Midterm by keralaguest

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									                         Income Taxation for Financial Advisors
                                   Midterm Exam


                                                                          1 points Save
Question 1
             Which of the following statements concerning Treasury actions
             related to federal income taxation is correct?

                   (A) Treasury regulations have often been overturned by the
                   courts.
                   (B) When a court holds a Treasury regulation invalid, the
                   IRS may not continue to enforce the regulation against other
                   taxpayers until it has been rewritten.
                   (C) Unlike Treasury regulations, revenue rulings are not
                   binding on IRS officials.
                   (D) Determination letters are not issued about unclear points
                   of law.
Question 2                                                                   1 points Save
             If Jennifer is in the 35 percent federal marginal tax bracket and has
             an opportunity to purchase a tax-free bond yielding 5 percent, what
             is the equivalent yield for a taxable bond?

                   (A) 5.31 percent
                   (B) 6.50 percent
                   (C) 7.69 percent
                   (D) 8.53 percent
Question 3                                                                 1 points Save
              Which of the following is the correct term for an item of income
              that is subtracted from an individual taxpayer's total income
              realized during the tax year to determine the taxpayer's gross
              income?

                    (A) a deduction
                    (B) an exclusion
                    (C) an exemption
                    (D) a tax credit
Question 4                                                                 1 points Save
             Which of the following statements concerning the standard
             deduction is correct?
                         Income Taxation for Financial Advisors
                                   Midterm Exam


                   (A) A special standard deduction amount applies to taxpayers
                   who are dependents.
                   (B) The amount of the standard deduction remains the same
                   from year to year until it is changed by Congress.
                   (C) If a single taxpayer is aged 65 or older and/or legally
                   blind, he or she is entitled to a deduction equal to twice the
                   regular standard deduction.
                   (D) Taxpayers with income above certain levels are subject
                   to a phaseout of their standard deduction.
Question 5                                                                  1 points Save
             Maggie is 65 years old and is owner and annuitant under an annuity
             contract that will begin this year, making annuity payments of
             $9,000 per year for life with 10 years certain. If Maggie's
             investment in the contract she has owned for 9 years is $100,000,
             her life expectancy under the regulations is 20 years, and the
             actuarial value of the 10 year guarantee is $6,000, what is the
             amount of the annuity payment that could be excluded from
             Maggie's gross income each year?

                   (A) $4,504
                   (B) $4,700
                   (C) $5,000
                   (D) $5,172
Question 6                                                                 1 points Save
             During the current tax year, Ray had $5,000 of physician and
             hospital expenses that were not reimbursed by health insurance and
             he paid premiums of $3,000 for an individual health insurance
             contract. If Ray's adjusted gross income is $50,000, how much can
             he deduct for medical expenses on his tax return for the current
             year?

                   (A) $0
                   (B) $3,750
                   (C) $4,250
                   (D) $8,000
Question 7                                                               1 points Save
              Rita, aged 60, is provided with $200,000 of group term life
              insurance for which she contributes $384 per year toward the cost
                         Income Taxation for Financial Advisors
                                   Midterm Exam
              of coverage. If the Table I cost per month per $1,000 of coverage
              for age 60 is $.66 and assuming no change in the amount of Rita's
              coverage during the year, how much taxable income must Rita
              report this year?

                    (A) $660
                    (B) $804
                    (C) $900
                    (D) $1,188
Question 8                                                               1 points Save
             Which of the following statements concerning the "kiddie tax" is
             correct?

                   (A) The kiddie tax applies only if a child is aged 12 or older
                   at the end of the tax year.
                   (B) Under the kiddie tax, the child's net unearned income is
                   taxed at the highest marginal rate applicable to the child's
                   parents for the year.
                   (C) The kiddie tax applies only to income generated by an
                   asset received from the child's parents.
                   (D) Only unearned income from assets transferred to the
                   child during the past 5 years including the current tax year is
                   subject to the kiddie tax.
Question 9                                                                  1 points Save
             The full value of which of the following gifts to a local food pantry
             that is a qualified public charity would be deductible as a charitable
             contribution in the year the gift is given?

