1. (TCO A) A taxpayer may litigate a tax dispute without first paying the tax in the: (Points : 5) | U.S. District Court. U.S. Tax Court. U.S. Court of Federal Claims. All of the above
2. (TCO F) A business bad debt is deductible for tax purposes as a(n): (Points : 5) | ordinary business deduction. short-term capital loss. long-term capital loss. miscellaneous itemized deduction.
3. (TCO I) Under the cash method of tax accounting, tax deductions are generally taken when: (Points : 5) | payment is made. the liability arises. there is net income to absorb the expense. None of the above
4. (TCO A) Which of the following constitutes tax evasion? (Points : 5) | Arranging your affairs to keep your tax liability as low as possible under the tax law Failing to disclose a tax liability from a completed transaction Trying to maximize profits Trying to minimize your tax liability.
5. (TCO C) Which of the following items is subject to federal income tax? (Points : 5) | Interest on U.S. Treasury bonds Gambling winnings Interest on loans made in the ordinary course of business All of the above
6. (TCO B) Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift, but Sam is insolvent. Which of the following statements is correct concerning the impact of this transaction? (Points : 5) | 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. (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 2012 gross rental income.
Property #1, security deposit on one-year lease