Chapter-1: Principles of Income-Tax Law Self Assessment Questions 1. The tax base is: a. the measure or value upon which a tax is levied. b. None of the other answer options. c. All of the other answer options. d. a flow measure.
2. A tax that exacts a higher proportion of income from higher-income households than from lower-income households is a: a. marginal tax rate. b. progressive tax. c. excise tax. d. regressive tax.
3. Which of the following are BOTH regressive taxes? a. the personal income tax and excise taxes. b. the personal income tax and sales taxes. c. None of the other answer options. d. excise taxes and sales taxes.
4. The total amount of tax you pay divided by your income is your: a. tax base. b. average tax rate. c. personal exemption. d. standard deduction.
5. A theory of fairness holding that taxpayers should contribute to the government in the form of taxes in proportion to the benefits that they receive from public expenditures is the:
a. vertical equity. b. horizontal equity. c. ability-to-pay principle. d. benefits-received principle.
6. The "best" tax base is: a. wealth. b. the subject of considerable debate. c. consumption. d. one that creates excess burdens.
7. Tax shifting: a. results in the burden of the tax falling on those who were not the ones initially responsible for paying it. b. is less likely with broad-based taxes than with partial taxes. c. None of the other answer options. d. All of the other answer options.
8. Which of the following statements is TRUE? a. The payroll tax is progressive. b. If a payroll tax were initially levied on workers instead of on firms the firms would not end up sharing the burden of the tax. c. Workers bear the bulk of the burden of a payroll tax if labour supply is relatively inelastic and firms bear the bulk of the burden of a payroll tax if labour supply is relatively elastic. d. Workers bear the bulk of the burden of a payroll tax if labour supply is relatively elastic and firms bear the bulk of the burden of a payroll tax if labour supply is relatively inelastic.
9. The corporate profits tax: a. could cause wages to rise or fall.
b. eventually depresses profits in other sectors besides the corporate sector. c. is progressive. d. All of the other answer options.
10. The principle which states that, all else equal, a tax that does not distort economic decisions is preferable to one that does is the: a. ability-to-pay principle. b. None of the other answer options. c. principle of neutrality. d. principle of second best.
11. Utility is: a. distribution. b. fairness. c. equity. d. a concept used as a measure of well-being.
12. Which of the following statements is TRUE? a. A person working for a low wage might be better off than someone else who works for a higher wage. b. People act to maximise their utility. c. The distribution of income or of wealth is used as indirect measures of well- being. d. All of the other answer options.
13. Households derive their income from all of the following sources EXCEPT: a. the government. b. utility. c. property. d. None of the other answer options.
14. About 64 percent of the personal income in Canada in 1999 was derived from: a. property. b. government. c. human capital. d. wages and salaries.
15. Income from property takes the form of: a. dividends. b. interest. c. profits. d. All of the other answer options.
16. Which of the following statements is FALSE? a. Money income is a more complete income measure than economic income. b. Income from property is more unevenly distributed than wages and salaries. c. Income distribution in Canada has remained relatively stable over time. d. Transfers flow to low-income households but not solely to them.
17. The age group with the highest incidence of poverty in Canada in 1997 was: a. families with household head aged 55 to 64. b. families with household head aged 65 and over. c. families with household head aged 24 to 34. d. families with household head aged under 24.
18. Social contract theory refers to a theory of distributional justice developed by: a. Karl Marx. b. John Rawls. c. Lyndon Johnson. d. John Stuart Mill.
19. The most important progressive tax in Canada is: a. the personal income tax. b. the corporate income tax. c. sales (excise) taxes. d. GST.
20. Which of the following is an example of a demogrant? a. Canada Pension Plan. b. private pension plan benefits. c. Old Age Security Benefit. d. personal income tax.
Answers for Self Assessment Questions 1. (c)
2.(b)
3.(d)
4.(b)
5.(d)
6. (b)
7.(d)
8.(c)
9.(d)
10.(c)
11. (d)
12.(d)
13.(b)
14.(d)
15.(d)
16. (a)
17.(d)
18.(b)
19.(a)
20.(c)
Chapter-2: Income Tax Self Assessment Questions
1. How many states do not have a personal income tax? a. All states have a personal income tax. b. 9 c. 10 d. 11
2. All of the following are types of properties that are exempt from property taxes except: a. Private homes b. Religious Organizations c. Charitable Organizations d. Public Educational Buildings
3. ................ is the most important source of revenue for states. a. Income Tax b. Property Tax c. Sales Tax d. None of the above.
4. .................................... is the most important source of revenue for local governments. a. Sales Tax b. Property Tax c. Income Tax d. None of the above.
5. All of the following are examples of excise taxes except:
a. Gasoline Taxes b. Cigarette Taxes c. Property Taxes d. Alcohol Taxes
6. How many states operate lotteries to generate revenue? a. 39 b. 40 c. 48 d. All 50 states operate lotteries to generate revenue.
