Tax Planning and Compliance
Final Test Solutions
Course Introduction
Tax Planning and Compliance is a comprehensive course that explores the key principles and strategies involved in effective tax management for individuals and businesses. Students will analyze current tax laws, regulations, and compliance requirements, while learning how to identify tax-saving opportunities, minimize liabilities, and ensure adherence to statutory obligations. The course covers topics such as income taxation, tax credits and deductions, tax avoidance and evasion, reporting requirements, and the ethical considerations related to tax planning. Through case studies and practical exercises, students will develop the skills needed to implement compliant tax strategies and respond effectively to audits and regulatory inquiries.
Recommended Textbook
Concepts in Federal Taxation 2019 26th Edition Kevin E. Murphy
Available Study Resources on Quizplus
16 Chapters
2071 Verified Questions
2071 Flashcards
Source URL: https://quizplus.com/study-set/3648 Page 2
Chapter 1: Federal Income Taxation-An Overview
Available Study Resources on Quizplus for this Chatper
150 Verified Questions
150 Flashcards
Source URL: https://quizplus.com/quiz/72568
Sample Questions
Q1) Alan is a single taxpayer with a gross income of $88,000, a taxable income of $66,000, and an income tax liability of $10,460 for 2018. Josh also has $8,000 of tax-exempt interest income. What are Alan's marginal, average, and effective tax rates?
A)22% marginal; 14.5% average; 15.8% effective.
B)24% marginal; 14.5% average; 15.8% effective.
C)12% marginal; 15.8% average; 14.1% effective.
D)22% marginal; 15.8% average; 14.1% effective.
Answer: D
Q2) If a taxpayer has a choice of receiving income in the current year versus the following year, which of the following tax rates is important in determining the year in which he should include the income?
A)Average.
B)Effective.
C)Composite.
D)Marginal.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Income Tax Concepts
Available Study Resources on Quizplus for this Chatper
151 Verified Questions
151 Flashcards
Source URL: https://quizplus.com/quiz/72560
Sample Questions
Q1) The Nadal Company mails its annual dividend check on December 31. Even when the shareholders receive their check in the following year, they must report the income in the year the check was written and mailed.
A)True
B)False
Answer: False
Q2) Hank bought a small ranch for $300,000 in 2010. In 2018, oil is discovered on neighboring property. The county assessor re-valued Hank's property at $1,550,000. Hank does not recognize any income due to the
A)All-inclusive Income Concept.
B)Capital Recovery Concept.
C)Realization Concept.
D)Claim of Right Doctrine.
E)Ability-to-Pay Concept.
Answer: C
Q3) All deductions are allowed because of the legislative grace concept. A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Income Sources
Available Study Resources on Quizplus for this Chatper
146 Verified Questions
146 Flashcards
Source URL: https://quizplus.com/quiz/72559
Sample Questions
Q1) Which of the following statements is/are correct?
I.Maria receives a necklace worth $300 from her employer in recognition of her production unit's safety record at the company's annual meeting. Maria is not taxed on the $300.
II.Reggie opens a savings account at Mid Financial Savings and Loan. For opening the account he receives a microwave worth $200. On December 31, his account is credited for $300 of interest income. Reggie must report $500 of income.
III.Manu receives a salary of $80,000 as CEO of Camp's Cooking Crockery. Manu owns 60% of Camp's, which is organized as an S corporation. Camp's taxable income for the current year is $300,000 and Camp's pays $100,000 of dividends. Manu must recognize $360,000 of income.
A)Statements I, II, and III are correct.
B)Only statements I, and II are correct.
C)Only statements II and III are correct
D)No statement is correct.
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Income Exclusions
Available Study Resources on Quizplus for this Chatper
160 Verified Questions
160 Flashcards
Source URL: https://quizplus.com/quiz/72558
Sample Questions
Q1) Kristine is the controller of Evans Company. Evans provides all management level employees with medical insurance through a self-insured plan. During the current year, Kristine has $2,650 in medical expenses reimbursed by the plan. The income tax effect of the reimbursements Kristine receives is:
I.Kristine excludes the value of the reimbursement.
II.Kristine includes $2,650 in her gross income.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q2) Norma is in the 32% marginal tax bracket. Because of her high tax rate, Norma would like to reinvest a $10,000, 6%, certificate of deposit in a tax-exempt bond. What is the minimum rate of interest Norma would have to receive to make the tax exempt-bond a more profitable investment?
A)4.1%
B)6.0%
C)8.4%
D)9.0%
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: Introduction to Business Expenses
Available Study Resources on Quizplus for this Chatper
167 Verified Questions
167 Flashcards
Source URL: https://quizplus.com/quiz/72557
Sample Questions
Q1) Sergio purchases $3,000-worth of supplies from a local vendor. The supplies are delivered on April 1, 2018. The supplies are fully used up on December 31, 2018. Because of unusual circumstances, a bill for the supplies arrives from the vendor on February 1, 2019, and is promptly paid. When can Sergio deduct the expenses?
