1. Lillian bought local public activity municipal bonds and financed a new home because she was interested in getting some tax-free interest and itemizing her deductions on her federal tax return. This would be a good example of which of the following:

(1) Tax evasion
(2) Buying bonds exempt from regular income tax, but subject to AMT
(3) Tax avoidance
(4) Supporting a local municipality
(5) Building long-term equity through home ownership

A) 1, 2, and 5 only
B)
2, 3, 4, and 5 only
C)
3, 4, and 5 only
D) 3 and 5 only


2. Which of the following might a CFP® certificant recommend if they want to provide tax-deferred income to an investor:

(1)
Corporate bonds in a brokerage account
(2) Dividend stocks in a traditional IRA
(3) Fixed annuity
(4) High-yield mutual funds in a 401(k) plan
(5) REIT investments in a joint brokerage

A) 1, 2 , and 3 only
B)
2, 3, and 4 only
C)
3, 4, and 5 only
D)
1, 2, 3, 4, and 5

3.
Which of the following statements about taxes are TRUE?

A) Tax evasion is illegal
B)
Tax avoidance is illegal
C)
Tax-free income is taxed at the federal level
D) The Treasury Department is the highest source of tax authority

4. All of the following are issued by the National Office of the IRS, EXCEPT?

A) Private letter rulings
B)
Technical advice memorandums
C)
Revenue rulings
D) Regulations

5.
Which of the following statements are TRUE regarding the federal tax trial & appeal courts?

I. Jury trial is not available in the U.S. Tax Court
II. Appeals can be made to the U.S. Court of Appeals
III. In the U.S. District Court, taxpayer must pay their deficiency, then sue for refund
IV. U.S. Court of Federal Claims rules on monetary cases against the U.S.

A) I and II only
B)
I, II, and III only
C)
II, III, and IV only
D) I, II, III, and IV




Answer Key

Related Articles
  1. Taxes

    Tax Court: Your Last Resort

    Appealing an unfavorable or unfair tax ruling may be your last chance to save your finances.
  2. Financial Advisor

    3 Federal Income Tax Facts You Didn't Know

    Learn about three federal income tax facts that most Americans may not know from one of the most trusted financial resources on the Web.
  3. Taxes

    3 Ways To Avoid The Dividend Tax Hike

    Find out how you can offset the potential tax hikes.
  4. Taxes

    Investment Tax Basics For All Investors

    Nothing can be said to be certain, except death and taxes even in your investments.
  5. Taxes

    Taxes: Who Pays And How Much?

    When it comes to taxes, the debate is endless on who pays what, especially in Congress. With no new initiatives in sight, let's take a look at who is paying now.
  6. Investing

    How Mutual Funds Are Taxed in the U.S.

    A look at how mutual funds are taxed and how investors can be more tax efficient.
  7. Taxes

    Strategies for Protecting Your Income from Taxes

    Taxes are difficult to avoid, but there are many strategies you can find to help ward them off a bit. Here are a handful of ways to protect your income.
  8. Taxes

    The History Of Taxes In The U.S.

    The number of taxes that we now consider a given did not always exist. Find out how they arose.
  9. Taxes

    Understanding Taxes

    Taxes are mandatory fees that individuals and corporations must pay to their governments.
  10. Taxes

    What You Need To Know About Capital Gains And Taxes

    Find out how your profits are taxed and what to consider when making investment decisions.
Frequently Asked Questions
  1. What is the difference between a capital expenditure and a revenue expenditure?

    Capital expenditures represent major investments of capital that a company makes to expand its business and generate additional ...
  2. What is the difference between revenue and income?

    Revenue is simply the total amount of cash generated by the sale of products or services associated with the company's primary ...
  3. How can my stock's price change after hours, and what effect does this have on investors? Can I sell the stock at the after-hours price?

    When the regular market opens for the next day's trading, stocks may not necessarily open at the same price at which it traded ...
  4. What's the difference between a 401(k) and a Roth IRA?

    A 401(k) and a Roth IRA differ primarily on tax treatment, investment options, employer involvement, and limitations on contributions ...
Trading Center