Question 1

Match each statement with the correct term below.
-Alternative minimum tax

Accepted Answer

A) A separate,parallel tax system designed to ensure a taxpayer pays some tax. 
B) A compensation tool that is based on potential price increases of the company's stock. 
C) An individual trust account maintained for the exclusive benefit of an individual or beneficiary. 
D) A type of defined contribution pension plan in which the company and the employee contribute a fixed percentage of the employee's salary to the plan. 
E) A pension plan in which the benefits are based on the number of years an employee has worked for a company and on the employee's annual salary.
F)A pension plan whose benefits are determined by the amount of contributions the employee and the company contribute to the plan and the earnings of the plan. 
A) A separate,parallel tax system designed to ensure a taxpayer pays some tax. 
B) A compensation tool that is based on potential price increases of the company's stock. 
C) An individual trust account maintained for the exclusive benefit of an individual or beneficiary. 
D) A type of defined contribution pension plan in which the company and the employee contribute a fixed percentage of the employee's salary to the plan. 
E) A pension plan in which the benefits are based on the number of years an employee has worked for a company and on the employee's annual salary.
F)A pension plan whose benefits are determined by the amount of contributions the employee and the company contribute to the plan and the earnings of the plan. A

Question 2

Ross and Reba are both in their 30's and they are married.Reba earns $64,000 annually,and Ross earns $1,800 annually working part time.Their adjusted gross income is $81,500.Reba participates in an employer-sponsored retirement plan.Ross and Reba contribute the maximum amount allowable annually to their IRAs.What is their allowable deduction for this year's contributions?

Accepted Answer

A) $- 0 - 
B) $1,800 
C) $5,000 
D) $6,800 
E) $11,000 
A) $- 0 - 
B) $1,800 
C) $5,000 
D) $6,800 
E) $11,000 E

Question 3

Sylvester is a U.S.citizen living in Canada working as a computer programmer for Excel Designs,Inc. ,a U.S.company.
I.Sylvester is a nonresident alien for U.S.tax purposes.
II.If Sylvester earns $10,000 for a consulting job in London,this income will be subject to U.S.tax.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. B

Question 4

Eileen is a single individual with no dependents.Her adjusted gross income for 2017 is $60,000.She has the following items that qualify as itemized deductions.What is the amount of Eileen's AMT adjustment for itemized deductions for 2017?

Accepted Answer

Eileen must add back $6,100 of her itemi

Question 5

Under a nonqualified pension plan
I.The yearly earnings on the pension plan assets are taxable income to the employee.
II.An employer's contribution is taxable income to the employee at the time of the contribution.
​

Accepted Answer

A) Only I is correct. 
B) Only II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only I is correct. 
B) Only II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 6

Under a qualified pension plan
I.The yearly earnings on the pension plan assets are taxable income to the employee.
II.An employer's contribution is not taxable income to the employee at the time of the contribution.
​

Accepted Answer

A) Only I is correct. 
B) Only II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only I is correct. 
B) Only II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 7

Dunn Company bought an old building in downtown Lafayette for $75,000.The land was not purchased;it is being leased.The building was originally placed into service in 1918.Dunn spends $100,000 to rehabilitate the building with the intent to develop a microbrewery on the site.The company retained 80% of the external and internal walls and framework.Assume the amount of the older building rehabilitation credit Dunn can claim is $10,000.What is the basis in the building for depreciation purposes?

Accepted Answer

A) $100,000 
B) $145,000 
C) $105,000 
D) $165,000 
E) $175,000 
A) $100,000 
B) $145,000 
C) $105,000 
D) $165,000 
E) $175,000

Question 8

Which of the following statements are correct concerning the general business credit?
I.The general business tax credit only applies to an individual or corporation with a tax liability in excess of $100,000.
II.The general business credit only applies to an individual or corporation that has a tax credit carryover or can claim more than one general business credit during the year.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 9

To obtain the rehabilitation expenditures tax credit certain criteria must be satisfied.Which of the following are correct statements about the credit?
I.If the rehabilitated structure is sold before the end of the ten-year period following the year of the tax credit,recapture occurs.
II.The amount of the credit can be either 10% or 20% of qualified expenditures,depending on the classification of the building.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 10

Kathy and Patrick are married with salaries of $28,000 and $21,000,respectively.Adjusted gross income on their jointly filed tax return is $54,000.Both individuals are active participants in employer provided qualified pension plans.What are Kathy and Patrick's maximum combined IRA contribution and deduction amounts?
​
Contribution Deduction

Accepted Answer

A) $-0- $-0- 
B) $11,000 $-0- 
C) $5,500 $5,500 
D) $11,000 $8,000 
E) $11,000 $11,000 
A) $-0- $-0- 
B) $11,000 $-0- 
C) $5,500 $5,500 
D) $11,000 $8,000 
E) $11,000 $11,000

Question 11

One of the benefits of an incentive stock option is that the employee can sell the option at any time.

Accepted Answer

A) True 
 B)False

Question 12

On January 3,2017,Great Spirit Inc. ,grants Jordan a nonqualified stock option to acquire 1,000 shares of the company's stock for $12 per share.The fair market price of the stock on the date of grant is $15.The option does not have a readily ascertainable fair market value.On October 1,2017,when the fair market value of the stock is $18,Jordan exercises the stock option.Determine the tax consequences for Jordan and Great Spirit Inc. ,on the grant date of the option and the exercise date.

Accepted Answer

An employee who receives an option that

Question 13

Grand Corporation has $100,000 of U.S.source taxable income and $200,000 of foreign source taxable income from operations in Poland.Poland levied $80,000 in taxes on the foreign source income.U.S.taxes before credits are $105,000.The overall foreign tax credit limitation is

Accepted Answer

A) $35,000 
B) $53,334 
C) $70,000 
D) $80,000 
E) $105,000 
A) $35,000 
B) $53,334 
C) $70,000 
D) $80,000 
E) $105,000

Question 14

With regard to the alternative minimum tax (AMT),
I.the AMT rate equals the highest individual income tax rate.
II.the AMT is separate and distinct from,yet parallel to,the regular income tax system.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 15

When calculating AMTI,individual taxpayers must add back the following:
I.Miscellaneous itemized deductions subject to the 2% limitation.
II.Personal exemption amounts.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 16

On May 1,2016,Peyton is granted the right to acquire 500 shares of the Simon Corporation for $18 per share.The option qualifies under the company's incentive stock option plan.The current fair market value of the stock is $10.On September 18,2017 when the stock is selling for $20 per share,Peyton exercises his option to purchase the stock.Peyton sells the shares on November 15,2018,for $30 per share.Determine the tax consequences for Peyton and the Simon Corporation on the
a.Date of grant
b.Date of exercise
c.Date of sale

Accepted Answer

The answer of On May 1,2016,Peyton is granted the right...

Question 17

On May 5,2015,Elton Corporation granted Germaine an option to acquire 100 shares of the company's stock for $8 per share.The fair market price of the stock on the date of grant was $14.The stock requires that Germaine remain with the company for one year after the date of exercise.The option did not have a readily ascertainable fair market value.Germaine exercises the option on June 12,2016,when the fair market value of the stock is $18.On June 12,2017,the fair market value of the stock is $21 per share.How much must he report as income in 2016 and 2017?
​
2016 2017

Accepted Answer

A) $1,000 $300 
B) $1,000 $-0- 
C) $ 400 $-0- 
D) $-0- $1,300 
A) $1,000 $300 
B) $1,000 $-0- 
C) $ 400 $-0- 
D) $-0- $1,300

Question 18

When calculating AMTI,individual taxpayers must add back the following:
I.The standard deduction amount.
II.Casualty and theft losses.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 19

Jose is an employee of O'Hara Industry and earns $100,000 in 2017.The maximum amount O'Hara can contribute to a money purchase plan on behalf of Jose is

Accepted Answer

A) $15,000 
B) $20,000 
C) $25,000 
D) $35,000 
E) $40,000 
A) $15,000 
B) $20,000 
C) $25,000 
D) $35,000 
E) $40,000

Question 20

The employee's contribution to a nonqualified pension plan cannot be deferred,and the employer is not allowed a tax deduction for the contribution even though the employee includes the contribution in their income.

Accepted Answer

A) True 
 B)False

Match each statement with the correct term below. -Alternative minimum tax

Sylvester is a U.S.citizen living in Canada working as a computer programmer for Excel Designs,Inc. ,a U.S.company. I.Sylvester is a nonresident alien for U.S.tax purposes. II.If Sylvester earns $10,000 for a consulting job in London,this income will be subject to U.S.tax.

Eileen is a single individual with no dependents.Her adjusted gross income for 2017 is $60,000.She has the following items that qualify as itemized deductions.What is the amount of Eileen's AMT adjustment for itemized deductions for 2017?

Under a nonqualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is taxable income to the employee at the time of the contribution.

Under a qualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is not taxable income to the employee at the time of the contribution.

One of the benefits of an incentive stock option is that the employee can sell the option at any time.

Grand Corporation has $100,000 of U.S.source taxable income and $200,000 of foreign source taxable income from operations in Poland.Poland levied $80,000 in taxes on the foreign source income.U.S.taxes before credits are $105,000.The overall foreign tax credit limitation is

With regard to the alternative minimum tax (AMT), I.the AMT rate equals the highest individual income tax rate. II.the AMT is separate and distinct from,yet parallel to,the regular income tax system.

When calculating AMTI,individual taxpayers must add back the following: I.Miscellaneous itemized deductions subject to the 2% limitation. II.Personal exemption amounts.

When calculating AMTI,individual taxpayers must add back the following: I.The standard deduction amount. II.Casualty and theft losses.

Jose is an employee of O'Hara Industry and earns $100,000 in 2017.The maximum amount O'Hara can contribute to a money purchase plan on behalf of Jose is

The employee's contribution to a nonqualified pension plan cannot be deferred,and the employer is not allowed a tax deduction for the contribution even though the employee includes the contribution in their income.

Conceptual Foundations of Tax Law

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses -- Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, depletion, and Amortization

Property Dispositions

Nonrecognition Transactions

Choice of Business Entity -- General Tax and Nontax Factorsformation

Choice of Business Entity -- Operations and Distributions

Tax Research

Filters

Exam 15: Choice of Business Entity -- Other Considerations

Match each statement with the correct term below. -Alternative minimum tax

Sylvester is a U.S.citizen living in Canada working as a computer programmer for Excel Designs,Inc. ,a U.S.company. I.Sylvester is a nonresident alien for U.S.tax purposes. II.If Sylvester earns $10,000 for a consulting job in London,this income will be subject to U.S.tax. ​

Eileen is a single individual with no dependents.Her adjusted gross income for 2017 is $60,000.She has the following items that qualify as itemized deductions.What is the amount of Eileen's AMT adjustment for itemized deductions for 2017?

Under a nonqualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is taxable income to the employee at the time of the contribution. ​

Under a qualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is not taxable income to the employee at the time of the contribution. ​

One of the benefits of an incentive stock option is that the employee can sell the option at any time.

Grand Corporation has $100,000 of U.S.source taxable income and $200,000 of foreign source taxable income from operations in Poland.Poland levied $80,000 in taxes on the foreign source income.U.S.taxes before credits are $105,000.The overall foreign tax credit limitation is

With regard to the alternative minimum tax (AMT), I.the AMT rate equals the highest individual income tax rate. II.the AMT is separate and distinct from,yet parallel to,the regular income tax system. ​

When calculating AMTI,individual taxpayers must add back the following: I.Miscellaneous itemized deductions subject to the 2% limitation. II.Personal exemption amounts. ​

When calculating AMTI,individual taxpayers must add back the following: I.The standard deduction amount. II.Casualty and theft losses. ​

Jose is an employee of O'Hara Industry and earns $100,000 in 2017.The maximum amount O'Hara can contribute to a money purchase plan on behalf of Jose is

The employee's contribution to a nonqualified pension plan cannot be deferred,and the employer is not allowed a tax deduction for the contribution even though the employee includes the contribution in their income.

Conceptual Foundations of Tax Law

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses -- Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, depletion, and Amortization

Property Dispositions

Nonrecognition Transactions

Choice of Business Entity -- General Tax and Nontax Factorsformation

Choice of Business Entity -- Operations and Distributions

Tax Research

Filters

Sylvester is a U.S.citizen living in Canada working as a computer programmer for Excel Designs,Inc. ,a U.S.company. I.Sylvester is a nonresident alien for U.S.tax purposes. II.If Sylvester earns $10,000 for a consulting job in London,this income will be subject to U.S.tax.

Under a nonqualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is taxable income to the employee at the time of the contribution.

Under a qualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is not taxable income to the employee at the time of the contribution.

With regard to the alternative minimum tax (AMT), I.the AMT rate equals the highest individual income tax rate. II.the AMT is separate and distinct from,yet parallel to,the regular income tax system.

When calculating AMTI,individual taxpayers must add back the following: I.Miscellaneous itemized deductions subject to the 2% limitation. II.Personal exemption amounts.

When calculating AMTI,individual taxpayers must add back the following: I.The standard deduction amount. II.Casualty and theft losses.