Exam 16: an Introduction to Taxation

Brad and Angie had the following income and deductions during 2016: Salaries \ 110,000 Interest income 10,000 Itemized deductions 16,000 Taxes withheld during year 15,000 Calculate Brad and Angie's tax liability due or refund, assuming that they have 2 personal exemptions. They file a joint tax return.

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Question 1

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$\begin{array} { | l | r | } \hline \text { Salaries } & \$ 110,000 \\\hline \text { Interest income } & 10,000 \\\hline \text { Gross income } & 120,000 \\\hline \text { Deduction for AGI } & 0 \\\hline \text { AGI } & 120,000 \\\hline \text { Itemized deductions } & ( 16,000 ) \\\hline \text { Exemptions } ( 2 \times \$ 4,050 ) & ( 8,100 \\\hline \text { Taxable income } & \$ 95,900 \\\hline\end{array}$ Tax = $10,357.50 + .25(95,900 - 75,300) = $15,507.50
$15,507.50 - 15,000 taxes withheld = $507.50 taxes due

The computer is the primary tool of the tax professional. The tax professional uses the computer for all of the following client services except

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Question 2

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C

Until about 100 years ago, attempts to impose a federal income tax were ruled unconstitutional. The amendment to the U.S. Constitution allowing the imposition of a federal income tax is the

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Question 3

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C

Property is generally included on an estate tax return at its historical cost basis.

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Question 4

Which of the following taxes is regressive?

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Question 5

Mia is self-employed as a consultant. During 2016, Mia earned $180,000 in self-employment income. What is Mia's self-employment tax?

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Question 6

Gifts made during a taxpayer's lifetime may affect the amount of estate tax paid by the taxpayer's estate.

(True/False)

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Question 7

Which of the following is not a taxpaying entity?

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Question 8

Adam Smith's canons of taxation are equity, certainty, convenience and economy.

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Question 9

The primary objective of the federal income tax law is to achieve various economic and social policy objectives.

(True/False)

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Question 10

A proportional tax rate is one where the rate of the tax is the same for all taxpayers, regardless of income levels.

(True/False)

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Question 11

Leonard established a trust for the benefit of his son. The principal amount of the trust is $400,000. The trust is projected to earn approximately 5% per year. In the current year, the trust earned $20,000. Expenses of $4,000 were incurred. Assume that $14,000 is distributed to Leonard's son. a. How much income is taxed to the trust? b. How much income is taxed to Leonard's son?

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Question 12

During the current tax year, Frank Corporation generated gross income of $1,900,000 and had ordinary and necessary deductions of $1,400,000. What is the amount of Frank Corporation's corporate income tax for the year?

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Question 13

All of the following are executive (administrative) sources of tax law except

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Question 14

Jose dies in the current year and has a gross estate valued at $8,000,000. During his lifetime (but after 1976) Jose had made taxable gifts of $400,000. The estate incurs funeral and administrative expenses of $100,000 and also pays off Jose's debts which amount to $300,000. Jose bequeaths $500,000 to his wife. What is the amount of Jose's tax base, the amount on which the estate tax is computed?

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Question 15

The primary liability for payment of the gift tax is imposed upon the donee.

(True/False)

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Question 16

The unified transfer tax system

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Question 17

Doug and Frank form a partnership, D and F Advertising, each contributing $50,000 to start the business. During the first year of operations, D and F earns $80,000, which is allocated $40,000 each to Doug and Frank. At the beginning of the second year, Doug sells his interest to Marcus for $90,000. What is the amount of Doug's taxable gain on the sale?

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Question 18

Which is not a component of tax practice?

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Question 19

Vertical equity means that

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Question 20

Exam 16: an Introduction to Taxation

The computer is the primary tool of the tax professional. The tax professional uses the computer for all of the following client services except

Until about 100 years ago, attempts to impose a federal income tax were ruled unconstitutional. The amendment to the U.S. Constitution allowing the imposition of a federal income tax is the

Property is generally included on an estate tax return at its historical cost basis.

Which of the following taxes is regressive?

Mia is self-employed as a consultant. During 2016, Mia earned $180,000 in self-employment income. What is Mia's self-employment tax?

Gifts made during a taxpayer's lifetime may affect the amount of estate tax paid by the taxpayer's estate.

Which of the following is not a taxpaying entity?

Adam Smith's canons of taxation are equity, certainty, convenience and economy.

The primary objective of the federal income tax law is to achieve various economic and social policy objectives.

A proportional tax rate is one where the rate of the tax is the same for all taxpayers, regardless of income levels.

During the current tax year, Frank Corporation generated gross income of $1,900,000 and had ordinary and necessary deductions of $1,400,000. What is the amount of Frank Corporation's corporate income tax for the year?

All of the following are executive (administrative) sources of tax law except

The primary liability for payment of the gift tax is imposed upon the donee.

The unified transfer tax system

Which is not a component of tax practice?

Vertical equity means that

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, Cost Recovery, Amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Section 1231 and Recapture

Special Tax Computation Methods, Tax Credits, and Payment of Tax

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