Exam 2 Quiz Review Questions Flashcards
(31 cards)
When a taxable bond is issued at a discount, taxpayers are required to amortize the discount and reduce the amount of interest reported in the current year by the amount of current year original issue discount amortization. (CH 7-8)
True or False
False
The alternative minimum tax system requires higher-income taxpayers to be taxed at an alternative, higher tax rate on the regular income tax base to determine the amount of the alternative minimum tax. (Ch 7-8)
True or False
False
Qualified dividends received by individuals are taxed at either a 0 percent, a 15 percent, or a 20 percent preferential rate. (CH 7-8)
True False
True
In 2023, Wilma (who files as a head of household) reported regular taxable income of $150,000. She itemized her deductions, deducting $10,000 in charitable contributions and $2,000 in state income taxes. What is Wilma’s alternative minimum taxable income? (CH 7-8)
A. $152,000
B. $162,000
C. $150,000
D. $160,000
A. $152,000
In certain circumstances, in the current year, a taxpayer may need to pay in more than 100% of her prior year tax liability to avoid estimated tax penalties. (CH 7-8)
True or False
True
Which of the following suggests that a working taxpayer is an employee rather than an independent contractor? (CH 7-8)
A. Works for only one firm
B. Working hours set for taxpayer
C. Works on employer premises
D. All of the choices suggest employee status.
D. All of the choices suggest employee status.
An investment’s time horizon affects the after-tax rate of return on investments taxed annually.
(CH 7-8)
True or False
False
Which of the following types of interest income is taxed as it is earned? (CH 7-8)
A. Interest from U.S. Savings Bonds issued at a discount.
B. Accrued market premium on taxable bonds.
C. Accrued market discount on taxable bonds.
D. Interest from money market accounts.
D. Interest from money market accounts.
Taxpayers are allowed to deduct an exemption for alternative minimum tax purposes (CH 7-8)
True or False
True
Investment interest expense includes (CH 7-8) :
A. interest expense from loans to purchase stocks.
B. interest expense from loans to purchase municipal bonds.
C. interest expense from loans to purchase municipal bonds and interest expense from loans to purchase corporate bonds.
D. interest expense from loans to purchase corporate bonds and interest expense from loans to
E. interest expense from loans to purchase corporate bonds.
D. interest expense from loans to purchase corporate bonds and interest expense from loans to
For 2024, the applicable exclusion amount for the gift tax is $13.61 million. (CH 25)
True or False
True
The Federal transfer taxes are calculated using both transfers in the current year and transfers in previous years. (CH 25)
True or False
True
The annual exclusion eliminates any gratuitous transfer of a present interest in property. (CH 25)
True or False
False
The applicable credit is designed to (CH 25):
A. apply only to taxable transfers included in the gross estate.
B. is set at $12.92 million for any single transfer.
C. apply to amounts not already eliminated by the exemption equivalent.
D. prevent taxation of cumulative transfers below a specified minimum amount.
E. None of the choices are correct.
D. prevent taxation of cumulative transfers below a specified minimum amount.
The gross estate includes the entire value of real property owned by a decedent and spouse in joint tenancy with the right of survivorship. (CH 25)
True or False
False
Blue Corporation began business on April 1 of last year and reported gross receipts of $27 million. Which of the following is true statement about the gross receipts test as applied to Blue? (Ch 9)
A. Blue cannot qualify because they do not have gross receipts for the entire prior three-year period.
B. Blue will qualify because their average gross receipts is only $27 million.
C. Blue cannot qualify until the firm reports gross receipts for an entire year.
D. None of the choices are true.
E. Blue will not qualify because their average gross receipts is $36 million.
E. Blue will not qualify because their average gross receipts is $36 million.
short tax year can end on any day of any month. (CH 9)
True or False
True
Which of the following is not a payment liability? (CH 9)
A. Tort claims
B. Insurance premiums
C. All of the choices are correct.
D. Accrued compensation
E. Real estate taxes
D. Accrued compensation
the “all-events” test for income determines the amount of income that will be included in taxable income for accrual method taxpayers. (CH 9)
True or False
True
Charley Incorporated is a large corporation that reported revenue of $80 million and income of $620,000 this year. Included in the calculation of income was $10,000 of interest income, depreciation deductions of $170,000, and interest expense deductions of $420,000. What is the maximum amount of interest expense deduction this year? (CH 9)
A. $1,200,000
B. $10,000
C. $370,000
D. $360,000
E. $319,000
E. $319,000
Baker traded a building used in her business for some new land. Baker originally purchased the building for $50,000 and it had an adjusted basis of $30,000 at the time of the exchange. The new land had a fair market value of $35,000. Baker also paid $5,000 to the dealer in the transaction. What is Baker’s adjusted basis in the land after the exchange? (ch 10-11)
A. $30,000
B. $34,000
C. $35,000
D. $40,000
E. None of these choices are correct
C. $35,000
Which convention is the general rule for intangible property? (ch 10-11)
A. Full-month
B. Half-decade.
C. Mid-quarter
D. Mid-month
A. Full-month
Tax gain or loss realized is generally recognized for tax purposes. (ch 10-11)
True or False
True
Tax gain or loss realized is generally recognized for tax purposes. (ch 10-11)
True or False
True
