ACCT 323 ACCT323 Quiz 1 Answers (UMUC)

ACCT 323 ACCT323 Quiz 1 Answers (UMUC)

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ACCT323 Quiz 1 (UMUC)

  1. Which of the following is not one of the basic tax rate structures
  2. The state of Maryland recently increased its tax on a carton of cigarettes by $1.50. What type of tax is this
  3. Which of the following is not a factor that determines whether a taxpayer is required to file a tax return
  4. If Jane requests an extension to file her tax return, the latest she could pay her tax due without penalty is
  5. John filed his 2014 tax return on March 15th, 2015. The statute of limitations for IRS assessment on John’s 2014 tax return should end:
  6. Which of the following is not considered a primary authority?
  7. Which of the following committees typically initiates for tax legislation?
  8. A taxpayer can avoid a substantial understatement of tax penalty:
  9. The goal of tax planning generally is to
  10. Which of the following increases the benefits of income deferral?
  11. The constructive receipt doctrine
  12. A taxpayer instructing her son to collect rent checks for the taxpayer’s property and to report this as a taxable income on the son’s tax return violates which doctrine? 
  13. Elizabeth received $60,000 compensation from her employer, the value of her XYZ company appreciated by $5,000 during the year (she did not sell any of the stock), she received $30,000 of life insurance proceeds from the death of her husband. What is the amount of Elizabeth’s gross income from these items?
  14. Which of the following is not an itemized deduction?
  15. Which of the following statements regarding tax credit is true
  16. All of the following are tests for determining qualifying child status except the
  17. Gross income includes:
  18. Janet is a cash basis taxpayer and a member of the Valley Barter club. This year Sally provided 100hours of sewing services to the barter club in exchange for two football tickets. Which of the following is a true ticket
  19. Identify the rule that determines whether a taxpayer must include in income a refund of an amount deducted in a previous year
  20. Identify the rule that states income has been realized when a taxpayer receives the income and there are no restrictions on the taxpayer’s use of the income (e.g no obligation to repay the amount):
  21. The primary objective of the federal income tax law is to raise revenue. What are its secondary objectives?
  22. Under what circumstances must a taxpayer use a rate schedule instead of a tax table?
  23. Summarize the rules that explain which parent receives the dependency exemption for children in cases of divorce
  24. Does the fact that an item of income is paid in a form other than cash mean it is nontaxable? Explain
  25. When is income considered to be earned by an accrual-tax basis taxpayer
  26. Explain the importance of the distinction between alimony and a property settlement.
  27. Do you agree or disagree with the following statement: A taxpayer should not have to report income when debt is forgiven because the taxpayer receives nothing. Explain
  28. What special rules are applicable to non-degree candidates who receive scholarships?
  29. Are income distributions from a qualified state tuition program taxable?
  30. Explain what is encompassed by the term ‚Äútax law‚ÄĚ as used by tax advisors

SHORT PROBLEMS

Short Problem 1: (Computing Tax Due or Refund)

James Brown owns 40% partnership interest in Cole, Brown & Milstein LLC and provides you with the following partnership income items from the partnership tax return.

 

Partnership Income & other items (100%):     

Ordinary Income                    $450,000

                       Long-term capital gain            $70,000

                       Long-term capital loss            ($30,000)

Qualified dividends                $25,000         

                       Charitable Contributions         $10,000

                       Cash distributions to partners $375,000

 

James Brown files joint return with his wife and they also had the following income and deductions from other sources

 

Income:

                       Mrs. Brown wages                    $100,000

                       Qualified dividends                  $7,500

                       Interest from municipal bonds $5,000    (Tax exempt interest)

                      

Deductions:    

Real Estate Taxes             $9,500

                       Mortgage interest               $22,500

                       Charitable contributions   $2,500

 

Other information:

Federal income tax withheld from Mr. & Mrs. Brown was $45,000 and they also make estimated tax payments totaled $30,000.

The Browns have two dependent children that they wanted to claim on their return             

 

Instructions: (Please show your computations)

Compute the Browns Federal income tax due or refund for 2014 tax period and ignore child tax credit that the Browns may be entitled to.

Short Problem 2 (Taxable Income, Tax Liability and Tax Rates)

Daniel Craig, a single taxpayer provides the following information:

Income:           Wages                                   $100,000

                       Business Income                   $31,250

                       Interest from savings            $12,500

                       Tax-exempt bond interest     $6,250

                       Total Income                        $150,000

 

Deductions:     Business Expenses                $11,875

                       Itemized Deductions              $25,000

                       Personal exemptions             $3,950

                       Total Deductions                  $40,825.00

 

 

Instructions: (Please show your computations)

(a)       Compute Mr. Craig taxable income and federal tax liability for 2014

Compute Mr. Craig marginal, average, and effective tax rates

Short Problem 3 (Computation of Tax)

Juliet is a single taxpayer. Her salary is $51,000. Juliet realized a long-term capital loss of $5,000. Her itemized deductions totaled $6,000.

Instructions: Compute Juliet tax liability. (Please show your computations)

Short Problem 4 (Itemized Deductions)

 

Michael and Stacy Harris are married with a two year old child who lives with them and whom they support financially. In, 2014 their Adjusted Gross Income was $125,000 and they provide you with the following items:

 

Home mortgage interest                                      $7,500

Medical expenses                                               $25,000

Property taxes                                                     $5,000

Charitable contributions                                     $3,750

Miscellaneous expenses                                      $8,750

 

Compute Michael and Stacey Harris total Itemized deduction (Please show your computation) 


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