Tax Practice and Procedures
Review Questions
Course Introduction
Tax Practice and Procedures provides an in-depth exploration of the principles and processes involved in the administration of tax laws. The course covers key topics such as taxpayer rights and obligations, tax return preparation, filing and payment procedures, audits, appeals, and collection processes. Students will analyze the roles of tax authorities, ethical considerations faced by tax practitioners, and strategies for effective client representation before tax agencies. Emphasis is placed on understanding statutory and regulatory frameworks, procedural deadlines, and documentation requirements necessary for compliance and effective tax practice. Through practical examples and case studies, students will gain the skills required to navigate the complexities of tax compliance and resolve disputes within the framework of tax administration.
Recommended Textbook
Income Tax Fundamentals 2017 35th Edition by Gerald E. Whittenburg
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12 Chapters
1259 Verified Questions
1259 Flashcards
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Page 2
Chapter 1: The Individual Income Tax Return
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128 Verified Questions
128 Flashcards
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Sample Questions
Q1) Taxpayers can download tax forms from the IRS Internet site.
A)True
B)False
Answer: True
Q2) A dependent child with earned income in excess of the available standard deduction amount must file a tax return.
A)True
B)False
Answer: True
Q3) A married person with a dependent child may choose to file as head of household if it reduces his or her tax liability.
A)True
B)False
Answer: False
Q4) Gerald is single and earns $80,000 in dividend income and $180,000 in wage income in 2016. Compute his additional ACA Medicare surtax on net investment income. Answer: $2,280 = 3.8% x [the lesser of ($260,000 - $200,000) or $80,000]
Q5) List two general objectives of the tax code.
Answer: The tax code promotes social goals, economic goals and raising revenue.
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Chapter 2: Gross Income and Exclusions
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) Jack is a lawyer and Jeri is a child psychologist. Jack prepares Jeri's estate planning at no charge and Jeri agrees to counsel Jack's daughter six times at no charge in return for the estate planning. The value of the estate planning is $1,000 and the value of the therapy sessions is $1,000.
a.How much income does Jack have? Why?
b.How much income does Jeri have? Why?
Answer: a. $1,000. Taxable income includes "all income from whatever source derived." The value of the therapy for his child is income to him for the performances of services. There is no taxable income exception in the tax law for "barter income."
b. $1,000. Taxable income includes "all income from whatever source derived." The value of the estate planning is income to her for the performances of services. There is no taxable income exception in the tax law for "barter income."
Q2) Noncash items received as income must be included in income at their fair market value.
A)True
B)False Answer: True
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Page 4
Chapter 3: Business Income and Expenses Part I
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) Deductible transportation expenses:
A)Include meals and lodging.
B)Include only costs incurred while away from home.
C)Do not include the normal costs of commuting.
D)Do not include daily expenses for transportation between the taxpayer's home and temporary work locations if the taxpayer has a regular place of business.
Answer: C
Q2) Schedule C or Schedule C-EZ may be used to report the net profit or loss from a partnership with business expenses of $2,500 or less.
A)True
B)False
Answer: False
Q3) What is the advantage of carrying a net operating loss back against prior years' income rather than forward against future years?
Answer: It results in an immediate tax refund (cash flow) which would likely be of help to a business which has just suffered a loss.
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Chapter 4: Business Income and Expenses Part II
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97 Verified Questions
97 Flashcards
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Sample Questions
Q1) In 2016, all taxpayers may make a deductible or nondeductible contribution to an IRA. A)True
B)False
Q2) Walt and Jackie rent out their residence in San Diego to friends for 10 days while they vacation in Europe. They collect $1,000 of rental income. How is the rental income treated on their tax return? Explain.
Q3) What percentage of medical insurance payments can self-employed taxpayers deduct for adjusted gross income on their 2016 tax returns, assuming their self-employment income exceeds their medical insurance payments?
A)60 percent
B)70 percent
C)50 percent
D)90 percent
E)100 percent
Q4) Barrett is a 45-year-old political commentator who has self-employed net earned income of $170,000 in 2016. What is the maximum amount he can deduct for contributions to his simplified employee pension (SEP) for the year?
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Chapter 5: Itemized Deductions and Other Incentives
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143 Verified Questions
143 Flashcards
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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) Expenses of education to improve or maintain existing skills are deductible as a miscellaneous itemized deduction even if the education incidentally leads to qualification in a new job or business.
A)True
B)False
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Chapter 6: Credits and Special Taxes
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107 Verified Questions
107 Flashcards
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Sample Questions
Q1) The child tax credit is $1,000 per qualifying child unless it is phased out due to higher levels of parental income.
A)True
B)False
Q2) Denise is divorced and files a single tax return claiming her two children, ages 7 and 9, as dependents. Her AGI for 2016 is $81,500. Denise's child tax credit for 2016 is:
A)$0
B)$350
C)$1,000
D)$1,650
E)$2,000
Q3) If the net unearned income of a minor child is to be taxed at the parents' tax rate, the parents may elect, under certain conditions, to include the child's gross income on their tax return.
A)True
B)False
Q4) Most states are community property states.
