TAX FINAL EXAM QUESTIONS WITH
COMPLETE GUIDE TO ANSWERS
which of the following audits is the least common, broadest in scope, and typically most
complex?
a. correspondence
b. targeted
c. office
d. field
e. none of the choices are correct - CORRECT ANSWER-Field
which of the following is an example of a progressive tax system?
a. social security tax
b. a sales tax
c. a proportional tax
d. U. S federal income tax - CORRECT ANSWER-U. S federal income tax
Deb has found it very difficult to repay her loans. b/c of these difficulties, the bank
decided to forgive one of her most recent loans, an amount of $68,000 . After the loan
was discharged, Deb had total assets of $266,000 and her remaining loans total
$247,000. What amount must Deb include in her gross income?
a. 19,000
b. 68,000
c. 49,000
d. 32,000
e. zero- Deb was not solvent when the loan was discharged. - CORRECT ANSWER-
266,000 - 247,000 = 19,000
Curtis invests $275,000 in a city Athens bond that pays 4.75% interest. Alternatively,
Curtis could have invested the $275,000 in a bond recently issued by Initech, Inc. that
pays 6.50% interest with similar risk as the city of Athens bond. Assume that Curtis's
marginal tax rate is 24%. How much implicit tax would Curtis pay on the city of Athens
bond?
a. $13,062.50
b. $735.00
c. $635.00
d. $4812.50
e. none of the choices are correct - CORRECT ANSWER-275000 * 4.75% = 13062.50
,275000 * 6.50% = 17875
17875 - 13062.50 = 4812.50
Which of the following is not one of the basic tax rate structures?
a. proportional
b. equitable
c. regressive
d. progressive
e. all of these are different kinds of the basic tax rate structure - CORRECT ANSWER-
equitable
employers often withhold federal income taxes directly from worker's paychecks. This is
an example of which principle in practice?
a. convenience
b. certainty
c. economy
d. equity
e. none of the choices are correct - CORRECT ANSWER-convenience
the city of Granby, Colorado recently enacted a 1.5% surcharge on vacation cabin
rentals that will help pay for the city's new elementary school. This surcharge is an
example of _____.
a. sin tax to discourage undesirable behavior
b. a government fine
c. an earmarked tax
d. an excise tax
e. none of the choices are correct - CORRECT ANSWER-an earmarked tax
If Lindley requests an extension to file her individual tax return, the latest she could pay
her tax due without penalty is:
a. August 15
b. October 15
c. April 15
d. November 15
e. none of the choices are correct - CORRECT ANSWER-April 15
Josephine is considering taking a 6-month rotation in Paris for her job. Which type of
authority may be especially helpful in determining the tax consequences of Josephine's
job in Paris?
a. determination letter
b. tax treaty
,c. private letter ruling
d. regulation
e. revenue procedure - CORRECT ANSWER-tax treaty
Allen filed his 2018 tax return on May 15th, 2019 and under reported his gross income
by 28 percent. Assuming Allen's under reporting is not due to fraud, the statute of
limitations for IRA assessment on Allen's 2018 tax return should end:
a. April 15, 2022
b. May 15, 2022
c. April 15, 2025
d. May 15, 2025
e. none of the choices are correct - CORRECT ANSWER-May 15, 2025
Jamison's gross tax liability is $11,050. Jamison had $2, 740 of available credits and he
had $6,900 of taxes withheld by his employer. What is Jamison's taxes due (or taxes
refunded) with his tax return?
a. 8130 taxes due
b. 1410 taxes due
c. 1410 tax refund
d. 4150 taxes due - CORRECT ANSWER-11050 - 2740 - 6900 = 1410 taxes due
Tyrone claimed a large amount of charitable contributions as a tax deduction relative to
taxpayers with similar level of income. If Tyrone's tax return is chosen for audit because
of his large charitable contributions, which audit program likely identified Tyrone's tax
return for audit?
a. DIF system
b. deduction detective
c. document perfection
d. information matching
e. none of the choices are correct - CORRECT ANSWER-DIF system
Michael, Diane, Karen, and Kenny provide support for their mother Janet who is 76
years old. Janet lives by herself in an apartment in Los Angeles. Janet's gross income
for the year is $3,850. Janet provides 10% of her own support, Michael provides 42% of
Janet's support, Diane provides 8% of Janet's support, Karen provides 10% of Janet's
support, and Kenny provides the remaining 30% of Janet's support. Under multiple
support agreement, who may claim a dependency exemption for Janet as a qualifying
relative?
a. michael
b. michael and kenny
c. michael, karen and kenny
d. michael, diane, karen and kenny
, e. none of the choice are correct - CORRECT ANSWER-michael, karen and kenny
which of the following is not a factor determines whether a taxpayer is required to file a
tax return?
a. filing status
b. taxpayer's gross income
c. taxpayer's employment
d. taxpayer's age
e. none of the choice are correct - CORRECT ANSWER-taxpayer's employment
Emily is cash basis taxpayer, and she was an especially productive salesperson last
year. In Dec. of last year her supervisor told Emily she had earned a $5,000 bonus.
However, Emily received the bonus check after year-end. Identify the principle that will
determine when Emily is taxed on the bonus:
a. assignment of income
b. constructive receipt
c. return of capital principle
d. wherewithal to pay
e. all of the choices are correct - CORRECT ANSWER-constructive receipt
Joanna received $73,200 compensation from her employer, the value of her stock in
ABC company appreciated by $11,000 during the year (but she did not sell any of the
stock), she received $40,200 of life insurance proceeds from the death of her husband.
What is the amount of Joanna's gross income from these items?
a. 73200
b. 84200
c. 124400
d. 124400
e. 113400 - CORRECT ANSWER-73200
George purchased a life annuity for $3,800 that will provide him $95 monthly payments
for as long as he lives. Based on IRA tables, George's life expectancy is 100 months.
How much of the first $95 payment will George include in his gross income?
a. 95
b. 86
c. 57
d. 38
e. none of the choices are correct - CORRECT ANSWER-95*100 =9500
9500-3800=5700
5700/100=57
