Question 1

_____ 11.When a corporation lends money to an employee at below-market interest rates,the imputed interest is additional compensation to the employee.

Accepted Answer

A) True 
 B)False

Question 2

Jabo Corporation has its home office and manufacturing facilities in Peru.It sells products via the Internet in both Brazil and Chile,although it has a small sales and manufacturing facility in Santiago,Chile.

Accepted Answer

A) Under the source principle,all of Jabo's income would be taxed in Peru. 
B) Under the source principle,Chile would tax all of the profits from goods sold in Chile and Brazil. 
C) Under the residency principle Peru would tax all of the company's income. 
D) Under the residency principle,only sales in Brazil would be taxed in Brazil. 
A) Under the source principle,all of Jabo's income would be taxed in Peru. 
B) Under the source principle,Chile would tax all of the profits from goods sold in Chile and Brazil. 
C) Under the residency principle Peru would tax all of the company's income. 
D) Under the residency principle,only sales in Brazil would be taxed in Brazil.

Question 3

George and Georgette divorced last year.George was ordered to pay (and does pay)Georgette $600 per month alimony and $800 per month child support.In addition,George transferred title to his half of their stock to Georgette last year.The stock had a basis of $120,000 and a fair market value of $260,000 at the date of the transfer.This year Georgette sells the stock for $280,000.What is Georgette's income for this year if she has no other income items?

Accepted Answer

A) $7,200 
B) $19,200 
C) $159,200 
D) $167,200 
A) $7,200 
B) $19,200 
C) $159,200 
D) $167,200

Question 4

Which of the following explain why it is important to determine the period in which income is recognized?

Accepted Answer

A) Marginal tax rates may be different in different periods. 
B) Tax laws may change 
C) The time value of money 
D) All of the above are explanations 
E) A and b.only are explanations 
A) Marginal tax rates may be different in different periods. 
B) Tax laws may change 
C) The time value of money 
D) All of the above are explanations 
E) A and b.only are explanations

Question 5

In 2013,Willy gave his son 4,000 shares of ABC stock valued at $10 per share.Two weeks after the gift,ABC declared a $1 per share dividend.Willy also gave his son some municipal bonds the morning of June 30.On July 3,Willy received a check for $400 for the interest on the bonds.Finally,Willy gave his son five coupons from bonds that he owned.On August 2,the son exchanged the coupons at a bank receiving the $200 interest due on the coupons.What is the son's taxable income from these events?

Accepted Answer

A) 0 
B) $4,000 
C) $4,400 
D) $4,600 
A) 0 
B) $4,000 
C) $4,400 
D) $4,600

Question 6

Natasha graduated at the top of her high school class and received a $10,000 scholarship to attend the college of her choice.Natasha decided to attend State University and spent her $10,000 as follows:   How much of the $10,000 should Natasha report as gross income?

Accepted Answer

A) $10,000 
B) $3,400 
C) $2,500 
D) $1,500 
E) zero 
A) $10,000 
B) $3,400 
C) $2,500 
D) $1,500 
E) zero

Question 7

All of the following are acceptable methods of accounting for revenue and expenses for tax purposes except:

Accepted Answer

A) Cash method 
B) Accrual method 
C) Percentage-of-completion 
D) Hybrid method 
E) All are acceptable methods 
A) Cash method 
B) Accrual method 
C) Percentage-of-completion 
D) Hybrid method 
E) All are acceptable methods

Question 8

Wilma purchased an annuity policy for $100,000 that will pay her $10,000 per year for life beginning on her 60th birthday in 5 years.At 60,her life expectancy is 25 years.How much of each annual payment can Wilma exclude from income?

Accepted Answer

A) 0 
B) $4,000 
C) $6,000 
D) $10,000 
A) 0 
B) $4,000 
C) $6,000 
D) $10,000

Question 9

Which of the following statements explain permanent differences between tax and financial accounting? i.Income is recognized in one period for tax and in another period for financial accounting
Ii)Income is recognized for accounting but not for tax purposes.
Iii)Expenses not deductible for tax purposes are deductible for financial accounting.
Iv)An expense is deducted currently for tax but in a later period for financial accounting.

Accepted Answer

A) ii.only 
B) i.and ii. 
C) i.and iv. 
D) ii.and iii. 
A) ii.only 
B) i.and ii. 
C) i.and iv. 
D) ii.and iii.

