Reference no: EM131266468
1. Which of the following statements are true?
Mary is a cash basis attorney. In 2015, she performed services in connection with the formation of a corporation and received stock with a value of $4,000 for her services. By the end of the year, the value of the stock had decreased to $2,000. She continued to hold the stock. Mary must recognize $4,000 of gross income from the stock for 2015.
Daniel owned stock that decreased in value by $20,000 during the year, but he did not sell the stock. He earned $45,000 salary, but received only $34,000 because $11,000 in taxes were withheld. Daniel saved $10,000 of his salary and used the remainder for personal living expenses. Daniel's economic income for the year exceeded his gross income for tax purposes.
The Federal excise tax on cigarettes is an example of a proportional tax.
A sole proprietorship purchased an asset for $1,000 in 2015 and its value was $1,500 at the end of 2015. In 2016, the sole proprietorship sold the asset for $1,400. The sole proprietorship realized a taxable gain of $400 in 2016 but an economic loss of $100 in 2016.
Richard painted his house which saved him $3,000. According to the realization requirement, Richard must recognize $3,000 of income.
2. Which of the following statements are true? (There are multiple correct answers)
As a general rule, the assignee of income from property must pay tax on the income.
All of these statements are true.
As a general rule, income from services is taxed to the person who earns the income.
As a general rule, the person who receives the benefit of the income must pay the tax on the income.
As a general rule, property is taxed to the person who owns the property.
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What is the basis of the house for depreciation
: $245,000 and the FMV today is $200,000. He is moving into his friends house and has decided to convert his residence to a rental property. Assume 20% of the property's value is allocated to land. Assume the transfer occured on 01/1/16. What is the ba..
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Identify which accounts would be classified as permanent
: The following information was drawn from the accounting records of Swanson Company as of December 31, 2014, before the temporary accounts had been closed. The Cash balance was $3,410, and Notes Payable amounted to $20,200. Identify which accounts wou..
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The ending balance in retained earnings
: The need for adjusting entries is based on _______________. The ending balance in retained earnings is shown in the _______________. If $3,000 has been earned but not yet paid to a company's workers since the last payday within an accounting period, ..
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Revenue rulings have the same legal force as tax regulations
: Treasury Department Regulations that are issued in Final form do not have the force and effect of law. Revenue Procedures is one of the administrative sources of tax law. Tax avoidance is the illegal minimization of tax liabilities. Revenue Rulings h..
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Income from services is taxed to the person who earns income
: The Federal excise tax on cigarettes is an example of a proportional tax. A sole proprietorship purchased an asset for $1,000 in 2015 and its value was $1,500 at the end of 2015. In 2016, the sole proprietorship sold the asset for $1,400. The sole pr..
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Transactions as operating activities-investing activities
: The following transactions pertain to the operations of Blair Company for 2014: Acquired $23,400 cash from the issue of common stock. Performed services for $43,000 cash. Classify the cash flows from these transactions as operating activities (OA), i..
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Proposed regulations are binding on the irs and the taxpayer
: Proposed Regulations are binding on the IRS and the taxpayer. For tax purposes, dividends accrue on a daily basis. Decisions of the Small Cases Division of the Tax Court can be appealed. A person's gross estate includes life insurance proceeds paid t..
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Severance taxes are one form of transaction taxes
: When dealing with taxpayers, IRS agents must give the IRS Code and the Regulations equal weight. Severance taxes are one form of transaction taxes. Interpretive Final Regulations are hare to get overturned. Tax avoidance is illegal.
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