Taxation for Accountants Final Exam
Course Introduction
This course provides an in-depth exploration of tax principles and regulations relevant to accounting professionals. Students will examine the foundations of federal, state, and local taxation, focusing on the preparation and analysis of individual and business tax returns. The curriculum covers topics including tax planning strategies, compliance, reporting, and the ethical considerations involved in the practice of taxation. Through case studies and practical exercises, participants will gain the skills necessary to interpret tax laws, apply tax codes, and provide informed tax advice in various business contexts. This course is essential for future accountants seeking expertise in tax-related matters within the accounting profession.
Recommended Textbook
Pearsons Federal Taxation 2018 Corporations Partnerships Estates Trusts 31st Edition by Kenneth
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1727 Verified Questions
1727 Flashcards
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Chapter 1: Tax Research
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Q1) Identify which of the following statements is false.
A) When a court opinion discusses facts and issues on which the court does not rule, the comments are called dicta.
B) Dicta in a court opinion has no influence on other tax proceedings.
C) Published articles and tax services are examples of secondary sources of authority.
D) Dicta are not authoritative.
Answer: B
Q2) Which of the following courts is not a trial court for tax cases?
A) U.S. Bankruptcy Court
B) U.S. District Court
C) U.S. Tax Court
D) U.S. Court of Federal Claims
Answer: A
Q3) Where must a tax researcher look to access all Tax Court cases?
Answer: The regular opinions are found in the Tax Court of the United States Reporter,published by the U.S.Government Printing Office,and the memo decisions are published by both RIA and CCH in their own court reporters.
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Chapter 2: Corporate Formations and Capital Structure
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Sample Questions
Q1) The City of Seattle gives Dotcom Corporation $120,000 cash and land worth $200,000 to induce it to relocate to Seattle.Dotcom Corporation did not spend the cash during the 12 months following the contribution.What are the tax consequences to Dotcom Corporation with respect to the contribution?
Answer: No income is recognized.Dotcom Corporation's basis in the land is $0,and it must reduce the basis of other assets by $120,000.
Q2) The transferor's holding period for any boot property received in a Sec.351 stock exchange
A) includes the holding period for the boot transferred.
B) begins on the day after the exchange.
C) begins on the day of the exchange.
D) is the same as the holding period of the stock received in the exchange.
Answer: B
Q3) Any losses on the sale of Section 1244 stock are ordinary.
A)True
B)False
Answer: False
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4
Chapter 3: The Corporate Income Tax
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Sample Questions
Q1) Walter,who owns all of the Ajax Corporation stock,purchases a truck from Ajax Corporation in January.The truck cost $12,000 and has a $10,000 adjusted basis.Walter pays the truck's $8,000 FMV.Later in the same year,Walter sells the truck to an unrelated party for $13,000.With respect to these transactions,
A) Ajax Corporation reports a loss of $2,000 and Walter reports a gain of $5,000.
B) Ajax Corporation reports no loss and Walter reports a gain of $3,000.
C) Ajax Corporation reports a loss of $4,000 and Walter reports a gain of $5,000.
D) Ajax Corporation reports no loss and Walter reports a gain of $5,000.
Answer: B
Q2) Identify which of the following statements is false.
A) A corporation must file a tax return annually.
B) A corporation can obtain an automatic six-month extension of time to file its tax return.
C) The IRS will permit an extension of time to file a corporate return beyond the original due date only when the corporation's delay is reasonable.
D) The IRS can rescind the extension period.
Answer: C
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Chapter 4: Corporate Nonliquidating Distributions
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Sample Questions
Q1) Tia owns 2,000 shares of Bass Corporation common stock with an $80,000 basis.Bass distributes a nontaxable preferred stock dividend.When the preferred stock is distributed,it has an FMV of $60,000 and the FMV of the 2,000 common stock shares is $180,000.The basis of the preferred stock is
A) $0.
B) $20,000.
C) $60,000.
D) $80,000.
Q2) On April 1,Delta Corporation distributes $120,000 in cash to each of its two equal shareholders,Sarah and Matt.At the time of the distribution,Delta's E&P is $160,000.Sarah's basis in her stock is $50,000 and Matt's basis in his stock is $20,000.How are the distributions characterized to Sarah and Matt? Be specific.
Q3) What is a stock redemption? What are some of the reasons for making a stock redemption? Why are some redemptions treated as sales and others as dividends?
Q4) A shareholder's basis in property distributed as a dividend is its fair market value. A)True B)False
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Chapter 5: Other Corporate Tax Levies
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Sample Questions
Q1) ASC 740 requires that
A) the AMT is not considered as federal income tax expense.
B) companies must establish a valuation allowance for the minimum tax credit.
C) the minimum tax credit creates a deferred tax asset.
D) the minimum tax credit increases federal income tax expense.
Q2) Identify which of the following statements is true.
A) A corporation accumulates earnings to fund the redemption of a shareholder's stock following her death so as to provide her estate with liquidity to pay death taxes. Such an accumulation of earnings is a reasonable business need.
B) A corporation accumulates earnings to fund a buy-sell agreement. Such an accumulation of earnings is a reasonable business need.
