Exam_1_Practice_Fal - Tax 4001 Fall 2010 Practice Questions...

Info icon This preview shows pages 1–3. Sign up to view the full content.

Tax 4001 Fall 2010 Practice Questions for Exam 1 1. The constructive receipt doctrine: a. Does not apply to accrual basis taxpayers. b. Does not apply to cash basis taxpayers. c. Is used to distinguish unearned income from earned income. d. Means that a taxpayer cannot plan transactions to defer the recognition of income e. Provides an opportunity for a cash method taxpayer to delay the reporting of cash received. 2. Home Cable TV Company, an accrual basis taxpayer, allows its customers to pay by the month ($25 each month), by the year ($280 per year), or two years in advance ($540). In December Year 1, the company collected the following amounts applicable to future services: January Year 2-December Year 3 services (two-year contracts) $ 270,000 January Year 2 – December Year 2 services (one-year contracts) 1,120,000 January Year 2 services (monthly contracts) 350,000 December Year 1 services (monthly contracts) 100,000 How much of the above income must be reported as gross income in Year 1, and Year 2 respectively? 3. Answer #2 again, assuming Home Cable TV Company uses the cash-method of accounting? 4. Assume your marginal tax rate is 40% (combined Federal and state rates). Which would you prefer? a. $1.40 taxable income rather than $1.00 tax-exempt income. b. $.60 tax-exempt income rather than $1.00 taxable income. c. $1.50 taxable income rather than $1.00 tax-exempt income. d. $1.70 taxable income rather than $1.00 tax exempt income. e. Two of the above. Which two? ______________________. 5. Carol, a widow, elected to receive the proceeds of a $100,000 life insurance policy on the life of her deceased husband in 10 installments of $15,000 each. Her husband had paid premiums of $40,000 on the policy. How much income must Carol include in gross income over the life of the contract?
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

6. Nell is in the 15% income tax bracket.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.
  • Spring '10
  • Goldwater,Canada,Judd,Byrd,Theniel
  • Taxation in the United States

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern