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ACC 553 Federal Taxation Midterm Exam ( Keller )

Hw

ACC 553 Federal Taxation Midterm Exam ( Keller )

 

https://hwguiders.com/downloads/acc-553-federal-taxation-midterm-exam-keller/

 

ACC 553 Federal Taxation Midterm Exam ( Keller )

 

MULTIPLE CHOICE QUESTIONS Chapter 1

 

To be guilty of tax evasion, you must:

a. Try to maximize profits.

b. Try to minimize your tax liability.

c. Arrange your affairs so as to keep your taxes as low as possible.

d. Refuse to disclose a tax liability based on a completed transaction.

 

. The major source of federal tax revenue is:

a. Corporate income tax

b. Individual income tax

c. Excise tax

d. Estate tax

 

. Since 1980, the group of taxpayers whose tax burden has increased the most is:

a. Individuals

b. Corporations

c. Trusts and estates

d. None of the above

 

The most popular form of doing business in the United States is:

a. Corporate form

b. Partnership form

c. Single proprietorship

d. S corporation

 

32. The IRS levies penalties for which of the following:

a. Bouncing checks

b. Fraud

c. Late filing

d. All of the above

 

 

 

 

MULTIPLE CHOICE QUESTIONS—CHAPTER 3

 

32. Mr. and Mrs. Twig are both under 65 years of age and have no dependents. Their only income for the year was his salary of $15,500. During the year they made only a nominal amount of disbursements of the type that qualify as itemized deductions. What is their standard deduction on a 2011 joint return?

a. $3,700

b. $11,600

c. $5,800

d. $8,500

e. None of the above

 

33. Jerry Jenkins is over 65 years of age and has no dependents. His only income was his salary of $10,500. During the year, he made only a nominal amount of disbursements of the type that qualify as itemized deductions of $3,290. What is his standard deduction for 2011?

a. $5,800

b. $3,700

c. $7,250

d. $3,290

e. None of the above

 

34. What is Jerome Jackson’s standard deduction for 2011 if he has $20,000 in wages and fi les married filing separately? He also claims one of the two children.

a. $5,800

b. $4,850

c. $11,600

d. $3,700

e. None of the above

 

35. What is the amount of standard deduction for Abigale Abrams in 2011, a divorced parent, who fully supports her five-year-old daughter?

a. $5,800

b. $8,500

c. $11,600

d. $7,400

e. None of the above

 

36. Determine the amount of taxable income of Michael Manx in 2011, who is single and has $300 of wages and$2,000 of interest income for the year. He is claimed as a dependent by his parents.

a. $2,000

b. $2,300

c. $1,350

d. $300

e. $0

 

37. Marvin Miller, who is claimed as a dependent by his parents, received income of $3,100 from a trust fundand $500 from wages. Marvin had $1,050 in itemized deductions. What is Marvin’s taxable income?

a. $2,650

b. $3,600

c. $2,550

d. $1,700

e. None of the above

 

MULTIPLE CHOICE QUESTIONS—CHAPTER 13

19. A short tax year with the subsequent annualizing of taxable income is required for which of the following?

a. In the year of death of an individual

b. In the year of termination of a partnership

c. In the first year of a new corporation

d. In the year of liquidation of a corporation

e. None of the above

 

20. What is the amount of tax to be paid for a short period assuming the tax from placing the short period on an annual basis is $2,300; the tax computation for the short period without annualizing is $2,100; and the tax computation using the full 12 months and prorating is $2,200.

a. $2,300

b. $2,200

c. $2,100

d. $100

e. None of the above

 

21. Which of the following is not a method of accounting?

a. Cash receipts and disbursements method

b. Accrual method

c. LIFO inventory

d. Long-term contracts method

e. None of the above

 

22. The following statements about the cash basis method of accounting are false, except:

a. The prepayment made for future services may be deducted currently.

b. Interest credited to a savings account is not taxed until withdrawn.

c. Stock received for services rendered are taxed only in the year sold.

d. The exchange of services may lead to gross income to both parties.