I.In 2018, if he is an accrual basis taxpayer.
II.In 2018, if he is a cash basis taxpayer.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q2) Business expenses include
I.expenditures that have a business purpose
II.expenditures that are incurred for the production of income.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Business Expenses
Available Study Resources on Quizplus for this Chatper
146 Verified Questions
146 Flashcards
Source URL: https://quizplus.com/quiz/72556
Sample Questions
Q1) Rhonda and Ralph are married. Rhonda earns $81,000 annually, and Ralph earns $6,000 annually working part-time. Their AGI is $108,000. Rhonda participates in an employer-sponsored retirement plan. Ralph's company does not have a pension plan. Rhonda and Ralph contribute the maximum amount allowable annually to their IRAs. What is their allowable deduction for this year's contributions?
A)$0 -
B)$2,200
C)$5,500
D)$8,000
E)$11,000
Q2) Sally and Kelly are both accountants and are enrolled in the same continuing education tax course. Discuss how it is possible that Sally can deduct the cost of her tuition as an education expense while Kelly's tuition is not deductible.
Q3) A taxpayer may use either the actual cost method or the standard mileage rate for deducting auto expenses.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Losses-Deductions and Limitations
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/72555
Sample Questions
Q1) Casualty loss
A)Limited to $3,000 annually for individuals.
B)When an asset is disposed of for less than its basis.
C)An excess of business deductions over business income.
D)A trade or business in which the taxpayer is not a material participant.
E)A loss that results from some sudden, unexpected, or unusual event.
F)Any asset that is not a receivable, inventory, or depreciable or real property used in a trade or business.
Q2) A closely held corporation cannot offset net passive losses against income of the business.
A)True
B)False
Q3) The term tax shelter refers to investment property that involves residential and commercial real estate.
A)True
B)False
Q4) Why do the wash sale rules apply to the sale of stock at a loss but not to the sale of stock at a gain?
Q5) Why did Congress enact the at-risk rules?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Taxation of Individuals
Available Study Resources on Quizplus for this Chatper
163 Verified Questions
163 Flashcards
Source URL: https://quizplus.com/quiz/72554
Sample Questions
Q1) Paul, age 40 and single, has an 8-year-old son, Larry. Larry resides with his mother, Susan, in her home. Pursuant to the terms of their divorce, Paul properly claims Larry as a dependent on his income tax return. Paul pays child support payments to his ex-wife for support of his child. Susan does not claim Larry as her dependent but she does bear the economic burden of supporting the household in which they reside. What is the maximum amount of the 2018 standard deduction that Susan qualifies for?
A)$12,000
B)$18,000
C)$19,600
D)$24,000
E)Susan does not qualify to claim a standard deduction.
Q2) Married, filing separately
A)Unmarried without dependents.
B)Generally used when financial disagreement exists.
C)Unmarried and provides a household for a dependent.
D)Use the same tax rate schedule as married, filing jointly.
E)Determines which tax rate schedule and standard deduction amount is applicable.
Q3) Explain the support test and the gross income test to be a qualifying relative.
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Acquisitions of Property
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/72553
Sample Questions
Q1) On February 3 of the current year, Samantha converts her house to a rental property. Samantha's adjusted basis in the house is $150,000 and the fair market value is $120,000 on the date of conversion. Samantha uses the rental for 3 years and properly deducts depreciation totaling $12,000. Then, she sells the house for $130,000. What is the amount of the gain or (loss) recognized on the sale?
A)No gain or loss
B)$8,000 gain
C)$20,000 loss
D)$22,000 gain
E)$ 8,000 loss
Q2) Phyllis purchased an automobile for $3,000 down and a note for $15,000. During the year she paid interest of $1,000. Her basis is $18,000.
A)True
B)False
Q3) Intangible property lacks a physical existence; the rights exist only because of economic rights the property possesses.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Cost Recovery on Property: Depreciation, Depletion,
and Amortization
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/72567
Sample Questions
Q1) Capital recovery
A)The depreciation method for real estate.
B)A term used synonymously with the term depreciation.
C)The depreciation system for assets placed in service after 1986.
D)The initial basis of an asset minus the amount of capital recovered.
E)The term used to describe the amount multiplied by the MACRS percentages to calculate the annual depreciation deduction.
F)A provision intended to provide relief to small companies by allowing an immediate deduction for purchases of business equipment and by simplifying record keeping.
Q2) Depletion
A)Trucks, and passenger automobiles.
B)Used to recover the investment in intangible assets.
C)Used to recover the investment in long-lived tangible business-use assets.
D)An attempt to stimulate capital investment by small businesses.
E)Used to recover the investment in assets that waste away through extraction.
Q3) Discuss why listed property gets special attention.
Q4) Under current law, taxpayers must use regular MACRS.
A)True
B)False
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Property Dispositions
Available Study Resources on Quizplus for this Chatper
139 Verified Questions
139 Flashcards
Source URL: https://quizplus.com/quiz/72566
Sample Questions
Q1) Fillmore's net Section 1231 gains and losses reported for the past five years is presented below.