7. All of the following are examples of capital expenditures except: a. Purchasing a new police vehicle b. Lawn maintenance c. Constructing a new school d. All of the above are examples of capital expenditures.
8. Over one-half the money spent by state and local governments goes to just three services. Which of the following is not one of these services? a. Public Education b. Public Welfare c. Parks and Recreation d. Health Care
9........................ is defined as a dollar per thousand dollars of assessed value of property and is used to calculate a property owner's tax bill. a. Mill
b. Progressive Tax c. Assessed Value d. Tax Burden
10. ........................ is defined as the transfer of services to private enterprise. a. Capital Spending b. Decrements c. Attrition d. Privatization
11. ............................ is defined as fairness in spending. a. Equity b. Effectiveness c. Efficiency d. All of the above are concerned with fairness in spending.
12. A.......................... tax system places a relatively large tax burden on upper-income people and a relatively small tax burden on lower-income people. a. Progressive b. Proportional c. Regressive
13. A............................ tax system places a relatively large tax burden on lower-income people and a relatively small tax burden on upper-income people. a. Progressive b. Proportional c. Regressive
14. A.................................. tax system takes the same percentage of each person's income, regardless of whether the income is high, medium, or low. a. Proportional b. Regressive c. Progressive
15. ...............................is defined as the total amount of taxes paid as a percentage of a person's income. a. Marginal Tax b. Tax Revenue c. Revenue System d. Tax Burden
16. All states except................................... require their state, via state constitutional or statutory requirements, to balance their budget. a. Texas b. All states require a balanced budget c. North Carolina d. Vermont
17. Which group is unlikely to support tax limitations? a. People who benefit from government spending b. People whose tax burdens are heaviest c. People who think government wastes a lot of money d. Conservatives and Republicans
18. How many states do not have a corporate income tax? a. All states have a corporate income tax b. 4 c. 5
19. Which of the following is the fastest growing source of revenue for state and local governments? a. The property tax b. User fees c. The sales tax d. None of the above.
20. ..............................are bonds issued by governments that pledge their "full faith and credit," including tax revenues, to repayment. a. General Obligation Bonds b. General Revenue Bonds c. Revenue Bonds d. Expenditure Bonds
Answers for Self Assessment Questions 1. (b)
2.(a)
3.(c)
4.(b)
5.(c)
6. (b)
7.(b)
8.(c)
9.(a)
10.(d)
11. (a)
12.(a)
13.(c)
14.(a)
15.(d)
16. (d)
17.(a)
18.(b)
19.(b)
20.(a)
Chapter-3: Taxation of Residents Self Assessment Questions 1. A person is treated as being UK resident for a tax year if he or she is physically present in the UK for at least ---- days in the year or makes regular visits to the UK averaging at least --- days per year. Fill in the blanks. a. 183, 91 b. 91, 183 c. 182, 90 d. 90, 182
2. Eric, who has lived in the Netherlands for the whole of his life, arrives in the UK on 1 June 2012 and remains in the UK until 31 December 2012, when he returns permanently to the Netherlands. His UK residence status for 2012-13 is: a. Resident and ordinarily resident b. Resident but not ordinarily resident c. Ordinarily resident but not resident d. Neither resident nor ordinarily resident
3. In 2012-13, Lily (who is resident and ordinarily resident in the UK for the year) earns a gross salary from her UK employment of £45,000. PAYE of £7,600 is deducted from this income. She owns a holiday home in France and receives rents of £2,250 for the year. This is the net figure after withholding tax of 25% has been deducted. Her income tax payable for the year is: a. £9,084 b. £1,484 c. £734 d. £284
4. An employee who is not resident in the UK will be liable to UK income tax: a. On all employment income arising both from duties performed in the UK and from duties performed overseas (on the receipts basis) b. On all employment income arising both from duties performed in the UK and from duties performed overseas (on the remittance basis) c. On employment income arising from duties performed in the UK (on the receipts basis) and on employment income arising from duties performed overseas (on the remittance basis) d. On employment income arising only from duties performed in the UK (on the receipts basis)
5. Interest on UK government securities is exempt from UK income tax if the recipient is not ----in the UK. Fill in the blank. a. Domiciled b. Resident c. Resident and ordinarily resident d. Ordinarily resident
6. Haxmore Ltd, a UK resident company, owns 100% of the share capital of two other UK companies and 80% of the share capital of a company resident in Italy. Haxmore Ltd has three associated companies. True or False? a. True b. False
7. In the year to 31 March 2013, a UK resident company receives overseas income of £9,000 (net) from which 10% tax has been deducted at source. The company’s only other income is a UK trading profit of £80,000. There are no associated companies. What is the UK corporation tax liability for the year?
