Taxation and Deduction Concepts: A Review of Key Tax Rules and Elections

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Taxation and Deduction Concepts: A Review of Key Tax Rules and ElectionsQuestion 21 pointsSaveThe tax benefit received from a tax credit is affected by thetax rate of the taxpayer.TrueFalseQuestion 31 pointsSaveIf the shareholders of a calendar year C corporation elect Sstatus on April 13, 2007, the election is effective for all of2007.TrueFalseQuestion 41 pointsSaveRealized gain or loss is measured by the difference betweenthe amount realized from the sale or other disposition ofproperty and the property’s adjusted basis at the date ofdisposition.TrueFalseQuestion 51 pointsSaveIn April 2007 Bertie, a calendar year cash basis taxpayer, hadto pay the state of Michigan additional income tax for 2006.Even though it relates to 2006, for federal income tax purposesthe payment qualifies as a tax deduction for tax year 2007.TrueFalseQuestion 61 pointsSaveAn eligible taxpayer may elect to receive advance payments ofthe earned income credit from his or her employer.True

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FalseQuestion 71 pointsSaveMindy paid an appraiser to determine how much a capitalimprovement made for medical reasons increased the value ofher personal residence. The appraisal fee qualifies as adeductible medical expense.TrueFalseQuestion 81 pointsSaveThe education tax credits are not available to help defray the costof higher education if the income level of the taxpayer exceedscertain thresholds.TrueFalseQuestion 91 pointsSaveWhen a taxpayer has purchased several lots of stock on differentdates at different purchase prices andcannotidentify the lot ofstock that is being sold, he may choose which lot of stock isdeemed to be sold.TrueFalseQuestion 101 pointsSavePartnerships are considered to be separate taxable entities and,consequently, do not avoid taxation at the entity level.TrueFalseQuestion 111 pointsSaveAn education expense deduction isnotallowed if the educationresults in a promotion or pay raise for the employee.TrueFalseQuestion 121 pointsSaveThe § 179 deduction can exceed $112,000 in 2007 if the

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taxpayer had a § 179 amount that exceeded the taxable incomelimitation in the prior year.TrueFalseQuestion 131 pointsSaveIn computing the NOL of a corporation, the dividends receiveddeductioncanbe claimed.TrueFalseQuestion 141 pointsSaveA partner’s basis in the partnership interest isdecreasedby hisor her share of the tax-exempt income received by thepartnership.TrueFalseQuestion 151 pointsSaveAlthough partnerships arenotsubject to income tax, they arerequired to file income tax returns.TrueFalseQuestion 161 pointsSaveBoth education tax credits are available for qualified tuitionexpenses and, in certain instances, may also be available forroom, board, and book costs.TrueFalseQuestion 171 pointsSaveIf Wal-Mart stock decreases in value during the tax year by$4,500, the amount realized is a negative $4,500.TrueFalseQuestion 181 pointsSave

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