HOMEWORK ES WEEK 3 QUIZ

HOMEWORK ES WEEK 3 QUIZ - 1. Question : Student Answer:...

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1. Question : (TCO A) A taxpayer may litigate a tax dispute without first paying the tax in the: Student Answer: U.S. District Court. U.S. Court of Federal Claims. U.S. Supreme Court. U.S. Tax Court. Instructor Explanation: Chapter 2 Points Received: 5 of 5 Comments: 2. Question : (TCO F) A business bad debt is deductible for tax purposes as a(n): Student Answer: short-term capital loss. long-term capital loss. ordinary business deduction. None of the above Instructor Explanation: Chapter 6, IRC Sec. 166 Points Received: 5 of 5 Comments: 3. Question : (TCO I) Under the cash method of tax accounting, tax deductions are generally taken when: Student Answer: payment is made. the liability arises. there is net income to absorb the expense. None of the above Instructor Explanation: Chapter 13; Under the cash basis, deductions are generally taken for the year in which the related expenditures were actually paid. Points Received: 5 of 5 Comments: 4. Question : (TCO A) Which of the following does not constitute tax evasion? Student Answer: Arranging your affairs to keep your tax liability as low as possible under the tax law Trying to legitimately maximize profits Trying to legitimately minimize your tax liability All of the above Instructor Explanation: Chapter 1; Once a transaction is completed, it must be disclosed.
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Points Received: 5 of 5 Comments: 5. Question : (TCO C) Which of the following items is not subject to federal income tax? Student Answer: Interest on municipal bonds $5,000 birthday gift from a family member Discharge of debt through bankruptcy Life insurance proceeds All of the above Instructor Explanation: Chapter 5; IRC Secs. 101, 102, 103, & 108; All are excluded from gross income. Points Received: 5 of 5 Comments: 6. Question : (TCO B) Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift, and Sam is bankrupt. Which of the following statements is correct concerning the impact of this transaction? Student Answer: Both Bob and Sam recognize $8,000 of taxable income. Bob recognizes $8,000 of taxable income. Sam recognizes $8,000 of taxable income. Neither Bob nor Sam has any taxable income from this transaction. Instructor Explanation: Chapter 4; IRC Sec. 108; When a taxpayer's debt is forgiven, he recognizes income equal to the amount forgiven, unless bankrupt or insolvent at time of forgiveness. Points Received: 5 of 5 Comments: 7. Question : (TCO I) David, a cash basis taxpayer, owns two rental properties. Based on the following information, compute the amount that he must include in his 2011 gross rental income. Property #1, security deposit on one-year lease received 2/1/11 All of deposit returned at lease end: $1,000 Property #1, payment received 2/1/11 for last month of lease(1/12): $900 Property #1, rental income received in 2011 2/11-12/11: $8,000 Property #2, rental income received in 2011 1/11-12/11: $9,600 Property #2, security deposit received 1/1/11 to be used for last month's rent: $800 Property #2, rent 1/12 received 12/28/11: $800 Student Answer: $21,100 $19,300 $18,500 $20,100
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HOMEWORK ES WEEK 3 QUIZ - 1. Question : Student Answer:...

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