Which one of the following correctly states one of the conditions established by the IRS for a lease to be considered valid for tax purposes

An operating lease:    A.  is recorded at its net present value on the balance sheet. B.  is recorded on the balance sheet as both an asset and a liability. C.  is recorded at its estimated residual balance on the balance sheet. D.  is reflected in the footnotes rather than on the balance sheet. E.  does not appear either on a financial statement or in the footnotes. Refer to section 27.2

21.

Which one of the following will classify a lease as a capital lease for accounting purposes?    A.  The lease transfers ownership of the asset to the lessee by the end of the lease. B.  The lease term is 75 percent or less of the estimated economic life of the asset. C.  The lessee can buy the asset at fair market value at the end of the lease. D.  The initial present value of the lease payments equals or exceeds 80 percent of the fair market value of the asset. E.  The total of the lease payments exceeds $100,000. Refer to section 27.2

22.

A capital lease is recorded as an asset on the balance sheet in an amount equal to:    A.  the dollar amount of each lease payment multiplied by the total number of lease payments in the original agreement. B.  the dollar amount of each lease payment multiplied by the number of lease payments remaining. C.  the dollar amount of each lease payment multiplied by the number of lease payments per year. D.  the lesser of the present value of the remaining lease payments or the cost of the asset. E.  the future value of the lease agreement at the time the agreement was made. Refer to section 27.2

23.

Which one of the following correctly states one of the conditions established by the IRS for a lease to be considered valid for tax purposes?    A.  The lease should have high payments at the beginning of the lease period and low payments at the end of the lease period. B.  Any renewal option should be based on a value which is less than the fair market value of the asset at the time of renewal. C.  The term of the lease must be less than 80 percent of the economic life of the asset. D.  The lessee should have the option to purchase the asset at a discounted price at the end of the lease term. E.  The lessor must have a reasonable expectation of earning an aftertax profit. Refer to section 27.3

24.

The IRS will disallow any lease that:    A.  has a lease term in excess of three years. B.  has a term that is less than one-half of the economic life of the asset. C.  involves a lessee that has net operating losses. D.  appears to exist solely to defer taxes. E.  reduces the combined tax obligations of the lessor and the lessee. Refer to section 27.3

25.

The incremental cash flows of leasing consider which of the following? I. cost of the asset II. lease payment amount III. applicable tax rate IV. annual depreciation expense    A.  I and III only B.  II and IV only C.  II, III, and IV only D.  I, II, and IV only E.  I, II, III, and IV Refer to section 27.4

Julie and Gus are married and file a joint return. They expect to have $230,000 of taxable income in the next year and are considering

If a taxpayer files his or her tax return and receives a tax refund from the​ IRS, does this mean that the IRS feels that the return is correct and will not be subject to a future​ audit?

What is the statute of limitations for transactions​ involving:

a. Fraud​ (e.g., failure to file a tax​ return)

b. Disallowance of tax deduction items

c. The omission of rental income that is equal to greater than​ 25% of the​ taxpayer's reported gross income

Many tax professionals have moved into the field of financial planning for their clients.

a. How do taxes impact financial planning for a​ client?

b. Why do tax professionals have a perfect opportunity to perform financial planning for their​ clients?

Julie and Gus are married and file a joint return. They expect to have $230,000 of taxable income in the next year and are considering whether to purchase a personal residence that would provide additional tax deductions of $69,000 for mortgage interest and real estate taxes.

(Here is the 2016 tax rate schedule for the Married filing jointly filing​ status.)

Requirements

a.	What is their marginal tax rate for purposes of making this​ decision?
b.	What is the tax savings if the residence is​ acquired?

There is no specific statutory exclusion for welfare benefits.​ Nevertheless, the IRS has ruled that such benefits are not taxable

There is no specific statutory exclusion for welfare benefits.​ Nevertheless, the IRS has ruled that such benefits are not taxable. Is this within the authority of the​ IRS?


QI:4-4
Most exclusions exist for one of two reasons. What are those​ reasons? Give examples of exclusions that exist for each.


QI:4-5

a. If a gift of property is​ made, who is taxed on income produced by the​ property?

b. How can interfamily gifts reduce a​ family's total tax​ liability?

QI:4-6

a. What role does intent play in determining whether a transfer is a gift and therefore not subject to the income​ tax?

b. Are tips received by employees from customers excludable from gross income as​ gifts? Explain.

QI:4-7
What is the tax significance of the face amount of a life insurance​ policy?


QI:4-10

Answer each of the​ following:

a.	Define the term scholarship as it is used in Sec. 117.
b.	If a scholarship covers room and​ board, is it​ excludable?
c.	If an employer provides a scholarship to an employee who is on leave of​ absence, is that scholarship​ taxable?
d.	Is the amount paid by a university to students for services excludable from the​ students' gross​ income?

QI:4-13

Answer the following questions relative to​ employer-financed medical and​ health, disability, and life insurance plans.

a. May employers deduct premiums paid on employee​ insurance?

b. Do employees have to include such premiums in gross​ income?

c. Are benefits paid to the employee included in the​ employee's gross​ income?

QI:4-16
What conditions must be met if an employee is to exclude meals and lodging furnished by an​ employer?


QI:4-18
Are the same fringe benefits that are available to employees also available to​ self-employed individuals?