 

23. Jake Turner realized last December that he had almost reached the point where his medical expenses exceeded the 7.5 percent of AGI limitation. As a result, he insisted on paying his physician, Dr. Grope, $6,000 on account for future services for the Turner family. The results of this prepayment are:

a. Turner’s deduction: when paid; Dr. Grope’s income: when received

b. Turner’s deduction: when services are rendered; Dr. Grope’s income: when received

c. Turner’s deduction: when services are rendered; Dr. Grope’s income: when services are rendered

d. Turner’s deduction: when paid; Dr. Grope’s income: when services are rendered

 

24. Robert Graves sold his house to George Tombs for a total of $100,000. Earnest money of $5,000 was received at the end of the year prior to the closing. The remaining $15,000 of the down payment was received at closing. George assumed a $50,000 mortgage on the property and signed a second mortgage for $30,000. If

Robert’s basis was $35,000 the tax results, in part, are as follows:

a. Contract price: $65,000; gross profit: 100%; payments in year of sale: $35,000

b. Contract price: $50,000; gross profit: 100%; payments in year of sale: $50,000

c. Contract price: $65,000; gross profit: 100%; payments in year of sale: $20,000

d. Contract price: $80,000; gross profit: 65/80%; payments in year of sale: $30,000

MULTIPLE CHOICE QUESTIONS—CHAPTER 4

40. All of the following are considered “constructive receipt” of income, except:

a. Lori was informed her check for services rendered was available but she did not pick it up.

b. Pierre earned income that was received by his agent but was not received by Pierre.

c. Jacque bought a 9-month certificate of deposit in November 2011. It earned $200 interest in 2011. She can withdraw the principal and interest in 2011 if she pays a penalty of one month’s interest ($100).

d. A payment on a sale of real property place in escrow pending settlement at which time title would convey.

 

41. In which of the following situations will the divorced custodial parent be entitled to the dependency exemption for the child?

a. The noncustodial parent provides $1,500 of support for the child and the custodial parent provides $1,200.

b. The custodial and noncustodial parent both provide $1,500 of support for the child.

c. The custodial parent provides $1,500 of support for the child and the noncustodial parent provides $1,200.

d. All of the above.

 

42. In July 1996, Dan Farley leased a building to Robert Shelter for a period of 15 years at a monthly rental of $1,000 with no option to renew. At that time the building had a remaining estimated useful life of 20 years.Prior to taking possession of the building, Shelter made improvements at a cost of $18,000. These improvements had an estimated useful life of 20 years at the commencement of the lease period. The lease expired on June 30, 2011, at which point the improvements had a fair market value of $2,000. The amount that Farley, the landlord, should include in his gross income for 2011 is:6 mo * 1000 = 6000

a. $6,000

b. $8,000

c. $12,000

d. $24,000

 

43. Roger Burrows, age 19, is a full-time student at Marshall College and a candidate for a bachelor’s degree.

During 2011, he received the following payments:

State scholarship for tuition $3,600

Loan from college financial aid office 1,500

Cash support from parents 3,000

Cash dividends on qualified investments 700

Cash prize award in contest 500

$9,300

What is Burrows’s adjusted gross income for 2011?700+500=1200

a. $1,100

b. $1,200

c. $4,800

d. $9,300

 

44. Kevin is a candidate for an undergraduate degree at a local university. During 2011, he was granted a fellowship that provided the following:

Tuition $18,000

Books and supplies 2,000

Room and board 14,800

What amount can Kevin exclude from gross income in 2011?18000+2000=20000

a. $18,000

b. $20,000

c. $25,000

d. $32,800

e. $34,800

MULTIPLE CHOICE QUESTIONS—CHAPTER 5

27. Mr. W. is 66 years old and single. His income for 2011 consisted of the following:

Taxable pension $10,000

Taxable interest 2,000

Taxable dividends 5,000

Social security payments 5,000

Tax-exempt interest 7,000(sum =26500) less base amount 25000=1500, 50% excess =750

He did not have any adjustments to income. What amount of W’s social security benefits is taxable?

