Question 1

Characteristics of the "Fair Tax" (i.e., national sales tax) include which, if any, of the following:

Accepted Answer

A)  Abolition of the Federal individual (but not the corporate) income tax. 
B)  Abolition of all Federal income taxes but retention of payroll taxes (including the self-employment tax). 
C)  Abolition of all Federal income taxes and payroll taxes but retention of the Federal estate and gift taxes. 
D)  Abolition of all Federal income and payroll taxes as well as the Federal estate and gift taxes. 
E)  None of the above. 
A)  Abolition of the Federal individual (but not the corporate) income tax. 
B)  Abolition of all Federal income taxes but retention of payroll taxes (including the self-employment tax). 
C)  Abolition of all Federal income taxes and payroll taxes but retention of the Federal estate and gift taxes. 
D)  Abolition of all Federal income and payroll taxes as well as the Federal estate and gift taxes. 
E)  None of the above.

Question 2

Using the choices provided below, show the justification for each provision of the tax law listed.
-A deduction for contributions by an employee to certain retirement plans.

Accepted Answer

A) Economic considerations 
B) Social considerations 
C) Equity considerations 
A) Economic considerations 
B) Social considerations 
C) Equity considerations

Question 3

In 2014, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José has not made a taxable gift.

Accepted Answer

A) True 
 B)False

Question 4

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
-Wherewithal to pay concept

Accepted Answer

A) Deferral of gains from involuntary conversions 
B) Carryback and carryforward of net operating losses 
C) "No change" is one possible result 
D) State income tax applied to visiting nonresident 
E) IRS special agent
F)Undoing the "piggyback" result
G)Ideal budget goal as to new tax legislation
H)Every state that has a general sales tax has one
I)Imposed by all states and the Federal government
J)Imposed by some states but not the Federal government
K)Imposed only by the Federal government
L)No correct match provided 
A) Deferral of gains from involuntary conversions 
B) Carryback and carryforward of net operating losses 
C) "No change" is one possible result 
D) State income tax applied to visiting nonresident 
E) IRS special agent
F)Undoing the "piggyback" result
G)Ideal budget goal as to new tax legislation
H)Every state that has a general sales tax has one
I)Imposed by all states and the Federal government
J)Imposed by some states but not the Federal government
K)Imposed only by the Federal government
L)No correct match provided

Question 5

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

Accepted Answer

A) True 
 B)False

Question 6

Not all of the states that impose a general sales tax also have a use tax.

Accepted Answer

A) True 
 B)False

Question 7

Without obtaining an extension, Pam files her income tax return 55 days after the due date. With her return, she pays an additional tax of $60,000. Disregarding any interest element, what is Pam's penalty for failure to pay and to file?

Accepted Answer

$6,000. Disregarding

Question 8

State income taxes generally can be characterized by:

Accepted Answer

A)  The same date for filing as the Federal income tax. 
B)  No provision for withholding procedures. 
C)  Allowance of a deduction for Federal income taxes paid. 
D)  Applying only to individuals and not applying to corporations. 
E)  None of the above. 
A)  The same date for filing as the Federal income tax. 
B)  No provision for withholding procedures. 
C)  Allowance of a deduction for Federal income taxes paid. 
D)  Applying only to individuals and not applying to corporations. 
E)  None of the above.

Question 9

Under the usual state inheritance tax, two heirs, a cousin and a son of the deceased, would not be taxed at the same rate.

Accepted Answer

A) True 
 B)False

Question 10

Taxes levied by all states include:

Accepted Answer

A)  Tobacco excise tax. 
B)  Individual income tax. 
C)  Inheritance tax. 
D)  General sales tax. 
E)  None of the above. 
A)  Tobacco excise tax. 
B)  Individual income tax. 
C)  Inheritance tax. 
D)  General sales tax. 
E)  None of the above.

Question 11

Which, if any, of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS)?

Accepted Answer

A)  Penalties are imposed for failure to file a return or pay a tax on time. 
B)  Prepaid income is taxed in the year received and not in the year earned. 
C)  Annual adjustments for indexation increases the amount of the standard deduction allowed. 
D)  Casualty losses must exceed 10% of AGI to be deductible. 
E)  A deduction is allowed for charitable contributions. 
A)  Penalties are imposed for failure to file a return or pay a tax on time. 
B)  Prepaid income is taxed in the year received and not in the year earned. 
C)  Annual adjustments for indexation increases the amount of the standard deduction allowed. 
D)  Casualty losses must exceed 10% of AGI to be deductible. 
E)  A deduction is allowed for charitable contributions.

Question 12

A provision in the law that compels accrual basis taxpayers to pay a tax on prepaid income in the year received and not when earned is consistent with generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 13

Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

Accepted Answer

A)  Nonrecognition of gain allowed for involuntary conversions. 
B)  Net operating loss carryback and carryover provisions. 
C)  Carryover of excess charitable contributions. 
D)  Use of the installment method to recognize gain. 
E)  Carryover of excess capital losses. 
A)  Nonrecognition of gain allowed for involuntary conversions. 
B)  Net operating loss carryback and carryover provisions. 
C)  Carryover of excess charitable contributions. 
D)  Use of the installment method to recognize gain. 
E)  Carryover of excess capital losses.

Question 14

In terms of probability, which of the following taxpayers would be least likely to be audited by the IRS?

Accepted Answer

A)  Taxpayer owns and operates a check-cashing service. 
B)  Taxpayer is an employed electrician. 
C)  Taxpayer just received a $3 million personal injury award as a result of a lawsuit. 
D)  Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino. 
E)  Taxpayer has been audited several times before. 
A)  Taxpayer owns and operates a check-cashing service. 
B)  Taxpayer is an employed electrician. 
C)  Taxpayer just received a $3 million personal injury award as a result of a lawsuit. 
D)  Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino. 
E)  Taxpayer has been audited several times before.

Question 15

Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income tax on individuals.

Accepted Answer

A) True 
 B)False

Exam 1: An Introduction to Taxation and Understanding the Federal Tax Law

Characteristics of the "Fair Tax" (i.e., national sales tax) include which, if any, of the following:

Using the choices provided below, show the justification for each provision of the tax law listed. -A deduction for contributions by an employee to certain retirement plans.

In 2014, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José has not made a taxable gift.

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Wherewithal to pay concept

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

Not all of the states that impose a general sales tax also have a use tax.

Without obtaining an extension, Pam files her income tax return 55 days after the due date. With her return, she pays an additional tax of $60,000. Disregarding any interest element, what is Pam's penalty for failure to pay and to file?

State income taxes generally can be characterized by:

Under the usual state inheritance tax, two heirs, a cousin and a son of the deceased, would not be taxed at the same rate.

Taxes levied by all states include:

Which, if any, of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS)?

A provision in the law that compels accrual basis taxpayers to pay a tax on prepaid income in the year received and not when earned is consistent with generally accepted accounting principles.

Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

In terms of probability, which of the following taxpayers would be least likely to be audited by the IRS?

Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income tax on individuals.

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, 1231, and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters