Question 1

Current changes to the federal tax law are amendments to which of the following?

Accepted Answer

A) The Internal Revenue Code of 1913 
B) The Internal Revenue Code of 1954 
C) The Internal Revenue Code of 1986 
D) The Internal Revenue Code of 2014

Question 2

Which of these persons never pays taxes directly?

Accepted Answer

A) Individual 
B) Partnership 
C) C corporation 
D) Fiduciary

Question 3

Crystal invested $8,000 cash in CRK Partnership for a 30% general partnership interest.In its first year of operations,CRK lost $15,000.In its second year of operations,CRK lost an additional $14,000.How much of the second year's losses can Crystal deduct in that year?

Accepted Answer

A) $700 
B) $2,400 
C) $3,500 
D) $4,200

Question 4

Allred Corporation has taxable income of $467,000 and a general business credit of $46,000.Determine the corporation's refund or net tax due if it made estimated tax payments of $80,000.

Accepted Answer

The answer of Allred Corporation has taxable income of $467,000...

Question 5

Mason owns 45% of an S corporation that reported net income of $105,000 for the year.During the year,$20,000 was distributed to Mason from the corporation.How much should Mason include in his taxable income for the year?

Accepted Answer

A) $20,000 
B) $47,250 
C) $56,250 
D) $67,250

Question 6

What are the fiduciary entities and how are they created?

Accepted Answer

The answer of What are the fiduciary entities and how...

Question 7

Which of the following is not a characteristic of an S corporation?

Accepted Answer

A) Owners have limited liability 
B) The corporation is taxed directly on operating income 
C) The corporation can have no more than 100 shareholders 
D) Shareholders must consent to the S election by the corporation

Question 8

Which of the following is never included in computing gross income?

Accepted Answer

A) Loss on stock sale 
B) Social security benefits 
C) Unemployment benefits 
D) Gifts

Question 9

Hoku Corporation (a C corporation)had the following history of income and loss:  How much of a tax refund can Hoku Corporation receive by carrying back its 2015 loss?

Accepted Answer

A) $1,500 
B) $2,500 
C) $3,500 
D) None; it cannot carry its loss back

Question 10

Partnerships and S corporations are flow-through entities.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following types of taxes is a consumption tax?

Accepted Answer

A) Estate tax 
B) Income tax 
C) Gift tax 
D) Use tax

Question 12

What is an individual's maximum annual deduction for capital losses?

Accepted Answer

A) $3,000 
B) An amount equal to capital gains only 
C) An amount equal to capital gains plus $3,000 
D) Individuals cannot deduct capital losses

Question 13

What is Jerry's income tax savings (rounded to the nearest dollar)for the first year if they organize the business as a partnership?

Accepted Answer

A) $0 
B) $1,386 
C) $4,274 
D) $4,389 
E) $4,655

Question 14

Terri owns a 50 percent interest in the TT Partnership.At the beginning of the year,her basis in her partnership interest was $75,000.The partnership reports a $40,000 loss for the year and distributes $4,000 cash to Terri.What is her basis in her partnership interest at the end of the year?

Accepted Answer

A) $111,000 
B) $75,000 
C) $51,000 
D) $31,000

Question 15

Conrad sold an asset for $27,000.The asset originally cost $98,000 and depreciation deductions on the asset were $59,000.What is Conrad's gain or loss on the sale of the asset?

Accepted Answer

The answer of Conrad sold an asset for $27,000.The asset...

Question 16

What is Jerry's basis at the end of the second year if they organize the business as a partnership?

Accepted Answer

A) $0 
B) $6,300 
C) $27,950 
D) $15,050 
E) $15,400

Question 17

Only corporations are allowed to carry their net operating losses both backwards and forwards.

Accepted Answer

A) True 
 B)False

Question 18

Explain the difference in owner's liability for the general business debts of a limited liability company (LLC)and a limited liability partnership (LLP).

Accepted Answer

The answer of Explain the difference in owner's liability for...

Question 19

Which of the following business entities does not file a separate tax return to report business operations?

Accepted Answer

A) Sole proprietorship 
B) S corporation 
C) C corporation 
D) Partnership

Question 20

Wilma and Barney are married and have 4 dependent children.What is the total amount of their personal and dependency exemptions for 2015?

Accepted Answer

A) $8,000 
B) $16,000 
C) $24,000 
D) $36,400

Exam 1: Introduction to Taxation