a. £18,000 b. £17,000 c. £16,000 d. £15,000
8. The profits of a controlled foreign company which are apportioned to a UK company are charged to corporation tax at the UK company’s average rate of tax. True or False? a. True b. False
9. In the year to 31 March 2013, a UK resident company made a UK trading profit of £100,000. The company's only other income consisted of rents received of £52,500 (net) from an investment property in Germany. These rents were received net of withholding tax of 25%. The company has no associated companies. The credit for double tax relief that will be given in the corporation tax computation for the year will be: a. £13,125 b. £17,500 c. £14,000 d. £nil
10. In the year to 31 March 2013, a UK resident company made a UK trading profit of £250,000 and received net overseas income of £25,350 (net of 22% withholding tax). These were the company's only sources of income. The company also paid a qualifying charitable donation of £5,000. For double tax relief purposes, the charitable donation will be allocated as a deduction from the company's overseas income. True or False? a. True b. False
11. Which of the following types of income is not specifically exempt from income tax? a. Statutory redundancy pay b. Income from Individual Savings Accounts c. Any benefit in kind provided to employees by an employer d. Income from National Savings Certificates
12. The basic rate of income tax on non-savings income for tax year 2011-12 is: a. 20% b. 10% c. 40% d. 50%
13. If a married couple (or civil partners) receive joint income, the amount of that income will normally be divided equally between them for tax purposes. True or False? a. True b. False
14. A taxpayer has taxable income for 2011-12 (after deducting the personal allowance) of £75,200. None of the income is derived from savings or dividends. The income tax liability for the year is: a. £15,040 b. £23,080 c. £30,080 d. £37,600
15. A taxpayer has taxable income for 2011-12 (after deducting the personal allowance) of £185,300. None of the income is derived from savings or dividends. The income tax liability for the year is:
a. £92,650 b. £74,120 c. £70,650 d. £37,060
16. Which of the following types of income is received by individuals without deduction of basic rate tax? a. Loan interest paid by UK companies b. Building society interest c. Patent royalties d. Bank interest received on a National Savings bank account
17. In 2011-12, an individual receives net building society interest of £792. The equivalent gross income is: a. £792 b. £1,320 c. £880 d. £990
18. In 2011-12, George has property income of £8,000 and net bank interest of £4,000. He claims the personal allowance of £7,475. What is the income tax borne for the year? a. £901.50 b. £849.00 c. £1,105.00 d. £552.50
19. In 2011-12, an individual receives a net dividend of £648. The equivalent gross income is: a. £720 b. £810 c. £648 d. £6,480
20. In 2011-12, Steven has business profits of £34,125, net bank interest of £1,240 and net dividends of £9,000. He claims the personal allowance of £7,475. What is the income tax payable for the year after subtracting tax deducted at source? a. £7,360 b. £6,050 c. £8,280 d. £6,290
Answers for Self Assessment Questions 1. (a)
2.(b)
3.(c)
4.(d)
5.(d)
6. (a)
7.(b)
8.(a)
9.(c)
10.(b)
11. (c)
12.(a)
13.(a)
14.(b)
15.(c)
16. (d)
17.(d)
18.(a)
19.(a)
20.(b)
Chapter-4: Taxation of Non-Residents Self Assessment Questions 1. "Inbound taxation" deals with the U.S. tax rules that apply to foreign persons doing business in the United States. a. True b. False
2. A U.S. citizen earns $10,000 of rental income from her property in Italy. The rental income will not be subject to U.S. tax because it is considered foreign source income. a. True b. False
3. A citizen of France will only be subject to U.S. taxation if he spends 183 days or more in the United States during the year. a. True b. False
4. All foreign taxes paid by a U.S. corporation can be claimed as credits on its U.S. tax return. a. True b. False
5. A U.S. corporation's gross profit from sale of inventory it manufactures in the United States will be treated entirely as U.S. source income. a. True b. False
6. One of the goals of an income tax treaty between the United States and other countries is to reduce the withholding taxes imposed on cross-border payments such as dividends, interest, and royalties. a. True b. False
7. An individual owning 100 percent of a Dutch corporation will be eligible for a deemed paid foreign tax credit on dividends received from the corporation. a. True b. False
8. Subpart F of the Internal Revenue Code was created to prevent the deferral of U.S. taxation on certain types of passive income earned by foreign corporations controlled by U.S. shareholders. a. True b. False
9. Which of the following persons is not a "U.S. shareholder" of a controlled foreign corporation (CFC) for subpart F purposes? a. A U.S. corporation owning 25 percent of the CFC b. A U.S. citizen owning 10 percent of the CFC c. A U.S. citizen owning 5 percent of the CFC d. A U.S. trust owning 10 percent of the CFC
10. Which of the following is not a "chargeable person" for CGT purposes? a. An individual who is resident and ordinarily resident in the UK b. A company which is resident in the UK c. A partner in a UK partnership d. A trustee of a UK trust
11. Which of the following is a "chargeable asset" for CGT purposes? a. A motor car b. A taxpayer's principal private residence c. A taxpayer's holiday home d. Gilt-edged securities
12. Which of the following could give rise to a capital gain (or allowable loss)? a. A gift of an asset to a charity b. A transfer of an asset between a husband and wife who live together during the tax year in which the transfer occurs c. A disposal caused by the death of the taxpayer d. The receipt of compensation on the destruction of an asset
13. A taxpayer has a single capital gain in 2012-13 of £18,000. The gain does not qualify for entrepreneur's relief and there are no other gains or losses in the year. The taxpayer's taxable income for the year (after deducting the personal allowance) is £20,000 and there are no Gift Aid donations or pension contributions during the year.
The CGT liability for the year is: a. £1,332 b. £2,072 c. £3,240 d. £3,603
14. A taxpayer has a single capital gain in 2012-13 of £15,600. The gain does not qualify for entrepreneur's relief and there are no other gains or losses in the year. The taxpayer's taxable income for the year (after deducting the personal allowance) is £50,000 and there are no Gift Aid donations or pension contributions during the year. The CGT liability for the year is:
a. £900 b. £4,368 c. £1,400 d. £2,808
15. A taxpayer has a single capital gain in 2012-13 of £22,500. The gain does not qualify for entrepreneur's relief and there are no other gains or losses in the year. The taxpayer's taxable income for the year (after deducting the personal allowance) is £30,000 and there are no Gift Aid donations or pension contributions during the year. The CGT liability for the year is: a. £2,142 b. £5,863 c. £2,895 d. £3,332
16. A taxpayer has a capital loss brought forward from the previous tax year of £2,000. In 201213 he has capital gains of £18,200 and allowable losses of £700. What is the CGT assessment for 2012-13? a. £17,500 b. £15,500 c. £6,900 d. £4,900
17. Payments on account of capital gains tax fall due on 31 January in the tax year concerned and on the following 31 July. True or False? a. True b. False
18. Repayment supplement is calculated at a lower rate than the rate at which interest is charged on overdue income tax. True or False?
a. True b. False
19. Which of the following types of income is not specifically exempt from income tax? a. Statutory redundancy pay b. Income from Individual Savings Accounts c. Any benefit in kind provided to employees by an employer d. Income from National Savings Certificates
20. The basic rate of income tax on non-savings income for tax year 2012-13 is: a. 20% b. 10% c. 40% d. 50%
Answers of Self Assessment Questions 1. (a)
2.(b)
3.(b)
4.(b)
5.(b)
6.(a)
7.(b)
8.(a)
9.(c)
10.(b)
11(c)
12.(d)
13.(a)
14.(c)
15.(c)
16.(d)
17.(b)
18.(a)
19.(c)
20.(a)
Chapter-5: Service Tax Self Assessment Questions
1. Which two of the following are defined as sources of ‘customs and excise’ revenue? a. Petroleum Revenue Tax b. VAT c. Fuel Duties d. Both B and c
2. Which two of the following are the most accurate indicators of the government’s budgetary situation (fiscal stance) in any given year? a. Public Sector Net Cash Requirement b. Income Tax Schedules c. Public Sector Net Borrowing d. Both A and C
3. In the following five questions you will be given a description of a particular aspect of taxation. Which one of the expressions listed underneath most accurately fits the description? A tax system in which the marginal rate of taxation is higher than the average rate. a. A proportional tax system b. A welfare maximising tax system c. A progressive tax system d. A tax system which encourages additional effort
4. Results in the ‘income method’ giving a smaller value for the National Income than the ‘expenditure method’.
a. Increase in the ‘black economy’ b. Fall in VAT receipts
c. Downturn in the economy d. Growth in the incidence of indirect taxation
5. A person’s income when employed is less than when unemployed. a. The replacement rate is less than 100% b. The implicit marginal tax rate is more than 100% c. The replacement rate is greater than 100% d. The implicit marginal tax rate is less than 100%
6. A statistical relationship between tax revenue and tax rates which argues against ‘composite tax rates’ above 45%. a. The ‘Laffer’ curve b. The ‘indifference’ curve c. The ‘implicit marginal tax rate’ curve d. The ratio of direct to indirect taxation
7. In which circumstance would indifference curve analysis predict that a fall in income tax would increase incentives to work? a. Income effect outweighs substitution effect b. Substitution effect is zero c. Income effect is zero d. Substitution effect outweighs income effect
8. Taxes on expenditures (VAT and Customs and Excise) provide more tax receipts for government than taxes on incomes (Income Tax, Corporation Tax, Petroleum, Revenue Tax). a. True b. False
