Exam 1: An Introduction to Taxation

During the current tax year,Frank Corporation generated gross income of $1,900,000 and had ordinary and necessary deductions of $1,400,000.What is the amount of Frank Corporation's corporate income tax for the year?

Adam Smith's canons of taxation are equity,certainty,convenience and economy.

Which of the following serves as the highest authority for tax research,planning,and compliance activities?

Dividends paid from most U.S.corporations are taxed at the same rate as the recipients' salaries and wages.

The terms "progressive tax" and "flat tax" are synonymous.

The Senate equivalent of the House Ways and Means Committee is the Senate

Fireball Corporation is an S corporation.Leyla owns all of the stock.During the current year Fireball earned taxable income of $500,000 and paid a $300,000 distribution to Leyla.Which of the following statements is correct?

When a change in the tax law is deemed necessary by Congress,the entire Internal Revenue Code must be revised.

Helen,who is single,is considering purchasing a residence that will provide a $28,000 tax deduction for property taxes and mortgage interest.If her marginal tax rate is 25% and her effective tax rate is 20%,what is the amount of Helen's tax savings from purchasing the residence?

Which of the following steps,related to a tax bill,occurs first?

Gifts between spouses are generally exempt from transfer taxes.

Horizontal equity means that

Generally,the statute of limitations is three years from the later of the date the tax return is filed or the due date.

Limited liability company members (owners)are responsible for the liabilities of their limited liability company.

Regressive tax rates decrease as the tax base increases.

Larry and Ally are married and file a joint return.They are considering purchasing a personal residence that will generate two deductions: $10,000 in home mortgage interest and $8,000 in real estate taxes.Their marginal tax rate is 25%.If Larry and Ally purchase the residence,what will be the after-tax cost of the additional $18,000 in expenditures?

The various entities in the federal income tax system may be classified into two general categories,taxpaying entities (such as individuals and C [regular] corporations)and flow-through entities such as sole proprietorships,partnerships,S corporations,and limited liability companies.

Charlotte pays $16,000 in tax deductible property taxes.Charlotte's marginal tax rate is 28%,effective tax rate is 22% and average rate is 25%.Charlotte's tax savings from paying the property tax is

AB Partnership earns $500,000 in the current year.Partners A and B are equal partners who do not receive any distributions during the year.How much income does partner A report from the partnership?

Which of the following individuals is most likely to be audited?