Questions and Answers of Fundamentals Taxation 2019

Kobe is single and has two children, Trent, age 18, and Garret, age 21.Both sons attend college. Trent attended college from August through December of the current year. Garret attended college from
Felicia, who is single, received support from the following individuals and sources during the current year:Which of these individuals may claim Felicia as a dependent under a multiple support
A.J. and Claire were married five years ago and filed a joint tax return in each year. In the current year, the couple filed for divorce, which was finalized on December 30.The couple does not have
Huey and Daphne have been married for several years and are considering filing separately beginning this year. Huey has paid itemized deductions of $19,600 and Daphne has paid itemized deduc-tions of
Ella met Gerard while traveling to France on a student exchange program. They got married in the current year, but Gerard still lives in France. What is the correct filing status for Ella?
Lisbeth, age 55, and Franco, age 58, file a joint return for 2023. What is their standard deduction?
Viktor married Camille in 2015 and they have filed a joint tax return each year. They have one child together, Viktor Jr., age two. Viktor is a stay-at-home dad earning $$36,500$ as a part-time
Indicate which of the following costs are included in determining the support test for dependents (DEP), the maintaining a household test for head of household (MHOH), both tests, or neither test:a.
Elliot and Mariska have been married for 9 years and have three children under the age of 9.In Year 27, Elliot was killed in a plane crash. What is Mariska’s filing status in Years 27-30, assuming
List all allowed filing statuses for 2023 for each situation below:a. Nestor and Fran Navis are married and have three children under the age of 17, for whom they provide all the support.b. This
Irene, age 37, maintains a home for herself and supports three other people: Dirk, Pat, and Ralph. Dirk, age 42, is Ireneʼs boyfriend who has lived with her since October. He is unemployed and
Joy, Faith, and Hope all live together in the same household.Joy is 38 years old and unemployed. Faith is 19 years old and supports her mom, Joy, and her 12-year-old sister, Hope. Faith earns
Talen, age 16, is claimed as a dependent on his parentsʼ tax return. What is the correct standard deduction in the following independent circumstances?a. Talen earns $1,000 from shoveling snow for
Amelia and Sebastian have two children, Kerry, age 16, and Edward, age 22. Kerry has earned income of $$2,540$ and unearned income of $$3,300.$ Edward has earned income of $$26,780,$ unearned
Silas, age 15, works part-time at McDonalds and is claimed as a dependent on his parentsʼ tax return for 2023. In the following independent examples, indicate how much income is taxed at Silasʼs
What is the correct standard deduction in the following independent situations in 2023?a. Bert and Betty are each 68 years old and file married filing jointly.b. Sandy is 32 years old, single, and
In each of the following independent situations, indicate if the taxpayer must file Form 1040 in 2023:a. Balaji is 27 years old, files as single, and has $8,400 of business income from his home-based
Jacob would like your advice for the coming tax year.Assume Jacob provides more than half the support for the following individuals, none of whom qualified as a member of Jacobʼs household:•
John and Mary Arnold are a childless married couple who lived apart (alone in homes maintained by each) the entire year.They would like your advice regarding their separation and pending divorce. If
Savannah is 26 years old and lives with her parents. She earned $$4,500$ by babysitting and $$6,000$ by working as a lifeguard. Her employer at the pool withheld federal and state income tax. Is
Which of the following is an example of realty?a. Storefront propertyb. Landc. Apartment buildingd. Warehousee. All of these
Which of the following is an ordinary asset?a. Computerb. Delivery truckc. Accounts receivabled. Equipment
Which of the following assets are classified as ordinary for purposes of determining the character of gain or loss?I. Personal residence II. Inventory III. Asset sold by a business that had been
Which of the following assets are classified as capital for purposes of determining the character of gain or loss?I. Equipment used in a business II. Land owned by a dealer in real estate III.
Barak purchased a parcel of land for $$65,000.$ He also paid commissions of $$1,000,$ title fee of $$125,$ survey fee of $$150,$ legal fees of $$1,500,$ and two months later installed
Jasmine sold a rental property for $$675,000$ in the current year. She had initially purchased the property for $$500,000.$ Jasmine replaced the roof two years ago for $$35,000$ and remodeled
Which of the following is a possible deductible personal expense?a. Housekeeping serviceb. Mortgage interest expensec. Yardwork maintenanced. Groceries
Rico sells a parcel of investment real estate and received $$120,000$ cash and stock with a fair market value of $$100,000$ and basis of $$60,000.$ Additionally, his $$50,000$ mortgage on the
Jason sold land with a basis of $$35,000$ in a tax- deferred transaction in the current year and realized a gain of $$50,000.$ The land received had a fair market value of $$65,000$ and a basis
Darnell enjoys music and sound production. In his basement, he has a recording studio that he uses to create his own music.Lately, he has been recording and producing local artists’ music. Darnell
Tito purchased equipment to be used in his business on January 9 of the current year. In December, he is considering selling the equipment. If Tito sells in December, what is the asset
Scout owns and operates an orange grove in Florida that produces the best orange juice in the region. He purchased new equipment for $55,000 that helps process the oranges to juice and waste. He also
Luther owns a woodworking business and specializes in making handcrafted cribs. He typically would charge $880 per crib.His neighbors are having a baby in June and have asked for a crib, but they do
Mason owns a hair salon, a nail boutique, and a juice bar.He recently purchased a small, used backhoe for $24,100. Is this expense deductible?
