, WGU C237 Taxation (Pre-assessment)
Comprehensive Exam (2024 Update) ||
With Questions & Answers (100%
Accurate)
What year was the U.S income tax on individuals permanently established? -
ANSWER - 1913
What is the highest level of legislative authority of tax law in the United States? -
ANSWER - Internal Revenue Code
What are two primary sources of tax law in the United States? - ANSWER - Court
Decisions and Revenue Rulings
What is a certainty when evaluating a tax system? - ANSWER - Taxes can be
estimated if annual income is the same
What is an example of equity when evaluating a tax system? - ANSWER - Each
taxpayer pays a different amount based on their income level
What increases the tax base of an individual? - ANSWER - Interest Income
What is the nature of a progressive tax rate structure - ANSWER - The rate of tax
increases as the tax base increases
A single salaried individual who is not operating a business earned 350,000 of
taxable income last year.
what is the individual's tax liability? - ANSWER - 98,190
Which tax is considered proportional? - ANSWER - Excise tax
Which entities are considered flow through entities in the U.S Tax System? -
ANSWER - Limited Liability Partnerships
A taxpayer fails to report income that exceeds 25% of reported gross income but
files the return on time.
How many years after a return was originally due might the statute of limitations
expire? - ANSWER - 6 years
Which tax practice component includes understanding the facts, identifying the
issues, locating and analyzing tax authorities and documenting and communicating
the results? - ANSWER - Tax Research
,What are Exclusions? - ANSWER - Items of income that the tax law specifically says
are not taxable
A single individual with two dependents works at a bank and earns wages of
$50,000. She received a $6,000 gift from a parent to go to Europe and inherited
$10,000 from an uncle when he died. Her municipal bond paid $500 interest. This
individual has itemized deductions of $7,000.
what is the Tax Liability? - ANSWER - $3,568
A married individual with one dependent earned wages of $63,000. The individual
won $2,000 at a casino, inherited $5,000 and has itemized deductions of $4,1000.
What is the tax liability? - ANSWER - $4,539
Which scenario represents a realization of income? - ANSWER - A payment of
$2,000 for stocks sold
Which type of income satisfies all three requirements for the income to be taxable? -
ANSWER - Renting a condo for $5,000
In which situation has a taxpayer actually or constructively received income that
should be included in gross income for the current year? - ANSWER - The taxpayer
went on vacation the last two weeks of the year, and he instructed his employer to
put the year-end paycheck in his locked desk drawer at the office.
The taxpayer does not return and deposit the paycheck until the following January.
A taxpayer selects the accrual method for a retail business
Accounts receivable are reported net of noncollectable accounts. The beginning
balance reported in the allowance for uncollectible accounts is 4,400 and the
balance at the end of the year is 4,700. Estimated uncollectable accounts during the
year are 1300.
How much is deductible for uncollectible account expenses? - ANSWER - $1,000
Which benefit is included in gross income according to Internal Revenue Code
Section 61(a) - ANSWER - Employer reducing an outstanding loan
Which payment is included in gross income according to Internal Revenue Code
Section 61(a) - ANSWER - Cash from the sale of illegal drugs
An individual in a high income tax bracket would like to minimize her current year tax
liability. She gifts an interest bearing corporate bond
What tax planning strategy is being described? - ANSWER - Income Shifting
Which item is excluded from gross income by the Internal Revenue Code? -
ANSWER - A $200 gift from a relative
, What may be included in gross income? - ANSWER - Receipt of a cash dividend
Which two expenses are tax-free use of a qualified tution plan (QTP) distribution?
Choose two answers - ANSWER - Rent and Taxbooks
Which event would result in taxable income? - ANSWER - Forgiveness of mortgage
debt on rental property
Which type of gain does a taxpayer have if the taxpayer owns stock that has
appreciated in value? - ANSWER - An unrealized gain
Which type of gain does a taxpayer have if the taxpayer owns stock that has
appreciated in value? - ANSWER - Realized losses may be more than recognized
losses
An individual purchases a piece of property with a fair market value of 30,000 for
28,000.
The individual takes out a loan of 14,000 and pays the other 14,000 in cash. In
addition the individual pays 500 in transactions costs to purchase the property and
expects to earn 2000 per year from renting property out to others.
What is the basis for the property? - ANSWER - 28,500
An individual purchases a piece of property with a fair market value of 50,000 for
54,000.
The individual takes out a loan for 44,000 and the other 10,000 in cash. In addition,
the individual pays 1,000 in transactions costs to purchase the property and expects
to earn 5,000 per year from renting the property out to others.
What is the basis of the property? - ANSWER - 55,000
What is an example of a non capital asset? - ANSWER - Inventory
Which three items are capital assets? - ANSWER - A person residence, Land held
for personal use, Investment in common stock held by a business
An individual with a taxable income of 100,000 sells 200 shares of stock at a market
price of 50 per share.
One hundred shares of the stock were acquired 2 years earlier at a price of 55 per
share.
What is the effect of the transaction on the individual's tax circumstances? -
ANSWER - A long term capital gain of 1,500
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