9. UK direct taxes are progressive while indirect taxes are regressive.
a. True b. False
10. The UK is one of the most highly taxed countries in the developed world in terms of tax revenue as a percentage of GDP. a. True b. False
11. The allocation of revenues from extra taxes to specific outcomes is known as ‘the regulator’. a. True b. False
12. The large reduction in numbers of low income households facing implicit marginal tax rates of 100% suggests some progress in removing the ‘poverty trap’. a. True b. False
13. The Chance Dice Corporation had taxable income (excluding capital gains) of $16 million. Under the Revenue Reconciliation Act of 1993, the firm's $10,000 of realized capital gains will be taxed at ................. a. 39 percent b. 35 percent c. 34 percent d. the average tax rate of the firm
14. A corporation in the U.S. estimates and pays it taxes ...................... a. monthly b. quarterly c. semi-annually
d. annually
15. The average tax rate is equal to the ................................ a. total tax liability divided by taxable income b. rate that will be paid on the next dollar of taxable income c. median marginal tax rate d. percentage increase in taxable income from the previous period
16. Accounting.com has purchased 3-year class equipment for $100,000. It uses the MACRS method of depreciation. What is tax depreciation for the fourth year? a. $0 b. $7,410 c. $25,000 d. $33,333
17. In finance we refer to the market where existing securities are bought and sold as the ........................ market. a. money b. capital c. primary d. secondary
18. Which of the following is not an example of a financial intermediary? a. Wisconsin S&L, a savings and loan association. b. Strong Capital Appreciation, a mutual fund. c. Microsoft Corporation, a software firm. d. College Credit, a credit union.
19. How are funds allocated efficiently in a market economy?
a. The economic unit that considers itself most in need of funds receives funds first followed by those who are less in need. b. Receipt of funds is rotated over time so that each economic unit can receive them in turn. c. The largest economic units receive the funds first followed by smaller firms if sufficient funds are available. d. The economic unit that is willing to pay the highest expected return for a given risk level receives the funds.
20. What mechanism ensures that large firms who benefit from tax laws pay some minimum amount of tax? a. Annual minimum tax. b. Alternative minimum tax. c. Minimum tax law. d. Corpulent minimum tax.
Answers for Self Assessment Questions 1. (d)
2.(d)
3.(c)
4.(a)
5.(c)
6. (a)
7.(d)
8.(b)
9.(a)
10.(b)
11. (b)
12.(a)
13.(b)
14.(b)
15.(a)
16. (b)
17.(d)
18.(c)
19.(d)
20.(b)
Chapter-6: Direct Taxation Laws Self Assessment Questions 1. The following is capital receipt: a. Dividend from investment; b. Bonus shares; c. Sale of technological know- how; d. Compensation received for compulsory evacuation of place of business.
2. Following is not a capital receipt: a. Dividend on investment; b. Bonus shares; c. Sale of know-how; d. Compensation received for vacating business place.
3. An individual is said to be resident in India in a previous year (in which the February month has 29 days) if he is in India in that year for a period or periods amounting in all to 182 days or more, a. 182, b. 183, c. 60, d. 150
4. The assessee is charged to income-tax in the assessment year following the previous year: a. A non-resident business firm which shipped goods on 1.5.210 at Visakhapatnam Port in Andhra Pradesh b. An employee left India to USA on 1.8.2010 with no intention of returning c. ABC firm which discontinued its business on 1.9.2010 d. An employee-assessee of a University who worked during 1.4.09 to 30.03.2010
5. Income received in India in previous year is taxable in the hands of: a. Resident; b. Not-resident; c. Non ordinarily resident; d. All above.
6. Expenditure incurred by an employer on medical treatment and stay abroad of the employee shall not be taxed in the case of ............................. a. an employee whose gross total income before including the said expenditure does not exceed Rs. 2 lakhs. b. an employee whose income under the head "Salaries" exclusive of all monetary perquisites does not exceed Rs. 2 lakhs, c. an employee whose income under the head "Salaries" exclusive of all non-monetary perquisites does not exceed Rs. 2 lakhs, d. all employees irrespective of their amount of gross total income/the amount of income under the head "Salaries".
7. Gross Total Income' means aggregate of income computed under various heads and after allowing deduction under a. True b. False
8. If a person is resident and ordinarily resident of India, his income earned outside India is taxable in the country in which he earned that income.
a. True b. False
9. Where a person does basic operations in lands and later sells the saplings grown by him in a nursery owned by him, the same will be agricultural income. If the basic operations are not
done by the assessee and the saplings are sold in his nursery, the same will still be regarded as agricultural income. a. True b. False
10. If an employer transfers second hand motor car to the employee, the perquisite is valued at a. Actual cost less depreciation @ 30% for every completed year under straight line method b. Actual cost less depreciation @ 20% for every completed year under WDV method c. Actual cost less depreciation @ 30% for every completed year under WDV method d. Actual cost less depreciation @ 20% for every completed year under SLM method.
