Exam (elaborations)
TAX 4001 Exam 1
Exam of 5 pages for the course TAX 4001 at TAX 4001 (TAX 4001 Exam 1)
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TAX 4001 Exam 1#1 Tax Return Positions - ANS-file tax returns taking a position that has a realistic
possibility of being sustained if challenged (1 in 3 possibility)
#2 Try to Answer All Questions on Returns - ANS-sometimes there are situations where
the taxpayer does not have to answer all questions
#3 Procedural Aspects of Preparing a Return - ANS-a tax preparer may rely on
information provided without auditing unless the information appears to be incorrect
#4 Use of Estimates - ANS-estimates can be used, under some circumstance, on a filed
tax return
#6 Knowledge of Error - ANS-If a tax professional knows about an error in a tax return,
they must advise the taxpayer to file a correct return. The tax professional may not
inform the IRS without the taxpayer's permission
Accounting Methods for Tax - ANS-- must use cash or accrual method or a hybrid of the
two
Accrual Income - ANS-income when the all events test is met
Administrative Authorities - ANS-Treasury and IRS Pronouncements
AICPA Statements on Standards for Tax Services - ANS-- binding only for members of
the AICPA
- may not be used as the standard care required for non-AICPA member professionals
Assignment of Income Doctrine - ANS-requires income to be taxed to the taxpayer who
actually earns it
Average Tax Rate - ANS--the total taxes calculated divided by the taxable income
-represents a taxpayer's average level of tradition on each dollar of taxable income
=Total Tax/Taxable Income
-used in budgeting tax expense as a portion of income, determining what percent of
taxable income earned is paid in tax
, C Corporation - ANS-not a flow through entity. All income and loss and deductions stay
inside the corporation and are not available to shareholders. The entity pays its' own
taxes directly.
Circular 230 - ANS-Issued by the IRS, provides regulations governing tax practice and
applies to all persons practicing before the IRS
Correspondence Audit - ANS-- most common audit
- conducted by mail and generally are limited to one or two items on the taxpayer's
return
- generally the narrowest in scope and least complex
- typically the IRS requests supporting documentation for one or more items
DIF (Discriminant Function) - ANS-- assigns a score to each tax return that represents
the probability the tax liability on the report has been under reported
(higher report = higher likelihood of under reporting)
Double taxed as ___________ are paid with after tax dollars and _____________
payments are not deductible to the corporation, but are ___________ income to the
shareholders if individuals. - ANS-
Explicit Taxes - ANS--include most direct taxes, Ex: income, property, and sales taxes
-a tax directly imposed by the government
Field Examinations - ANS-- least common audit
- conducted @ taxpayers place of business
- can last months or even years
GAAP wants to report all possible _____________ and
defer ____________. - ANS-- expenses
- income
If the prepaid business expense payments are for expenses that do not last more than
___________ and do not extend past ______________, they may be deducted when
paid. - ANS-- a year
- the end of the next taxable year
Implicit Taxes - ANS--indirect taxes generally resulting from making certain expenses
deductible to others
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