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Flashcards in Mid-Course Exam Deck (59)
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1

Where does the Federal tax legislation generally originate?

The House Ways and Means Committee

2

In the citation Notice 90–20, 1990–1 C.B. 328, to what do the 20 and the 328 refer?

20 refers to the notice number and 328 refers to the page number of the Code Bulletin.

3

Where can private letter rulings be found?

IRS letter rulings report (CCH), BNA daily tax reports, Tax Notes (Tax analysts), Private Letter Rulings (RIA)

4

Can a taxpayer get a jury trial in the U.S. Court of Federal Claims?

The taxpayer can not obtain a jury trial in the Court of Federal Claims.

5

Does a tentative tax deficiency have to be paid only after the trial in the court of federal claims?

No must be paid before.

6

When considering the use of the U.S. Court of Federal Claims as the trial court for Federal tax litigation, indicate whether the following is "True" or "False".

The taxpayer can not obtain a jury trial in the Court of Federal Claims. True
• The tentative tax deficiency does not have to be paid until after the trial.False
• Each state has at least one U.S. Court of Federal Claims; therefore, choosing the U.S. Court of Federal Claims usually minimizes the inconvenience and expense of traveling for the taxpayer and his or her counsel. False
• The Court of Federal Claims hear only Federal tax cases and, therefore, have more expertise in tax matters. False

7

When using the U.S. Tax Court for Federal tax litigation, indicate whether the following are "True" or "False".

The U.S. Tax Court hears only tax cases.
True
• Tax Court has more expertise in tax matters.
True
• A taxpayer does not have to pay the tax deficiency assessed by the IRS before trial, but a taxpayer may deposit a cash bond to stop the running of interest.
True
• A taxpayer may obtain a jury trial in the U.S. Tax Court.
False
• Appeals from the Tax Court go to the Court of Appeals for the Federal Circuit.
False

8

Is this example included or excluded from gross income:
Taxpayer sells his Super Bowl tickets for three times what he paid for them.

Included

9

Personal exemptions included or excluded from gross income:
b. Damages award received by the taxpayer for personal physical injury—none were for punitive damages.
e. Insurance proceeds paid to the taxpayer on the death of her uncle—she was the designated beneficiary under the policy.
h. Stolen funds the taxpayer had collected for a local food bank drive.
i. Reward paid by the IRS for information provided that led to the conviction of the taxpayer's former employer for tax evasion.

b. excluded
e. excluded
h. included
i. included

10

Dependency Exemptions: Heather, age 12, lives in the same household with her mother, grandmother, and uncle.

a. Who is eligible to claim Heather as a dependent?

All Three

11

Filing Status: Indicate whether the head-of-household filing status is available or not available for 2016 in each of the following independent situations:
d. Taxpayer, a single parent, maintains a home in which she and her unmarried son live. The son, age 19, earns $5,000 from a part-time job.

Head of Household status not available.

12

Capital Gains and Losses from Property:
c. Gain on the sale of a houseboat owned for 2 years and used for family vacations.
d. Loss on the sale of a reconditioned motorcycle owned for 3 years and used for recreational purposes.

c. LT Capital Gain
d. Non-deductible personal use asset

13

Identify whether this item is deductible or not:
Amount lost in football office pool

Not deductible

14

Identify whether this item is taxable or not:
Gift from parents

Not taxable

15

Accounting income is not recognized until it's ...

realised.

16

Gross income from partnership for individual if 30% interest and partnership generated £400K of taxable income?

£120K. Not treated as a separate taxable entity.

17

Taxpayer's gross income in this situation:
Deb's boss gave her two tickets to the Rabid Rabbits rock concert because she met her sales quota. At the time she received the tickets, each ticket had a face price of $200 and was selling on eBay for $300. On the date of the concert, the tickets were selling for $250 each. Deb and her son attended the concert.

$600 - market value of both tickets at the time she received them.

18

Troy, a cash basis taxpayer, is employed by Eagle Corporation, also a cash basis taxpayer. Troy is a full-time employee of the corporation and receives a salary of $60,000 per year. He also receives a bonus equal to 10% of all collections from clients he serviced during the year (which he receives in January of the following year). Determine the tax consequences of the following events to the corporation and to Troy:

a. On December 31, 2016, Troy was visiting a customer. The customer gave Troy a $10,000 check payable to the corporation for appraisal services Troy performed during 2016. Troy did not deliver the check to the corporation until January 2017.

The corporation recognizes the income in:
2016

Troy recognizes the bonus related to this collection in:
2017

19

Assume Eagle Corporation is an accrual basis taxpayer. On December 31, 2016, Troy was visiting a customer. The customer gave Troy a $10,000 check payable to the corporation for appraisal services Troy performed during 2016. Troy deposited the check on December 31, but the bank did not add the deposit to the corporation's account until January 2017.

The corporation recognizes the income in:
2016

Troy recognizes the bonus related to this collection in:
2017

20

The facts are the same as in (a), except that the customer told Troy to hold the check until January 2017 when the customer could make a bank deposit that would cover the check.