11. The following is exempt income............... a. Travel concession to employee b. Remuneration received for valuation of answer scripts c. Encashment of leave salary whilst in service
12. The following is not taxable as income under the head "Salaries":a. Commission received by a full-time director; b. Remuneration received by a partner; c. Allowances received by an employee; d. Free accommodation given to an employee.
13. A major disadvantage of the corporate form of organization is the ........................
a. double taxation of dividends b. inability of the firm to raise large sums of additional capital c. limited liability of shareholders d. limited life of the corporate form
14. Which of the following examples would be deductible as an expense on the corporation's income statement? a. Interest paid on outstanding bonds. b. Cash dividends paid on outstanding common stock. c. Cash dividends paid on outstanding preferred stock. d. All of the above.
15. A corporation that receives $1,000 in dividends from another corporation, of which they have owned 10% for one full year, will be taxed on how much of those dividends? a. All $1,000 of the dividends. b. None of the dividends since it is from another corporation. c. $100 (10% of $1,000) since they owned a 10% position for at least 6 months. d. $300 (30% of $1,000) since 70% of dividends is tax exempt.
16. In finance we refer to the market where new securities are bought and sold for the first time as the .............................. market. a. money b. capital c. primary d. secondary
17. Limited liability companies (LLCs) generally possess no more than two of the following four (desirable) characteristics: (1) limited liability, (2) centralized management, (3) unlimited life, and (4) the ability to transfer ownership interest without prior consent of the other owners. The two characteristics most likely to be absent in LLCs are............................ a. limited liability and centralized management b. centralized management and unlimited life c. centralized management and the ability to transfer ownership interest without prior consent of the other owners d. unlimited life and the ability to transfer ownership interest without prior consent of the other owners
18. Which of the following is an advantage of a corporation that is not an advantage as a limited partner in a partnership? a. Limited liability. b. Easy transfer of ownership position. c. Double taxation. d. All of the above are advantages that the corporation has over the limited partner.
19. Which of the following statements is correct for a sole proprietorship? a. The sole proprietor has limited liability. b. The sole proprietor can easily dispose of their ownership position relative to a shareholder in a corporation. c. The sole proprietorship can be created more quickly than a corporation. d. The owner of a sole proprietorship faces double taxation unlike the partners in a partnership.
20. What is potentially the biggest advantage of a small partnership over a sole proprietorship? a. Unlimited liability. b. Single tax filing. c. Difficult ownership resale. d. Raising capital.
Answers for Self Assessment Questions 1. (d)
2.(a)
3.(a)
4.(d)
5.(d)
6. (a)
7.(b)
8.(b)
9.(a)
10.(b)
11. (a)
12.(b)
13.(a)
14.(a)
15.(d)
16. (c)
17.(d)
18.(b)
19.(c)
20.(d)
Chapter-7: Central Sales Tax Act 1956 Self Assessment Questions 1. Service tax can be levied on the a. Taxable services b. Exempted services c. Partly exempted and partly taxable services d. On purchase of input goods
2. Value of works contract includes a. Value of transfer of property in goods b. Cost of consumables, electricity c. Value of VAT or Sales Tax on the above d. None of the above
3. A person who neither intends to hold nor holds any title to the goods or services is called a. Dealer b. Service tax provider c. Pure Agent d. Manufacturer
4. Under Service Tax (Determination of Value) Rules, 2006, Act means a. The Central Excise Act, 1944 b. Central Excise Tariff Act, 1985 c. Central Sales Tax Act, 1956 d. The Finance Act, 1994
5. The importer of service is liable to pay service tax only when the service provider having a. No place of business in India b. Place of business in India
c. Permanent address in India d. None of the above
6. The service tax paid on input services claimed as Cenvat credit after the export of service a. Cannot be claimed any rebate b. Can be claimed rebate (i.e. duty drawback) c. Can be claimed as refund d. None of the above
7. If the immovable property in respect of which service is rendered outside India the service is considered an export a. Only when payment came from overseas. b. Partly from overseas c. Irrespective of where the payment has come from d. Even without payment received from an importer.
8. The value of any taxable service, as the case may be, does not include a. Value of services collected by rail travel agent b. Services provide by the consultant c. The rail fare collected by rail travel agent d. None of the above
9. Which of the following services does not come under export of service? a. Air transport of passengers embarking for international travel b. Export of services with respect to immovable property c. Export of services with respect to management consultancy services d. None of the above.
