Criterion 1
1. Which of the following is NOT a primary tax authority?
a. Treasury Regulation
b. Revenue Ruling
c. a Tax Court Memorandum decision
d. an IRS publication
2. Congress' authority to enact an income tax was established by...
a. Article III of the Constitution.
b. the Sixteenth Amendment.
c. the Bill of Rights.
d. the Declaration of Independence.
3. Which of the following has the highest authoritative weight?
a. Treasury regulation
b. Private letter ruling
c. Revenue Ruling
d. Revenue Procedure
4. Which judicial doctrine means that a court will rule consistently with its previous rulings and the rulings of higher courts with appellate jurisdiction?
a. judicial hierarchy
b. the Goldman rule
c. judicial consistency
d. stare decisis
5. Which type of Treasury regulation has the highest authoritative weight?
a. an interpretive regulation
b. a procedural regulation
c. a legislative regulation
d. None, all have the same level of authority.
6. Sec. 162(a)(2) is a reference to...
a. Treasury Regulation number 162, section A, subsection 2.
b. Code section 162, subsection a, paragraph 2.
c. Code section 162, clause a, sub clause 2.
d. Section 162(a)(2) of the compendium of Tax Court decisions.
7. In order to determine whether tax authorities cited are still valid and up to date, an individual doing tax research will consult...
a. an annotated tax service.
b. a topical tax service.
c. a citator.
d. IRS notices.
Criterion 2
1. As a general rule individual taxpayers are required to file a tax return if...
a. they receive a W-2 and have federal tax withheld
b. they are not a dependent of another taxpayer.
c. their gross income is more than the standard deduction and personal exemption amounts for their filing status.
d. their gross income is more than the standard deduction and the personal and dependency exemption amounts claimed on their return.
2. Which of the following shows the correct relationship among standard deduction amounts for the respective filing statuses?
a. Single > Head of Household > Married Filing Jointly
b. Married Filing Jointly > Married Filing Separately > Head of Household
c. Married Filing Jointly > Head of Household > Single
d. Head of Household > Married Filing Separately > Married Filing Jointly
3. John and Mary's divorce become final on December 15. Neither of them remarried, and neither of them has any children. Their tax filing status should be...
a. married filing separately.
b. married filing jointly.
c. either a or b
d. single
4. In order to qualify as a taxpayer's dependent, an individual must be...
a. a qualifying family member.
b. a qualifying child or a qualifying relative.
c. a descendant or an ancestor of the taxpayer.
d. under the age of 19, or a full-time student under the age of 24.
5. In order to qualify for head of household status, a taxpayer must...
a. be unmarried and pay more than half the costs of providing a home for a qualifying person for the entire year.
b. be a divorced parent with legal custody of at least one child.
c. be unmarried or considered unmarried and pay more than half the costs of providing a home for a qualifying person for a least half the year.
d. be unmarried and provide a home for at least one other taxpayer.
6. Which of the following individuals is required to file a tax return?
a. John, age 66, who is single, and whose income consists of $22,000 in social security benefits and a $4,800 pension.
b. George, age 25 and single, whose W-2 shows $5,000 wages and $600 in federal withholding.
c. Mary, age 27 and single, whose W-2 shows $4,000 in wages, and has net income from self-employment of $500.
d. all of the above
7. Tom and Ruth want to file as married filing separately. If Tom wants to itemize his casualty losses, then...
a. they must file jointly.
b. Ruth must take the standard deduction.
c. Ruth must either itemize her deductions or claim a zero standard deduction.
d. none of the above
Criterion 3
1. Which of the following items would be included in gross income?
a. Interest from a municipal bond.
b. An inheritance.
c. Unemployment benefits.
d. Child support.
2. Under what circumstances must a person report taxable income?
a. Always.
b. Always, unless the income is only from interest.
c. Always, unless the income is so small that a tax return is not required.
d. Always, unless the person is identified as a dependent on someone else's return.
