1. A "tax" has been defined as a compulsory payment which is made to a governmental authority and:
| | which is not a penalty or fine. |
| | which is paid in exchange for a specific benefit to the taxpayer. |
| | which is to be used for the public good. |
2. Based on the following definition-"a tax is a nonpenal yet compulsory transfer remitted for the public good," the following is a tax:
| | A penalty for failure to file a return on time. |
| | A five percent state tax calculated on federal taxable income. |
| | An attorney licensing fee. |
3. Decisions of federal courts on cases and controversies involving the application or interpretation of tax law are known as:
| | administrative authority. |
4. Sources of tax authority which can be used to determine legislative intent, i.e., the reasons or purposes for enacting a particular rule of law, include:
| | the House Ways and Means Committee Report. |
| | the Internal Revenue Bulletin. |
5. Section 73(a) of the Internal Revenue Code provides that amounts received in exchange for services performed by a child shall be included in his or her gross income and not that of the parents, even if the child does not receive the payments. Reg. 1.73-1(a) specifies that "compensation for personal services of a child shall, regardless of the provisions of State law relating to who is entitled to the earnings of the child, and regardless of whether income is in fact received by the child, be deemed the gross income of the child and not the gross income of the parent of the child. Such compensation, therefore, shall be included in the gross income of the child and shall be reflected in the return rendered by or for such child." This regulation is:
6. The following characterize lawsuits which are heard in regular Tax Court:
| | A taxpayer's case may be heard by one judge or the entire panel en banc. |
| | The taxpayer must pay the deficiency up-front and sue for a refund. |
| | The taxpayer has a right to a jury trial. |
| | The request for hearing must be filed with the Court within 120 days of receiving a statutory notice of deficiency. |
7. A regular Tax Court case is appealed to:
| | the Circuit Court of appeals with the most favorable precedent. |
| | the Court of Appeals for the Circuit in which the taxpayer resides. |
| | the Court of Appeals for the Federal Circuit. |
8. A trial court of general jurisdiction which does not specialize in any particular type of law is:
| | Court of Appeals for the Federal Circuit. |
| | a United States District Court. |
9. The following is an example of a Citator which provides details of how later cases or rulings have dealt with a case of interest in their decisions:
10. Administrative sources of the tax law, such as IRS Regulations, Revenue Rulings and Revenue Procedures:
| | do not have the force of law because they are the opinions of the Secretary of the Treasury. |
| | are generally drafted by the Supreme Court. |
| | are official interpretations of the tax law made by the Department of the Treasury and the IRS. |
11. Which of the following is a step in the tax research process:
12. Which facts are relevant to a determination whether client has taxable income?
| | Client's mother lived with her. |
| | Client sold her house in 2013. |
| | Client purchased her house in 2010. |
13. A researcher must find his answer to a taxpayer's issue in which of the following authorities:
| | The Journal of Accountancy. |
| | CCH's Tax Research Consultant. |
| | RIA's Federal Tax Coordinator. |
| | The Internal Revenue Code. |
14. Marvin's Mighty Maples, a minor league baseball team located in Vermont, sells season tickets to its games which are scheduled a year in advance. Season tickets for first tier seats are $5,000 per year. The Maples' season runs from April to September. The Maples operate on the accrual basis and have a fiscal year that ends on June 30.
| | Marvin's Maples may defer that portion of the season ticket sales that relate to the next fiscal year, because it is an accrual basis taxpayer. |
| | Marvin's Maples may not defer that portion of the season ticket sales that relate to the next fiscal year, as prepaid income must be recognized when received. |
| | Marvin's Maples may not defer that portion of the season ticket sales that relate to the next fiscal year because they are required to use a calendar year. |
| | Marvin's Maples may defer that portion of the season ticket sales that relate to the next fiscal year because when income will actually be earned is not required to be estimated. |
15. Beatrice asks her employer to pay $500 of her monthly $5,000 salary to her son for his living expenses while away at college. Beatrice never receives this money it is paid directly to her son.