Question 10

_____ 16.Under the source principle of international taxation,income will be taxed in a particular jurisdiction if the source of that income is a business operating in that jurisdiction.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is an application of the wherewithal-to-pay concept?

Accepted Answer

A) Percentage-of-completion 
B) Hybrid method of accounting 
C) Installment method 
D) Accrual method of accounting 
A) Percentage-of-completion 
B) Hybrid method of accounting 
C) Installment method 
D) Accrual method of accounting

Question 12

Cora owns 6,000 shares of KLM stock,2,000 shares of BBT Mutual fund,and 10,000 shares of Centex Corporation.Her 1099-DIV forms from these investments showed the following: KLM: $3 per share distribution all reinvested in KLM
BBT Mutual fund: $5 per share distribution,$1 of which represents a capital gain distribution;none of this is reinvested.
Centex: $2 per share distribution,all of which represents a return of capital.
How much must Cora include in her income in the current year?

Accepted Answer

A) $48,000 
B) $28,000 
C) $22,000 
D) $20,000 
A) $48,000 
B) $28,000 
C) $22,000 
D) $20,000

Question 13

Marylee and George divorced in 2012 after 20 years of marriage during which time George gave up his career and stayed home with their children.In 2013,Marylee,the CEO of a mail order company,transfers their home valued at $450,000 and held in joint tenancy to George as part of the divorce settlement.She will also pay George $4,000 per month alimony and $6,000 per month in child support beginning in January of 2013.If George has no other income,what is his adjusted gross income for 2013?

Accepted Answer

A) $48,000 
B) $120,000 
C) $273,000 
D) $498,000 
A) $48,000 
B) $120,000 
C) $273,000 
D) $498,000

Question 14

Abdo Corporation received permission to change its tax year-end from December 31 to August 31 in 2013.Its income from January 1 through August 31 is $278,000.What is Abdo's tax liability?

Accepted Answer

A) $91,670 
B) $94,520 
C) $108,420 
D) $141,780 
A) $91,670 
B) $94,520 
C) $108,420 
D) $141,780

Question 15

William is single and had salary income from his position as Chief Financial Officer of Zippy Bank of $450,000 (the 39.6 tax bracket).He also had $35,000 in income from the dividends on the stock of his previous employer.How will William's taxable income of $475,000 (after his standard deduction and personal exemption)be taxed?

Accepted Answer

A) All $475,000 will be taxed at 39.6% 
B) All $475,000 will be taxed at 43.4% due to the surtax 
C) Only the $450,000 income from his salary will be taxed at 39.6% 
D) His salary income will be taxed at 39.6% and his dividend income at 23.8% 
A) All $475,000 will be taxed at 39.6% 
B) All $475,000 will be taxed at 43.4% due to the surtax 
C) Only the $450,000 income from his salary will be taxed at 39.6% 
D) His salary income will be taxed at 39.6% and his dividend income at 23.8%

Question 16

_____ 2.When income is taxed in a different period than it is accrued for financial accounting,there is a timing difference.

Accepted Answer

A) True 
 B)False

Question 17

To whom do the doctrines of constructive receipt and claim of right apply?

Accepted Answer

A) Cash basis taxpayers only 
B) Accrual basis taxpayers only 
C) Cash basis,accrual basis,respectively 
D) Accrual basis,cash basis,respectively 
A) Cash basis taxpayers only 
B) Accrual basis taxpayers only 
C) Cash basis,accrual basis,respectively 
D) Accrual basis,cash basis,respectively

Question 18

Tomohiro Corporation loans $50,000 interest-free for one year to Matt,a shareholder.Matt uses the loan to pay for personal debts.Assume that the applicable federal rate is 4 percent.What are the tax consequences of this loan to Tomohiro and to Matt?

Accepted Answer

A) No tax consequences to either Tomohiro or Matt 
B) No income to Matt,$2,000 deduction for Tomohiro 
C) $2,000 income to Matt,no income to Tomohiro 
D) $2,000 income to Matt and $2,000 deduction for Tomohiro 
E) $2,000 income to Matt and $2,000 income to Tomohiro 
A) No tax consequences to either Tomohiro or Matt 
B) No income to Matt,$2,000 deduction for Tomohiro 
C) $2,000 income to Matt,no income to Tomohiro 
D) $2,000 income to Matt and $2,000 deduction for Tomohiro 
E) $2,000 income to Matt and $2,000 income to Tomohiro

Question 19

Tighe won a new automobile from his employer for being the top salesperson in the entire firm.The auto cost the employer only $34,000 because he purchased a fleet of cars from the dealer;it had a retail price of $37,000.In addition,Tighe's employer gave him $5,000 with which to pay the taxes on the prize.How much must Tighe include in his gross income?