3. Which of the following types of income is subject to preferred (lower) tax rates?
a. Interest on savings accounts.
b. Interest from a credit union.
c. Qualified dividends.
d. all of the above
4. In 2015, Cheryl, who is single and not a dependent of another taxpayer, has taxable income of $30,000. Using the abbreviated 2015 tax schedule for single filers below, compute her tax liability. $ 0 to $ 9,225 10% , $9,225 to $37,450 15%
a. $4,039.
b. $4,500.
c. $5,423.
d. none of the above
5. Using the same facts as in the question above, compute Cheryl's tax liability if her income consisted of $26,000 in wages and $4,000 in long term capital gains.
a. $4,500.
b. $4,039.
c. $3,840.
d. $3,439.
6. Referring to the facts in Question 4, what would Cheryl's tax liability be if the $30,000 included $6,000 she withdrew from her IRA to pay off her credit cards. Cheryl is 35.
a. $4,039.
b. $4,500.
c. $4,639.
d. $5,239.
7. Which of the following taxpayers is required to take a minimum distribution from their retirement account?
a. Pete, who has a 401-K and is age 68 and retired.
b. Roger, who has a 401-K with his employer, and is still working at age 73.
c. Don, who is still working at age 71, and has an IRA.
d. Roger and Don, but not Pete.
Criterion 4
1. Which of the following is NOT an adjustment to income?
a. a penalty on early withdrawal from savings
b. sales taxes paid
c. a portion of the self-employment tax paid by a self-employed taxpayer
d. qualifying moving expenses
2. Tom made payment totaling $12,800 to his ex-wife this year. His divorce from Rita became final in 2014, and Rita was granted sole custody of their son, Anthony. According to the Decree, Tom is required to pay Rita $1,000 a month until Anthony reaches the age of 18. After Anthony reaches turns 18, Tom is required to pay Rita $350 a month until the end of 2017 unless she remarries. Tom also provided $800 to help pay for Anthony's braces. The amount of these payment that can be deducted as an adjustment to income is...
a. $12,800.
b. $12,000.
c. $7,800.
d. $4,200.
3. James, an unmarried student aged 20, had gross income of $22,000 this year. His income consisted of $4,000 in wages and $18,000 in investment income received from a trust. The maximum he can contribute to an IRA is...
a. $5,500.
b. $5,000.
c. $4,000.
d. $0.
4. Brent's only investment income this year was $200 of interest earned on a certificate of deposit. He paid $5,400 of home mortgage interest, $780 interest on his car loan, and $400 in margin interest on loans to buy stock. His deductible interest is...
a. $5,400.
b. $5,600.
c. $5,800.
d. $6,580.
5. Georgie, age 30, incurred $11,200 in qualifying medical expenses this year. If her AGI is $55,000, her deduction for medical expenses on Schedule A will be...
a. $11,200.
b. $7,075.
c. $5,700.
d. $5,500.
6. Carl paid the following taxes in 2015: $3,600 in state income taxes withheld from his paycheck, a $250 balance due on his 2014 state income tax return, $350 in self-employment tax, $1,500 in property taxes on his home, and $2,000 special assessment collected by the city for sidewalks on his street. His deductible taxes on Schedule A will be...
a. $3,500.
b. $2,100.
c. $5,700
d. $5,350.
7. Michelle has the following miscellaneous itemized deductions: professional publications related to her job - $240, professional licenses and professional association dues - $560, commuting expenses - $1020, and tax preparation - $200. If her AGI is $35,000, her deduction for job related and miscellaneous expenses on Schedule A will be...
a. $2,020.
b. $1,320.
c. $300.
d. $800.
