Question 1

If a "special agent" becomes involved in the audit of a return, this indicates that the IRS suspects that fraud is involved.

Accepted Answer

A) True 
 B)False

Question 2

Which, if any, of the following transactions will decrease a taxing jurisdiction's ad valorem tax revenue imposed on real estate?

Accepted Answer

A)  A tax holiday is granted to an out-of-state business that is searching for a new factory site. 
B)  An abandoned church is converted to a restaurant. 
C)  A public school is razed and turned into a city park. 
D)  A local university sells a dormitory that will be converted for use as an apartment building. 
E)  None of the above. 
A)  A tax holiday is granted to an out-of-state business that is searching for a new factory site. 
B)  An abandoned church is converted to a restaurant. 
C)  A public school is razed and turned into a city park. 
D)  A local university sells a dormitory that will be converted for use as an apartment building. 
E)  None of the above.

Question 3

Using the choices provided below, show the justification for each provision of the tax law listed.
-A deduction for certain expenses (interest and taxes) incident to home ownership.

Accepted Answer

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

Question 4

In preparing a tax return, all questions on the return must be answered.

Accepted Answer

A) True 
 B)False

Question 5

The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the Federal income tax on corporations.

Accepted Answer

A) True 
 B)False

Question 6

Match the statements that relate to each other. Note: Some choices may be used more than once.
-Late filing and statute limitations (deficiency situations)

Accepted Answer

A) 3 years from date return is filed 
B) 3 years from due date of return 
C) 20% of underpayment 
D) 5% per month (25% limit) 
E) 0.5% per month (25% limit)
F)Conducted at IRS office
G)Conducted at taxpayer's office
H)6 years
I)45-day grace period allowed to IRS
J)No statute of limitations (period remains open)
K)75% of underpayment
L)No correct match provided 
A) 3 years from date return is filed 
B) 3 years from due date of return 
C) 20% of underpayment 
D) 5% per month (25% limit) 
E) 0.5% per month (25% limit)
F)Conducted at IRS office
G)Conducted at taxpayer's office
H)6 years
I)45-day grace period allowed to IRS
J)No statute of limitations (period remains open)
K)75% of underpayment
L)No correct match provided

Question 7

The U.S. (either Federal, state, or local) does not impose:

Accepted Answer

A)  Franchise taxes. 
B)  Severance taxes. 
C)  Occupational fees. 
D)  Custom duties. 
E)  Export duties. 
A)  Franchise taxes. 
B)  Severance taxes. 
C)  Occupational fees. 
D)  Custom duties. 
E)  Export duties.

Question 8

If more IRS audits are producing a greater number of no change results, this indicates increased compliance on the part of taxpayers.

Accepted Answer

A) True 
 B)False

Question 9

The tax law allows, under certain conditions, deferral of gain recognition for involuntary conversions.
a. What is the justification for this relief measure?
b. What happens if the proceeds are not entirely reinvested?

Accepted Answer

a. By recognizing that the taxpayer's re

Question 10

The annual exclusion, currently $14,000, is available for gift and estate tax purposes.

Accepted Answer

A) True 
 B)False

Question 11

Can a taxpayer start the 3-year statute of limitations on additional assessments by the IRS by filing his income tax return early (i.e., before the due date)? Can the period be shortened by filing late (i.e., after the due date)?

Accepted Answer

The answer is no in both cases

Question 12

A Federal excise tax is no longer imposed on admission to theaters.

Accepted Answer

A) True 
 B)False

Question 13

In terms of revenue neutrality, comment on a tax cut enacted by Congress that:
a. contains revenue offsets.
b. includes a sunset provision.

Accepted Answer

a. Ideally, to achieve revenue neutralit

Question 14

Which, if any, is not one of Adam Smith's canons of taxation?

Accepted Answer

A)  Economy. 
B)  Certainty. 
C)  Convenience. 
D)  Simplicity. 
E)  Equality. 
A)  Economy. 
B)  Certainty. 
C)  Convenience. 
D)  Simplicity. 
E)  Equality.

Question 15

If a taxpayer files early (i.e., before the due date of the return), the statute of limitations on assessments begins on the date the return is filed.

Accepted Answer

A) True 
 B)False

Question 16

A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not made in lieu of rent. At the end of the lease, the value of the improvements are not income to the landlord. This rule is an example of:

Accepted Answer

A)  A clear reflection of income result. 
B)  The tax benefit rule. 
C)  The arm's length concept. 
D)  The wherewithal to pay concept. 
E)  None of the above. 
A)  A clear reflection of income result. 
B)  The tax benefit rule. 
C)  The arm's length concept. 
D)  The wherewithal to pay concept. 
E)  None of the above.

Question 17

In late June 2014, Art is audited by the state and a large deficiency is assessed. In November of the same year, his Federal income tax return is audited by the IRS. What has probably happened?

Accepted Answer

The IRS has been not

Question 18

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

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 19

A use tax is imposed by:

Accepted Answer

A)  The Federal government and all states. 
B)  The Federal government and a majority of the states. 
C)  All states and not the Federal government. 
D)  Most of the states and not the Federal government. 
E)  None of the above. 
A)  The Federal government and all states. 
B)  The Federal government and a majority of the states. 
C)  All states and not the Federal government. 
D)  Most of the states and not the Federal government. 
E)  None of the above.

Question 20

In terms of Adam Smith's canons of taxation, how does the Federal income tax fare as far as economy is concerned?

Accepted Answer

Economy is present only if the

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

If a "special agent" becomes involved in the audit of a return, this indicates that the IRS suspects that fraud is involved.

Which, if any, of the following transactions will decrease a taxing jurisdiction's ad valorem tax revenue imposed on real estate?

Using the choices provided below, show the justification for each provision of the tax law listed. -A deduction for certain expenses (interest and taxes) incident to home ownership.

In preparing a tax return, all questions on the return must be answered.

The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the Federal income tax on corporations.

Match the statements that relate to each other. Note: Some choices may be used more than once. -Late filing and statute limitations (deficiency situations)

The U.S. (either Federal, state, or local) does not impose:

If more IRS audits are producing a greater number of no change results, this indicates increased compliance on the part of taxpayers.

The tax law allows, under certain conditions, deferral of gain recognition for involuntary conversions. a. What is the justification for this relief measure? b. What happens if the proceeds are not entirely reinvested?

The annual exclusion, currently $14,000, is available for gift and estate tax purposes.

Can a taxpayer start the 3-year statute of limitations on additional assessments by the IRS by filing his income tax return early (i.e., before the due date)? Can the period be shortened by filing late (i.e., after the due date)?

A Federal excise tax is no longer imposed on admission to theaters.

In terms of revenue neutrality, comment on a tax cut enacted by Congress that: a. contains revenue offsets. b. includes a sunset provision.

Which, if any, is not one of Adam Smith's canons of taxation?

If a taxpayer files early (i.e., before the due date of the return), the statute of limitations on assessments begins on the date the return is filed.

A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not made in lieu of rent. At the end of the lease, the value of the improvements are not income to the landlord. This rule is an example of:

In late June 2014, Art is audited by the state and a large deficiency is assessed. In November of the same year, his Federal income tax return is audited by the IRS. What has probably happened?

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

A use tax is imposed by:

In terms of Adam Smith's canons of taxation, how does the Federal income tax fare as far as economy is concerned?

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