                   (A) the value of the taxpayer's time and services spent
                   packing food at the food pantry
                   (B) newly purchased food items worth $200 given to the
                   food pantry
                   (C) a cash gift of $25,000 to the food pantry if the donor's
                   adjusted gross income is $40,000
                   (D) the landlord's gift to the food pantry of the right to use
                   his or her building rent free to conduct its activities of storing
                   and distributing food
Question 10                                                              1 points Save
              Sam paid his wife alimony of $50,000 in the first postseparation
              year, $30,000 in the second postseparation year, and $20,000 in
                        Income Taxation for Financial Advisors
                                  Midterm Exam
              the third postseparation year. Each year, Sam deducted the
              amount of the payment on his tax return, and his wife included the
              payment as gross income on her tax return. Which of the
              following statements concerning this situation is correct?

                    (A) Sam will have to include $10,000 in his income in the
                    third postseparation year for an excess alimony payment in
                    the first year.
                    (B) Sam will have to include $10,000 in his income in the
                    third postseparation year for an excess alimony payment in
                    the second year.
                    (C) Because the payments in the second and third
                    postseparation years equal the $50,000 paid in the first
                    year, there is no excess alimony payment that Sam must
                    include as income in the third postseparation year.
                    (D) Sam's wife will have to include $35,000 as income in
                    her return for the third postseparation year.
Question 11                                                               1 points Save
              In which of the following courts may a taxpayer request a jury
              trial?

                   (A) U.S. Tax Court
                   (B) U.S. District Court
                   (C) U.S. Court of Federal Claims
                   (D) U.S. Court of Appeals
Question 12                                                                1 points Save
              The tax rate schedules for which of the following types of filing
              status for taxpayers other than corporations produce the lowest tax
              payable for any one amount of income as compared with any other
              filing status?

                   (A) estates and trusts
                   (B) single taxpayers
                   (C)married taxpayers filing jointly
                   (D) unmarried heads of household
Question 13                                                             1 points Save
              Which of the following statements concerning qualified residence
              interest is correct?
                        Income Taxation for Financial Advisors
                                  Midterm Exam

                    (A) Because a qualified residence is the taxpayer's principal
                    residence, only interest on a loan secured by the principal
                    residence is deductible as qualified residence interest.
                    (B) Home equity indebtedness must be used for one of the
                    specific purposes identified in the Internal Revenue Code in
                    order to generate qualified residence interest.
                    (C) If total acquisition indebtedness is less than $1 million
                    for a single taxpayer, the interest on the mortgage on the
                    residence will be deductible as qualified residence interest.
                    (D) The total of acquisition indebtedness and home equity
                    indebtedness may not exceed the taxpayer's cost for the
                    home, or the interest on the home equity loan will not be
                    deductible as qualified residence interest.
Question 14                                                               1 points Save
              MNO Corp. provides a disability income plan for its employees
              and requires employees to contribute 60 percent of the premium
              cost through after-tax payroll deductions. If a covered employee
              receives $10,000 in disability income benefits from the plan this
              year, how much of the benefit must he or she include in gross
              income?

                   (A) $4,000
                   (B) $6,000
                   (C) $8,000
                   (D) $10,000
Question 15                                                            1 points Save
              Which of the following statements concerning deductions used in
              computing an individual's income tax is correct?

                   (A) All deductions are subtracted from gross income to
                   calculate a taxpayer's adjusted gross income.
                   (B) All deductions are available to reduce income subject to
                   tax only if their total exceeds the standard deduction.
                   (C) All deductions reduce a taxpayer's adjusted gross
                   income.
                   (D) Dollar-for-dollar, deductions have less impact on the
                   actual income tax a taxpayer owes than tax credits do.
Question 16                                                               1 points Save
              Which of the following taxes are deductible by individual
              taxpayers on Schedule A of the federal income tax return?
                         Income Taxation for Financial Advisors
                                   Midterm Exam


                    (A) state income taxes
                    (B) federal income taxes
                    (C) taxes paid on rental property owned by the taxpayer
                    (D) federal gift taxes




Question 17                                                              1 points Save
              Which of the following statements concerning the tax treatment of
              various governmental obligations is correct?