A)True
B)False
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Chapter 7: Accounting Periods and Methods and Depreciation
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) Lanyard purchased office equipment (7-year property) for use in his business. He paid $100,000 for the equipment on July 1, 2016. Lanyard did not purchase any other property during the year. For 2016, his business had net income of $350,000, before depreciation and before considering the election to expense.
a.What is the maximum amount that Lanyard can deduct in 2016 under the election to expense?
b.
What is the total depreciation (regular depreciation and the amount allowed under the election to expense) on the office equipment for 2016, assuming Lanyard uses the accelerated method under MACRS and claims the maximum amount allowable under the election to expense?
c.What is Lanyard's total depreciation deduction for 2017 on the 2016 purchase of equipment?
Q2) Shellie purchased a passenger automobile on March 2, 2016. She paid $15,000 for the automobile and can support business use of 85 percent. Calculate the amount of depreciation on the automobile for 2016 using the accelerated MACRS method (if available), assuming Shellie does not make the election to expense or claim bonus depreciation.
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Chapter 8: Capital Gains and Losses
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) Gain recognized on the sale of a Section 1245 asset is classified as ordinary income up to the amount of depreciation claimed.
A)True
B)False
Q2) For purposes of determining the adjusted basis of a capital asset at the time of its sale,
A)Capital improvements are added to the basis.
B)Ordinary repairs reduce the adjusted basis.
C)Accumulated depreciation is added to the basis.
D)The basis does not include costs such as title insurance and escrow fees related to the initial purchase.
Q3) If a capital asset acquired on October 27, 2008 is sold on April 30, 2016 for a gain, the gain is a long-term capital gain.
A)True
B)False
Q4) The exchange of shares of stock does not qualify for like-kind exchange treatment.
A)True
B)False
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Chapter 9: Withholding Estimated Payments and Payroll Taxes
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82 Verified Questions
82 Flashcards
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Sample Questions
Q1) Emily is a self-employed attorney.
a.
Assuming that Emily earns $20,000 from her practice, calculate the total amount of her self-employment tax liability for 2016. b.
Assuming that Emily earns $135,000 from her practice, calculate the total amount of her self-employment tax liability for 2016.
Q2) A taxpayer would be required to pay Social Security and Medicare taxes for a domestic employee in all but one of the following situations. In which situation would this not be required?
A)A nanny who earns $22,000 a year
B)A baby-sitter who earns $1,300 a year
C)A cook who is paid $35,000 a year
D)A cleaning lady who is paid $8,000 a year
E)The taxpayer would not have to pay Social Security and Medicare taxes in any of the above situations
Q3) What is the purpose of backup withholding?
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Page 11
Chapter 10: Partnership Taxation
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81 Verified Questions
81 Flashcards
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Sample Questions
Q1) Lucky's original contribution to the Boxwood Partnership was land with a basis of $5,000 and a market value of $55,000. Her share of the taxable income from the partnership since her original contribution has been $95,000 and Lucky has received $45,000 in cash distributions from the partnership. Lucky did not recognize any gains as a result of the distributions. Calculate Lucky's current basis in her partnership interest.
Q2) If Margo and Bruce purchase and operate an ice cream store, for tax purposes they have formed a partnership.
A)True
B)False
Q3) A partnership may deduct a single personal exemption in calculating ordinary taxable income or loss.
A)True
B)False
Q4) A partnership will terminate and its tax year will close if the partnership ceases to carry on any business activity.
A)True
B)False
Q5) List three advantages of an LLC.
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Chapter 11: The Corporate Income Tax
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80 Verified Questions
80 Flashcards
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Sample Questions
Q1) In the current year, Parvifolia, Inc. had $400,000 of revenue from operations and $160,000 of dividends from non-affiliated 15 percent-owned domestic corporations. The corporation's deductible operating expenses totaled $410,000. What is Parvifolia, Inc.'s dividends received deduction for the current year?
A)$105,000
B)$112,000
C)$120,000
D)$128,000
E)None of the above
Q2) Ficus, Inc. began business on March 1, 2016, and elected to file its income tax return on a calendar-year basis. The corporation incurred $800 in organizational expenditures. Assuming the corporation does not elect to expense but chooses to amortize the costs over 180 months, the maximum allowable deduction for amortization of organizational expenditures in 2016 is:
A)$4.44
B)$44.44
C)$53.28
D)$800.00
E)None of the above
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Page 13
Chapter 12: Tax Administration and Tax Planning
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67 Verified Questions
67 Flashcards
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Sample Questions
Q1) Taxpayers are required by law to maintain records to facilitate an IRS audit.
A)True
B)False
Q2) A taxpayer's average tax rate is determined by dividing the total tax paid by the total income of the taxpayer.
A)True
B)False
Q3) List three things that a preparer needs to do in order to participate in the Annual Filing Season Program.
Q4) Which of the following is the most common type of audit for an individual taxpayer?
A)Office audit
B)Telephone audit
C)Correspondence audit
D)Field audit
E)None of the above
Q5) What is the difference between tax avoidance and tax evasion?
Q6) List three different ways that a tax return may be selected for an audit.
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Page 14