?
\[\begin{array} { r r }
2013 & \$ 15,000 \\
2014 & 12,000 \\
2015 & 5,000 \\
2016 & ( 28,000 ) \\
2017 & ( 13,000 ) \end{array}\]
In 2018, Fillmore has a $15,000 net Section 1231 gain. What amounts and character of income will Fillmore ultimately report in 2018 as a result of this net Section 1231 gain?
A)$6,000 LTCG; $9,000 ordinary income
B)$15,000 ordinary income
C)$15,000 Section 1231 gain
D)$9,000 LTCG; $6,000 ordinary income
E)None of the above.
Q2) What incentive provisions or preferential treatments exist for capital gains?
Q3) Discuss the general differences between Section 1245 and Section 1250 property.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Non-Recognition Transactions
Available Study Resources on Quizplus for this Chatper
117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/72565
Sample Questions
Q1) Like-kind property
A)Losses are never deferred.
B)Must be real property used for business or as a investment.
C)Not considered like-kind property.
D)A taxpayer can have only one at a time.
E)The maximum amount that can be recognized on a like-kind exchange.
F)This type of exchange must be completed within 180 days of first property transfer.
G)The concept upon which the ability to defer gains on certain nontaxable transactions relies.
Q2) Rosilyn trades her old business-use luxury car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use economy car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company. Bob assumes Rosilyn's loan balance. What is Rosilyn's amount realized on the transaction?
A)$3,000
B)$9,000
C)$12,000
D)$13,000
E)$14,000
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Choice of Business Entity-General Tax and
Nontax Factorsformation
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/72564
Sample Questions
Q1) Franco and Melanie start a new business called F&M Delivery. Franco contributes $50,000 in cash and Melanie contributes a fleet of vans worth $80,000. The business assumes Melanie's $30,000 debt on the van. The business borrows $500,000 to purchase necessary buildings and for working capital. They anticipate that the business will suffer losses for at least three years before it becomes profitable. Which entity forms would be appropriate for Franco and Melanie's new business?
Q2) Limited liability refers to
A)whether the entity ceases to exist with a change in ownership. B)who manages the entity.
C)whether the owners are risking any more than they invested in the firm.
D)the ease with which ownership can be transferred.
Q3) Does the selection of a corporate entity ever make sense based on a desire for lower marginal tax rates? Discuss.
Q4) Corporations can use a 52- to 53-week fiscal year end, but the year must end on Saturday each year.
A)True
B)False
Q5) Discuss the characteristics of a personal service corporation (PSC).
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Choice of Business Entity-Operations and Distributions
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/72563
Sample Questions
Q1) William, a CPA, owns a 75% interest in Burglar Concrete Company (BCC). BCC is organized as a partnership. During the current year, William prepares BCC's tax return and receives his normal $300 fee for the preparation of the return.
I.BCC cannot deduct the $300 fee because of the related party rules.
II.William must recognize the $300 fee as income.
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.
Q2) Double taxation
A)Sole Proprietorship.
B)Partnership.
C)Corporation.
D)S Corporation.
Q3) Sales of property between a partner who owns more than 50% of a partnership's interest and the partnership are subject to the related party rules.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Choice of Business Entity-Other Considerations
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/72562
Sample Questions
Q1) On October 2, 2018, Miriam sells 1,000 shares of stock at $20 per share. Miriam acquired the stock on November 12, 2017, when she exercised her option to purchase the shares through her company's incentive stock option plan. The exercise price was $11 per share and the fair market value of the stock at the date of exercise was $14 per share. For 2018, Miriam must report ?
\(\begin{array}{ll}
\text { Ordinary } & \text { Capital } \\ \text { Income } & \text { Gain } \end{array}\)
A)\(\begin{array}{ll}
\$ 3,000 & \$ 6,000 \\\end{array}\)
B) \(\begin{array}{ll}\$ 6,000 & \$ 3,000 \\\end{array}\)
C) \(\begin{array}{ll}\$ 9,000 & \$-0- \\\end{array}\)
D) \(\begin{array}{ll}\$-0- & \$ 9,000 \end{array}\)
Income Gain
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Tax Research
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/72561
Sample Questions
Q1) Joint Committee on Taxation
A)Where federal tax legislation generally originates.
B)Has jurisdiction over all tax matters in the U.S. Senate.
C)The committee responsible for initial hearings and deliberations on a tax bill.
D)Responsible for negotiating a resolution of the differences in the House and Senate versions of a tax bill.
E)The agency within the administrative branch of government with overall responsibility for administration of tax law.
F)Oversees the operation and administration of the tax system as a whole, and prepares a general explanation of any tax bill signed by the President.
Q2) Which regulation deals with Code Section 170?
A)Reg. Sec. 1.170-5
B)Reg. Sec. 170.162-5
C)Reg. Sec. 1.5-170
D)Reg. Sec. 170
E)Reg. Sec. 170.25-5
Q3) Describe the steps of the tax research process.
To view all questions and flashcards with answers, click on the resource link above. Page 18