                    (A) Interest on all bonds issued by state and local
                    governments is excluded from gross income for federal
                    income tax purposes.
                    (B) Interest on all U.S. Treasury obligations is always
                    included in gross income for federal income tax purposes.
                    (C) Gain from the sale of municipal bonds is taxable for
                    federal income tax purposes.
                    (D) Interest on U.S. obligations is subject to state and local
                    taxation.




Question 18                                                              1 points Save
              Which of the following statements concerning the tax treatment of
              divorced or separated parents is (are) correct?

              I. Generally, the custodial parent will be entitled to claim the
              dependency exemption for a child when the parents are divorced
              or separated.

              II. If a couple is married at the beginning of a tax year, they are
              eligible to file jointly for that year even if they obtained a decree
              of divorce or of separate maintenance during the year.

                    (A) I only
                    (B) II only
                    (C) Both I and II
                         Income Taxation for Financial Advisors
                                   Midterm Exam

                    (D) Neither I nor II
Question 19                                                                1 points Save
              Which of the following statements concerning the income tax
              treatment of a second (vacation) home that is rented to others for a
              portion of the year is (are) correct?

              I. If the number of days the home is used as the taxpayer's
              residence during the year does not exceed the greater of 14 days or
              10 percent of the number of days during the year that the property
              is rented at fair market value, the property is treated as a residence
              for tax purposes.

              II. If the taxpayer rents the home for less than 15 days during the
              tax year, the rental income is excludible from the taxpayer's gross
              income and no deductions attributable to rental use are allowed.

                    (A) I only
                    (B) II only
                    (C) Both I and II
                    (D) Neither I nor II
Question 20                                                            1 points Save
              Which of the following statements concerning how the principle
              of assignment of income operates is (are) correct?

              I. Income that is generated by the performance of personal
              services is taxed to the person who performed the services.

              II. Income generated by property is taxed to the taxpayer who
              owns the property.

                    (A) I only
                    (B) II only
                    (C) Both I and II
                    (D) Neither I nor II
Question 21                                                                1 points Save
              VIM Corp. transfers stock to employee Jones under the conditions
              that Jones may not sell the stock for 10 years and must return the
              stock to the company if he resigns during that time. At what
              time(s) is Jones permitted to include the fair market value of the
              stock in his income for tax purposes?
                         Income Taxation for Financial Advisors
                                   Midterm Exam


              I. in the year in which the 10-year period expires

              II. at the time of transfer

                    (A) I only
                    (B) II only
                    (C) Both I and II
                    (D) Neither I nor II
Question 22                                                             1 points Save
              Which of the following statements concerning federal income tax
              compliance is (are) correct?

              I. Both individuals and corporations must generally file returns by
              April 15 for the previous calendar year or, if they are fiscal
              taxpayers, by the 15th day of the 4th month after their fiscal year
              ends.

              II. Unless fraud is involved, the IRS has 5 years from the time any
              return is filed within which to assess additional taxes.

                    (A) I only
                    (B) II only
                    (C) Both I and II
                    (D) Neither I nor II
Question 23                                                             1 points Save
              Which of the following statements concerning the deduction of
              insurance premiums as medical expenses is (are) correct?

              I. Although premiums paid for group medical insurance are
              deductible, premiums paid for individual health insurance policies
              are not deductible.

              II. Although expenses for qualified long-term care services are
              deductible as medical expenses, premiums for qualified long-term
              care insurance contracts are not deductible.

                    (A) I only
                    (B) II only
                         Income Taxation for Financial Advisors
                                   Midterm Exam

                    (C) Both I and II
                    (D) Neither I nor II
Question 24                                                                1 points Save
              Which of the following statements concerning the taxation of
              qualified long-term care insurance benefits and services is (are)
              correct?

              I. Benefits received from qualified long-term care insurance
              contracts are generally excludible from income subject to certain
              limits.

              II. The value of long-term care services provided by a spouse or
              relative of the individual for whom the services are performed is
              generally deductible as a medical expense.

