or business outside the United States. What gain or loss, if any, is recognized as a result of this transaction?
A) $0.
B) ($50).
C) $100.
D) $150.
Q3) The U.S. system for taxing income earned outside its borders by U.S. persons is referred to as the territorial approach because only income earned within the U.S. border is subject to taxation.
A)True
B)False
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11
Chapter 10: Partnerships: Formation, Operation, and Basis
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100 Verified Questions
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Sample Questions
Q1) Julie owns property that is treated as a capital asset in her hands. She contributed a parcel of land (basis $60,000; fair market value $58,000) to a real estate partnership, which will hold it as inventory. After three years, the partnership sells the land for $56,000. The partnership will recognize a $4,000 ordinary loss on sale of the property.
A)True
B)False
Q2) Justin and Kevin formed the equal JK Partnership during the current year, with Justin contributing $60,000 in cash and Kevin contributing land (basis of $40,000, fair market value of $30,000) and equipment (basis of $0, fair market value of $30,000). Kevin recognizes a $20,000 gain on the contribution and his basis in his partnership interest is $60,000.
A)True
B)False
Q3) An example of the "entity concept" underlying partnership taxation is the fact that the partners (rather than the partnership) pay tax on partnership income.
A)True
B)False
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Page 12
Chapter 11: Partnerships: Distributions, Transfer of Interests, and Terminations
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Sample Questions
Q1) Jeremy sold his 40% interest in the HIJ Partnership to Ashley for $400,000. The inside basis of all partnership assets was $600,000 at the time of the sale. If the partnership makes a § 754 election, it will record a $160,000 step-up in the basis of the partnership assets, and the step-up will be attributed solely to Ashley.
A)True
B)False
Q2) Tyler's basis in his partnership interest is $110,000, including his share of partnership debt. Sarah buys Tyler's partnership interest for $60,000 cash and she assumes Tyler's $90,000 share of the partnership's debt. If the partnership owns no hot assets, Tyler will recognize a capital loss of $50,000.
A)True
B)False
Q3) Zach's partnership interest basis is $80,000. Zach receives a proportionate, liquidating distribution from a liquidating partnership of $60,000 cash and inventory having a basis of $30,000 to the partnership and a fair market value of $26,000. Zach assigns a basis of $20,000 to the inventory and recognizes no gain or loss.
A)True
B)False
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Chapter 12: S: Corporations
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Sample Questions
Q1) A cash basis calendar year C corporation in Athens, Georgia, has $100,000 of accounts receivable on the date of its conversion to an S corporation on February 14. By the end of the year, $70,000 of these receivables are collected. Calculate any built-in gains tax, assuming that there is sufficient taxable income.
A) $0.
B) $10,500.
C) $24,500.
D) $35,000.
E) Some other amount.
Q2) Which event will not terminate an S election?
A) Receipt of passive income.
B) Share of stock given to a nonresident alien.
C) Shares of stock given to a corporation.
D) A second class of stock issued.
E) All of the above terminate an election.
Q3) The carryover period for the NOLs of a C corporation continues to run during S corporation years.
A)True
B)False
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Page 14
Chapter 13: Comparative Forms of Doing Business
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Sample Questions
Q1) Under what circumstances, if any, do the § 469 passive activity loss rules apply to C corporations?
Q2) Rocky and Sandra (shareholders) each loan Eagle Corporation $10,000 at the market rate of 10% interest. Which of the following statements are false?
A) Eagle may deduct the interest expense, and the interest income is taxable to Rocky and Sandra.
B) When the note principal is repaid, neither Rocky nor Sandra recognizes gross income from the repayment.
C) If the IRS were successful in reclassifying the notes as equity, the interest payments would not be deductible by Eagle, and Rocky and Sandra would still recognize income.
D) If the IRS were successful in reclassifying the notes as equity, repayment of the note principal to Rocky and Sandra would not qualify for return of capital treatment and would most likely result in dividend income treatment for Rocky and Sandra.
E) All of the above are true.
Q3) A business entity is not always taxed the same way as its legal form.
A)True
B)False
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Page 15
Chapter 14: Taxes on the Financial Statements
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Sample Questions
Q1) Purple, Inc., a domestic corporation, owns 100% of Blue, Ltd., a foreign corporation and Yellow, Inc., a domestic corporation. Purple also owns 40% of Green, Inc., a domestic corporation. Purple receives no distributions from any of these corporations. Which of these entities' net income are included in Purple's GAAP income statement for current year financial reporting purposes?
A) Purple, Blue, Yellow, and Green.
B) Purple, Blue, and Yellow.
C) Purple, Blue, and Green.
D) Purple, Yellow, and Green.
Q2) How does an auditor determine whether a valuation allowance is needed against an entity's deferred tax asset? List some of the factors than an auditor will consider in this regard.
