Income Tax Fundamentals 2006 24th Edition Gerald E. Whittenburg, Martha Altus Buller - Solutions

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15. Circular 230 is prepared by the: IRS/Department of Treasuryb. American Bar Associationc. American Institute of CPAsd. Securities Exchange Commissione. Some other body
14. An enrolled agent (EA): Achieves EA status by passing an examinationb. Achieves EA status by completing a university curriculum certified by the IRSc. Renews his/her EA card annuallyd. Must
13. Circular 230 addresses:a. The conduct of tax preparers who practice before the IRSb. Fees that tax preparers can charge clientsc. Disciplinary proceedings for tax preparers who abuse the
12. Which of the following is not true about California extensions of times to file an individual income tax return? A form is required to request the extensionb. The extension of time is for six
11. Edna cannot use electronic filing this year because she:a. Is filing a return for a prior yearb. Received unemployment compensation incomec. Uses the Married Filing Separately filing statusd.
10. Clara cannot use electronic filing for 2005 because she:a. Moved to California in 2004b. Moved to California in 2005c. Has Adjusted Gross Income of $45.000 Is filing an amended returne. None of
9. The following is not an advantage of using electronic filing for a California tax return: Lower chance of auditb. Less likely to make mathematical errorsc. Quicker receipt of refund dollarsd.
8. A California tax preparer was certified on November 1. 2000. He files his renewal application on November 27, 2005. As a result:a. The filing fee is $25.00b. The filing fee is $38.00c. The filing
7. For the CTEC continuing education requirement, which of the following is not the case?a. Courses must be completed using CTEC-approved schools Twenty hours must be completed every year" Half of
6. Under Circular 230, a tax professional's advertisement could not include the following:a. We're the IRA tax specialistsb. We're State University graduates We're a lot better than the Smith Tax
5. Circular 230 prohibits the tax professional from:a. Advertising for clientsb. Charging contingent fees Charging unconscionable feesd. Operating a tax consulting business as a partnershipe. All of
4. Circular 230 prohibits a tax professional from simultaneously being:a. A CPA and an EAb. A CPA and an attorneyc. An EA and an attorneyd. An attorney, CPA, and EA Circular 230 does not prohibit any
3. Which of the following cannot represent Pack Corporation in an audit before the IRS, under the rules of Circular 230?a. Pack's treasurerb. A partner of the CPA firm that completed Pack's return
2. Tax preparer conduct regulated by Circular 230 includes:a. Representing a taxpayer before the US Supreme Courtb. Employment of suspended or disbarred personsc. Specifications stating when
1. The conduct of a tax professional can be regulated by:a. Federal agencies, such as the Treasury Departmentb. State agencies, such as the California Tax Education Councilc. Neither a nor b Both a
4. Form FTB 3519 is necessary to accompany a payment made for an extension.
3. The balance due is required to be paid by the original due date to avoid penalties and interest.
2. The extension of time is for six months.
1. A form is required to request the extension
5. The FTB charges a nominal fee for using the electronic filing system.
4. If you file a tax return electronically, the chances go up that you later will be audited.
3. When using electronic filing, the taxpayer submits the return information over the Internet, then mails any Forms W-2 to the FTB.
2. Electronic filing requires the use of computer-based systems.
1. Electronic filing can be used only where the taxpayer has a refund coming.
4. The qualifying education requirement can be waived for experienced tax preparers 5 California tax preparers must complete sixty hours of continuing education courses every three years, averaging
3. The qualifying education requirement is met by taking a sixty-hour course
2. The surety bond procedure protects the public from deceptive actions by a tax preparer.
1. One must be eighteen years of age to become a California tax preparer.
6. Entry of financial data into tax preparation software programs by others than attorneys, CPAs, and EAS.
5. EAs can charge fees equal to one-third of concessions granted by the IRS in an audit.
4. Attorneys must testify against other attorneys who misrepresent credentials in public advertisements.
3. Clients must be represented by public accountants in IRS audits.
2. EAs must not sign returns that include frivolous positions.
1. CPAs must take continuing education courses on new tax laws,
2. Codes of conduct that control tax preparers are designed to assure a minimum level of quality for the services rendered by practitioners.
