SOLUTION MANUAL FOR
MCGRAW HILL'S TAXATION OF
INDIVIDUALS AND BUSINESS
ENTITIES
PRACTICE EXAM QUESTIONS
WITH CORRECT DETAILED
ANSWERS | ALREADY GRADED
A+<RECENT VERSION>
1. Alternative minimum tax (AMT) - ANSWER a tax on a broader tax
base than the base for the "regular" tax; the additional tax paid when the
tentative minimum tax (based on the alternative minimum tax base)
exceeds the regular tax (based on the regular tax base). The alternative
minimum tax is designed to require taxpayers to pay some minimum
level of tax even when they have low or no regular taxable income as a
result of certain tax breaks in the tax code.
2. Alternative minimum tax (AMT) base - ANSWER alternative
minimum taxable income minus the alternative minimum tax exemption.
3. Alternative minimum tax (AMT) exemption - ANSWER a deduction
to determine the alternative minimum tax base that is phased out based on
alternative minimum taxable income.
,4. Alternative minimum tax adjustments - ANSWER adjustments
(positive or negative) to regular taxable income to arrive at the alternative
minimum tax base.
5. Alternative minimum tax system - ANSWER a secondary or parallel
tax system calculated on an alternative tax base that more closely reflects
economic income than the regular income tax base. The system was
designed to ensure that taxpayers generating economic income pay some
minimum amount of income tax each year.
6. Alternative valuation date - ANSWER the date six months after the
decedent's date of death.
7. Amortization - ANSWER the method of recovering the cost of
intangible assets over a specific time period.
8. Amount realized - ANSWER the value of everything received by the
seller in a transaction (cash, FMV of other property, and relief of
liabilities) less selling costs.
9. Annotated tax service - ANSWER a tax service arranged by code
section. For each code section, an annotated service includes the code
section; a listing of the code section history; copies of congressional
committee reports that explain changes to the code section; a copy of all
the regulations issued for the specific code section; the service's unofficial
explanation of the code section; and brief summaries (called annotations)
of relevant court cases, revenue rulings, revenue procedures, and letter
rulings that address issues specific to the code section.
10.Annual exclusion - ANSWER amount of gifts allowed to be made
each year per donee (regardless of the number of donees) to prevent the
taxation of relatively small gifts ($15,000 per donee per year currently).
, 11.Annualized income method - ANSWER a method for determining a
corporation's required estimated tax payments when the taxpayer earns
more income later in the year than earlier in the year. Requires
corporations to base their first and second required estimated tax
installments on their income from the first three months of the year, their
third installment based on their taxable income from the first six months
of the year, and the final installment based on their taxable income from
the first nine months of the year.
12.Annuity - ANSWER a stream of equal payments over time.
13.Applicable credit - ANSWER also known as the unified credit, the
amount of current tax on the exemption equivalent; designed to prevent
transfer taxation of smaller cumulative transfers.
14.Apportion - ANSWER as used in the sourcing rules, the process of
calculating the amount of a deduction that is associated with a specific
item or items of gross income for purposes of computing foreign source
taxable income.
15.Apportionment - ANSWER the method of dividing business income
of an interstate business among the states where nexus exists.
16.Arm's length amount - ANSWER price in transactions among
unrelated taxpayers, where each transacting party negotiates for his or her
own benefit.
17.Arm's length transactions - ANSWER transactions among unrelated
taxpayers, where each transacting party negotiates for his or her own
benefit.
MCGRAW HILL'S TAXATION OF
INDIVIDUALS AND BUSINESS
ENTITIES
PRACTICE EXAM QUESTIONS
WITH CORRECT DETAILED
ANSWERS | ALREADY GRADED
A+<RECENT VERSION>
1. Alternative minimum tax (AMT) - ANSWER a tax on a broader tax
base than the base for the "regular" tax; the additional tax paid when the
tentative minimum tax (based on the alternative minimum tax base)
exceeds the regular tax (based on the regular tax base). The alternative
minimum tax is designed to require taxpayers to pay some minimum
level of tax even when they have low or no regular taxable income as a
result of certain tax breaks in the tax code.
2. Alternative minimum tax (AMT) base - ANSWER alternative
minimum taxable income minus the alternative minimum tax exemption.
3. Alternative minimum tax (AMT) exemption - ANSWER a deduction
to determine the alternative minimum tax base that is phased out based on
alternative minimum taxable income.
,4. Alternative minimum tax adjustments - ANSWER adjustments
(positive or negative) to regular taxable income to arrive at the alternative
minimum tax base.
5. Alternative minimum tax system - ANSWER a secondary or parallel
tax system calculated on an alternative tax base that more closely reflects
economic income than the regular income tax base. The system was
designed to ensure that taxpayers generating economic income pay some
minimum amount of income tax each year.
6. Alternative valuation date - ANSWER the date six months after the
decedent's date of death.
7. Amortization - ANSWER the method of recovering the cost of
intangible assets over a specific time period.
8. Amount realized - ANSWER the value of everything received by the
seller in a transaction (cash, FMV of other property, and relief of
liabilities) less selling costs.
9. Annotated tax service - ANSWER a tax service arranged by code
section. For each code section, an annotated service includes the code
section; a listing of the code section history; copies of congressional
committee reports that explain changes to the code section; a copy of all
the regulations issued for the specific code section; the service's unofficial
explanation of the code section; and brief summaries (called annotations)
of relevant court cases, revenue rulings, revenue procedures, and letter
rulings that address issues specific to the code section.
10.Annual exclusion - ANSWER amount of gifts allowed to be made
each year per donee (regardless of the number of donees) to prevent the
taxation of relatively small gifts ($15,000 per donee per year currently).
, 11.Annualized income method - ANSWER a method for determining a
corporation's required estimated tax payments when the taxpayer earns
more income later in the year than earlier in the year. Requires
corporations to base their first and second required estimated tax
installments on their income from the first three months of the year, their
third installment based on their taxable income from the first six months
of the year, and the final installment based on their taxable income from
the first nine months of the year.
12.Annuity - ANSWER a stream of equal payments over time.
13.Applicable credit - ANSWER also known as the unified credit, the
amount of current tax on the exemption equivalent; designed to prevent
transfer taxation of smaller cumulative transfers.
14.Apportion - ANSWER as used in the sourcing rules, the process of
calculating the amount of a deduction that is associated with a specific
item or items of gross income for purposes of computing foreign source
taxable income.
15.Apportionment - ANSWER the method of dividing business income
of an interstate business among the states where nexus exists.
16.Arm's length amount - ANSWER price in transactions among
unrelated taxpayers, where each transacting party negotiates for his or her
own benefit.
17.Arm's length transactions - ANSWER transactions among unrelated
taxpayers, where each transacting party negotiates for his or her own
benefit.
