Question 1

Kate files her tax return 36 days after the due date.When she files the return,she sends a check for $2,000 which is the balance of the tax owed by her.Kate's penalty for failure to file a return will be
A)0)5% per month (or factor thereof)up to a maximum of 25%.
B)5% per month (or factor thereof)up to a maximum of 25%.
C)20% per month (or factor thereof).
D)25%.

Accepted Answer

The penalty for failure to file a tax return is 5% per month (or partial month) up to a maximum of 25% of the unpaid tax. Since Kate filed her tax return 36 days after the due date, she will incur a penalty of 5% x 1.2 = 6% of the unpaid tax. However, since she has already paid the balance of the tax owed, the penalty will be 6% of $0, which is $0. Therefore, Kate's penalty for failure to file a return is 0.

Question 2

Leonard established a trust for the benefit of his son.The principal amount of the trust is $400,000.The trust is projected to earn approximately 5% per year.In the current year,the trust earned $20,000.Expenses of $4,000 were incurred.Assume that $14,000 is distributed to Leonard's son.
a.How much income is taxed to the trust?
b.How much income is taxed to Leonard's son?

Accepted Answer

The answer of Leonard established a trust for the benefit...

Question 3

The IRS must pay interest on
A)all tax refunds.
B)tax refunds paid later than 30 days after the due date.
C)tax refunds paid later than 45 days after the due date.
D)The IRS never pays interest on tax refunds.

Accepted Answer

The answer of The IRS must pay interest on
A)all tax...

Question 4

Peyton has adjusted gross income of $20,000,000 on his 2014 tax return,filed April 15,2015.He accidentally failed to include $200,000 that he received for a television advertisement.How long does the IRS have to audit Peyton's federal tax return?
A)until April 15,2017
B)until April 15,2018
C)until April 15,2021
D)The IRS can audit Peyton's return at any future date.

Accepted Answer

The IRS has three years from the date the tax return was filed or the due date, whichever is later, to audit the return. In this case, Peyton filed his return on April 15, 2015, so the IRS has until April 15, 2018, to audit his return.

Question 5

During the current tax year,Charlie Corporation generated gross income of $1,800,000 and had ordinary and necessary deductions of $1,300,000,resulting in taxable income of $500,000.If Charlie Corporation paid qualifying dividends of $200,000 to shareholders,all of whom are in the 25% marginal tax bracket,what is the total tax paid on both corporate income and the corporate dividends?

Accepted Answer

The answer of During the current tax year,Charlie Corporation generated...

Question 6

Mia is self-employed as a consultant.During 2013,Mia earned $180,000 in self-employment income.What is Mia's self-employment tax?

Accepted Answer

The answer of Mia is self-employed as a consultant.During 2013,Mia...

Question 7

Which is not a component of tax practice?
A)providing clients tax refund advance loans
B)tax research
C)tax planning and consulting
D)compliance

Accepted Answer

Providing clients tax refund advance loans would fall under the category of lending, which is not a component of tax practice. The other options, tax research, tax planning and consulting, and compliance are all key components of tax practice.

Question 8

A presidential candidate proposes replacing the income tax with a national sales tax.The sales tax would have a flat rate.Describe the impact of this change in terms of tax structure and equity.

Accepted Answer

The answer of A presidential candidate proposes replacing the income...

Question 9

During the current tax year,Frank Corporation generated gross income of $1,900,000 and had ordinary and necessary deductions of $1,400,000.What is the amount of Frank Corporation's corporate income tax for the year?

Accepted Answer

The answer of During the current tax year,Frank Corporation generated...

Question 10

Frederick failed to file his 2014 tax return on a timely basis.In fact,he filed his 2014 income tax return on October 31,2015,(the due date was April 15,2015)and paid the amount due at that time.He failed to make timely extensions.Below are amounts from his 2014 return:
  Frederick sent a check for $1,776 in payment of his liability.He thinks that he has met all of his financial obligations to the government for 2014.For what additional amounts may Frederick be liable assuming any applicable interest rate is 6%?

Accepted Answer

The answer of Frederick failed to file his 2014 tax...

Question 11

Vincent makes the following gifts during 2014:
$15,000 cash gift to wife
Gift of automobile valued at $35,000 to his adult son
Gift of golf clubs valued at $5,000 to a friend
$10,000 contribution to church
Although he is married,none of the gifts are considered joint gifts with his wife.What are the total taxable gifts subject to the unified transfer tax?

Accepted Answer

The answer of Vincent makes the following gifts during 2014:
$15,000...

