ACCT 553 HOMEWORK
1. Question : (TCO A) A taxpayer may litigate a tax dispute without first paying the tax in the:
Student Answer: U.S. District Court.
U.S. Court of Federal Claims.
U.S. Supreme Court.
U.S. Tax Court.
2. Question : (TCO F) A business bad debt is deductible for tax purposes as a(n):
Student Answer: short-term capital loss.
long-term capital loss.
ordinary business deduction.
None of the above
3. Question : (TCO I) Under the cash method of tax accounting, tax deductions are generally taken when:
Student Answer: payment is made.
the liability arises.
there is net income to absorb the expense.
None of the above
4. Question : (TCO A) Which of the following does not constitute tax evasion?
Student Answer: Arranging your affairs to keep your tax liability as low as possible under the tax law
Trying to legitimately maximize profits
Trying to legitimately minimize your tax liability
All of the above
5. Question : (TCO C) Which of the following items is not subject to federal income tax?
Student Answer: Interest on municipal bonds
$5,000 birthday gift from a family member
Discharge of debt through bankruptcy
Life insurance proceeds
All of the above
Instructor Explanation: Chapter 5; IRC Secs. 101, 102, 103, & 108; All are excluded from gross income.
Comments:
6. Question : (TCO B) Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift, and Sam is bankrupt. Which of the following statements is correct concerning the impact of this transaction?
Student Answer: Both Bob and Sam recognize $8,000 of taxable income.
Bob recognizes $8,000 of taxable income.
Sam recognizes $8,000 of taxable income.
Neither Bob nor Sam has any taxable income from this transaction.
7. Question : (TCO I) David, a cash basis taxpayer, owns two rental properties. Based on the following information, compute the amount that he must include in his 2011 gross rental income.
Property #1, security deposit on one-year lease received 2/1/11
All of deposit returned at lease end: $1,000
Property #1, payment received 2/1/11 for last month of lease(1/12): $900
Property #1, rental income received in 2011 2/11-12/11: $8,000
Property #2, rental income received in 2011 1/11-12/11: $9,600
Property #2, security deposit received 1/1/11 to be used for last month’s rent: $800
Property #2, rent 1/12 received 12/28/11: $800
Student Answer: $21,100
$19,300
$18,500
$20,100
Instructor Explanation: Chapter 5; $900 + $8,000 + $9,600+ $800 + $800 = $20,100
8. Question : (TCO F) Section 197’s intangible assets, such as patents and trademarks, are amortized for tax purposes over:
Student Answer: 6 years.
15 years.
10 years.
20 years.
9. Question : (TCO E) Explain the constructive receipt doctrine.
10. Question : (TCO G) Answer the following questions concerning the sources of tax law.
a. What role does the Internal Revenue Service play in interpreting, and providing guidance on, the tax law? What types of tax law guidance are published by the IRS?
b. What roles do the U.S. Constitution and U.S. Congress play in creating the tax law? Briefly explain how a tax bill becomes a tax law.
c. Describe the components of the common body of tax law (CBOTL).