a. $0

b. $750

c. $1,500

d. $2,000

 

28. Mr. and Mrs. Birch are both over 65 years of age and are fi ling a joint return. Their income for 2011 consisted of the following:

Taxable interest $6,000

Taxable dividends 8,000

Social security payments (Mr. and Mrs. Birch combined) 15,000 ½ = 7500

Tax-exempt interest 4,000

Taxable pension 15,000sum = (40500-base 32000)=8500/2 = 4250

They did not have any adjustments to income. What amount of Mr. and Mrs. Birch’s social security benefits is taxable?

a. $0

b. $4,250

c. $7,500

d. $7,750

 

29. During 2011, Anne Apple received tangible personal property as a safety achievement award from her employer. The award was not a qualified plan award. The property cost the employer $500 and had a fairmarket value of $600. How much must Anne include in her 2011 gross income?

a. $0

b. $200

c. $500

d. $600

 

30. During 2011, Edward East had wages of $10,000 and received unemployment compensation of $6,200 from thestate. Edward is single and 45 years old. What is the amount of unemployment compensation to be included in hisgross income?a. $0

b. $2,100

c. $4,200

d. $6,200

 

31. On June 3, 2011, Leon Wren, an electrician, was injured in an accident during the course of his employment.As a result of injuries sustained, he received the following payments during 2011:Damages for personal injuries $8,000

Worker’s compensation 3,000; Reimbursement from his employer’s accident and health plan for medical expenses paid by Wren 1,200The amount to be included in Wren’s 2011 gross income should be:

a. $0

b. $1,200

c. $3,000

d. $12,200

 

TRUE-FALSE QUESTIONS—CHAPTER 6

1. An ordinary expenditure is one which is commonly incurred by other businesses.TRUE

2. Hobby expenditures are deductible to the extent of hobby gross income.TRUE

3. If an employee accounts to the employer for business-related expenses and is reimbursed by the employer, the expenses must still be reported on the employee’s tax return.FALSE

4. Job-seeking expenses are not deductible if an individual finds a job in a new trade or business.TRUE

5. Rents and royalties expenses are deductible from adjusted gross income.FALSE

6. Tax deductions for tax planning and tax compliance expenses may only be claimed for expenses incurred in planning and compliance with respect to federal and state income taxes.FALSE

7. The Cohan case set a requirement for tax purposes that adequate substantiation is required for every tax deduction claimed on a tax return.FALSE

8. Advertising which is intended to influence public reaction to proposed legislation normally is not a deductible business expense for tax purposes.TRUE

9. The amount of a bad debt deduction is always limited to the adjusted basis of the debt in the hands of the taxpayer.TRUE

10. Full worthlessness of a debt must be proven in order to claim a business bad debt deduction.FALSE

 

MULTIPLE CHOICE QUESTIONS—CHAPTER 7

31. Ann Jones uses a dry cleaning machine in her business, and it was completely destroyed by fire. At the timeof the fire, the adjusted basis was $20,000 and its fair market value was $18,000. How much is Ann’s loss?

a. $18,000

b. $2,000

c. $20,000

d. None of the above

 

32. Ann Jones uses a dry cleaning machine in her business, and it was partially destroyed by fire. At the time ofthe fire, the adjusted basis was $20,000 and its fair market value was $18,000. The adjusted basis after the fireis $10,000 and the fair market value after the casualty is $10,000. How much is the casualty loss?

a. $10,000

b. $8,000

c. $18,000

d. $20,000

 

33. ABC, Inc. of Jasper, Georgia suffered a casualty loss of $150,000 in March 2011. This loss was caused byheavy rains that completely flooded their factory. As a result of these rains, the President declared NorthGeorgia (including Jasper) a disaster area on March 23, 2011. In what year can ABC, Inc. elect to deduct the

casualty loss?

a. 2011 or 2012

b. 2010 or 2011

c. 2011

d. 2010

 

34. Which of the following is not a passive activity?

a. Owning a business and not materially participating

b. Having rental condos

c

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