Taxation MCQs (Chapterwise Multiple Choice Questions)

Which of the following would be considered a f‌iscal tax year?

02/15/07 - 03/15/08

08/01/07 — 07/31/08

04/01/07 - 04/30/08

01/01/08 -12/31/08

Answer & Explanation

Correct Answer: 01/01/08 -12/31/08

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Which of the following is not eligible to be a shareholder of S Corporation?

A domestic partnership

Individuals who are not nonresident aliens.

Estates

An exempt organization described in section 401 (a) or 501(c)(3).

Answer & Explanation

Correct Answer: A domestic partnership

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Which of the following accounting changes does not require the f‌iling of Form 3115 to request a change in the accounting method?

Change from cash method to accrual method

Change in the method of valuing inventory.

Change from the accrual method to the cash method

Correction of a mathematical error.

Answer & Explanation

Correct Answer: Correction of a mathematical error.

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Which of the following may be considered as alimony?

Non-cash property settlement

Child support

Payments to keep up the payer's property.

Payments made to a third party on behalf of the former spouse for her tuition expenses

Answer & Explanation

Correct Answer: Payments made to a third party on behalf of the former spouse for her tuition expenses

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Which of the following is not a credit against gross estate tax in determining net estate tax?

Foreign death taxes

Qualif‌ied charitable contributions

Unif‌ied credit (applicable credit amount)

State death taxes

Answer & Explanation

Correct Answer: Qualif‌ied charitable contributions

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All of the following credits are part of the General Business Credit except .

Research and Development Credit

Investment Credit

Credit for employer paid FICA on employee tips used to meet the minimum Federal wage rate

Renewable electricity production credit

Answer & Explanation

Correct Answer: Renewable electricity production credit

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Which of the following is correct with respect to depreciation recapture when a property is used for trade or business?

The gain to the extent of depreciation claimed is not taxable.

The gain to the extent of depreciation claimed is taxed as a long term capital gain.

The gain to the extent of depreciation claimed is an ordinary gain and is taxed at a marginally higher rate than capital gains.

None of the above

Answer & Explanation

Correct Answer: The gain to the extent of depreciation claimed is an ordinary gain and is taxed at a marginally higher rate than capital gains.

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Which of the following is not rental income in the year in which it is received?

Payment to cancel the remaining lease

Expenditure on repairs paid by the tenant instead of rent

Security deposit refunded at the end of the tenure

Advance rent

Answer & Explanation

Correct Answer: Security deposit refunded at the end of the tenure

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Susan runs a consulting business. The gross receipts for the tax year are $60,000 and the net profit is $45,000. In addition, Susan received $25,000 as wages. She also received stock dividends of $2,000, Municipal Bond interest Of $4,000 and savings account interest of $1,000. What is her adjusted gross income?

$77,000

$92,000

$88.000

$73000

Answer & Explanation

Correct Answer: $73000

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Which of the following is income from passive activity?

Alaska Permanent Funds Dividend

State tax refund

Interest from a savings account.

Personal service income

Answer & Explanation

Correct Answer: Interest from a savings account.

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Taxation Quick Quiz

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