                    (A) I only
                    (B) II only
                    (C) Both I and II
                    (D) Neither I nor II
Question 25                                                                1 points Save
              Which of the following statements concerning a cash-basis
              taxpayer's reporting of income is (are) correct?

              I. A cash-basis taxpayer always reports income and pays taxes on
              that income only if it is actually received during the taxable year.

              II. Cash-basis taxpayers can shift the year in which they will
              report an item of income merely by putting off the actual receipt
              of the income until their tax circumstances are more favorable.

                    (A) I only
                    (B) II only
                    (C) Both I and II
                    (D) Neither I nor II
Question 26                                                            1 points Save
              Which of the following statements concerning income tax basis is
              (are) correct?

              I. The recipient of an inheritance generally receives a carryover
                           Income Taxation for Financial Advisors
                                     Midterm Exam
              basis.

              II. The recipient of a gift generally receives a step-up in basis.

                       (A) I only
                       (B) II only
                       (C) Both I and II
                       (D) Neither I nor II
Question 27                                                             1 points Save
              Which of the following statements concerning deductions for
              losses by an individual taxpayer is (are) correct?

              I. In order for a deduction for a loss in the value of corporate
              securities to be taken on an individual's tax return, the securities
              must always have been sold or exchanged during the taxable year.

              II. Personal losses are deductible on an individual's tax return only
              if they are theft losses or casualty losses.

                       (A) I only
                       (B) II only
                       (C) Both I and II
                       (D) Neither I nor II




Question 28                                                              1 points Save
              Which of the following statements concerning the tax treatment of
              child support payments is (are) correct?

              I. Child support payments are deductible by the payer and
              includible in gross income by the payee.

              II. Payments are treated as child support to the extent that the
              applicable divorce or separation agreement fixes or designates
              them as such.

                       (A) I only
                       (B) II only
                         Income Taxation for Financial Advisors
                                   Midterm Exam

                    (C) Both I and II
                    (D) Neither I nor II




Question 29                                                                1 points Save
              Martin gives stock worth $50,000 to a qualified charity this year.
              If the stock cost Martin $26,000 when he purchased it 5 years ago,
              his adjusted gross income is $60,000, and this is his only
              charitable gift this year, which of the following statements
              concerning the amount Martin can deduct for his charitable
              contribution this year is (are) correct?

              I. Unless he makes a special election, Martin's maximum
              deduction this year is $18,000.

              II. If Martin elects to reduce the value of his gift by 100 percent of
              its potential gain, he can deduct $26,000 this year.

                    (A) I only
                    (B) II only
                    (C) Both I and II
                    (D) Neither I nor II
Question 30                                                                1 points Save
              During the current tax year, Greta has $1,000 of long-term capital
              gains from the sale of collectibles, $12,000 of long-term capital
              gains from the sale of ABC stock, $15,000 of long-term capital
              losses from the sale of QRS stock, and $20,000 of ordinary
              income. Which of the following statements concerning Greta's
              income tax situation is (are) correct?

              I. Greta could net her $3,000 of long-term capital loss from the
              stock sales against her long-term capital gains from the sale of
              collectibles.

              II. Greta could deduct the remaining $2,000 of her net long-term
              capital loss from the stock sales against ordinary income.

                    (A) I only
                    (B) II only
                        Income Taxation for Financial Advisors
                                  Midterm Exam

                    (C) Both I and II
                    (D) Neither I nor II
Question 31                                                                1 points Save
              Which of the following statements concerning the business
              expense deduction for education related to a business activity is
              (are) correct?

              I. Expenses are deductible as a business expense if incurred
              primarily for the purpose of maintaining or improving skills the
              taxpayer needs in his or her current employment or business
              activity.

              II. Expenses are deductible as a business expense if incurred
              primarily for the purpose of qualifying the taxpayer either for a
              new line of work or for meeting the minimum requirements to
              obtain employment as determined by the standards of a profession.

                    (A) I only
                    (B) II only
                    (C) Both I and II
                    (D) Neither I nor II




Question 32                                                                1 points Save
              Which of the following statements concerning the income tax
              consequence of a divorce settlement agreement stipulating that the
              ownership of an existing life insurance policy will be retained by
              the insured spouse who will continue to pay the premiums with the
              other spouse named as policy beneficiary is (are) correct?

