FINAL EXAM ACC 105
Which of the following is not a type of IRS audit?
Operational Audit
Under which of the following circumstances would a partnership terminate and close its tax year?
Sale of an interest in a partnership by a partner who holds a 60 percent capital and profits interest.
At which of the following IRS locations are tax returns processed?
Services Centers
A "correspondence audit" by the IRS is conducted through mail
T
A corporation must reconcile, to the IRS satisfaction, the difference between taxable income..... as shown on the tax return and net income as shown on the company's books
T
A partnership generally must adopt the same tax year as its majority partners
T
A partnership must separately report Section 1231 gains and losses rather than including them in ordinary taxable income.
T
A partnership tax year will close if the partnership ceases to carry on any business activity.
T
A regular corporation with excess charitable contributions may carry the excess forward to the 5 succeeding tax years.
T
An S corporation files a Form 1120S
T
Corporations can elect to deduct up to $5,000 of organizational costs in the year they begin business, assuming their total organizational expenses do not exceed $50,000.
T
If a corporation's status as an S corporation is involuntarily terminated in the middle of the tax year, the corporation must file as an S corporation for the first half of the tax year and a regular corporation for the second half of the tax year.
T
In general, income is recognized by the partner when a partnership interest is received in exchange for services rendered to the partnership.
T
Tax Penalties are considered to be additional taxes and are not deductible by taxpayers
T
Tax evasion involves the use of illegal methods to reduce or avoid income tax
T
Tax practitioners can be assessed a penalty for promoting an abusive tax shelter.
T
Taxpayers are required by law to maintain records to facilitate an IRS audit.
T
The Discriminant Function System is designed to identify tax returns that may contain errors.
T
The IRS may issue a summons for a taxpayer's bank account records
T
The accumulated earnings tax is designed to prevent shareholders from avoiding the individual income tax
T
The holding period of property contributed to a partnership includes the period of time that the contributor has held the property.
T
The statute of limitations for a tax return generally is 3 years.
T
The tax law contains a penalty for filing a "frivolous" tax return.
T
Which of the following statements best describes the process of tax planning?
Tax planing is the process of arranging one's financial affairs to minimize one's overall tax liability.
A tax return with a large casualty loss would be most likely selected for audit through
The Discriminant Function System.
Kitty is a 60 percent partner of Tabby Associates. Kitty sells a building to the partnership for $75,000. If the building had an adjusted basis to Kitty of $95,000, how much gain or loss does Kitty recognize on this transaction?
$0 gain or loss
Sabrina contributes a building with an adjusted basis of $40,000 to a partnership. The fair market value of the building is $100,000 on the date of the contribution. What is Sabrina's basis in her partnership interest immediately after the contribution?
$40,000
Barry owns a 50 percent interest in B&B interst, basis of $60,000 for $100,000
$40,000 ordinary income
for 2017 that is the maximum tax rate for personal service corporation
39.6 percent
Harry forms the nectarine corporation
A.$150,000
Which of the following items must be reported separately from ordinary income or loss on a partnership return?
Capital Losses
Which of the following is the most common type of audit for an individual taxpayer?
Correspondence Audit
A corporation may be found subject to both the accumulated earnings tax and personal holding company tax in the same tax year
F
A corporation may carry forward capital losses for an indefinite period
F
A partnership may not show a loss as a result of deducting guaranteed payments made to the partners.
F
A partnership reports its income on a Form 1040
F
An "office audit" is an audit in which the revenue agent visits the taxpayer's office
F
As a result of an IRS audit a taxpayer may be required to pay additional taxes, but he or she is never pad a refund.
F
Because a partnership does not pay taxes, a partnership is not recognized as a legal entity under civil law.
F
Broker's fees incurred in the issuance of a corporation's stock are considered organizational expenditures
F
Corporations are granted favorable tax treatment for short-term capital losses.
F
Corporations may deduct without limitation any amount of charitable contributions providing the amounts are paid to qualified organizations
F
Guaranteed payments made by a partnership must be made to individuals other than partners in the partnership.
F
If a corporations is unable to deduct a capital loss against capital gains for a particular tax year, it loses the tax benefit since the loss may not be carried to other tax year.
F
If a taxpayer has too much income tax withheld from his salary during the tax year, the IRS will pay interest on the excess amount.
F
If the shareholders of an S corporation voluntarily revoke the corporation's S corporation status.......
F
Income from a partnership is taxed to the partner only if the partner receives the income as a distribution during the year.
F
Losses are disallowed for transactions between a partnership and a partner who has a 50 percent interest in the partnership.
F
Partnership income is taxed at the same tax rates as the income of corporations.
F
Partnership losses that are not used because a partner's basis in the partnership interest is zero may not be carried forward and are lost by the partner.
F
The IRS has ten regional offices
F
The basis of a partner's interest in a partnership is increased by losses of the partnership allocated to the partner.
F
The corporation tax rates favor large corporations
F
The statute of limitations for the deductions of a worthless security is 5 years.
F
The tax law is administered by the Federal Trade Commission
F
The tax year of a partnership generally closes upon entry of a new partner.
F
to prevent triple taxation, a corporation is entitled to deduct 50 percent of the dividends received from other domestic corporations
F
the nandina corporation was formed and began
b. $110
Which of the following is not a requirement for qualification as a S corporation
b. Corporation must have 25 or fewer shareholders
for 2017 the beech corporation
c. $90,000