Tax Accounting Practice Final

80 Questions | Total Attempts: 254

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Accounting Quizzes & Trivia

Questions and Answers
  • 1. 
    In computing MACRS depreciation, salvage value is ignored.
    • A. 

      True

    • B. 

      False

  • 2. 
    Deductions for business gifts are limited to what amount per individual each year?
    • A. 

      25

    • B. 

      250

    • C. 

      50

    • D. 

      None of the above

  • 3. 
    Amortization is 
    • A. 

      The systematic recovery (expensing) of an investment in a productive natural resource.

    • B. 

      The systematic recovery (expensing) of good or resources

    • C. 

      The systematic recovery (expensing) of an investment

    • D. 

      None of the above

  • 4. 
    The portion of an employee's salary deemed "unreasonable" may be considered a dividend distribution to an employee that is also a shareholder of the corporation.
    • A. 

      True

    • B. 

      False

  • 5. 
    Personal expenses are only deductible if the tax laws specifically state that they are.
    • A. 

      True

    • B. 

      False

  • 6. 
    A self-employed attorney uses a country club to entertain clients and spends the following amounts at the club:  Annual dues$1,000Personal meals1,500Business meals2,500  
    • A. 

      0

    • B. 

      1750

    • C. 

      1250

    • D. 

      2500

  • 7. 
    If a taxpayer has two places of business in different areas, the IRS usually considers the following factors in determining the taxpayer's principal place of business: (Choose the wrong answer.)
    • A. 

      Amount of time spent at each location

    • B. 

      Taxpayer's preference for principal place of business

    • C. 

      Degree of business activity at each location

    • D. 

      Amount of income at each location

  • 8. 
    Prepaid interest payments can be deducted in the year of payment regardless of whether the taxpayer uses the cash method or accrual method of accounting.
    • A. 

      True

    • B. 

      False

  • 9. 
    Percentage depletion is computed without regard to the adjusted basis of the property being depleted.
    • A. 

      True

    • B. 

      False

  • 10. 
    • A. 

      Away from home overnight

    • B. 

      Away from home temporarily

    • C. 

      Away from home for a reasonable period of time

    • D. 

      Away from home for a 24-hour period

  • 11. 
    • A. 

      3590

    • B. 

      5641

    • C. 

      6909

    • D. 

      4872

  • 12. 
    Business depreciable property placed in service prior to what year is not eligible for ACRS depreciation?
    • A. 

      1980

    • B. 

      1981

    • C. 

      1979

    • D. 

      1982

  • 13. 
    • A. 

      $100,000

    • B. 

      $450,000

    • C. 

      $250,000

    • D. 

      $134,000

  • 14. 
    Nonbusiness bad debts are deductible:
    • A. 

      In full against business gross income.

    • B. 

      Only when they become wholly or partially worthless.

    • C. 

      As short-term capital losses.

    • D. 

      B and c are both correct.

  • 15. 
    For tax purposes, the term "research and experimentation expenditures" includes which of the following:
    • A. 

      Efficiency surveys

    • B. 

      Management studies

    • C. 

      Development of a plant process

    • D. 

      Advertising

  • 16. 
    A calendar-year corporation incurs $63,000 of start-up costs. If the corporation began business on August 1 of the current year, what is the maximum amount of the start-up costs that it can deduct against business income in the current year?
    • A. 

      $4,167

    • B. 

      $10,000

    • C. 

      $11,472

    • D. 

      $8,556

  • 17. 
    A taxpayer can claim a transportation deduction equal to 50 cents per mile traveled in a passenger automobile for business purposes.
    • A. 

      True

    • B. 

      False

  • 18. 
    A taxpayer can claim a transportation deduction equal to 50 cents per mile traveled in a passenger automobile for business purposes.
    • A. 

      True

    • B. 

      False

  • 19. 
    Employment-related expenses of employees are:
    • A. 

      Not allowed as trade or business tax deductions

    • B. 

      Allowed as trade or business tax deductions

    • C. 

      Limited to two percent of AGI

    • D. 

      Always deductible for AGI

  • 20. 
    A 50 percent deduction is allowed for amounts paid or incurred for dues and fees paid to social, athletic, sporting, or country clubs.
    • A. 

