Exam 1: An Introduction to Taxation

Describe the components of tax practice.

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?

Which of the following is not one of Adam Smith's canons of taxation?

The primary objective of the federal income tax law is to achieve various economic and social policy objectives.

Eric dies in the current year and has a gross estate valued at $6,500,000. The estate incurs funeral and administrative expenses of $100,000 and also pays off Eric's debts which amount to $250,000. Eric bequeaths $600,000 to his wife. Eric made no taxable transfers during his life. Eric's taxable estate will be

An individual will be subject to gift tax on gifts made to a charity greater than $14,000.

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

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

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

Jillian, a single individual, earns $230,000 in 2015 through her job as an accounting manager. What is her FICA tax?

Kate files her tax return 36 days after the due date. When she files the return, she sends a check for $2,000 which is the balance of the tax owed by her. Kate's penalty for failure to file a return will be

Alan files his 2015 tax return on April 1, 2016. His return contains no misstatements or omissions of income. The statute of limitations for changes to the return expires

Property is generally included on an estate tax return at its historical cost basis.

Which of the following taxes is proportional?

Frederick failed to file his 2015 tax return on a timely basis. In fact, he filed his 2015 income tax return on October 31, 2016, (the due date was April 15, 2015) and paid the amount due at that time. He failed to make timely extensions. Below are amounts from his 2015 return: Frederick sent a check for $1,671 in payment of his liability. He thinks that he has met all of his financial obligations to the government for 2015. For what additional amounts may Frederick be liable assuming any applicable interest rate is 6%?

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

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?

The largest source of federal revenues is the corporate income tax.

Which of the following statements is incorrect?

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