Shane exchanged his investment land (basis $$43,000,$ FMV $$56,000)$ for farming land (basis $$44,000,$ FMV $$51,000)$ and $$5,000$ cash. Assume this exchange qualifies as a tax-deferred
Indicate whether the following activities should be classified as business, investment, or personal.a. Kaitlin knits and crochets and sells her items at her church.She does not keep an inventory
Classify each of the following assets as realty, personalty (tangible), personalty (intangible asset), or natural resource.a. Coalb. Covenant not to competec. Warehouse used to store chemicalsd.
Classify each of the following assets as ordinary, Section 1231, or capital.a. Notes receivableb. One parcel of land held for investmentc. Automobile used 100% for business held for three yearsd.
Elnaz paid $$180,000$ for a building in the current year. She also paid commissions of $$2,800,$ transfer fee of $$150,$ survey fee of $$100,$ appraisal fees of $$850,$ and title insurance
Fantasia is a popular photographer in her area and she typically charges $125 for a photo session. Mario is an accountant who charges $100 per hour to complete a tax return. Fantasia would like to
Raul owns a nail salon in town and has hired you to do his bookkeeping. When reviewing his accounts, you notice that he has charges for Chicago Cubs games and Kindercare Day Care Center on his
Elijah owns an apartment building that he purchased ten years ago for $345,000. His current adjusted basis is $220,000 and his outstanding mortgage is $250,000. Elijah sells the building for cash of
Chase would like to exchange land that he owns (adjusted basis $140,000 and FMV of $172,000) for land in a neighboring county (adjusted basis $120,000 and FMV $142,000) plus cash of $30,000. Assume
Saul would like to exchange land that he owns (adjusted basis $$125,000$ and FMV of $$155,000)$ for land in a neighboring county (adjusted basis $$110,000$ and FMV $$130,000)$ plus cash of
How would your answers change to Application Problem 8 if the transaction qualified as an excluded transaction?Problem 8Chase would like to exchange land that he owns (adjusted basis $$140,000$ and
Michael has his own consulting firm and works from home.He has the following expenses: Advertising, supplies, car expenses, computer, mortgage interest expense, real estate taxes, and utilities.What
Jakari Smith is a new client and has been an investment advice provider as well as an income tax preparer for a well- established firm in the city. He would like to start his own firm as an S
Porter enjoys antique shopping and looking for a good buy. He visited several antique stores and flea markets recently and purchased an old chest of drawers for his extra bedroom. While moving the
Danny Traitor, whose filing status is single, filed his income tax returns for 2021, 2022, and 2023 showing ordinary losses of $$127,000,$ $$254,000,$ and $$569,000,$ respectively, from trading
Maverick and Melanie Hall are selling their current home and purchasing another larger home for their growing family. You will review a list of improvements provided by the Halls, and the settlement
Distinguish between a primary authority and a secondary authority.
Describe the legislative process indicating where the bill begins and how the bill finally becomes law.
In IRC §280A(c)(1)(A), what labels are used for the subparts?
What is included in the administrative sources of tax law?
Distinguish between a proposed regulation, a temporary regulation, and a final regulation.
What is the difference between a Revenue Ruling and a Private Letter Ruling?
Name the three courts of original jurisdiction that would hear federal tax issues.
Define the terms acquiescence and nonacquiescence.
What is the Small Case Division of the U.S. Tax Court?
When will the Supreme Court hear a tax case?
If a tax treaty and the Internal Revenue Code are in direct conflict with one another, which must a taxpayer rely on?
What variables might you consider when assessing the validity of sources of tax law?
Briefly describe the steps in the tax research process.
Define statute of limitations and how it applies to tax assessment and refunds.
Explain the failure to pay penalty and the failure to file a tax return penalty.
Provide two examples of an accuracy related penalty.
Provide two examples of a tax preparer penalty.
What is meant by the term substantial authority?
Name three types of IRS audits.