| | Beatrice must report taxable compensation income of $5,000 per month. |
| | Beatrice's son must report $500 per month of taxable income. |
| | Beatrice must report taxable compensation income of $5,000 per month; but, she gets a deduction for the $500 per month that is paid to her son. |
| | Beatrice must report taxable compensation income of $4,500 per month. |
16. The accrual method of accounting is permitted by the Internal Revenue Code if:
| | it is required to be used in conjunction with the cash method. |
| | it is used only to account for inventories. |
| | it clearly and accurately reflects the taxpayer's income. |
17. An accrual basis taxpayer may deduct an expense if economic performance has occurred and:
| | the all events test has been met and the amount of the obligation can be determined with reasonable accuracy. |
| | the all events test has not been met, but the amount of the payment can be fixed with reasonable accuracy. |
| | the all events test has been met, but the amount of the payment cannot be fixed with reasonable accuracy. |
18. Code Sec. 162 would most likely permit an ordinary and necessary trade or business expense deduction in which situation:
| | HIJ, Inc. paid its president, a controlling shareholder, a salary of $500,000; its comparable competitor paid its president a salary of $400,000. |
| | EFG Co. paid its president, an unrelated individual, a salary of $500,000; its comparable competitor paid its president a salary of $450,000. |
| | ABC Corporation paid its president, an unrelated individual, a salary of $500,000; its comparable competitor paid its president a salary of $100,000. |
19. The Internal Revenue Code contains three general categories of currently deductible expenses including the following:
| | Expenses incurred in a trade or business, expenses incurred for the production of income, and expenses incurred for personal living. |
| | Expenses incurred in a trade or business, expenses incurred for the production of income, and expenses incurred for the production of tax-exempt income. |
| | Capital expenditures, expenses incurred in a trade or business, and expenses incurred for the production of income. |
| | Expenses incurred in a trade or business, expenses incurred for the production of income, and Code authorized personal expenditures. |
20. Betty purchased 500 shares of Newmont Mining Company for $10,000 on January 15, 2016. She sold those shares on July 1, 2016 for $20,000. Betty has:
| | a long-term capital gain of $10,000. |
| | a short-term capital gain of $10,000. |
| | a long-term capital loss of $10,000. |
| | a short-term capital loss of $10,000. |
21. Edgar Souris had a commercial office building which he rented to various stores and businesses. The property was condemned by the city so that they could put in a new highway. Edgar's office building cost $225,000 15 years ago and he has taken depreciation on it of $75,000. Edgar's received condemnation proceeds from the city of $350,000. In the next year he purchased an apartment building for $300,000.
| | Edgar has a realized gain on the involuntary conversion of $0 and recognized gain of $0. |
| | Edgar has a realized gain on the involuntary conversion of $200,000 and recognized gain of $50,000. |
| | Edgar has a realized gain on the involuntary conversion of $50,000 and recognized gain of $0. |
| | Edgar has a realized gain on the involuntary conversion of $200,000 and recognized gain of $0. |
22. Gain or loss on the sale of the following property might be recharacterized under Code Sec. 1231:
| | The loss on the condemnation of a building lot purchased by the taxpayer 10 years ago and held for appreciation in value. |
| | The loss on the sale of stock owned by taxpayer for six months. |
| | The gain on the sale of a backhoe used in taxpayer's construction business. |
23. The Supreme Court decision in Allied Signal v. Director-Division of Taxation, established the following rule with respect to unitary income taxation:
| | A state may include in the unitary income tax base income only if some rational relationship exists between the taxing state and the taxpayer's intrastate business. |
| | A state may include in the unitary income tax base any income however unrelated to the business operations of the parent in the state. |
| | A state may include in the income unitary tax base gains from the sale of passive stock investments. |
24. Code Sec. 7602 would most likely permit the Service to examine a taxpayer's books and records in the following situation:
| | Casey Jiminez is the niece of Ruben Kincaid. She received a gift of stock from him just before his death and no gift tax return was ever filed. The IRS is currently investigating the need for filing a gift tax return and who will be responsible for the tax due, if any. |
| | Joe Smith filed a tax return with no information other than "under protest" written across page 1 of the Form 1040. |
| | Kelly Jones properly prepared and filed her return and it is not under audit. |
25. Pursuant to which code section may a taxpayer seek to recover the additional tax paid on an amount included in income under claim of right, but which was required to be repaid in a lower tax year?