10. Service tax liability arises only when the taxable turnover of the previous year exceeds
a. 9,00,000 b. 8,00,000, c. 7,00.000 d. 10,00,000
11. No service tax will be levied on value of goods and material supplied to the service recipient while providing service, provided Cenvat Credit on such goods and material is a. not taken b. taken c. partly reversed d. none of the above
12. One of the following services is a "reverse charge" a. Management consultancy services b. Telecommunication services c. Information Technology services d. Mutual Fund distributors services
13. Services rendered to the Reserve Bank of India is a. exempted service b. taxable service c. partly exempted d. none of the above
14. Importer of service is liable to pay service tax only when a. provider of service has no place of business in India b. provider of service has place of business in India c. import of service is not taxable in India d. provider of service is related to the importer
15. Services are taxable only when defined under a. Section 64( 105) of Finance Act, 1994 b. Section 65( 105) of Finance Act, 1994 c. Service Tax Rules d. Section 4 of the Central Excise Act, 1944
16. Which one of the following service is called reverse charge a. Service provider is liable to pay service tax b. Service receiver is liable to pay service tax c. No one is liable to pay service tax d. Whose services are exempted from service tax
17. Services provided to United Nations employees for their personal purposes is a. Not liable to pay service tax b. Partly liable to pay service tax c. Liable to pay service tax d. None of the above
18. Exemption turnover of Rs. 10000 dollar for previous year it is the value of taxable service rendered and for the current year a. Value of taxable service received b. Value of taxable services rendered c. Value of taxable services partly received and partly rendered d. None of the above.
19. Sales tax and expenses in connection with the proceedings for the assessment of sales tax are allowed as business expenditure a. True b. False
20. Form________________is used for applying for registration under Service Tax.
a. ST-2 b. ST-3 c. ST-1 d. ST-4
Answers for Self Assessment Questions 1. (a)
2.(b)
3.(c)
4.(d)
5.(a)
6. (b)
7.(c)
8.(c)
9.(a)
10.(d)
11. (a)
12.(d)
13.(b)
14.(a)
15.(b)
16. (b)
17.(c)
18.(a)
19.(a)
20.(c)
Chapter-8: Wealth Tax Act Self Assessment Questions 1. Urban land on which a building (residential or commercial) is constructed: a. With the approval of an appropriate authority b. Without the approval of an appropriate authority
2. Urban land on which construction is not permitted a. True b. False
3. Vacant urban land (on which construction is permissible) owned by aperson since 1960
4. Urban land held as stockintrade and which was acquired – a. On June 1, 1998 b. On June 1, 1999
5. Urban unused land held by an assessee, for industrial purposes (whether or not construction is started) and which was acquired: a. On April 1, 2007 b. On March 31, 2007
6. Urban land held by an assesses for industrial purposes (as construction of factory will be started during November 2009, it is used for agricultural purposes on temporary basis) and it was acquired on – a. April 1, 2007 b. March 31, 2007
7. Land acquired in 1965 (it may be used for construction of any building residential or commercial) and a. Situated within the jurisdiction of a municipality having population of less than 10,000 b. Situated within the jurisdiction of a municipality have population of 10,000 or more c. Situated within 6 kilometres [i.e., the notified distance vide Notification No.SO 871(E)] from Amristar d. Both B and C
8. Shares, debentures, fixed deposits in bank, plant and machinery, units of a mutual fund, amount recoverable from Government, sundry debtors, goodwill, stockintrade a. True b. False
9. In the cash book of an individual/HUF opening balance on March 31, 2009 is 1,85,000, out of which the assessee deposits.1,35,000 in his current account with Citibank before the close of banking hours on a. True b. False
10. "Shareholder wealth" in a firm is represented by: a. the number of people employed in the firm. b. the book value of the firm's assets less the book value of its liabilities. c. the amount of salary paid to its employees. d. the market price per share of the firm's common stock.
11. The long-run objective of financial management is to: a. maximize earnings per share. b. maximize the value of the firm's common stock. c. maximize return on investment. d. maximize market share.
12. What are the earnings per share (EPS) for a company that earned $100,000 last year in aftertax profits, has 200,000 common shares outstanding and $1.2 million in retained earning at the year end? a. $100,000 b. $6.00 c. $0.50 d. $6.50
13. The first step in the establishment of a charitable, not-for-profit organization (NPO) is to: a. Apply to the IRS for exemption from federal income taxes. b. Establish a legal identity for the NPO separate from the individuals who joined together with a charitable purpose. c. Prepare by-laws that show how the business of the organization will be conducted. d. Elect officers of the not-for-profit organization.
14. A state might regulate a nonprofit corporation that operates in its state by all of the following methods except: a. License to conduct charitable gaming. b. Registration of political lobbyists. c. Exemption from sales and property taxes. d. Approval of all disbursements.
15. Which of the following interactions with the Internal Revenue Service (IRS) are most likely for a not-for-profit organization during the first stage in its life cycle? a. Filing unrelated business income tax Form 990-T. b. Reporting the dissolution of the tax-exempt organization. c. Applying for exempt status on Form 1023 or 1024. d. Filing information return Form 990.