Criterion 5
1. Which of the following assets is not subject to deprecation?
a. Warehouse
b. Printing press
c. Mineral deposit
d. Office furniture
2. Tax depreciation is currently calculated under what system?
a. Accelerated cost recovery system
b. Modified accelerated cost recovery
c. Straight line
d. Sum of the years digits
3. Little Company purchased a $2,000 computer for use in its main office. This asset that is depreciated over 5 years for federal tax purposes. For five year assets, first year depreciation is 20%, second year depreciation is 32%, and third year depreciation is 19.2%. The computer was sold during the third year. At the time of sale, the adjusted basis would be...
a. $1,000.
b. $800.
c. $768.
d. $576.
4. Robert, who is single, recently sold his home in 2015 for $375,000. He has lived there since he bought the house in 1990 for $100,000. How should this transaction be reported on his tax return?
a. He will report an ordinary gain of $275,000.
b. He will report a long term capital gain of $275,000.
c. He will report a long term capital gain of $25,000.
d. This transaction does not have to be reported because it involves the sale of his residence.
5. The sale of machinery for more than the original cost basis (before depreciation), used in a trade or business, and held for more than one year results in the following types of gain or loss?
a. Capital only
b. Ordinary only
c. Capital and §1231
d. §1245 and §1231
6. Marty purchased 100 shares of QPX stock for $12,000 on March 15, 2015. He also paid his broker a $50 commission on the purchase. On August 30, 2015, he sold all 100 shares for $15,050. No commission was paid on the sale of the stock. Which of the following statements most accurate describes the effect of this sale on Marty's tax liability?
a. He will have a capital gain of $3,050, which will be taxed at ordinary rates.
b. He will have a capital gain of $3,050, which will be taxed at lower capital gains rates.
c. He will have a capital gain of $3,000, which will be taxed at ordinary rates.
d. He will have a capital gain of $3,000, which will be taxed at lower capital gains rates.
7. For federal tax purposes, real property is depreciated using the ______________ convention.
a. mid-month
b. mid-quarter
c. half-year
d. whole-year
Criterion 6
1. Fairness requires...
a. disclosure of conflicts of interest.
b. impartiality.
c. intellectual honesty.
d. all of the above
2. The Internal Revenue Code imposes a penalty on tax practitioners for any position taken on a return that is not supported by substantial authority. This penalty can be avoided if...
a. the practitioner does not sign the return.
b. the position is not frivolous.
c. the position has a reasonable basis and is disclosed on the return.
d. none of the above
3. Which of the following statements is correct with respect to a client's request to a tax practitioner for the return of the client's records?
a. The practitioner may never return records of the client to the client, even if the client requests the prompt return of the records.
b. The existence of a dispute over fees always relieves the practitioner of his or her responsibility to return records of the client to the client.
c. The practitioner must, at the request of the client, promptly return the records of the client to the client unless applicable state law provides otherwise.
d. The practitioner must return the client's personal papers, but not tax reporting documents, such as the client's W-2s and 1099s.
4. Which of the following is considered a tax return preparer?
a. A neighbor who assists in the preparation of a depreciation schedule.
b. A son who enters tax return information into a computer program and prints a return.
c. A woman who prepares tax returns in her home during filing season and accepts payment for her services.
d. A volunteer at a local church who prepares tax returns but accepts no payment.
5. Tax preparers are prohibited from...
a. advertising their services.
b. offering other services, such as bookkeeping, in addition to tax preparation.
c. offering discounts to repeat customers.
d. negotiating their clients' refund checks.
6. Sarah, a tax preparer, is reviewing the prior year return of a new client, she discovers a mistake that resulted in an understatement of the client's tax liability for that year. She should...
a. report the matter to the IRS.
b. refuse to accept the new client.
c. advise the client that an amended return should be prepared.
d. include the unpaid amount in her calculation of this year's tax.
7. Which of the following cannot be included in a tax preparer's advertising?
a. The preparer's professional credentials, such as CPA, EA, etc.
b. Areas of specialization, such as farm returns
c. The availability of e-filing services
d. The names of some of the preparer's more prominent clients.