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

State and local governments are sometimes forced to find ways to generate additional revenue. Comment on the pros and cons of the following procedures: a. Decouple what would be part of the piggyback format of the state income tax. b. Tax amnesty provisions. c. Internet shaming.

The first income tax on individuals (after the ratification of the Sixteenth Amendment to the Constitution) levied tax rates from a low of 2% to a high of 6%.

Match the statements that relate to each other. Note: Some choices may be used more than once. -Interest due on refund

To lessen, or eliminate, the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.

Which, if any, of the following statements best describes the history of the Federal income tax?

Even though a client refuses to correct an error on a past return, it may be possible for a practitioner to continue to prepare returns for the client.

Using the choices provided below, show the justification for each provision of the tax law listed. -Tax credits available for the purchase of a vehicle that uses alternative (non-fossil) fuels.

Your client, Connie, won $12,000 in a football office pool. She sees no reason to include it in her income for several reasons. First, the amount won will not be reported to the IRS. Second, as an average income employee, she is unlikely to be audited by the IRS. Third, she feels that she has probably lost this much in other past office pools. How do you respond?

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

If fraud is involved, there is no time limit on the assessment of a deficiency by the IRS.

For state income tax purposes, a majority of states allow a deduction for Federal income taxes.

One of the major reasons for the enactment of the Federal estate tax was to prevent large amounts of wealth from being accumulated within the family unit.

As it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize gain in the year the installment sale occurs.

In cases of doubt, courts have held that tax relief provisions should be broadly construed in favor of taxpayers.

The pay­as­you­go feature of the Federal income tax on individuals conforms to Adam Smith's canon of certainty.

Using the choices provided below, show the justification for each provision of the tax law listed. -A deduction for qualified tuition paid to obtain higher education.

David files his tax return 45 days after the due date. Along with the return, David remits a check for $40,000 which is the balance of the tax owed. Disregarding the interest element, David's total failure to file and to pay penalties are:

Regarding proper ethical guidelines, which (if any) of the following is correct?

Using the choices provided below, show the justification for each provision of the tax law listed. -A Federal deduction for state and local sales taxes paid.

The Federal estate and gift taxes are examples of progressive taxes.