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

A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state that levies no such taxes.

The proposed flat tax:

Property can be transferred within the family group by gift or at death. One motivation for preferring the gift approach is:

Jason's business warehouse is destroyed by fire. As the insurance proceeds exceed the basis of the property, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized due to the application of the wherewithal to pay concept.

Match the statements that relate to each other. Note: Some choices may be used more than once. -Criminal fraud penalty

Paige is the sole shareholder of Citron Corporation. During the year, Paige leases a building to Citron for a monthly rental of $80,000. If the fair rental value of the building is $60,000, what are the income tax consequences to the parties involved?

Taxes not imposed by the Federal government include:

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

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

Both economic and social considerations can be used to justify:

Tracy has just been audited and the IRS agent has issued an RAR that assesses a large deficiency. Since Tracy disagrees with the result, her next step is to go to court. Do you agree?

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Import taxes (customs duties)

If the tax deficiency is attributable to fraud, the negligence penalty will not be imposed.

Some states use their state income tax return as a means of collecting unpaid sales and use taxes.

When Congress enacts a tax cut that is phased in over a period of years, revenue neutrality is achieved.

The objective of pay-as-you-go (paygo) is to achieve revenue neutrality.

Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence. The 20% negligence penalty will apply to $25,000.

Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty?

Match the statements that relate to each other. Note: Some choices may be used more than once. -Field audit

Which, if any, of the following taxes are proportional (rather than progressive)?