1. Tax professionals are subject to restrictions on their conduct by both Federal and state agencies.
5. Klink, a provider of architectural services, has nexus only in California and Arizona. Klink is incorporated in Nevada, and its corporate offices are in California. Contracts for the year produced
4. Kim has property holdings in several states. Kim also leases a California building for $1 million a year. It leases no real estate outside of California. Kim's average cost. act of accumulated
3. Bowl's manufacturing facility, distribution center, and retail stores are located in California, but Bowl's customers live in California, Arizona. and New Mexico. Arizona sales are made by a sales
2. Compute Dott's California taxable income. Taxable income totaled $200,000, from selling gaming products in two states, with this year's results as follows. Amounts are given in thousands of
1. Compute Dott's California taxable income. Total taxable income is $200,000, from selling gaming products in two states, with this year's results as follows. Amounts are given in thousands of
20, The unitary rule:a. Results in apportionment factors reflecting group activitiesb. Applies only to single corporate entities.c. Applies even when there is no common ownership of the group
19. The unitary rule:a. Must be applied when a unitary group of corporations is foundb. Does not apply to a unitary group of partnerships Does not apply to LLCs and LLPSd. Always works to the
18. The California payroll factor:a. Includes the employee's year-end bonusb. Is computed for an employee who works in California for a Minnesota distributorc. Includes the taxable fringe benefits
17. The California property factor includes:a. Property in transit from Illinois to California assigned to California using the destination ruleb. Property in transit from California to Illinois
16. The California property factor:a. Includes assets leased by the taxpayer at fair market valueb. Includes assets owned by the taxpaver at fair market valuec. Includes California real estate at its
15. The California property factor:a. Includes the taxpayer's investment portfoliob. Includes the taxpayer's business assetsc. Includes costs incurred by the taxpaver and paid to a general contrac
equipment
14. Norm sells some equipment used in his California business for $100, resulting in a $40 taxable gain to him. The California sales factor includes with respect to this transaction:a. $0b. $40c.
13. The California throwback rule:a. Applies when a California seller does not have nexus with the state of destinationb. Applies when a California seller has PL. 86-272 protection with the state of
12. The California throwback rule:a. Applies in computing the sales factor-b. Eliminates a tax advantage when a California taxpayer sells to a Nevada purchaserc. Applies when a California taxpayer
11. The California sales factor:a. Includes sales when the purchaser is in Californiab. Applies a throwback rule when a sale is made from California to Nevadac. Is computed net of sales discountsd.
10. In applying the apportionment process:a. All states use the same computationsb. California double weights the sales factorc. California double weights the payroll factord. California double
9, The California apportionment percentage:a. Applies to nonbusiness income.b. Applies to business incomec. Double weights the payroll factord. Uses equally weighted sales, property, and payroll
8. In computing California taxable income:a. Make all California adjustments, then apply apportionment factorsb. Apply apportionment factors, then make all California adjustmentsc. Apply
7. If a business wants to avoid nexus with California, it should:a. Not have employees with California home officesb. Lease California property, not own itc. Limit its activities to those protected
6. Swank makes sales to California customers from its Pennsylvania distribu- tion center. Swank sells its goods over the Internet and has no other pres ence in California. Nexus with California is
5. Swarm makes sales to California customers from its Pennsylvania distribu- tion center. Swarm sells its goods over the Internet and has no other presence in California. Nexus with California is
4. PL 86-272 protection is lost when a New York taxpayer:a. Advertises in California to sell toothbrushesb. Sends a salesperson into California in a company car to sell tooth- brushesc. Sends a
3. A partnership is an example of a flow-through business entity. 4. The basic rate at which California corporations pay income or franchise tax is 10.84% 5. Every entity doing business in California
2. When "flow through" taxation occurs, the entity usually pays no tax itself, but its owners include the entity's income, deduction, and credit items proportionately
1. The calculation of taxes on California business income differs depending on the form of entity in which the business is conducted.
2. Nicholas (age 66) and Pascale (age 62) Quester have been married for 30 years and have lived in Texas all their lives. Nick retired last year. On July 1 of 2005, Pascale retires and they move to
1. Alonso Carson (age 42) is a single taxpayer. His only federal itemized deductions were for state income taxes paid. He lives at 765 Tahoe Drive, Reno, NV 89501. Alonso's Social Security Number is
17. Scott Henderson is a single taxpayer. In 2005, his California taxable income is $48.000 and he has the following potential alternative minimum tax adjustment and preference items: Personal
16. Akore is married to Captain Hornblower, USN, who is stationed in California. Hornblower is a resident of South Dakota. Akore lives with her husband in San Diego, California. In the current year,
15. Corporal Airfoil, a Louisiana resident, is stationed in California. He has a part- time job working for American Airlines at an airport near where he is stationed. He earns $7,000 working for the
14. Sgt. York is a California resident serving in California when she is transferred to Texas under Permanent Change of Station (PCS) orders. Her salary is $2,500 per month. York is transferred on
13. Heloise, a head of household taxpayer, was transferred to California by her employer on October 1, 2005. Her salary for the year was $120.000, of which $50,000 was earned after she became a
12. Colin, a single taxpayer, was transferred to California by his employer on May 1. 2005. His salary for the year was $90,000, of which $60,000 was earned after he became a California resident. In
11. Mao Tse-tung is a visiting professor at San Diego State University. He is paid $55,000 for the year. The $55,000 is exempt from Federal taxation because of a US-China tax treaty, What is Mao's
10. Casey Jones is a railroad engineer for the Union Pacific Railroad and a resident of Reno, Nevada. He spends eighty percent of his time operating trains into and out of California. Casey's wages
9. Captain Herb Kelleher flies for Southwest Airlines and is a resident of Phoenix. Arizona. This year he was scheduled to have sixty percent of his total flight time over California. Herb's wages
8. Terry Tax was a resident of Missouri from January 1 to September 30. On October I she became a California resident. She is a partner in an accounting firm that has 8 offices in California and 100%
7. Spencer Smooth, a Georgia resident, is a partner in the Atlanta office of Deloitte, Anderson, and Young. (DA&Y) an international accounting firm. Deloitte. Anderson and Young has 10 offices in
6. Zoe, a Nevada resident, has the following income items for the current year, Profit from sole proprietorship in Nevada Net rental income from a California apartment building Interest income on a
5. Luther Longball plays baseball for the Arizona Diamondbacks and is a resident of Arizona. His salary for playing baseball is $1.539.000 per year and there are 162 games during the baseball season.