Accepted Answer

A) $42,000 
B) $37,000 
C) $35,000 
D) $32,000 
A) $42,000 
B) $37,000 
C) $35,000 
D) $32,000

Question 20

_____ 18.International tax treaties help to alleviate the potential of double taxation when companies have business facilities in several countries.

Accepted Answer

A) True 
 B)False

_____ 11.When a corporation lends money to an employee at below-market interest rates,the imputed interest is additional compensation to the employee.

Jabo Corporation has its home office and manufacturing facilities in Peru.It sells products via the Internet in both Brazil and Chile,although it has a small sales and manufacturing facility in Santiago,Chile.

Which of the following explain why it is important to determine the period in which income is recognized?

Natasha graduated at the top of her high school class and received a $10,000 scholarship to attend the college of her choice.Natasha decided to attend State University and spent her $10,000 as follows: How much of the $10,000 should Natasha report as gross income?

All of the following are acceptable methods of accounting for revenue and expenses for tax purposes except:

Wilma purchased an annuity policy for $100,000 that will pay her $10,000 per year for life beginning on her 60th birthday in 5 years.At 60,her life expectancy is 25 years.How much of each annual payment can Wilma exclude from income?

_____ 16.Under the source principle of international taxation,income will be taxed in a particular jurisdiction if the source of that income is a business operating in that jurisdiction.

Which of the following is an application of the wherewithal-to-pay concept?

Abdo Corporation received permission to change its tax year-end from December 31 to August 31 in 2013.Its income from January 1 through August 31 is $278,000.What is Abdo's tax liability?

_____ 2.When income is taxed in a different period than it is accrued for financial accounting,there is a timing difference.

To whom do the doctrines of constructive receipt and claim of right apply?

Tomohiro Corporation loans $50,000 interest-free for one year to Matt,a shareholder.Matt uses the loan to pay for personal debts.Assume that the applicable federal rate is 4 percent.What are the tax consequences of this loan to Tomohiro and to Matt?

_____ 18.International tax treaties help to alleviate the potential of double taxation when companies have business facilities in several countries.

Introduction to Taxation

The Tax Practice Environment

Employee Compensation

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Income Taxation of Individuals

Wealth Transfer Taxes

Filters

Exam 3: Determining Gross Income

_____ 11.When a corporation lends money to an employee at below-market interest rates,the imputed interest is additional compensation to the employee.

Jabo Corporation has its home office and manufacturing facilities in Peru.It sells products via the Internet in both Brazil and Chile,although it has a small sales and manufacturing facility in Santiago,Chile.

Which of the following explain why it is important to determine the period in which income is recognized?

Natasha graduated at the top of her high school class and received a $10,000 scholarship to attend the college of her choice.Natasha decided to attend State University and spent her $10,000 as follows: How much of the $10,000 should Natasha report as gross income?

All of the following are acceptable methods of accounting for revenue and expenses for tax purposes except:

Wilma purchased an annuity policy for $100,000 that will pay her $10,000 per year for life beginning on her 60th birthday in 5 years.At 60,her life expectancy is 25 years.How much of each annual payment can Wilma exclude from income?

_____ 16.Under the source principle of international taxation,income will be taxed in a particular jurisdiction if the source of that income is a business operating in that jurisdiction.

Which of the following is an application of the wherewithal-to-pay concept?

Abdo Corporation received permission to change its tax year-end from December 31 to August 31 in 2013.Its income from January 1 through August 31 is $278,000.What is Abdo's tax liability?

_____ 2.When income is taxed in a different period than it is accrued for financial accounting,there is a timing difference.

To whom do the doctrines of constructive receipt and claim of right apply?

Tomohiro Corporation loans $50,000 interest-free for one year to Matt,a shareholder.Matt uses the loan to pay for personal debts.Assume that the applicable federal rate is 4 percent.What are the tax consequences of this loan to Tomohiro and to Matt?

_____ 18.International tax treaties help to alleviate the potential of double taxation when companies have business facilities in several countries.

Introduction to Taxation

The Tax Practice Environment

Employee Compensation

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Income Taxation of Individuals

Wealth Transfer Taxes

Filters