              I. The payment of premiums is considered alimony, and thus the
              premiums paid are deductible by the policyowner-spouse and
              includible as income on the other spouse's return.

              II. The subsequent payment of death benefits will not be subject to
              income tax under the transfer-for-value rule.

                    (A) I only
                    (B) II only
                         Income Taxation for Financial Advisors
                                   Midterm Exam

                    (C) Both I and II
                    (D) Neither I nor II




Question 33                                                            1 points Save
              Which of the following statements concerning tax compliance
              penalties is (are) correct?

              I. Taxpayers who file incorrect returns may be subject to an
              accuracy-related penalty that is calculated as a percentage of the
              amount of the underpayment of tax actually due.

              II. Tax return preparers may be subject to one or more of several
              different penalties.

                    (A) I only
                    (B) II only
                    (C) Both I and II
                    (D) Neither I nor II
Question 34                                                              1 points Save
              Which of the following statements concerning the tax treatment of
              the value of child-and dependent-care costs provided by an
              employer under a written nondiscriminatory plan is (are) correct?

              I. An employee may exclude any amount of such child-and
              dependent-care costs provided by the employer from gross
              income.

              II. Any reimbursements under dependent-care assistance programs
              reduce the dollar limit on expenses qualifying for the child-care
              credit.

                    (A) I only
                    (B) II only
                    (C) Both I and II
                        Income Taxation for Financial Advisors
                                  Midterm Exam

                   (D) Neither I nor II
Question 35                                                                1 points Save
              Paula is the owner and annuitant under a variable annuity contract
              that will begin to make annuity payments this year. If Paula's life
              expectancy is 20 years and her investment in the contract is
              $200,000, which of the following statements concerning the tax
              treatment of her benefit payments is (are) correct?

              I. Paula may exclude $10,000 of each annual payment from her
              gross income.

              II. If the amount of an annual payment is less than the annual
              amount excludible from gross income, the unused portion of the
              excludible amount is lost for income tax purposes.

                   (A) I only
                   (B) II only
                   (C) Both I and II
                   (D) Neither I nor II
Question 36                                                                  1 points Save
              Generally, all or a portion of the interest paid is deductible for all
              the following types of loans EXCEPT

                    (A) indebtedness incurred in the course of a business
                    activity
                    (B) a loan incurred in the course of an investment activity
                    (C) a loan secured by the taxpayer's personal residence
                    (D) loans borrowed for personal use
Question 37                                                                1 points Save
              All the following statements concerning the federal income
              taxation of gifts are correct EXCEPT

                   (A) The value of stock given as a gift is not taxable at the
                   time the gift is made.
                   (B) Any dividends or capital gains earned on stock
                   subsequent to the time the gift was made are taxable to the
                   donee of the gift.
                   (C) A gift given by an employer to an employee in
                   recognition of his or her hard work and overtime beyond the
                        Income Taxation for Financial Advisors
                                  Midterm Exam

                   amount compensated by the company is not taxable to the
                   employee.
                   (D) A bequest of three payments paid from an estate is
                   excluded from the recipient's gross income.
Question 38                                                              1 points Save
              For a business-related expense to be deductible on a taxpayer's
              current income tax return, it must meet all the following
              requirements EXCEPT

                   (A) The expense must be ordinary in the sense that it is a
                   customary or usual expense made by many taxpayers
                   involved in the same business activity.
                   (B) The expense must be necessary in the sense that it is
                   appropriate and helpful to the taxpayer's business.
                   (C) The expense must be paid or incurred during the tax
                   year for which the return is being filed.
                   (D) The expense must be a capital expenditure related to the
                   operation of the business.
Question 39                                                                1 points Save
              All the following tax credits are phased out completely if the
              taxpayer's adjusted gross income is high enough EXCEPT

                   (A) dependent-care credit
                   (B) adoption credit
                   (C) credit for children
                   (D) education credits
Question 40                                                                1 points Save
              All the following statements concerning the tax treatment of
              capital gains and losses of individual taxpayers are correct
              EXCEPT

