Principles of Taxation
Mock Exam
Course Introduction
Principles of Taxation introduces students to the fundamental concepts and frameworks underpinning tax systems, with a focus on the objectives, structures, and key principles of taxation. This course examines different types of taxes, their economic and social implications, as well as the criteria for an effective tax system, including equity, efficiency, and simplicity. Students will explore the roles of taxpayers and authorities, the procedures for tax assessment and collection, and the impact of taxation on individuals, businesses, and government revenue. By the end of the course, participants will gain a foundational understanding of the legal and practical aspects of taxation relevant to business and decision-making contexts.
Recommended Textbook
Fundamentals of Taxation 9th Edition 2016 by Ana Cruz
Available Study Resources on Quizplus
15 Chapters
1631 Verified Questions
1631 Flashcards
Source URL: https://quizplus.com/study-set/3923 Page 2
Chapter 1: Introduction to Taxation, the Income Tax
Formula, and Form 1040ez
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/78252
Sample Questions
Q1) Which of the following would disqualify a taxpayer from filing a Form 1040EZ?
A) Has total taxable income under $100,000.
B) Has no dependents.
C) Be age 68 and not blind.
D)Has interest income less than $1,500.
Answer: C
Q2) Which of the following refers to an income tax regulation?
A) Reg. §1.162-5.
B) Reg. §20.2032-1.
C) Reg. §25.2503-4.
D)Reg. §31.3301-1.
Answer: A
Q3) Alice is an employee of Valley Company. Alice properly completed her Form 1040EZ tax return and received a refund from the IRS of $1,244. Alice had income tax withholdings during the year of $4,782. Alice's tax liability for the year was:
A) $1,244.
B) $3,538.
C) $4,782.
D)$6,026.
Answer: B
Page 3
To view all questions and flashcards with answers, click on the resource link above.
Chapter 2: Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/78251
Sample Questions
Q1) 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?
A) Robert.
B) Fred or Lucas.
C) Robert, Fred or Lucas.
D)None of these.
Answer: B
Q2) What is the amount of the social security wage limitation for 2015?
A) $106,800.
B) $110,100.
C) $118,500.
D)$117,000.
Answer: C
Q3) The amount of tax liability for a taxpayer depends on many factors, including the filing status of the taxpayer.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Gross Income: Inclusions and Exclusions
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/78250
Sample Questions
Q1) Name three items that are exempt from income under the umbrella of compensation for injuries or sickness.
Answer: The following items are exempt from income under the umbrella of compensation for injuries or sickness:
1. Payments received under workers' compensation acts.
2. Damages (other than punitive damages) received as a result of personal physical injuries or sickness.
3. Pensions or annuities received for personal injuries or sickness from active service in the armed forces, coast guard, public health service, or foreign service.
4. Disability income resulting from a terrorist attack while in the employ of the United States engaged in official duties outside the United States.
Q2) Income may be realized in the form of:
A) Services.
B) Money.
C) Property.
D)All of these.
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Adjustments for Adjusted Gross Income
Available Study Resources on Quizplus for this Chatper
108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/78249
Sample Questions
Q1) What is a Health Savings Account (HSA)?
Q2) In 2011 through 2014, Rory borrowed a total of $30,000 for higher education expenses on qualified education loans. In 2015, while still living at home and being claimed by his parents as a dependent, he began making payments on the loan. The first year interest on the loan was reported as $1,750. The amount that Rory can claim on his tax return is:
A) $0.
B) $1,500.
C) $1,750.
D)$2,500.
Q3) As a for AGI deduction, the expense for self-employed health insurance premiums: A) Is never limited.
B) Can be limited by the amount of net earnings of the business.
C) Can be limited by the availability of other health insurance coverage.
D)Is limited by both can be limited by the amount of net earnings of the business and can be limited by the availability of other health insurance coverage.
Q4) What is meant by a penalty on early withdrawal of savings and under what circumstances is it deductible?
Q5) Why is it important to distinguish between a property settlement and alimony?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Itemized Deductions
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/78248
Sample Questions
Q1) Taxpayers can deduct qualified residence interest on their principal residence and on a second residence selected by the taxpayer.
A)True
B)False
Q2) When are travel costs deductible as medical costs? How are medical travel costs calculated?
Q3) Which of the following statements is true regarding documentation requirements for charitable contributions?
A) If the total deduction for all noncash contributions for the year is more than $500, Section A of Form 8283, Noncash Charitable Contributions, must be completed.