      True

    • B. 

      False

  • 21. 
    If a taxpayer is married on the last day of the tax year, a joint return must be filed in order to claim a dependent care credit.
    • A. 

      True

    • B. 

      False

  • 22. 
    Which of the following is allowed when computing AMTI for individuals?
    • A. 

      Standard deduction

    • B. 

      Charitable contributions

    • C. 

      Personal exemptions

    • D. 

      None of the above

  • 23. 
    Although a work opportunity credit usually is available only for qualified first-year wages, qualified second-year wages paid to a long-term family recipient can qualify for the credit.
    • A. 

      True

    • B. 

      False

  • 24. 
    • A. 

      Carried back one year and carried forward ten years

    • B. 

      Carried back one year and carried forward 20 years

    • C. 

      Carried back two years and carried forward 20 years

    • D. 

      Carried back two years and carried forward ten years

  • 25. 
    During the current year a corporation pays $8,000 to install ramps to the entrance of the corporation's office building that will allow disabled individuals better access to the building. The corporation's disabled access credit equals:
    • A. 

      0

    • B. 

      2000

    • C. 

      3,750

    • D. 

      3,875

  • 26. 
    The general business credit is subject to recapture only if disposition of the property results in an ordinary income.
    • A. 

      True

    • B. 

      False

  • 27. 
    Carlton Corporation's 2011 general business credit exceeded its 2011 income tax liability. The resultant general business credit:
    • A. 

      May be placed in a reserve account and, based on the useful lives of the related assets, applied against the income tax liabilities of subsequent year

    • B. 

      May be returned to the depreciation bases of the related assets and claimed as depreciation over the useful lives of the assets

    • C. 

      May be carried over for five years except that the carryover is limited to the useful lives of the related assets

    • D. 

      May be carried back one year and carried forward 20 years

  • 28. 
    The differences between MACRS depreciation and depreciation allowed for computing AMT results in a permanent difference between taxable income and AMTI.
    • A. 

      True

    • B. 

      False

  • 29. 
    Certain individuals can get a refundable tax credit of 40 percent of earned income.
    • A. 

      True

    • B. 

      False

  • 30. 
    What is the maximum amount that Mr. and Mrs. Jones, both over 65, may take as a credit for the elderly before the income tax limitation, assuming that they have gross income of $23,000 and adjusted gross income of $21,500?
    • A. 

      0

    • B. 

      20

    • C. 

      1125

    • D. 

      263

  • 31. 
    Wages paid to workers who either live or work in an empowerment zone or in a renewal community qualify for the empowerment zone and renewal community employment credit.
    • A. 

      True

    • B. 

      False

  • 32. 
    The excess of percentage depletion over cost depletion is a tax preference item for purposes of computing AMT.
    • A. 

      True

    • B. 

      False

  • 33. 
    The employer's wage deduction is reduced by the amount of work opportunity credit claimed.
    • A. 

      True

    • B. 

      False

  • 34. 
    Taxpayers may elect to carry forward unused general business credit for 10 years rather than back one year and forward 20 years.
    • A. 

      True

    • B. 

      False

  • 35. 
    Transportation costs for a child between the taxpayer's household and the child care location are allowable child care expenses.
    • A. 

      True

    • B. 

      False

  • 36. 
    The minimum tax credit:
    • A. 

      May not be used to offset any future AMT tax liability

    • B. 

      Provides that the amount of AMT paid by a corporation in one year differences can be used to offset the regular tax liability of a subsequent year

    • C. 

      May be carried forward indefinitely as an offset against regular tax liability

    • D. 

      B and C

    • E. 

      All of the above

  • 37. 
    What is the earned income credit allowed Don Andersen assuming he has adjusted gross income of $8,500 and earned income of $5,000? He maintains a household for his daughter.
    • A. 

      2,890

    • B. 

      0

    • C. 

      1,700

    • D. 

      3,094

  • 38. 
    Foreign income taxes paid to a foreign country may be claimed as a credit against United States income tax or deducted as an itemized deduction.
    • A. 

      True

    • B. 