                   (A) Short-term capital gains are subject to ordinary income
                   tax rates unless they are offset by capital losses under the
                   netting process.
                   (B) All long-term capital gains are subject to a maximum
                   tax rate of 15 percent.
                   (C) Capital losses are fully deductible against capital gains
                   for the year.
                   (D) If a taxpayer's capital losses exceed capital gains for the
                   year, the net capital loss can be deducted from the
                        Income Taxation for Financial Advisors
                                  Midterm Exam

                   taxpayer's ordinary income in an amount up to $3,000 per
                   year.
Question 41                                                                1 points Save
              All the following statements concerning the deduction for health
              insurance premiums paid by a sole proprietorship, partnership, or
              S corporation for a proprietor, partner, or more-than-2-percent
              shareholder in the S corporation are correct EXCEPT

                   (A) The covered person is entitled to an itemized deduction
                   for the premiums paid.
                   (B) The deduction cannot exceed the individual's earned
                   income from the business that provides the health plan.
                   (C) The deduction is available only if the self-employed
                   person is not eligible to participate in any subsidized health
                   insurance plan maintained by an employer of the self-
                   employed person or the person's spouse.
                   (D) Premiums for qualified long-term care insurance are
                   eligible for this deduction.
Question 42                                                                1 points Save
              All the following statements concerning income subject to
              taxation are correct EXCEPT

                   (A) As a general rule, any item of income received by a
                   taxpayer is includible in gross income unless a specific
                   provision in the Internal Revenue Code specifically states
                   that the item may be excluded.
                   (B) In most cases, both income and capital are subject to
                   federal income taxation.
                   (C) The discharge of indebtedness is generally a taxable
                   event that results in gross income unless the discharge of the
                   debt can be treated as a nontaxable gift.
                   (D) Although some exceptions exist, income generally is
                   taxable when it is realized by the taxpayer.
Question 43                                                              1 points Save
              All the following are requirements an individual must meet to be
              treated as a "qualifying child" under the dependency exemption
              rules EXCEPT

                   (A) The individual must have gross income for the year in
                   an amount less than the amount of the exemption.
                   (B) The individual must meet a relationship test with regard
                   to the taxpayer claiming the exemption.
                        Income Taxation for Financial Advisors
                                  Midterm Exam

                   (C) The individual must have the same principal place of
                   abode as the taxpayer claiming the exemption for more than
                   half of the taxable year.
                   (D) The individual must generally have not attained a
                   specified age.




Question 44                                                              1 points Save
              All the following exchanges of insurance and annuity contracts
              qualify as a nontaxable exchange EXCEPT

                   (A) a life insurance contract exchanged for another life
                   insurance contract
                   (B) a life insurance contract exchanged for an annuity
                   contract
                   (C) an annuity contract exchanged for a life insurance
                   contract
                   (D) an annuity contract exchanged for another annuity
                   contract
Question 45                                                                1 points Save
              Ted, aged 53, has owned a deferred annuity for 10 years that
              currently has a cash value of $200,000. If his investment in the
              contract is $175,000, all the following statements concerning
              income taxation related to the contract are correct EXCEPT

                   (A) If Ted withdraws $10,000 from the contract, he will not
                   have to include the amount withdrawn as gross income on
                   his tax return because it is a return of investment in the
                   contract.
                   (B) If Ted completely surrenders the annuity contract, he
                   will have to include $25,000 as gross income on his tax
                   return.
                   (C) If Ted takes a distribution from the contract in the form
                   of a life annuity, he will be exempt from the 10 percent
                   penalty tax for premature distributions.
                   (D) If Ted gives the annuity contract to his daughter this
                   year, Ted must include $25,000 as gross income on his tax
                   return this year.
Question 46                                                            1 points Save
              All the following statements concerning income tax compliance
                        Income Taxation for Financial Advisors
                                  Midterm Exam
              are correct EXCEPT