Q3) The operations of an 80% or more owned domestic subsidiaries must be included in the parent corporation's consolidated tax return.
A)True
B)False
Q4) Only U.S. corporations are included in a combined GAAP financial statement.
A)True
B)False
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Chapter 15: Exempt Entities
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Sample Questions
Q1) The excise taxes such as the tax on self-dealing and the tax on excess business holdings are imposed on exempt organizations classified as private foundations and also are imposed on exempt organizations classified as public charities.
A)True
B)False
Q2) An exempt organization that is eligible to elect under § 501(h) to engage in lobbying activities on a limited basis incurs no tax liability from lobbying, if the lobbying expenditures for the tax year do not exceed the lobbying expenditures ceiling.
A)True
B)False
Q3) An exempt organization is located in the state of Nevada. Gambling in Nevada is legal. Therefore, bingo games are conducted by both taxable and tax-exempt organizations. If the net earnings from the bingo games are less than $25,000, the exempt organization is not subject to the unrelated business income tax (UBIT).
A)True
B)False
Q4) What income and activities are not subject to the feeder organization rules?
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17
Chapter 16: Multistate Corporate Taxation
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Sample Questions
Q1) A taxpayer wishing to reduce the negative tax effects of the application of the unitary theory might:
A) Affiliate with a service division that shows an operating loss, like one in research and development.
B) Acquire a unitary affiliate in a country with a high wage structure.
C) Add a profitable entity to the unitary group.
D) a. and b.
Q2) Typical indicators of nexus include the presence of employees based in the state, and the ownership or lease of realty there.
A)True
B)False
Q3) A typical state taxable income addition modification is the interest income from U.S. Treasury bonds.
A)True
B)False
Q4) A state cannot levy a tax on a business unless the business was incorporated in the state.
A)True
B)False
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Chapter 17: Tax Practice and Ethics
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Sample Questions
Q1) According to AICPA rules, the CPA cannot take an aggressive tax return position on the basis of the "audit ____________________."
Q2) Recently, the overall Federal income tax audit rate for individual returns has been about 3%.
A)True
B)False
Q3) The basic Treasury document regulating tax preparers is the Regulation known as _________________________.
Q4) Neither the taxpayer nor the government can appeal a decision of the Tax Court Small Cases Division.
A)True
B)False
Q5) The tax preparer penalty for taking an unreasonable tax return position is the greater of $1,000 or ____________________ of the tax professional's income from preparing the return.
Q6) About ____________________% of all Forms 1040 are audited each year. The rate is about ____________________% if income exceeds $1 million. or
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Chapter 18: The Federal Gift and Estate Taxes
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Sample Questions
Q1) Some of the charitable organizations that qualify for estate tax purposes do not qualify for income tax purposes.
A)True
B)False
Q2) For gift tax purposes, a property settlement in consideration of marriage (i.e., prenuptial agreement) is not treated the same as a property settlement incident to a divorce.
A)True
B)False
Q3) Harry and Brenda are husband and wife. Using his funds, Harry purchases real estate which he lists as: "Harry and Brenda, tenants by the entirety with right of survivorship." If Brenda dies first, none of the value of the real estate will be included in her gross estate.
A)True
B)False
Q4) If interest is provided for in loans between related parties, there is no imputed interest, as a gift loan does not result.
A)True
B)False
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Chapter 19: Family Tax Planning
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Sample
Questions
Q1) Ramon sells a parcel of land (basis of $100,000; fair market value of $300,000) to his church. As long as the selling price does not exceed $100,000, Ramon recognizes no gain on the sale.
A)True
B)False
Q2) The election by an estate of § 2032A (special use valuation as to real estate) or § 2032 (the alternate valuation date) will have no effect on the income tax basis of the property received by the heirs.
A)True
B)False
Q3) Under Cindy's will, her share of their community property passes to Van, her surviving spouse. Cindy's property is not subject to probate.
A)True
B)False
Q4) A disclaimer by a surviving spouse will generate additional estate tax since it reduces the amount of marital deduction allowed.
A)True
B)False
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21
Chapter 20: Income Taxation of Trusts and Estates
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Sample Questions
Q1) If provided for in the controlling agreement, a trust might terminate when the income beneficiary graduates with a law degree.
A)True B)False
Q2) The Gable Trust reports $20,000 business income and $10,000 exempt interest income, and it paid a $3,000 fiduciary fee. Gable's distributable net income is computed net of the full $3,000 deduction for the fees. A)True
B)False
Q3) An estate operates a manufacturing business. It can claim a domestic production activities deduction (DPAD). A)True B)False
Q4) The Gable Trust reports $20,000 business income and $10,000 exempt interest income, and it paid a $3,000 fiduciary fee. Gable's distributable net income (DNI) includes $9,000 for the interest income. A)True
B)False
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