      False

  • 39. 
    A married taxpayer is required to file a joint return in all circumstances in order to be eligible for the earned income credit.
    • A. 

      True

    • B. 

      False

  • 40. 
    • A. 

      3400

    • B. 

      4400

    • C. 

      4000

    • D. 

      3000

  • 41. 
    Job-seeking expenses are not deductible if an individual is looking for work in a new trade or business.
    • A. 

      True

    • B. 

      False

  • 42. 
    Ad valorem personal property taxes are allowed as an itemized deduction.
    • A. 

      True

    • B. 

      False

  • 43. 
    • A. 

      5,000

    • B. 

      4,500

    • C. 

      3000

    • D. 

      2,700

    • E. 

      None of the above

  • 44. 
    An individual who pledged $500 to the church to be paid next year is allowed a charitable contribution deduction in the year pledged.
    • A. 

      True

    • B. 

      False

  • 45. 
    Itemized deductions only reduce taxable income if the taxpayer's itemized deductions exceed the standard deduction amount.
    • A. 

      True

    • B. 

      False

  • 46. 
    Which one of the following is not deductible when itemizing?
    • A. 

      State income tax

    • B. 

      Cigarette tax

    • C. 

      None of the answers

    • D. 

      Real Property Tax

  • 47. 
    • A. 

      True

    • B. 

      False

  • 48. 
    Vitamin pills taken daily for general health are a qualified medical expense
    • A. 

      True

    • B. 

      False

  • 49. 
    Medical expenses recovered after being claimed as a deduction in the previous year must be included in income in the year of recovery to the extent that the deduction decreased taxable income in the year they were deducted.
    • A. 

      True

    • B. 

      False

  • 50. 
    All theft losses must be deducted in the year in which the theft actually occurred.
    • A. 

      True

    • B. 

      False

  • 51. 
    Education expenses which qualify an individual for a new trade or business are always deductible for tax purposes.
    • A. 

      True

    • B. 

      False

  • 52. 
    All state and local taxes are deductible for federal income tax purposes.
    • A. 

      True

    • B. 

      False

  • 53. 
    Individual taxpayers are allowed to deduct unreimbursed medical and dental expenses paid during the year for themselves, their spouse, and dependents.
    • A. 

      True

    • B. 

      False

  • 54. 
    Miscellaneous itemized deductions are deductible only
    • A. 

      None of the answers

    • B. 

      If they fall below the limit on standard itemized deductions.

    • C. 

      If the taxpayer takes the standard deduction.

    • D. 

      To the extent that in aggregate they exceed two percent of AGI.

  • 55. 
    Medical expenses may be claimed only for persons who qualify as a spouse or dependent on your return.
    • A. 

      True

    • B. 

      False

  • 56. 
    Fees paid to chiropractors may be a deductible medical expense.
    • A. 

      True

    • B. 

      False

  • 57. 
    An interest deduction is allowable on mortgage payments made by the taxpayer for a sick friend.
    • A. 

      True

    • B. 

      False

  • 58. 
    Embezzlement losses are deductible in the year of discovery.
    • A. 

      True

    • B. 

      False

  • 59. 
    Unreimbursed expenses of employees are considered to be deductions
    • A. 

      For or from AGI depending on the type of expense

    • B. 

      From AIG

    • C. 

      For AIG

    • D. 

      None of the above

  • 60. 
    If any employee makes adequate accounting to the employer and the employer reimbursement equals employee expenses, both the reimbursement and the expenses should be shown on the employee's tax return.
    • A. 

      True

    • B. 

      False

  • 61. 
    When business property is completely destroyed, the loss is equal to the difference between the fair market value of the property before the event and the fair market value immediately after the event.
    • A. 

      True

    • B. 

      False

  • 62. 
    Billy Ray owns several parcels of rental real estate, and he actively participates in managing the properties. His total loss from these activities in 2011 is $30,000 and his AGI for 2011 is $110,000. For how many years may the disallowed loss be carried forward?
    • A. 

      The disallowed loss may not be carried forward

    • B. 

      The disallowed loss may be carried forward for 15 years.

    • C. 