                   (A) If a taxpayer disagrees with the IRS agent's conclusion
                   following an initial income tax audit, the taxpayer may
                   request a hearing before the IRS appeals organization.
                   (B) If no agreement is reached with the appeals
                   organization, statutory notice of deficiency is issued by the
                   commissioner of Internal Revenue.
                   (C) Following completion of the appeals process, a
                   taxpayer's only option is to pay the tax deficiency and then
                   file a claim for a refund with the U.S. District Court.
                   (D) No tax need be paid in advance for cases to be litigated
                   in the U.S. Tax Court.
Question 47                                                                1 points Save
              Expenses for all the following products and services are eligible
              for the medical expense deduction EXCEPT

                   (A) qualified long-term care services
                   (B) dental care
                   (C) most nonprescription drugs
                   (D) the cost of eyeglasses or contact lenses




Question 48                                                              1 points Save
              All the following statements concerning the income tax treatment
              of insurance premiums are correct EXCEPT

                   (A) Generally, premiums paid for personal life insurance
                   are not deductible.
                   (B) Generally, premiums paid on business life insurance are
                   not deductible.
                   (C) Generally, premiums paid for personal medical
                   reimbursement insurance are not deductible.
                   (D) Generally, premiums paid by an employer for medical
                   reimbursement insurance and disability income insurance
                   that directly benefit the employee are deductible by the
                   employer.
                        Income Taxation for Financial Advisors
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Question 49                                                               1 points Save
              All the following statements concerning the tax treatment of self-
              funded medical reimbursement plans are correct EXCEPT

                   (A) If a self-funded plan is discriminatory in either benefits
                   or eligibility, a highly compensated employee must include
                   the entire benefit received in gross income.
                   (B) If a self-funded plan is discriminatory in either benefits
                   or eligibility, an employee who is not a highly compensated
                   individual will have no taxable income for benefits
                   received.
                   (C) If a self-funded plan meets the nondiscrimination
                   requirements, the employee will have no taxable income for
                   benefits received.
                   (D) The employer will receive an income tax deduction for
                   benefit payments, regardless of whether the plan is
                   discriminatory or nondiscriminatory.




Question 50                                                              1 points Save
              All the following statements concerning the federal income tax
              system are correct EXCEPT

                   (A) Federal taxation must proceed from a statutory origin.
                   (B) Congress enacts federal income tax law that is now
                   compiled in the Internal Revenue Code.
                   (C) The Internal Revenue Code provides for the Treasury
                   Department to prescribe rules and regulations needed for
                   enforcement of the Code.
                   (D) Any disputes between taxpayers and the IRS are
                   ultimately settled by the U.S. Tax Court.




Question 51                                                               1 points Save
              All the following statements concerning the taxation of accident
              and health benefits are correct EXCEPT
                        Income Taxation for Financial Advisors
                                  Midterm Exam

                   (A) Medical expense reimbursements from accident and
                   health insurance plans are excluded from gross income to
                   the extent the taxpayer has not claimed a medical expense
                   deduction for the underlying medical costs as an itemized
                   deduction.
                   (B) If a taxpayer purchases a disability income policy with
                   after-tax dollars, the entire proceeds from the policy are
                   excluded from gross income.
                   (C) Disability income benefits paid by a nondiscriminatory
                   employer-sponsored plan are generally excluded from the
                   employee's gross income even if the employer pays all or
                   part of the premiums.
                   (D) Long-term care reimbursements are excluded from
                   gross income, subject to certain restrictions.




Question 52                                                                1 points Save
              All the following types of itemized deductions are subject to the 2
              percent of adjusted gross income floor EXCEPT

                   (A) unreimbursed employee transportation, travel, and
                   entertainment expenses
                   (B) casualty and theft losses
                   (C) fees for investment advice and tax advice
                   (D) deductible employment-related education expenses of
                   employees




Question 53                                                               1 points Save
              All the following state and local charges may be deductible by
              individual taxpayers on Schedule A of the federal income tax
              return EXCEPT

                   (A) real property taxes
                   (B) assessments for betterments
                   (C) income taxes
                   (D) personal property taxes
Income Taxation for Financial Advisors
          Midterm Exam

								
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