D239 ACCT 6100
Advanced Tax Concepts
OBJECTIVE ASSESSMENT GUIDE
Q&S
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,1. Which of the following is a key feature of the Alternative
Minimum Tax (AMT)?
- A) It provides a flat tax rate for all taxpayers.
- B) It disallows exemptions and certain deductions.
- C) It eliminates capital gains tax.
- D) It applies only to corporate taxpayers.
- Correct Answer: B
- Rationale: The AMT is designed to ensure that high-
income taxpayers pay a minimum amount of tax,
disallowing certain deductions and exemptions typically
allowed under the regular income tax system.
2. Under Section 1031 of the Internal Revenue Code,
which type of property is eligible for like-kind exchange
treatment?
- A) Personal residence
- B) Artwork
- C) Inventory held for sale
- D) Rental property
- Correct Answer: D
- Rationale: Section 1031 allows for tax deferral on the
exchange of like-kind properties, and rental properties
qualify under this provision.
3. Which of the following best describes the concept of
"substance over form" in tax accounting?
- A) Taxpayer must report transactions as they are legally
structured.
- B) Tax consequences depend on the economic reality of
transactions.
- C) It allows taxpayers to select their method of
©WGU 2024/2025
, accounting.
- D) It mandates specific accounting methods for all
transactions.
- Correct Answer: B
- Rationale: "Substance over form" dictates that the
economic realities of transactions take precedence over
their legal forms for tax purposes.
Fill-in-the-Blank Questions
4. The IRS uses _______________ to allocate income
and expenses between related entities for tax purposes.
- Correct Answer: Transfer Pricing
- Rationale: Transfer pricing rules are established to
ensure that transactions between related entities are priced
fairly for tax purposes.
5. Under the IRS rules, S corporations must have no more
than _______________ shareholders to maintain their
status.
- Correct Answer: 100
- Rationale: An S corporation is limited to a maximum
of 100 shareholders in order to qualify for S corporation
taxation.
True/False Questions
6. True or False: Capital gains are always taxed at the
ordinary income tax rate.
- Correct Answer: False
- Rationale: Long-term capital gains are typically taxed
at reduced rates compared to ordinary income, whereas
short-term capital gains are taxed at ordinary income rates.
©WGU 2024/2025
Advanced Tax Concepts
OBJECTIVE ASSESSMENT GUIDE
Q&S
©WGU 2024/2025
,1. Which of the following is a key feature of the Alternative
Minimum Tax (AMT)?
- A) It provides a flat tax rate for all taxpayers.
- B) It disallows exemptions and certain deductions.
- C) It eliminates capital gains tax.
- D) It applies only to corporate taxpayers.
- Correct Answer: B
- Rationale: The AMT is designed to ensure that high-
income taxpayers pay a minimum amount of tax,
disallowing certain deductions and exemptions typically
allowed under the regular income tax system.
2. Under Section 1031 of the Internal Revenue Code,
which type of property is eligible for like-kind exchange
treatment?
- A) Personal residence
- B) Artwork
- C) Inventory held for sale
- D) Rental property
- Correct Answer: D
- Rationale: Section 1031 allows for tax deferral on the
exchange of like-kind properties, and rental properties
qualify under this provision.
3. Which of the following best describes the concept of
"substance over form" in tax accounting?
- A) Taxpayer must report transactions as they are legally
structured.
- B) Tax consequences depend on the economic reality of
transactions.
- C) It allows taxpayers to select their method of
©WGU 2024/2025
, accounting.
- D) It mandates specific accounting methods for all
transactions.
- Correct Answer: B
- Rationale: "Substance over form" dictates that the
economic realities of transactions take precedence over
their legal forms for tax purposes.
Fill-in-the-Blank Questions
4. The IRS uses _______________ to allocate income
and expenses between related entities for tax purposes.
- Correct Answer: Transfer Pricing
- Rationale: Transfer pricing rules are established to
ensure that transactions between related entities are priced
fairly for tax purposes.
5. Under the IRS rules, S corporations must have no more
than _______________ shareholders to maintain their
status.
- Correct Answer: 100
- Rationale: An S corporation is limited to a maximum
of 100 shareholders in order to qualify for S corporation
taxation.
True/False Questions
6. True or False: Capital gains are always taxed at the
ordinary income tax rate.
- Correct Answer: False
- Rationale: Long-term capital gains are typically taxed
at reduced rates compared to ordinary income, whereas
short-term capital gains are taxed at ordinary income rates.
©WGU 2024/2025