4. Indicate whether each of the following taxpayers is a resident or nonresident of California for tax purposes. A. Karl was a resident of California who declared himself to be a resident of Alaska
3. Indicate whether each of the following taxpayers is a resident or nonresident of California for tax purposes.a. Gerald is a business executive and resides in Arizona with his family. Several times
2. List five factors that could be used to determine the residency of a taxpayer.a. b. Cd. C
1. An individual is a California resident if he or she is: a in California for other than a orb. domiciled in California, but outside California for a purpose. purpose. or
20. The California alternative minimion tax is the tentative minimum tax less the taxpayer's?a. Regular taxb. Alternative minimum taxable incomec. Alternative minimum tax exemptiond. Alternative
19. The California AMT exemption is phased out by what percentage over the threshold amount?a. 7%b. 10%c. 20%d. 25%e. None of the above
18. Which of the following is not a California AMT adjustment or preference?a. Personal property taxesb. Interest on a home loan used to purchase the homec. Real property taxesd. Depletione. All of
17. The California alternative minimum tax rate is:a. 3%b. 5%c. 7%d. 9.3%e. None of the above
16. Olive Oyl is married to Popeye, a CPO in the US Navy, who is stationed in California. Popeye is a resident of Ohio, Olive Ost has lived with Popeye in California for the last three years. In the
15. PFC Smith, an Oklahoma resident, is stationed in California. He has a part-time job as a security guard. He earns $5,000 as a security guard in the current year and $15,000 from the US Marines.
14.a. $0b. $16,000c. $32,000d. $48,000e. Some other amount An individual domiciled in California when entering the military is considered to be:a. Nonresident while stationed in Californiab. Resident
13. Patton is a California resident who is serving in California when he is trans- ferred to Alabama under Permanent Change of Station (PCS) orders. His salary is $4,000 per month. Patton is
12. Part-year California resident taxpayers file which tax form and associated schedules for California tax purposes?a. Form 540Ab. Form 540c. Form 540NRd. Form 540PYe. None of the above-
11. The ratio used to calculate the tax liability for nonresident and part-year res ident taxpayers is:a. Federal AGI/California AGIb. Federal taxable income/California taxable incomec. California
10. The calculation of nonresident and part-year resident California tax is designed to make sure the taxpayer pays:a. The lowest marginal rate of taxb. The highest marginal rate of taxc. The same
9. A nonresident merchant seaman spends 10% of his total time in California. He has a California driver's license and bank account. He earns $80,000 salary in the current year and has $1,000 interest
8. Nonresident airline employees whose scheduled flight time is California are subject to California individual income taxation.a. 20%b. 30%c. 50%d. 75%e. Some other percentage over
7. For a nonresident of California, which would not be taxed by Californiara. $100,000 prize winnings by a professional golfer from a golf tournament in Californiab. Profits from a sole
6. Brunhilde, a resident of Nevada, sold California real estate and received an installment note on the sale. This year she receives a payment of $12,000, of which $7,000 is return of basis. $3.800
5. For a nonresident of California, which of the following would be taxed by California?a. Interest on a California credit union savings accountb. Dividends of a California corporationc. Gain on the
4. Ralph earns a salary of $5,000 per month. On June 1. he is transferred from Modesto, California to Tucson, Arizona for a new, permanent job assignment. How much of Ralph's salary is taxable for
3. The Franchise Tax Board presumes individuals are California residents for tax purposes if they are in the state for more than:a. 6 monthsb. 9 monthsc. 12 monthsd. 18 monthse. None of the above
2. The California nonresident "safe harbor" rule requires a taxpayer to be out of the state for work related purposes for:a. 120 daysb. 183 daysc. 365 daysd. 546 dayse. None of the above

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Income Tax Fundamentals 2006 24th Edition Gerald E. Whittenburg, Martha Altus Buller - Solutions

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