Question 12

What are the correct monthly rates for calculating failure to file and failure to pay penalties?
A) 
B) 
C) 
D)

Accepted Answer

The correct monthly rates for calculating failure to file and failure to pay penalties are listed in IRS Revenue Procedure 2020-45. The monthly rate for failure to file is 5% and the monthly rate for failure to pay is 0.5%. Choice C contains the correct rates (0.5% and 5%) in the correct order.

Question 13

Brad and Angie had the following income and deductions during 2014:
  Calculate Brad and Angie's tax liability due or refund,assuming that they have 2 personal exemptions.They file a joint tax return.

Accepted Answer

The answer of Brad and Angie had the following income...

Question 14

Larry and Ally are married and file a joint return.They are considering purchasing a personal residence that will generate two deductions: $10,000 in home mortgage interest and $8,000 in real estate taxes.Their marginal tax rate is 25%.What is the total tax savings if Larry and Ally purchase the residence?

Accepted Answer

The answer of Larry and Ally are married and file...

Question 15

Jeffery died in 2014 leaving a $16,000,000 gross estate.Six months after his death,the gross assets are valued at $16,100,000.In years prior to 2014 (but after 1976),Jeffery had made taxable gifts of $300,000.Of the $16,000,000 gross estate,estate assets valued at $3 million were transferred to his wife and $100,000 was used to pay administrative and funeral expenses.Jeffery had debts of $200,000,and the remainder of the estate was transferred to his children.
a.What is the amount of Jeffery's taxable estate?
b.What is the tax base for computing Jeffery's estate?
c.What is the amount of estate tax owed if the unified credit is $2,081,800?
d.Alternatively,if six months after his death,the gross assets in Jeffery's estate declined in value to $15,000,000,can the administrator of Jeffery's estate elect the alternate valuation date?

Accepted Answer

The answer of Jeffery died in 2014 leaving a $16,000,000...

Question 16

Latashia reports $100,000 of gross income on her 2014 tax return,filed April 15,2015.She omits $30,000 of income,but the error was not fraudulent.When does the statute of limitations for examining her tax return expire?
A)April 15,2017
B)April 15,2018
C)April 15,2021
D)It never expires.

Accepted Answer

The statute of limitations is generally three years, but it extends to six years if more than 25% of gross income is omitted.

Question 17

Doug and Frank form a partnership,D and F Advertising,each contributing $50,000 to start the business.During the first year of operations,D and F earns $80,000,which is allocated $40,000 each to Doug and Frank.At the beginning of the second year,Doug sells his interest to Marcus for $90,000.What is the amount of Doug's taxable gain on the sale?

Accepted Answer

The answer of Doug and Frank form a partnership,D and...

Question 18

Describe the steps in the legislative process for major tax reform.

Accepted Answer

The answer of Describe the steps in the legislative process...

Question 19

Chris,a single taxpayer,had the following income and deductions during 2014:
  Calculate Chris's tax liability due or refund for 2014.

Accepted Answer

The answer of Chris,a single taxpayer,had the following income and...

Question 20

Explain how returns are selected for audit.

Accepted Answer

The answer of Explain how returns are selected for audit....

Quiz 2 an Introduction to Taxation

Kate files her tax return 36 days after the due date.When she files the return,she sends a check for $2,000 which is the balance of the tax owed by her.Kate's penalty for failure to file a return will be

The IRS must pay interest on

Peyton has adjusted gross income of $20,000,000 on his 2014 tax return,filed April 15,2015.He accidentally failed to include $200,000 that he received for a television advertisement.How long does the IRS have to audit Peyton's federal tax return?

Mia is self-employed as a consultant.During 2013,Mia earned $180,000 in self-employment income.What is Mia's self-employment tax?

Which is not a component of tax practice?

A presidential candidate proposes replacing the income tax with a national sales tax.The sales tax would have a flat rate.Describe the impact of this change in terms of tax structure and equity.

During the current tax year,Frank Corporation generated gross income of $1,900,000 and had ordinary and necessary deductions of $1,400,000.What is the amount of Frank Corporation's corporate income tax for the year?

What are the correct monthly rates for calculating failure to file and failure to pay penalties?

Brad and Angie had the following income and deductions during 2014: Calculate Brad and Angie's tax liability due or refund,assuming that they have 2 personal exemptions.They file a joint tax return.

Latashia reports $100,000 of gross income on her 2014 tax return,filed April 15,2015.She omits $30,000 of income,but the error was not fraudulent.When does the statute of limitations for examining her tax return expire?

Describe the steps in the legislative process for major tax reform.

Chris,a single taxpayer,had the following income and deductions during 2014: Calculate Chris's tax liability due or refund for 2014.

Explain how returns are selected for audit.