Week-3 Federal Taxation Comprehensive Topics

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Page 1 1. (TCO A) A taxpayer may litigate a tax dispute without first paying the tax in the: (Points : 5) U.S. District Court. U.S. Court of Federal Claims. U.S. Supreme Court. U.S. Tax Court. 2. (TCO F) A business bad debt is deductible for tax purposes as a(n): (Points : 5) short-term capital loss. long-term capital loss. ordinary business deduction. None of the above 3. (TCO I) Under the cash method of tax accounting, tax deductions are generally taken when: (Points : 5) the liability arises. payment is made. the expense is actually incurred. None of the above 4. (TCO A) Which of the following constitutes tax evasion? (Points : 5) Arranging your affairs to keep your tax liability as low as possible under the tax law Avoiding taxes Failing to disclose a tax liability from a completed transaction Trying to minimize your tax liability 5. (TCO C) Which of the following items is subject to federal income tax? (Points : 5) Interest on U.S. Treasury bonds Gambling winnings Interest on loans made in the ordinary course of business All of the above 6. (TCO B) Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift, and Sam is bankrupt. Which of the following statements is correct concerning the impact of this transaction? (Points : 5) Both Bob and Sam recognize $8,000 of taxable income. Bob recognizes $8,000 of taxable income. Sam recognizes $8,000 of taxable income. Neither Bob nor Sam has any taxable income from this transaction. 7. (TCO I) Johnny, a cash basis taxpayer, owns two rental properties. Based on the following information, compute the amount that he must include in his 2012 gross rental income. Property #1,

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