Exam 2: an Introduction to Taxation

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

The Internal Revenue Service is the branch of the Treasury Department responsible for administering the federal tax law.

All of the following are executive (administrative)sources of tax law except

The Sixteenth Amendment to the U.S.Constitution permits the passage of a federal income tax law.

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

Individuals are the principal taxpaying entities in the federal income tax system.

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?

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%.What is the total tax savings if Larry and Ally purchase the residence?

What does the statute of limitations mean? Describe the different statutes of limitations that apply to tax returns.

Mia is self-employed as a consultant.During 2015,Mia earned $180,000 in self-employment income.What is Mia's self-employment tax?

A taxpayer's average tax rate is the tax rate applied to an incremental amount of taxable income that is added to the tax base.

Arthur pays tax of $5,000 on taxable income of $50,000 while taxpayer Barbara pays tax of $12,000 on $120,000.The tax is a

Jeffery died in 2015 leaving a $16,000,000 gross estate.Six months after his death,the gross assets are valued at $16,100,000.In years prior to 2015 (but after 1976),Jeffery had made taxable gifts of $300,000.Of the $16,000,000 gross estate,estate assets valued at $3 million were transferred to his wife and $100,000 was used to pay administrative and funeral expenses.Jeffery had debts of $200,000,and the remainder of the estate was transferred to his children. a.What is the amount of Jeffery's taxable estate? b.What is the tax base for computing Jeffery's estate? c.What is the amount of estate tax owed if the unified credit is $2,117,800? d.Alternatively,if six months after his death,the gross assets in Jeffery's estate declined in value to $15,000,000,can the administrator of Jeffery's estate elect the alternate valuation date?

Martha is self-employed in 2015.Her business profits are $140,000.What is her self-employment tax?

Latashia reports $100,000 of gross income on her 2015 tax return,filed April 15,2016.She omits $30,000 of income,but the error was not fraudulent.When does the statute of limitations for examining her tax return expire?

In a limited liability partnership,a partner is not liable for his partner's acts of negligence or misconduct.

Organizing a corporation as an S Corporation results in a single level of taxation.

In 2015,an estate is not taxable unless the sum of the taxable estate and taxable gifts made after 1976 exceeds

Leonard established a trust for the benefit of his son.The principal amount of the trust is $400,000.The trust is projected to earn approximately 5% per year.In the current year,the trust earned $20,000.Expenses of $4,000 were incurred.Assume that $14,000 is distributed to Leonard's son. a.How much income is taxed to the trust? b.How much income is taxed to Leonard's son?

When returns are processed,they are scored to determine their potential for yielding additional tax revenues.This program is called