      The disallowed loss may be carried forward for 15 years, but only after it has been carried back for 3 years.

    • D. 

      The disallowed loss may be carried forward indefinitely.

  • 63. 
    The gain from the sale of property that produces portfolio income (e.g., stocks and bonds) is classified as passive income.
    • A. 

      True

    • B. 

      False

  • 64. 
    • A. 

      0

    • B. 

      15000

    • C. 

      20000

    • D. 

      30000

  • 65. 
    Hobby expenses are generally deductible only to the extent of the income generated by the activity.
    • A. 

      True

    • B. 

      False

  • 66. 
    • A. 

      $10,000 of portfolio income

    • B. 

      0

    • C. 

      $20,000 of portfolio income

    • D. 

      None of the above

  • 67. 
    A deduction resulting from the partial destruction of business property is limited to the lesser of (1) the adjusted basis of the casualty property, or (2) the decline in fair market value of the casualty property.
    • A. 

      True

    • B. 

      False

  • 68. 
    Exclusive use of a portion of a home for business purposes is required to qualify for a business use of home deduction.
    • A. 

      True

    • B. 

      False

  • 69. 
    Suspended passive losses are carried forward for a maximum time period of 20 years.
    • A. 

      True

    • B. 

      False

  • 70. 
    Bob Mapp gave his daughter a limited partnership interest in a real estate activity. Suspended losses amounted to $30,000. Bob’s adjusted basis at the time of the gift was $40,000 ( fair market value was greater than $40,000). What is the daughter’s basis in the property?
    • A. 

      $40,000

    • B. 

      $30,000

    • C. 

      $70,000

    • D. 

      None of the above

  • 71. 
    A business incurring a net operating loss in a taxable year can carry the loss back two years and forward 15 years.
    • A. 

      True

    • B. 

      False

  • 72. 
    All casualty and theft losses are deductible if incurred in a trade or business or in connection with an investment.
    • A. 

      True

    • B. 

      False

  • 73. 
    The percentage of passive losses that may offset nonpassive income for 2011 is: (select two answers)
    • A. 

      10%

    • B. 

      0%

    • C. 

      Depending

    • D. 

      For all tax years beginning after 1990, passive losses may not offset nonpassive income.

  • 74. 
    Bill Goggans died and left passive activity property to his nephew, Travis. Bill’s basis in the activity was $30,000, while Travis’ basis was stepped up to $50,000. Suspended losses amounted to $22,000. How much is the passive loss deduction that can offset nonpassive income?
    • A. 

      2000

    • B. 

      22,000

    • C. 

      30000

    • D. 

      0

  • 75. 
    • A. 

      50000

    • B. 

      3000

    • C. 

      30000

    • D. 

      0

  • 76. 
    In determining whether a taxpayer materially participates, the participation of a taxpayer's spouse will be taken into account.
    • A. 

      True

    • B. 

      False

  • 77. 
    Farmers may carryback an NOL for three years.
    • A. 

      True

    • B. 

      False

  • 78. 
    Which of the following statements is correct?
    • A. 

      Hobby expenses are always fully deductible.

    • B. 

      The financial status of the taxpayer is not considered in determining whether activities are engaged in for profit.

    • C. 

      The deduction for the allowed hobby expenses is an itemized deduction, but not subject to the 2 percent floor.

    • D. 

      Hobby expenses that are deductible without reference to whether they are incurred in an activity designed to produce income, such as certain taxes, remain fully deductible.

  • 79. 
    • A. 

      Fred has a loss of $50,000 suspended under the passive loss rules.

    • B. 

      Fred has an at-risk amount in the activity of $0.

    • C. 

      Fred has a loss of $10,000 suspended under the at-risk rules.

    • D. 

      Fred has a loss of $60,000 suspended under the passive loss rules.

  • 80. 
    Mike, who is single and the best fricken classmate you have ever had, has $100,000 of salary, $15,000 of income from a limited partnership, and a $30,000 passive loss from a real estate rental activity in which he actively participates. His modified adjusted gross income is $100,000. Of the $30,000 loss, how much is deductible?
    • A. 

      30,000

    • B. 

      20,000

    • C. 

      25,000

    • D. 

      0