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WGU C237 TAXATION 1 REVIEW QUESTIONS AND ANSWERS 2024
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WGU C237 TAXATION 1 REVIEW QUESTIONS AND ANSWERS 2024
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WGU C237 TAXATION 1 REVIEWWhich of the following individuals is most likely to be audited? - ANSWERS-
Correct:
Marvella has a $145,000 net loss from her unincorporated business (a horse
farm). She also received $950,000 salary as a CEO of a corporation.
NOT:
Jerry is a school teacher with two children earning $55,000 a year. He also
receives $200 in interest income on a bank account.
Lola has AGI of $35,000 from wages and uses the standard deduction.
Melvin is retired and receives Social Security benefits.
NOTE:Some examples of situations where individuals are more likely to be
audited include the following:
-Individuals who are sole proprietors and claim expenses in connection with their
trade or businesses, especially if significant tax losses are incurred.
-Itemized deductions exceeding an average amount for the person's income level
,-Filing of a refund claim by a taxpayer who has been previously audited, where
substantial tax deficiencies have been assessed
-Individuals who are self-employed with substantial business income or income
from a profession (e.g., a medical doctor)
Alan files his 2015 tax return on April 1, 2016. His return contains no
misstatements or omissions of income. The statute of limitations for changes to
the return expires - ANSWERS-April 15, 2019.
NOTE: statute of limitations: limited time period in which to make such
corrections. This time period is called the and prevents either the taxpayer or the
IRS from changing a filed tax return after the time period has expired.
- The general rule for the statute of limitations is three years from the later of the
date the tax return was actually filed or its due date.
- a six-year statute of limitations applies if the taxpayer omits items of gross
income that in total exceed 25% of the gross income reported on the return.
The statute of limitations remains open indefinitely if a fraudulent return is filed
or if no return is filed.
The largest source of revenues for the federal government comes from -
ANSWERS-individual income taxes.
Arthur pays tax of $5,000 on taxable income of $50,000 while taxpayer Barbara
pays tax of $12,000 on $120,000. The tax is a - ANSWERS-proportional tax.
,Which of the following taxes is regressive? - ANSWERS-Federal Insurance
Contributions Act (FICA)
Sarah contributes $25,000 to a church. Sarah's marginal tax rate is 35% while her
average tax rate is 25%. After considering her tax savings, Sarah's contribution
costs - ANSWERS-$16,250.
25 000 x 35% marginal rate= $8750 savings
25 000 - 8750 = 16 250 contribution cost
The marginal tax rate is of greater significance in measuring the tax effect for
sarah's decision.
The marginal tax rate is the percentage that is applied to an incremental amount
of taxable income that is added to or subtracted from
the tax base.
If her marginal tax rate is 35%, she will save 35
cents for every $1 contributed to her church.
The average tax rate is simply the total tax liability divided by taxable income.
a- marginal tax rate is the tax rate applied to an incremental amount of taxable
income that is added to the tax base. The marginal tax rate concept is useful for
planning because it measures the tax effect of a proposed transaction.
, b- The average tax rate is computed by dividing the total tax liability by the
amount of taxable income. This represents the average rate of tax for each dollar
of taxable income.
c- The effective tax rate is the total tax liability divided by total economic income.
All of the following statements are true except - ANSWERS-LLCs are generally
taxed as partnerships.
the net income of C corporation is subject to double taxation because it is taxed
at the entity level and dividends paid from the C corporation to individual
shareholders is also taxed.
the net income earned by a sole proprietorship is reported on the owner's
individual income tax return.
Not ture:
the net income of an S corporation is subject to double taxation because it is
taxed at the entity level and dividends paid from the S corporation to individual
shareholders are also taxed.
The term "tax law" includes - ANSWERS-judicial decisions.
Treasury Regulations.
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