C) A corporation's net capital gain (minus any federal income taxes paid with respect to such gain) increases the tax base for the accumulated earnings tax.
D) All of the above are false.
Q3) What are the four general rules that provide a framework for the ACE calculation?
Q4) How is alternative minimum taxable income computed?
Q5) Define personal holding company income.
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Page 7
Chapter 6: Corporate Liquidating Distributions
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Sample Questions
Q1) Key Corporation distributes a patent with an indeterminable value to Gary as part of a plan of complete liquidation.In addition,Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis.Gary's basis in the Key stock (a capital asset)surrendered is $120,000.If Gary relies on the open transaction doctrine,at the liquidation date he must recognize a
A) $0 gain.
B) $10,000 capital loss.
C) $30,000 capital loss.
D) $70,000 capital gain.
Q2) What event determines when a cash or accrual method of accounting taxpayer reports a liquidating distribution?
Q3) Market Corporation owns 100% of Subsidiary Corporation's stock.Market Corporation completely liquidates Subsidiary Corporation,receiving land with a $400,000 adjusted basis and a $500,000 FMV in exchange for Subsidiary stock,which has a $300,000 adjusted basis.Market Corporation has a basis in the land of
A) $300,000.
B) $400,000.
C) $500,000.
D) none of the above
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Page 8
Chapter 7: Corporate Acquisitions and Reorganizations
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Q1) Identify which of the following statements is true.
A) A tax-free spin-off coming under Sec. 355 occurs when a parent corporation distributes stock in a controlled subsidiary corporation in exchange for some of its own stock.
B) Tax-free split-offs and spin-offs coming under Sec. 355 require the surrender of shareholder stock.
C) When boot is received in a Sec. 355 spin-off transaction, the FMV of the boot will be a dividend to the extent of the shareholder's ratable share of the distributing corporation's E&P.
D) All of the above are false.
Q2) In which of the following reorganizations does the distributing corporation transfer all of its assets to two controlled corporations before the distributing corporation dissolves?
A) split-off
B) spin-off
C) split-up
D) Type C reorganization
Q3) What are the two steps of a Sec.338 deemed liquidation election?
Q4) Briefly describe A,B,C,D,and G reorganization types.
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Chapter 8: Consolidated Tax Returns
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Q1) The IRS can attempt to collect taxes owed on a consolidated return from any of the members of the consolidated group.
A)True
B)False
Q2) Cardinal and Bluebird Corporations both use a calendar year as their tax year.At the close of business on June 30,Cardinal Corporation buys all of Bluebird Corporation's stock.If the two corporations file a consolidated return and both corporations earn their income evenly throughout the year,what portion of Cardinal's income will be included in the consolidated return? (Assume all months have 30 days.)
A) 100%
B) 50%
C) 0%
D) none of the above
Q3) Penish and Sagen Corporations have filed consolidated tax returns for several calendar years.At the close of business on September 30,2012,Penish Corporation sells all of its Sagen stock to June.What are the tax consequences to each corporation?
Q4) Explain the requirements a group of corporations must meet in order to elect to file a consolidated return.
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Page 10
Chapter 9: Partnership Formation and Operation
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Q1) Explain the difference between partnership distributions and distributive shares.
Q2) In computing the ordinary income of a partnership,a deduction is allowed for A) net Sec. 1231 losses.
B) bad debts.
C) foreign income taxes paid.
D) charitable contributions.
Q3) Janice has a 30% interest in the Jansen Partnership.She is to receive a guaranteed payment for deductible services of $50,000.The partnership reports $30,000 of ordinary income and a $100,000 long-term capital gain before deducting the guaranteed payment.What is her income from the partnership?
Q4) A partner's basis for his partnership interest can be negative. A)True B)False
Q5) Guaranteed payments are always ordinary income to the recipient. A)True B)False
Q6) Explain the tax consequences for both the service partner and the partnership when a contribution of services is made to the partnership.
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Chapter 10: Special Partnership Issues
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Q1) Can a partner recognize both a gain and a loss on the sale of a partnership interest? If so,under what conditions?
Q2) Identify which of the following statements is false.
A) A sale or exchange of at least 50% of the capital and profits interest in a partnership within a 12- consecutive-month period will terminate the partnership and end all of the partnership's elections.
B) When using the 50% rule to terminate a partnership, if an interest is sold more than once during the 12-month period, each sale is counted separately.
C) A partner's individual income tax return, under some circumstances, may include the results of partnership operations for a period exceeding 12-months.
D) When several different transfers are made during a 12-month period, the partnership termination occurs on the date of the transfer that first crosses the 50% threshold.
Q3) For purposes of Sec.751,inventory includes all of the following except A) capital assets or 1231 property.
B) items held for sale in the ordinary course of business.
C) accounts receivable.
D) All of the above are inventory per Sec. 751.
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Chapter 11: US Corporations
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Q1) S shareholders cannot increase the basis of their stock by a ratable share of the general S corporation liabilities.
A)True
B)False
Q2) Which one of the following individuals or entities is ineligible to be an S corporation shareholder?
