1. (TCO 9) Trent files his tax return 35 days after the due date. Along with the
ID: 2371031 • Letter: 1
Question
1. (TCO 9) Trent files his tax return 35 days after the due date. Along with the return, Trent remits a check for $8,000, which is the balance of the tax owed.
Disregarding the interest element, Trent's total failure to file and to pay penalties are: (Points : 5)
$80.
$720.
$800.
$880.
None of the above
2. (TCO 9) A characteristic of fraud penalties is: (Points : 5)
Civil fraud can result in a fine and a prison sentence.
When negligence and civil fraud apply to a deficiency, both penalties are imposed.
The criminal fraud penalty is 75% of the deficiency attributable to the fraud.
The IRS has a greater burden of proof in the case of criminal fraud than with civil fraud.
None of the above
3. (TCO 1) Tax bills are handled by which committee in the U.S. Senate? (Points : 5)
Taxation Committee
Ways and Means Committee
Finance Committee
Budget Committee
None of the above
4. (TCO 1) Which statement is false with respect to tax treaties? (Points : 5)
There is a $1,000 penalty per failure to disclose on the tax return where there is a direct treaty conflict for an individual.
There is a $10,000 penalty per failure to disclose on the tax return where there is a direct treaty conflict for a corporation.
Treaties override the Code when in conflict.
Treaties may override a Code section when in conflict.
None of the above
5. (TCO 11) Emily, whose husband died in December 2011, maintains a household in which her dependent daughter lives. Which (if any) of the following is her filing status for the tax year 2011? (Note: Emily is the executor of her husband's estate.) (Points : 5)
Single
Married filing separately
Surviving spouse
Head of household
Married filing jointly
6. (TCO 11) During the year, Kim sold the following assets: business auto for a $1,000 loss, stock investment for a $1,000 loss, and pleasure yacht for a $1,000 loss. Presuming adequate income, how much of these losses may Kim claim? (Points : 5)
$0
$1,000
$2,000
$3,000
None of the above
7. (TCO 7) Orange Cable TV Company, an accrual basis taxpayer, allows its customers to pay by the year in advance ($350 per year), or two years in advance ($680). In September 2011, the company collected the following amounts applicable to future services:
October 2011-September 2013 services
(two-year contracts)
$72,000
October 2011-September 2012 services
(one-year contracts)
$64,000
Total
$136,000
As a result of the above, Orange Cable should report as gross income: (Points : 5)
$136,000 in 2011.
$64,000 in 2011.
$84,000 in 2012.
$111,000 in 2012.
None of the above
8. (TCO 7) With respect to the prepaid income from services, which of the following is true? (Points :5)
The treatment of prepaid income is the same for tax and financial accounting.
A cash basis taxpayer can spread the income over the period services are to be provided if all of the services will be completed by the end of the tax year following the year of receipt.
An accrual basis taxpayer can spread the income over the period services are to be provided if all of the services will be completed by the end of the tax year following the year of receipt.
An accrual basis taxpayer can spread the income over the period services are to be provided on a contract for three years or less.
None of the above
9. (TCO 3) The First Chance Casino has gambling facilities, a bar, a restaurant, and a hotel. All employees are allowed to obtain food from the restaurant at no charge during working hours. In the case of the employees who operate the gambling facilities, bar, and restaurant, 60% of all First Chance's employees, the meals are provided for the convenience of the casino. However, the hotel workers demanded equal treatment and therefore were also allowed to eat in the restaurant at no charge while they are at work. Which of the following is correct? (Points : 5)
All the employees are required to include the value of the meals in their gross income.
Only the restaurant employees may exclude the value of their meals from gross income.
Only the employees who work in gambling, the bar, and the restaurant may exclude the meals from gross income.
All of the employees may exclude the value of the meals from gross income.
None of the above
10. (TCO 3) Under the Swan Company's cafeteria plan, all full-time employees are allowed to select any combination of the benefits below, but the total received by the employee CANNOT exceed $8,000 a year.
I. Group medical and hospitalization insurance for the employee, $3,600 a year.
II. Group medical and hospitalization insurance for the employee's spouse and children, $1,200 a year.
III. Childcare payments, actual cost, but not more than $4,800 a year.
IV. Cash required to bring the total of benefits and cash to $8,000.
Which of the following statements is true? (Points : 5)
Sam, a full-time employee, selects choices II and III and $2,000 cash. His gross income must include the $2,000.
Paul, a full-time employee, elects to receive $8,000 cash because his wife's employer provided these same insurance benefits for him. Paul is required to include the $8,000 in gross income.
Sue, a full-time employee, elects to receive choices I, II, and $3,200 for III. Sue is not required to include any of the above in gross income.
All of the above
None of the above
1. (TCO 9) Trent files his tax return 35 days after the due date. Along with the return, Trent remits a check for $8,000, which is the balance of the tax owed.
Disregarding the interest element, Trent's total failure to file and to pay penalties are: (Points : 5)
$80.
$720.
$800.
$880.
None of the above
Explanation / Answer
1. $800
2. The criminal fraud penalty is 75% of the deficiency attributable to the fraud.
3. Taxation Committee
4.Treaties may override a Code section when in conflict.
5. Surviving spouse
6. None of the above
7. $111,000 in 2012.
8. A cash basis taxpayer can spread the income over the period services are to be provided if all of the services will be completed by the end of the tax year following the year of receipt
9. All of the employees may exclude the value of the meals from gross income.
10. Sam, a full-time employee, selects choices II and III and $2,000 cash. His gross income must include the $2,000
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