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ACC
455 Final Exam
1) Identify which of the
following statements is false.
A. Members
from both the House and the Senate are on the Conference Committee.
B. When tax advisors speak of
the tax law, they usually have in mind just the Internal Revenue Code.
C. Records of
committee hearings are helpful in determining Congressional intent.
D. All are
false.
2) Which of the following courts
is not a trial court for tax cases?
A. U.S.
District Court
B. U.S. Court
of Federal Claims
C. U.S. Bankruptcy Court
D. U.S. Tax
Court
3) The Term tax law includes
A.
legislation
B. treasury
regulations
C. judicial
decisions
D. all of the above
4) Which of the following
statements about a partnership is true?
A. Partners
are taxed on distributions from a partnership.
B. Partners
are considered employees of the partnership.
C. A
partnership is a taxpaying entity.
D. Partners are taxed on
their allocable share of income whether it is distributed or not.
5) Which of the following
statements is incorrect?
A. Limited
partners` liability for partnership debt is limited to their amount of
investment.
B. In a
general partnership, all partners have unlimited liability for partnership
debts.
C. In a limited partnership, all
partners participate in managerial decision-making.
D. All of the
statements are correct.
6) Which of the following
statements is correct?
A. S
shareholders are only taxed on distributions.
B. S shareholders are taxed on
their proportionate share of earnings whether or not distributed.
C. An owner
of a C corporation is taxed on his or her proportionate share of earnings.
D. S
shareholders are taxed on their proportionate share of earnings that are
distributed.
7) Identify which of the
following statements is true.
A. Under the check-the-box
regulations, an LLC that has one member (owner) may be disregarded as an entity
separate from its owner.
B. An
unincorporated business may not be taxed as a corporation.
C. A new LLC
that is owned by four members elects to be taxed under its default
classification (as a partnership) in its first year of operations. The entity
is prohibited from changing its tax classification at any time in the future.
D. All are
false.
8) Three members form an LLC in
the current year. Which of the following statements is ncorrect?
A. The LLC
can elect to have its default classification ignored.
B. If the LLC elects to use its
default classification, it can elect to change its status to being taxed as a C
corporation beginning with the third tax year after the initial classification.
C. The LLC`s
default classification under the check-the-box rules is as a partnership.
D. The LLC
can elect to be taxed as a C corporation with no special tax consequences.
9) Identify which of the
following statements is false.
A. Under the check-the-box
regulations, an LLC that has only two members (owners) must be taxed as a
partnership.
B. Once an
election is made to change its classification, an entity cannot change again
for 60 months.
C. The
check-the-box regulations permit an LLC to be taxed as a C corporation.
D. A business
need not be incorporated under state or federal law to be taxed as a
corporation.
10) Barry, Dan, and Edith
together form a new corporation; Barry and Dan each contribute property in
exchange for stock. Within 2 weeks after the formation, the corporation issues
additional stock to Edith in exchange for property. Barry and Dan each hold
10,000 shares and Edith will receive 9,000 shares. Which transactions will
qualify for nonrecognition?
A. Only the
second transaction will qualify for nonrecognition.
B. Both transactions will
qualify under Sec. 351 if they are part of the same plan of incorporation.
C. Only the
first transaction will qualify for nonrecognition.
D. Because of
the step transaction doctrine neither transaction will qualify.
11) Identify which of the
following statements is true.
A. A
transferor`s gain or loss that goes unrecognized when Sec. 351 applies is
permanently exempt from taxation.
B. If a taxpayer transfers
property and services as part of a transaction meeting the Sec. 351
requirements, all of the stock received is counted in determining whether the
property transferors have acquired control.
C. If a
taxpayer transfers property and services as part of a transaction meeting the
Sec. 351 requirements, the nonrecognition of gain or loss will apply to the
services.
D. All are
false.
12) Identify which of the
following statements is true.
A. The exchange
of stock for services rendered is not a taxable transaction.
B. The repeal
of Sec. 351 would result in more existing businesses being incorporated.
C. Section 351 was enacted to
allow taxpayers to incorporate without incurring adverse tax consequences.
D. All are
false.
13) Once a corporation has
elected a taxable year it can change the taxable year without IRS permission if
A. the
resulting short period does not have a net operating loss
B. the
corporation has not changed its accounting period within the last 10 years
C. the
annualized income for the short period is at least 80% of the corporation`s
income for the preceding taxable year
D. All of these
14) A new corporation may
generally select one of the following accounting methods with the exception of
A. accrual
method
B. hybrid
method
C. cash
method
D. retail method
15) Identify which of the
following statements is true.
A. A corporation that accrues
compensation payable to an employee must pay the amount within two and one-half
months after the close of the taxable year to deduct the amount in the year of
the accrual.
B. Accrued
compensation that is deductible in the year of accrual is considered to be part
of an IRS deferred compensation plan.
C. Accrued
compensation not paid within three and one-half months after the close of the
corporation tax year is deducted in the year following the accrual.
D. All are
false.
16) Island Corporation has the
following income and expense items for the year.
Gross
receipts from
sales
$60,000
Dividends
received from 15%-owned domestic
corporation 40,000
Expenses
connected with
sales
30,000
The taxable income of Island
Corporation is
A. $70,000
B. $42,000
C. $100,000
D. $47,000
17) Maxwell Corporation reports
the following results:
Gross income
from
operations
$ 90,000
Dividends
received from 18%-owned domestic
corporation 70,000
Expenses
100,000
Maxwell`s dividends-received
deduction is
A. $49,000
B. $70,000
C. $42,000
D. $56,000
18) Green Corporation is
incorporated on March 1 and begins business on June 1. Green`s first tax year
ends on October 31, i.e., a short year. Acc 455 final exam.Green incurs the
following expenses during the year:
Date
Type Amount
February
Draft charter
$ 2,000
March
Stock
commission
30,000
March
Accounting fees to set up books 2,000
April
Temporary director
fees
2,000
December
Charter modification
fee
1,000
What is the deduction for
organizational expenses if Green chooses to deduct its costs as soon as
possible?
A. $5,028
B. $667
C. $500
D. $36,000
19) Tax-exempt interest income on
state and local municipal bonds which are not a private activity is
A. a positive
adjustment in calculating alternative minimum taxable income (AMTI)
B. a negative
adjustment in calculating alternative minimum taxable income (AMTI)
C. included in calculating
ACE (adjusted current earnings)
D. a tax
preference item
20) Which of the following is not
an adjustment in calculating AMTI?
A. The
regular tax NOL deduction
B. Production
activities deduction
C. The
difference between the gains for AMTI and regular tax purposes
D. Gain on installment sales
of noninventory property