B) A noncash contribution of less than $250 must be supported by a cancelled check, or a receipt, or other written acknowledgement from the charitable organization.
C) A contribution charged to a credit card is considered a cash contribution for purposes of documentation requirements.
D)All of these are true.
Q4) Define a personal casualty loss.
Q5) How is the medical expense deduction calculated? How is it limited?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Self-Employed Business Income
Available Study Resources on Quizplus for this Chatper
73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/78247
Sample Questions
Q1) "Listed property" includes only passenger automobiles.
A)True
B)False
Q2) Sole proprietors must pay self-employment tax on 100% of their self-employment income.
A)True
B)False
Q3) The significance of meeting the "travel away from home" standard is that it allows the deduction of meals, lodging, and other incidental expenses such as dry cleaning.
A)True
B)False
Q4) Paola purchased an office building on January 5, 2013, for $450,000. $30,000 of the price was for the land. On September 25, 2015, he sold the office building. What is the cost recovery deduction for 2015 rounded to the nearest dollar?
A) $0.
B) $7,321.
C) $7,628.
D)$10,769.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Capital Gains and Other Sales of Property
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/78246
Sample Questions
Q1) In 2012, Joe purchased land for $73,500 for use in his business. He sold it in 2015 for $100,000. What is the gain on the sale before any netting?
A) $26,500 Section 1231 gain.
B) $26,500 Section 1245 gain.
C) $26,500 Section 1250 gain.
D)$26,500 ordinary income.
Q2) Currently, the maximum capital gain rate applied to a taxpayer in the 15% regular tax bracket is 0%.
A)True B)False
Q3) The basis of inherited property to the beneficiary is the FMV at the date of death or alternate valuation date.
A)True B)False
Q4) The purpose of Code Sections 1245 and 1250 recapture provisions is to restrict the possibility of converting ordinary income into capital gains through use of depreciation deductions.
A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Rental Property, Royalties, Income From
Flow-Through Entities
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/78245
Sample Questions
Q1) Royalties can be earned from allowing others the right to use:
A) patents.
B) plays.
C) songs.
D)all of these.
Q2) A property that has been rented for 120 days and used for personal use for 13 days should be categorized as:
A) Primarily rental
B) Primarily personal
C) Personal/rental
D)None of these
Q3) Royalty income is income received from the use of books, stories, plays, copyrights, trademarks, etc. owned by the taxpayer.
A)True
B)False
Q4) Royalties can be earned from allowing others the right to use or exploit:
A) Copyrights
B) Formulas
C) Coal mines
D)All of these
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Tax Credits
Available Study Resources on Quizplus for this Chatper
140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/78244
Sample Questions
Q1) Which of the following statements is not true regarding the education credits?
A) The American opportunity tax credit is only available for the first two years of postsecondary education.
B) The lifetime learning credit is limited to $2,000 per taxpayer per year.
C) The American opportunity tax credit is limited to $2,500 per student per year.
D)A taxpayer cannot receive the American opportunity tax credit if he/she has a felony drug conviction.
Q2) Max and Nora have modified AGI of $75,000, and adopted a little boy from San Antonio, Texas, in the current year and incurred a total of $13,000 in qualified adoption expenses. In addition, Max's employer provided the couple with adoption benefits of $4,000. What is the maximum amount of adoption credit they can take this year?
A) $4,000.
B) $9,000.
C) $13,000.
D)$13,400.
Q3) The maximum lifetime learning credit per taxpayer is $3,000 per year.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 10: Payroll Taxes
Available Study Resources on Quizplus for this Chatper
122 Verified Questions
122 Flashcards
Source URL: https://quizplus.com/quiz/78243
Sample Questions
Q1) Employers are required to deposit FUTA taxes when their liability for a quarter exceeds:
A) $500.
B) $1,000.
C) $1,500.
D)$2,500.
Q2) Supplemental wages are subject to the following taxes:
A) FICA taxes.
B) Federal withholding taxes.
C) Unemployment taxes.
D)All of these.
Q3) The amount withheld from supplemental payments depends on whether the employer accounts for the payment separate from regular wages.
A)True
B)False
Q4) Although the federal unemployment tax is 6.0% of covered wages, employers receive a 5.4% federal credit if they make accurate and timely state unemployment tax deposits.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Retirement and Other Tax-Deferred Plans and Annuities:
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/78242
Sample Questions
Q1) Kaysia participates in a SIMPLE plan provided by her employer. In 2015, she contributes 6% of her $40,000 salary, and her employer contributes 3% to the plan. What amount of the contributions will be vested in her account at the end of 2015?
