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Individual Taxation: Practice Exam Questions

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1. Which of the following taxes are proportional (rather than progressive)?
a. State general sales tax.
b. Federal income tax.
c. Federal estate tax.
d. Federal gift tax.

2. Burt and Lisa are married and live in a common law state. Burt wants to make gifts to their four children in 2014 and plans to use the election to split gifts. What is the maximum total amount of the annual exclusion they will be allowed for these gifts (total includes gifts to all children)?
a. $14,000.
b. $28,000.
c. $56,000.
d. $112,000.

3. The Federal income tax applicable to corporations:
a. Allows a deduction for the standard deduction.
b. Requires the determination of adjusted gross income.
c. Requires the determination of taxable income.
d. Allows a deduction for personal exemptions.

4. A characteristic of FICA is that:
a. It does not apply when one spouse works for the other spouse.
b. It is imposed only on the employer.
c. It provides a modest source of income for retired employees.
d. It is a progressive tax since the tax due increases as wages increase.

5. David files his tax return 45 days after the due date. Along with the return, David remits a check for $40,000 which is the balance of the tax owed. Disregarding the interest element, David's total failure to file and to pay penalties are:
a. $400.
b. $3,600.
c. $4,000.
d. $4,400.

6. The Federal tax law is designed to accomplish which of the following objectives?
a. Social.
b. Economic.
c. Political.
d. All of the above.

7. In 2014, Quinn had the following transactions:
Alimony received $ 8,000
Salary earned 50,000
Cash dividends received on stock investment 1,000
Gift received 20,000
Quinn's AGI for 2014 is:
a. $42,000.
b. $50,000.
c. $59,000.
d. $79,000.

8. Which of the following is a deduction for AGI?
a. Charitable contributions.
b. Mortgage interest paid.
c. State income taxes withheld.
d. Interest on student loans.

9. Ellen is single and has taxable income for 2013 was $38,905. Using the 2013 tax tables (Appendix A), the tax on Ellen's taxable income is:
a. $4,976.
b. $5,226.
c. $5,660.
d. $6,024.

10. Kyle, whose wife died in December 2011, filed a joint tax return for 2011. He did not remarry, but has continued to maintain his home in which his two dependent children live. What is Kyle's filing status as to 2014?
a. Head of household.
b. Surviving spouse.
c. Single.
d. Married filing separately.

11. A child has $5,000 of unearned income. In which, if any, of the following situations will the kiddie tax not apply?
a. The child is married but does not file a joint return.
b. Both parents are deceased.
c. The child has earned income that does not exceed more than half of his support.
d. The child is under age 24 and a full-time student.

12. During 2014, Olivia sold the following assets: business equipment for a $8,000 loss, stock investment for a $10,000 loss, and her principal residence for a $26,000 loss. Presuming adequate gains and income, how much of these losses may Olivia claim on her 2014 return?
a. $11,000.
b. $18,000.
c. $26,000.
d. $44,000.

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International Taxation

Sample of included problems: (There are a total of 54 problems, all correct answers are given) ...

1) GreenCo, a domestic corporation, earns $25 million of taxable income from U.S. sources and $5 million of taxable income from foreign sources. What amount of taxable income does GreenCo report on its U.S. tax return?

A) $25 million
B) $30 million
C) $25 million less any tax paid on U.S. income
D) $30 million less any tax paid on the foreign income

2) Without the foreign tax credit, double taxation would result when:

A) The United States taxes the U.S.-source income of a U.S. resident
B) The United States and a foreign country both tax the foreign-source income of a U.S. resident
C) A foreign country taxes the foreign-source income of a nonresident alien
D) Only the United States taxes the foreign-source income of a U.S. resident (e.g., a treaty prevents foreign taxation)

3) U.S. income tax treaties:

A) Provide for primary taxation with a tax credit for income sourced in one country and earned by a resident of the other treaty country
B) Provide for taxation exclusively by the source country
C) Provide that the country with the highest tax rate will be allowed exclusive tax collection
D) Provide for taxation exclusively by the country of residence

4) Which of the following statements is false in regard to the U.S. income tax treaty program?

A) There are over 50 income tax treaties between the U.S. and other countries.
B) For the most part, neither country is prohibited from taxing the income of its residents
C) The treaties generally provide for primary taxing rights that require the other treaty partner to allow a credit for the taxes paid on the twice-taxed income
D) Residence of the taxpayer is an important consideration, while the presence of a permanent establishment is not
E) None of the above statements is false

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