Bcom Bachelor of Commerce Bachelor of Commerce: Income Tax Laws 3

Question 1

Which IRS form is used by individuals to report their federal income tax return?

Accepted Answer

Form 1040

Answer

Form 1040 is the standard US Individual Income Tax Return used to report income, deductions, credits, and calculate tax owed or refund due.

Question 2

What is the concept of 'basis' in tax law?

Accepted Answer

The original cost of an asset used to calculate gain or loss on disposition

Answer

Basis is generally the original cost paid for an asset and is subtracted from the sales price to determine the taxable gain or deductible loss upon disposition.

Question 3

Under the 'constructive receipt' doctrine, when is income generally taxable to a cash-basis taxpayer?

Accepted Answer

When the funds are made available to the taxpayer without restriction

Answer

The constructive receipt doctrine holds that income is taxable when it is credited to the taxpayer's account or made available without substantial limitation, even if not yet physically received.

Question 4

Which of the following retirement account contributions is made with pre-tax dollars, reducing current taxable income?

Accepted Answer

Traditional IRA (deductible)

Answer

A deductible Traditional IRA contribution reduces adjusted gross income in the year of contribution; taxes are deferred until distributions are taken in retirement.

Question 5

What is the 'wash sale' rule?

Accepted Answer

A rule disallowing a loss deduction when substantially identical securities are repurchased within 30 days before or after the sale

Answer

The wash sale rule (IRC §1091) disallows a loss deduction if substantially identical securities are purchased within 30 days before or after the sale generating the loss.

Bcom Bachelor of Commerce Practice Test

Bcom Bachelor of Commerce Practice Test

Bcom Bachelor of Commerce Bachelor of Commerce: Income Tax Laws 3