A) an estate
B) resident alien of the United States
C) a voting trust where all of the beneficiaries are U.S. citizens
D) a partnership where all of the partners are U.S. citizens
Q3) VJ Corporation is to be owned equally by Vic and Joe.The corporation will be formed by exchanging the assets and liabilities of the V & J Manufacturing Partnership for all the corporation's stock on September 1 of the current year.Both shareholders use the calendar year as their tax year and desire to make an S election.What tax issues should Vic and Joe consider with respect to the incorporation?
Q4) If losses are suspended due to the lack of basis in S corporation stock,do the losses expire when the S election terminates?
Q5) What is a permitted year?
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Chapter 12: The Gift Tax
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Q1) Gift tax returns are filed on a calendar-year basis.
A)True
B)False
Q2) Which of the following statements is true?
A) If the donor does not pay the gift tax, the donee is personally liable for the tax.
B) When a married couple elects gift splitting, each spouse is potentially liable for 50% of the gift tax.
C) Gift tax returns are due March 15 in the year following the gift.
D) Donors can request an automatic extension of time to pay their gift tax even when they don't request to have an income tax extension.
Q3) In the current year,Bonnie,who is single,sells stock valued at $60,000 to Linda for $15,000.Later that year,Bonnie gives Linda $25,000 in cash.Bonnie's taxable gifts from these transfers total
A) $70,000.
B) $59,000.
C) $56,000.
D) $25,000.
Q4) Discuss the statutory exemptions from the gift tax.
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Page 14
Chapter 13: The Estate Tax
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Q1) Identify which of the following statements is true.
A) A courtesy interest is a widower's interest in his deceased wife's property.
B) All gifts made within three years of the date of death must be included in the gross estate.
C) Dower rights are not the same as courtesy rights.
D) All of the above are false.
Q2) Sasha gives $1,000,000 to her granddaughter.Sasha has used all of her unified credit and is in the 40% marginal gift tax bracket; ignore the annual exclusion and exemption.What is the amount of her tax on this transfer?
A) $450,000
B) $400,000
C) $1,450,000
D) $652,500
Q3) The payment date for estate taxes may be extended by the IRS for all of the following reasons except
A) the estate includes a 40% interest in a closely held business.
B) the estate includes a relatively large remainder or reversionary interest.
C) the executor of the estate shows reasonable cause.
D) All are valid reasons.
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Page 15
Chapter 14: Income Taxation of Trusts and Estates
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Q1) The $3,000 limitation on deducting net capital losses does not apply to a trust.
A)True
B)False
Q2) In the current year,a trust has distributable net income (DNI)of $30,000.During the year,the trust makes a mandatory distribution to Sarah of $5,000 and a discretionary distribution of $10,000 to Kyle.The trust has no tax-exempt income.The distribution deduction of the trust is
A) $30,000.
B) $15,000.
C) $10,000.
D) $5,000.
Q3) In the year of termination,a trust incurs a $20,000 NOL.In addition,it has a $30,000 NOL carryover from the two preceding tax years.The trust distributes 40% of its assets to Sam,30% of its assets to Alex,and 30% of its assets to Catherine.How much of the NOL can Sam (who has $150,000 of gross income)deduct on his return in the year that the trust terminates?
Q4) Describe the tier system for trust beneficiaries.
Q5) A trust receives no standard deduction when computing taxable income. A)True
B)False
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Chapter 15: Administrative Procedures
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Q1) Explain the four conditions that must be met in civil cases for the burden of proving any factual issue relevant to the determination of taxpayer liability to rest with the IRS.
Q2) Jayne and Jon jointly file a tax return this year.Jayne fraudulently reports two expenses on Schedule C: $2,000 and $2,500.The IRS audits the return,assesses a $1,050 deficiency,and begins collection efforts two years after the timely filing by Jayne and Jon.What must Jon do to be relieved of the $1,050 tax liability?
Q3) The court in which the taxpayer does not have to pay the tax and then litigate for a refund is the
A) U.S. Court of Federal Claims.
B) Federal district court.
C) Tax Court.
D) all of the above
Q4) What is the penalty for a tax return preparer who lacks substantial authority to take a return position?
A) $50
B) $250
C) $1,000
D) 20% of the understatement
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Page 17
Chapter 16: US Taxation of Foreign-Related Transactions
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Q1) Phoenix Corporation is a controlled foreign corporation (CFC)incorporated in Country X.It is 100% owned by its U.S parent corporation.Phoenix has $80,000 of taxable income from the sale of widgets that were purchased from their U.S.parent corporation.All widgets have the same gross profit.Sixty percent of the widgets were sold through a Country Y wholesaler that is 100% owned by Phoenix,and are destined for use in Country Y.The remaining 40% are sold through unrelated Country X wholesalers and are destined for use in Country X.What amount of profits will be constructively distributed as foreign-based company sales income to the U.S.parent company?
A) $0
B) $32,000
C) $48,000
D) $80,000
Q2) Explain the alternatives available to individual taxpayers for reporting foreign income taxes that have been paid or accrued.
Q3) Nonresident aliens are not allowed to claim the standard deduction.
A)True
B)False
Q4) What is a corporate inversion and why was this provision enacted?
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