The corporation recognizes the income in:
2017

Troy recognizes the bonus related to this collection in:
2017

21

Liz and Doug were divorced on December 31 of the current year after 10 years of marriage. Their current year's income received before the divorce was as follows:

Doug's salary $41,000
Liz's salary $55,000
Rent on apartments purchased by Liz 15 years ago $8,000
Dividends on stock Doug inherited from his mother 4 years ago $1,900
Interest on a savings account in Liz's name funded with her salary $2,400
Allocate the income to Liz and Doug assuming that they live in:

a. California.

Doug: $
51,100
Liz: $
57,200

California
Doug
Salary $48
Rent
Dividends $1.9
Interest $1.2
Total: $51,100

Liz
Salary $48
Rent $8
Dividends
Interest $1.2
Total: $57,200

22

Jacob was awarded the Nobel Peace Prize. When he was presented the check for $1,400,000, Jacob said, "I do not need the money. Give it to the United Nations to use toward the goal of world peace." Jacob is required to include $

of the prizes received in his gross income.

0

23

Linda won the Craig County Fair beauty pageant. She received a $10,000 scholarship that paid her $6,000 for tuition and $4,000 for meals and housing for the academic year. Linda is required to include $

of the scholarship in her gross income.

4000

24

In 2016, Alva received dividends on her stocks as follows:

Amur Corporation (a French corporation whose stock is traded on
an established U.S. securities market) $60,000
Blaze, Inc., a Delaware corporation 40,000
Grape, Inc., a Virginia corporation 22,000
If an amount is zero, enter "0".

a. Alva purchased the Grape stock three years ago, and she purchased the Amur stock two years ago. She purchased the Blaze stock 18 days before it went ex-dividend and sold it 20 days later at a $5,000 loss. Alva had no other capital gains and losses for the year. She is in the 35% marginal tax bracket.


.

The amount of her tax on qualifying dividends is
$12,300.

(35% tax bracket pays 15% on dividends as long as fulfilling the 60/121 day holding rule. If not satisfying rule it's ordinary income tax rates so would be 35% in this example).

25

Holly was injured while working in a factory and received $12,000 as workers' compensation as she was unable to work because of the injury. Jill, who was self-employed, was also injured and unable to work. Jill collected $12,000 on an insurance policy she had purchased to replace her loss of income while she was unable to work.

How much are Holly and Jill each required to include in their gross income?

If an amount is zero, enter "0".

Holly: $
0
Jill: $
0

26

Several of Egret Company's employees have asked the company to create a hiking trail that employees could use during their lunch hours. The company owns vacant land that is being held for future expansion but would have to spend approximately $50,000 if it were to make a trail. Nonemployees would be allowed to use the facility as part of the company's effort to build strong community support.

Regarding the following items, help Egret employees by identifying each as either "Yes, a tax issue" or "No, not a tax issue".

Is the benefit a no-additional-cost service?
Yes, a tax issue

27

Select either "Yes" or "No" to indicate which of the following items can probably be found in the Internal Revenue Bulletin.

a. Action on Decision.
b. Small Cases Division of the U.S. Tax Court decision.
c. Letter ruling.
d. Revenue Procedure.
e. Finalized Regulation.
f. U.S. Court of Federal Claims decision.
g. Acquiescences to Tax Court decisions.
h. U.S. Circuit Court of Appeals decision.

a. Action on Decision.
Yes
b. Small Cases Division of the U.S. Tax Court decision.
No
c. Letter ruling.
No
d. Revenue Procedure.
Yes
e. Finalized Regulation.
Yes
f. U.S. Court of Federal Claims decision.
No
g. Acquiescences to Tax Court decisions.
Yes
h. U.S. Circuit Court of Appeals decision.
No

28

Margie is 15 and claimed as a dependent by her parents. She receives $800 in dividends income and $1,400 in wages from a part-time job.

$1,750. When filing her own tax return, Margie's standard deduction is limited to the greater of $1,050 or $1,750 (the sum of the earned income for the year plus $350).

29

The following information applies to Emily for 2016. Her filing status is single.

Salary $85,000
Interest income from bonds issued by Xerox 1,100
Alimony payments received 6,000
Contribution to traditional IRA 5,500
Gift from parents 25,000
Short-term capital gain from stock investment 2,000
Amount lost in football office pool 500
Number of potential dependents (two cousins, who live in Canada) ?
Age 40

Salary $85,000
Interest on bonds 1,100
Alimony received 6,000
Capital gain 2,000
IRA contribution (5,500)
AGI $88,600
Standard deduction (6,300)
Personal and dependency exemptions (1 × $4,050) (4,050)
Taxable income $78,250

30

Taylor, age 18, is claimed as a dependent by her parents. For 2016, she has the following income: $4,000 wages from a summer job, $1,800 interest from a money market account, and $2,000 interest from City of Boston bonds.

If an amount is zero, enter "0".

Taylor's standard deduction for 2016 is $

Taylor's personal exemption for 2016 is $

Taylor's taxable income for 2016 is $

Wages $4,000
Money market interest 1,800
Bond interest (City of Boston bond interest is tax-exempt) –0–
Gross income $5,800
Less: Standard deduction* (4,350)
Personal exemption** (–0–)
Taxable income $1,450

*A dependent's standard deduction is limited to the greater of $1,050 or the sum of his or her earned income plus $350. In this case it is $4,000 + $350 = $4,350.
**A dependent may not claim a personal exemption on his or her return.