ACC565 Midterm Exam - 2015: Taxation and Corporate Law Strayer University
A midterm exam covering taxation and corporate law.
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ACC565 Midterm Exam - 2015: Taxation
and Corporate Law Strayer University
Strayer ACC565 midterm exam 2015
Question 1
When a taxpayer contacts a tax advisor requesting advice as to the most advantageous way to
dispose of a stock, the tax advisor is faced with
Answer
a restricted-fact situation.
a closed-fact situation.
an open-fact situation.
a recognized-fact situation.
Question 2
During the course of an audit, a CPA discovers an error in a prior return. According to the
Statements on Standards for Tax Services, the CPA should
Answer
ask the client for permission to disclose the error to the IRS.
withdraw from the engagement.
inform the IRS of the error, regardless of whether the client grants permission.
correct the error in the current year's tax return.
Question 3
A Technical Advice Memorandum is usually
Answer
an internal IRS document describing alternative legislative proposals.
part of a Tax Court decision.
requested by the taxpayer before entering into a taxable transaction.
issued by the national office in response to an audit request.
Question 4
Regulations are
Answer
equal in authority to legislation.
equal in authority to legislation if statutory.
presumed to be valid and to have almost the same weight as the IRC.
equal in authority to legislation if interpretative.
Question 5
In accordance with the rules that apply to corporate formation, which one of the following
features does not make an issue of preferred stock "nonqualified"?
and Corporate Law Strayer University
Strayer ACC565 midterm exam 2015
Question 1
When a taxpayer contacts a tax advisor requesting advice as to the most advantageous way to
dispose of a stock, the tax advisor is faced with
Answer
a restricted-fact situation.
a closed-fact situation.
an open-fact situation.
a recognized-fact situation.
Question 2
During the course of an audit, a CPA discovers an error in a prior return. According to the
Statements on Standards for Tax Services, the CPA should
Answer
ask the client for permission to disclose the error to the IRS.
withdraw from the engagement.
inform the IRS of the error, regardless of whether the client grants permission.
correct the error in the current year's tax return.
Question 3
A Technical Advice Memorandum is usually
Answer
an internal IRS document describing alternative legislative proposals.
part of a Tax Court decision.
requested by the taxpayer before entering into a taxable transaction.
issued by the national office in response to an audit request.
Question 4
Regulations are
Answer
equal in authority to legislation.
equal in authority to legislation if statutory.
presumed to be valid and to have almost the same weight as the IRC.
equal in authority to legislation if interpretative.
Question 5
In accordance with the rules that apply to corporate formation, which one of the following
features does not make an issue of preferred stock "nonqualified"?
Answer
The shareholder can require the corporation to redeem the stock.
The dividend rate on the stock may not vary with interest rates, commodity prices, or other
similar indices.
The corporation is either required to redeem the stock or is likely to exercise a right to redeem
the stock.
The stock is limited and preferred as to dividends.
Question 6
The transferor's holding period for any boot property received in a Sec. 351 stock exchange
Answer
includes the holding period for the boot transferred.
begins on the day after the exchange.
begins on the day of the exchange.
is the same as the holding period of the stock received in the exchange.
Question 7
Rose and Wayne form a new corporation. Rose contributes cash for 85% of the stock and Wayne
contributes services for 15% of the stock. The tax effect is
Answer
Rose and Wayne must recognize their realized gains, if any.
Wayne must report the FMV of the stock received as capital gain.
Rose and Wayne are not required to recognize their realized gains.
Wayne must report the FMV of the stock received as ordinary income.
Question 8
Which of the following is an advantage of a sole proprietorship over other business forms?
Answer
tax-exempt treatment of fringe benefits
the deduction for compensation paid to the owner
low tax rates on dividends
ease of formation
Question 9
Trail Corporation has gross profits on sales of $140,000 and deductible expenses of $180,000. In
addition, Trail has a net capital gain of $60,000. Trail's taxable income is
Answer
a $20,000 loss.
a $40,000 loss.
$60,000.
$20,000.
Question 10
Which of the following results in a deferred tax asset?
Answer
Revenue or gains are recognized earlier for book purposes than for tax purposes.
Operating loss or tax credit carryforwards exist.
Tax basis of an asset is less than its book.
Expenses are deductible earlier for tax purposes than for book purposes.
Question 11
The shareholder can require the corporation to redeem the stock.
The dividend rate on the stock may not vary with interest rates, commodity prices, or other
similar indices.
The corporation is either required to redeem the stock or is likely to exercise a right to redeem
the stock.
The stock is limited and preferred as to dividends.
Question 6
The transferor's holding period for any boot property received in a Sec. 351 stock exchange
Answer
includes the holding period for the boot transferred.
begins on the day after the exchange.
begins on the day of the exchange.
is the same as the holding period of the stock received in the exchange.
Question 7
Rose and Wayne form a new corporation. Rose contributes cash for 85% of the stock and Wayne
contributes services for 15% of the stock. The tax effect is
Answer
Rose and Wayne must recognize their realized gains, if any.
Wayne must report the FMV of the stock received as capital gain.
Rose and Wayne are not required to recognize their realized gains.
Wayne must report the FMV of the stock received as ordinary income.
Question 8
Which of the following is an advantage of a sole proprietorship over other business forms?
Answer
tax-exempt treatment of fringe benefits
the deduction for compensation paid to the owner
low tax rates on dividends
ease of formation
Question 9
Trail Corporation has gross profits on sales of $140,000 and deductible expenses of $180,000. In
addition, Trail has a net capital gain of $60,000. Trail's taxable income is
Answer
a $20,000 loss.
a $40,000 loss.
$60,000.
$20,000.
Question 10
Which of the following results in a deferred tax asset?
Answer
Revenue or gains are recognized earlier for book purposes than for tax purposes.
Operating loss or tax credit carryforwards exist.
Tax basis of an asset is less than its book.
Expenses are deductible earlier for tax purposes than for book purposes.
Question 11
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University
Strayer University
Subject
Accounting