Which of the following is a primary authority?a. Journal of Taxation articleb. Wiley tax textbookc. Tax Court decisiond. IRS Publication
Which of the following is a secondary authority?a. Revenue Rulingb. Supreme Court decisionc. Internal Revenue code sectiond. Wiley tax textbook
Which of the following is a not a primary source of tax authority?a. The Wall Street Journalb. Legislativec. Administratived. Judicial
Which of the following carries the higher weight of authority?a. Internal Revenue code sectionb. Treatyc. Both are equal and depends on which is more recentd. None of these
In IRC §179(b)(3)(A), what subpart is (3)?a. Sectionb. Subsectionc. Paragraphd. Subparagraph
What rule states that a Tax Court will follow previous deci-sions in the Circuit that will have jurisdiction on appeal?a. Goldberg Ruleb. Golden Rulec. Molsen Ruled. Golsen Rule
What day, in general, is Form 1040 due not including exten-sions and without incurring possible penalty?a. March 15b. April 1c. April 15d. June 30
If Barb filed her Year 3 tax return on February 14, Year 4, when does the statute of limitations expire for assessing additional tax?a. February 14, Year 6b. April 15, Year 6c. February 14, Year 7d.
Heather inadvertently forgot toe- file her Year 10 tax return on April 15, Year 11, but she did pay her balance due of $1,500 on time. Shee- filed on June 3, Year 11.What late filing penalty does
What is the penalty per tax return for a tax practitioner violation for failure to sign a tax return?a. $0b. $60c. $105d. $1,000
Which of the following may practice before the IRS?a. CPAb. Enrolled Agentc. Attorneyd. All of these
CPA Rick has for many years prepared the individual income tax returns for his client, Luka. In preparing this year’s return, Rick discovered a material error in last year’s return that caused
What is another common name for the Statutory Notice of Deficiency?a. 10-day letterb. 30-day letterc. 90-day letterd. 120-day letter
Provide two unique distinctions of the District Court, Tax Court, and the U.S. Court of Federal Claims.
When weighing sources of authority, list from highest to lowest the administrative sources of authority.
Who may file Form 1040-SR, and what are two advantages of doing so?
List three acts of incompetence of a tax professional under Circular 230.
Describe a no change report, and whether or not it is advantageous for the taxpayer?
Classify the following tax sources as either Primary, Secondary, Both, or Neither.a. Tax treaty between the United States and Canadab. Senate Finance Committee Reportc. Revenue Rulingd. U.S. Tax
For each of the following citations, identify the type of authority (Legislative, Administrative, or Judicial)a. IRC §1031(a) (Internal Revenue Code Section)b. Rev. Proc. 2004-34, 2004-1 C.B. 911
A taxpayer living in the following states would appeal a decision of the U.S. District Court to which Court of Appeals?a. Illinoisb. Alabamac. Californiad. Massachusettse. Washington D.C.f. Hawaii
Rank the weight of the authorities below beginning with the item with greatest authority.a. Internal Revenue code sectionb. Letter Rulingc. Article in the Journal of Taxationd. Tax Court decisione.
Cain filed his 2023 Form 1040 on February 14, 2024.a. When will the statute of limitations for his 2023 return expire?b. When will the statute of limitations expire if he filed his tax return on
Grant filed his 2023 tax return on May 29, 2024 and never properly extended his tax return. Grant owed $6,400 which was paid on April 15, 2024.a. How much is his failure to file penalty?b. If he
Grant filed his 2023 tax return late and never properly extended his tax return. Grant owed $6,400 for his 2023 tax return.a. How much is Grant’s failure to pay penalty if he filed his return and
Grant filed his 2023 tax return late and never properly extended his tax return. Grant’s lack of filing his return on time was determined to be intentional and fraudulent. Grant owed $6,400 for his
(LO3) Asher is a podiatrist and has adjusted gross income of $$225,000.$ His tax liability is $$56,000$ for 2023 and was $$50,000$ for 2022. Assume that the underpayment interest rate charged
(LO3) Carole and Luiz owe $18,500 in tax liability with their 2023 tax return due on April 15, 2024. They filed their return, but unfortunately, they were not able to pay their liability until July
Kyle was hit by a delivery truck while walking his dog in 2021. He received punitive damages as part of the lawsuit of $$200,000.$ Kyle did not think this was taxable income and did not include it
(LO3) Norma’s grandma passed away on August 18, 2023. She left cash and land to Norma in her will. An estate tax return was not filed because the estate’s total fair market value was low enough
Dale is a CPA and handles many tax returns during the year. Upon audit of one of his client’s returns, it was discovered that Dale took an unreasonable position on the client’s tax return that

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