A) $0.
B) $1,200.
C) $2,400.
D)$3,600.
Q2) Distributions from a traditional IRA:
A) Are fully taxable if the IRA was entirely funded with deductible contributions.
B) Are always fully taxable.
C) Are always nontaxable.
D)Are fully taxable if the IRA was entirely funded with nondeductible contributions.
Q3) In the case of defined-contribution plans, in 2015 what are the maximum contribution limits by an employee under the age of 50 to a qualified pension plan, a 401(k) plan, a Keogh plan, SEP, and SIMPLE plan?
Q4) What is an annuity contract? Who are the parties to an annuity contract?
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Special Property Transactions
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/78241
Sample Questions
Q1) The receipt of boot in a like-kind exchange causes the recognition of a realized gain.
A)True
B)False
Q2) On July 1, 2015, DJ sold equipment used in her business and reported the gain using the installment method. Her adjusted basis in the equipment was $150,000. The equipment was subject to $30,000 of depreciation recapture. DJ sold the property for $250,000, with $100,000 due on the date of the sale and $150,000 (plus interest at the Federal rate) due on August 1, 2016. What is the amount of gain recognized in 2015?
Q3) Jasmine sold land for $250,000 in 2015. The land had a basis of $118,000 and she incurred selling expenses of $10,000. Jasmine received $50,000 down in 2015 and will receive five additional annual payments of $40,000 each. How much income will Jasmine recognize in 2016 when she receives the first additional payment of $40,000?
A) $0.
B) $18,880.
C) $19,520.
D)$40,000.
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: At-Riskpassive Activity Loss Rules and the
Individual Alternative Minimum Tax
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/78240
Sample Questions
Q1) The term "active participation" is used to determine:
A) Whether an activity is considered passive.
B) Whether a taxpayer is a material participant.
C) Whether a taxpayer is eligible for the $25,000 rental offset.
D)None of these.
Q2) After computing all tax preferences and AMT adjustments, Adam and his wife Cindy have AMTI of $290,000. If Adam and Cindy file a joint tax return, what exemption amount can they claim for AMT for 2015?
A) $0.
B) $50,625.
C) $53,600.
D)$83,400.
Q3) Most real estate debt meets the requirements of qualified nonrecourse financing. A)True
B)False
Q4) The at-risk amount is increased each tax year by:
A) Income items.
B) The basis of assets contributed.
C) The share of debt the investor is liable to repay.
D)All of these.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Partnership Taxation
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/78239
Sample Questions
Q1) If a personal-use asset is contributed to a partnership for business use, the partnership's basis in the asset is always:
A) $0.
B) The FMV of the asset at the date of contribution.
C) The basis of the asset at the date of contribution.
D)The lesser of the asset's FMV or basis at the date of contribution.
Q2) All income/gain and expense/loss items affect a partner's basis in his or her partnership interest.
A)True
B)False
Q3) Rich is a partner in RKW partnership. Rich owned 50% from January 1, 2015 to April 30, 2015, when he bought Kevin's 25% interest. He owned 75% for the rest of the year (assume a 365-day year). The partnership had ordinary income of $150,000 and $25,000 in long-term capital gains. Barring any special allocations in a partnership agreement, Rich's share of the income items is:
A) $75,000 ordinary income; $12,500 capital gain.
B) $100,172 ordinary income; $16,696 capital gain.
C) $112,500 ordinary income; $18,750 capital gain.
D)$150,000 ordinary income; $25,000 capital gain.
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Corporate Taxation
Available Study Resources on Quizplus for this Chatper
127 Verified Questions
127 Flashcards
Source URL: https://quizplus.com/quiz/78238
Sample Questions
Q1) A shareholder of a Subchapter S corporation is required to personally report his or her proportionate share of corporate net income.
A)True
B)False
Q2) Corporate distributions to shareholders are called dividends.
A)True
B)False
Q3) Valarie owns 100% of Green Company. Green has earnings and profits of $10,000. The corporation distributes property with a basis of $9,000 and a FMV of $12,000 to Valarie. She must report dividend income of:
A) $2,000.
B) $9,000.
C) $10,000.
D)$12,000.
Q4) Certain items of income or expense are not included in income of a Subchapter S corporation but, instead, are separately stated on Schedule K-1. List some items that are separately stated.
To view all questions and flashcards with answers, click on the resource link above.
17