Individual Tax Final Exam with answers || || || || ||
A taxpayer sells a parcel of land on the installment sale basis and will
|| || || || || || || || || || || || || ||
recognize the gain over the five-year installment schedule. Form 6252 must be
|| || || || || || || || || || ||
included with his tax return only in the year of sale. - CORRECT ANSWERS
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✔✔False
Points paid on a mortgage tp buy a personal residence are deductible in the
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year paid. - CORRECT ANSWERS ✔✔True
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The installment method may be used for sales of all kinds of property with
|| || || || || || || || || || || || || ||
the exception of - CORRECT ANSWERS ✔✔marketable securities
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In year 1, a contractor agrees to build a building for $2,500,000 by the end of
|| || || || || || || || || || || || || || || ||
year 2. The builder's cost is estimated to be $1,800,000. The actual costs in
|| || || || || || || || || || || || || ||
Year 1 are $900,000 and Year 2's actual costs are $1,300,000. Under the
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completed contact method, the gross profit for Year 1 is - CORRECT
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ANSWERS ✔✔$300,000 ||
How does a taxpayer's tax accounting method affect the amount of tax paid? -
|| || || || || || || || || || || || || ||
CORRECT ANSWERS ✔✔The accounting methods used by a taxpayer can|| || || || || || || || || ||
accelerate or defer the recognition of income, and thereby, change when the
|| || || || || || || || || || || ||
tax must be paid. Also, because of the progressive tax rate structure, taxes can
|| || || || || || || || || || || || || ||
be saved by spreading income over several years, rather than having income
|| || || || || || || || || || || ||
bunched into one year, pushing the taxpayer into higher brackets.
|| || || || || || || || ||
, Do accounting rules determine the amount of income to be reported by a
|| || || || || || || || || || || || ||
taxpayer? - CORRECT ANSWERS ✔✔In the long run, the amount of income
|| || || || || || || || || || || ||
reported by a taxpayer will generally be the same regardless of the accounting
|| || || || || || || || || || || || ||
methods used by the taxpayer. In a given year the amount of income reported
|| || || || || || || || || || || || || ||
by a taxpayer can vary significantly depending on the accounting method
|| || || || || || || || || || ||
used by the taxpayer. || || ||
Which of the following businesses is most likely to benefit from the election
|| || || || || || || || || || || || ||
to account for its inventory under LIFO? - CORRECT ANSWERS ✔✔A
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company producing parts for the auto industry- costs in this field tend to
|| || || || || || || || || || || || ||
steadily climb. ||
A subsidiary corporation filing a consolidation return with its parent
|| || || || || || || || || ||
corporation must change its accounting period to conform with its parent's || || || || || || || || || || ||
tax year. - CORRECT ANSWERS ✔✔True
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An installment sale is best defined as - CORRECT ANSWERS ✔✔any
|| || || || || || || || || || ||
disposition of property where at least one payment is received after the close
|| || || || || || || || || || || || ||
of the taxable year in which disposition occurs
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The installment method is not applicable to sales of inventory and marketable
|| || || || || || || || || || ||
securities - CORRECT ANSWERS ✔✔True
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Which of the following companies who business involves long-term contracts
|| || || || || || || || || ||
with eligible to use the completed contract method? - CORRECT ANSWERS
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✔✔a home construction company averaging $30 million in gross revenues
|| || || || || || || || || ||
each year ||
A taxpayer sells a parcel of land on the installment sale basis and will
|| || || || || || || || || || || || || ||
recognize the gain over the five-year installment schedule. Form 6252 must be
|| || || || || || || || || || ||
included with his tax return only in the year of sale. - CORRECT ANSWERS
|| || || || || || || || || || || || || || ||
✔✔False
Points paid on a mortgage tp buy a personal residence are deductible in the
|| || || || || || || || || || || || || ||
year paid. - CORRECT ANSWERS ✔✔True
|| || || || ||
The installment method may be used for sales of all kinds of property with
|| || || || || || || || || || || || || ||
the exception of - CORRECT ANSWERS ✔✔marketable securities
|| || || || || || ||
In year 1, a contractor agrees to build a building for $2,500,000 by the end of
|| || || || || || || || || || || || || || || ||
year 2. The builder's cost is estimated to be $1,800,000. The actual costs in
|| || || || || || || || || || || || || ||
Year 1 are $900,000 and Year 2's actual costs are $1,300,000. Under the
|| || || || || || || || || || || || ||
completed contact method, the gross profit for Year 1 is - CORRECT
|| || || || || || || || || || || ||
ANSWERS ✔✔$300,000 ||
How does a taxpayer's tax accounting method affect the amount of tax paid? -
|| || || || || || || || || || || || || ||
CORRECT ANSWERS ✔✔The accounting methods used by a taxpayer can|| || || || || || || || || ||
accelerate or defer the recognition of income, and thereby, change when the
|| || || || || || || || || || || ||
tax must be paid. Also, because of the progressive tax rate structure, taxes can
|| || || || || || || || || || || || || ||
be saved by spreading income over several years, rather than having income
|| || || || || || || || || || || ||
bunched into one year, pushing the taxpayer into higher brackets.
|| || || || || || || || ||
, Do accounting rules determine the amount of income to be reported by a
|| || || || || || || || || || || || ||
taxpayer? - CORRECT ANSWERS ✔✔In the long run, the amount of income
|| || || || || || || || || || || ||
reported by a taxpayer will generally be the same regardless of the accounting
|| || || || || || || || || || || || ||
methods used by the taxpayer. In a given year the amount of income reported
|| || || || || || || || || || || || || ||
by a taxpayer can vary significantly depending on the accounting method
|| || || || || || || || || || ||
used by the taxpayer. || || ||
Which of the following businesses is most likely to benefit from the election
|| || || || || || || || || || || || ||
to account for its inventory under LIFO? - CORRECT ANSWERS ✔✔A
|| || || || || || || || || || ||
company producing parts for the auto industry- costs in this field tend to
|| || || || || || || || || || || || ||
steadily climb. ||
A subsidiary corporation filing a consolidation return with its parent
|| || || || || || || || || ||
corporation must change its accounting period to conform with its parent's || || || || || || || || || || ||
tax year. - CORRECT ANSWERS ✔✔True
|| || || || ||
An installment sale is best defined as - CORRECT ANSWERS ✔✔any
|| || || || || || || || || || ||
disposition of property where at least one payment is received after the close
|| || || || || || || || || || || || ||
of the taxable year in which disposition occurs
|| || || || || || ||
The installment method is not applicable to sales of inventory and marketable
|| || || || || || || || || || ||
securities - CORRECT ANSWERS ✔✔True
|| || || || ||
Which of the following companies who business involves long-term contracts
|| || || || || || || || || ||
with eligible to use the completed contract method? - CORRECT ANSWERS
|| || || || || || || || || || ||
✔✔a home construction company averaging $30 million in gross revenues
|| || || || || || || || || ||
each year ||