16. Which of the following terms applies to a tax-exempt organization that is supported primarily by donations from a small set of individuals and exists to make grants to other taxexempt organizations? a. Public charity. b. Private foundation. c. Charitable organization. d. Not-for-profit organization.
17. Incorporating documents that contain language helpful in ascertaining the charitable or taxexempt purpose of the organization include all of the following except: a. By-laws. b. Articles of incorporation. c. Application to the IRS for tax-exempt status. d. All of the above.
18. The largest number of tax-exempt entities are granted exemption under which section of the following Internal Revenue Codes (IRC)? a. IRC Sec. 501(c)3 charitable, religious, scientific, literary, educational, and testing for public safety. b. IRC Sec. 501(c)4 civic leagues, social welfare organizations, local employee associations, community organizations. c. IRC Sec. 501(c)6 business leagues, trade associations, chambers of commerce, real estate boards. d. IRC Sec. 501(c)7 social and recreational clubs, hobby clubs, country clubs.
19. A reason why the Form 990 was revised for tax years 2008 and beyond is to: a. Enhance transparency about the organization. b. Allow the IRS to efficiently assess noncompliance with regulations. c. Minimize the burden of filing on tax-exempt organizations. d. All of the above.
20. For which of the following types of abuse would the IRS most likely impose "intermediate sanctions" on a tax-exempt entity? a. Failure to file a Form 990 tax return on time. b. Refusal to provide a copy of the Form 990 to an individual who requested it. c. Excessive compensation paid to the executive director. d. Imprudent investments that resulted in a loss for the entity.
Answers for Self Assessment Questions 1. (b)
2.(b)
3.(a)
4.(a)
5.(b)
6. (a)
7.(d)
8.(b)
9.(b)
10.(d)
11. (b)
12.(c)
13.(b)
14.(d)
15.(c)
16. (b)
17.(a)
18.(a)
19.(d)
20.(c)
Chapter-9: VALUE ADDED TAX (VAT) Self Assessment Questions 1. How many Schedules are there under the VAT Act. a. Five Schedules b. Six Schedules c. Seven Schedules d. Eight Schedules
2. Goods specified under Schedule V will be taxed at the rate of a. 0% b. 1% c. 4% d. 12.5%
3. Under which Schedule do Bullion and Specie come? a. Schedule 1 b. Schedule II c. Schedule III d. Schedule IV
4. The point of levy of tax for Aviation and other motor spirit is the point of a. First sale in the State b. Second sale in the State c. First and Second sale in the State d. Third sale in the State
5. Sale of taxable goods in the course of inter-state trade or commerce falling within the scope of section 3 of the Central Sales Tax Act, 1956 are called
a. Zero rated sales b. Exempted sales c. Non-exempted sales d. Taxable sales
6. VAT rate on all kinds of Pulses and Dhalls is a. 1% b. 4% c. 12.5% d. 0%
7. At the point of first sale in the state the following product attracts 32.55% of VAT a. Petrol b. Machinery c. Liquor d. Diesel Oil
8. Abbreviate ITC a. Input Tax Code b. Input Tax Credit c. Initial Tax Credit d. In-house Tax Credit
9. Sale of vegetables and fruits other than those cured, frozen, preserved, processed, dried, dehydrated or canned are called a. Exempted sales b. Taxable sales c. Partly exempted sales d. Special sales
10. Kerosene sold through public distribution system will attract VAT rate a. 0% b. 1% c. 4% d. 12.50%
11. Input Tax Credit can be allowed in respect of Schedule VI goods a. True b. False
12. Gold and Jewellery are liable to tax under VAT @ 1% a. True b. False
13. Goods that fall under the Schedule I will get Input Tax Credit True False
14. Generally sale of books, periodicals and journals are exempted goods under VAT. a. True b. False
15. VAT rates are common for all the products specified in Schedule V
a. True b. False
16. Input Tax Credit (ITC) can be claimed if the inputs are used for a. personnel purpose b. distributing as free sample c. captive consumption d. business purpose
17. Every registered dealer must file return for each month on or before a. 20th of the succeeding month b. 10th of the succeeding month c. 5th of the succeeding month d. End of the current month
18. ITC can be claimed against inter-state sale only when those sales are supported by a. Form D b. Form H c. Form C d. Form I
19. The period covered by the return is called a Tax Period and will cover a a. Calendar month b. Calendar year c. Half a month d. Six months
20. The method under which tax is imposed at each stage of sales on the entire sale value and the tax paid at the earlier stage is allowed as set-off is called a. Subtraction method b. Deductive method
c. Value addition and deletion method d. Invoice method
Answers for Self Assessment Questions 1. (b)
2.(d)
3.(c)
4.(a)
5.(d)
6. (b)
7.(a)
8.(b)
9.(a)
10.(c)
11. (b)
12.(a)
13.(b)
14.(a)
15.(a)
16. (d)
17.(a)
18.(c)
19.(a)
20.(d)
