HS 321 PRACTICE TEST - MISSED
QUESTIONS WITH CORRECT ANSWERS.
1 of 44
Term
All the following statements concerning the attribution
rules for determining constructive ownership of stock are
correct EXCEPT
1. Shares of stock owned by a father are considered as
being owned by his daughter's husband.
2. Shares of stock owned by an estate are considered as
being
owned proportionately by its beneficiaries having a direct
present
,interest in the estate.
3. Shares of stock owned by a trust are considered as
being owned by its beneficiaries in proportion to their
actuarial interests in the trust.
4. Shares of stock owned by a partnership are
considered as being owned proportionately by the
partners.
Give this one a try later!
An existing cash value policy transferred by one spouse to the other
results in taxable income to the recipient spouse.
The answer is (A). Such a transfer will not result in a taxable event.
Shares of stock owned by a father are considered as being owned
by his daughter's husband.
The answer is (A). The attribution rules apply from parent to
child and between spouses, but not from a parent to the spouse
of a child because the family attribution rules cannot be applied
twice in succession.
That portion of the proceeds which represents his share of depreciable
partnership property with a fair market value in excess of basis is
received by him on a tax-free basis.
The answer is (C). Proceeds received for the fair market value of
property in excess of its basis are taxable.
sale of the policy to a shareholder in a corporation in which the insured
is also a shareholder.
, The answer is (D). This sale of a policy to another shareholder is not
an exception to the transfer-for-value rules.
Don't know?
2 of 44
Term
A newly formed corporation will have gross income in the
current year of $100,000. Which of the following would be
fully deductible by the corporation for the current
taxable year?
I. All of the organizational expenses incurred in
forming the corporation
II.The payment of common stock dividends out of current
earnings and profits.
Give this one a try later!
Neither I nor II.
The answer is (D). I is incorrect because the recipient of excess
alimony payments receives a deduction for such payments in the
third post separation year. II is incorrect because child support
payments are not deductible.
Neither I nor II.
The answer is (D). I is incorrect because it is immaterial under the
attribution rules whether the shareholder receives cash at the time of the
redemption. II is
incorrect because there is no requirement that the shareholder
repay debts to the corporation in order to avoid family attribution.
, Neither I nor II.
The answer is (D). I is incorrect because damages (other than punitive
damages) received on account of a physical personal injury are
generally not taxable. II is incorrect because property received by
inheritance is generally not taxable.
Neither I nor II.
The answer is (D). I is incorrect because organizational expenses
in excess of the deductible limit permitted under section 195 of
the Internal Revenue Code must be amortized over a 180-month
period. II is incorrect because dividends paid are not deductible
regardless of the amount of the
corporation's earnings and profits.
Don't know?
3 of 44
Term
A corporation pays the premiums on a life insurance
policy on the life of its president. In which of the
following situations may the
corporation deduct the premiums as an expense?
I.The corporation is the absolute owner and
beneficiary of the policy.
II.The president is the absolute owner of all rights under
the policy and the corporation makes the premium
payments pursuant to the president's compensation
package.
Give this one a try later!
QUESTIONS WITH CORRECT ANSWERS.
1 of 44
Term
All the following statements concerning the attribution
rules for determining constructive ownership of stock are
correct EXCEPT
1. Shares of stock owned by a father are considered as
being owned by his daughter's husband.
2. Shares of stock owned by an estate are considered as
being
owned proportionately by its beneficiaries having a direct
present
,interest in the estate.
3. Shares of stock owned by a trust are considered as
being owned by its beneficiaries in proportion to their
actuarial interests in the trust.
4. Shares of stock owned by a partnership are
considered as being owned proportionately by the
partners.
Give this one a try later!
An existing cash value policy transferred by one spouse to the other
results in taxable income to the recipient spouse.
The answer is (A). Such a transfer will not result in a taxable event.
Shares of stock owned by a father are considered as being owned
by his daughter's husband.
The answer is (A). The attribution rules apply from parent to
child and between spouses, but not from a parent to the spouse
of a child because the family attribution rules cannot be applied
twice in succession.
That portion of the proceeds which represents his share of depreciable
partnership property with a fair market value in excess of basis is
received by him on a tax-free basis.
The answer is (C). Proceeds received for the fair market value of
property in excess of its basis are taxable.
sale of the policy to a shareholder in a corporation in which the insured
is also a shareholder.
, The answer is (D). This sale of a policy to another shareholder is not
an exception to the transfer-for-value rules.
Don't know?
2 of 44
Term
A newly formed corporation will have gross income in the
current year of $100,000. Which of the following would be
fully deductible by the corporation for the current
taxable year?
I. All of the organizational expenses incurred in
forming the corporation
II.The payment of common stock dividends out of current
earnings and profits.
Give this one a try later!
Neither I nor II.
The answer is (D). I is incorrect because the recipient of excess
alimony payments receives a deduction for such payments in the
third post separation year. II is incorrect because child support
payments are not deductible.
Neither I nor II.
The answer is (D). I is incorrect because it is immaterial under the
attribution rules whether the shareholder receives cash at the time of the
redemption. II is
incorrect because there is no requirement that the shareholder
repay debts to the corporation in order to avoid family attribution.
, Neither I nor II.
The answer is (D). I is incorrect because damages (other than punitive
damages) received on account of a physical personal injury are
generally not taxable. II is incorrect because property received by
inheritance is generally not taxable.
Neither I nor II.
The answer is (D). I is incorrect because organizational expenses
in excess of the deductible limit permitted under section 195 of
the Internal Revenue Code must be amortized over a 180-month
period. II is incorrect because dividends paid are not deductible
regardless of the amount of the
corporation's earnings and profits.
Don't know?
3 of 44
Term
A corporation pays the premiums on a life insurance
policy on the life of its president. In which of the
following situations may the
corporation deduct the premiums as an expense?
I.The corporation is the absolute owner and
beneficiary of the policy.
II.The president is the absolute owner of all rights under
the policy and the corporation makes the premium
payments pursuant to the president's compensation
package.
Give this one a try later!
