Exam 16: an Introduction to Taxation

Firefly Corporation is a C corporation. Freya owns all of the stock. During the current year Firefly earned taxable income of $500,000 and paid a $300,000 dividend to Freya. Which of the following statements is correct?

Which of the following is not an objective of the federal income tax law?

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

The largest source of revenues for the federal government comes from

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

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

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

Which of the following taxes is proportional?

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

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

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

Which of the following statements is incorrect?

Frederick failed to file his 2016 tax return on a timely basis. In fact, he filed his 2016 income tax return on October 31, 2017, (the due date was April 15, 2017 and paid the amount due at that time. He failed to make timely extensions. Below are amounts from his 2016 return: Taxable income \ 120,000 Total tax liability on taxable income 26,637 Total tax withheld from his salary 25,000 Frederick sent a check for $1,637 in payment of his liability. He thinks that he has met all of his financial obligations to the government for 2016. For what additional amounts may Frederick be liable assuming any applicable interest rate is 6%?

Latashia reports $100,000 of gross income on her 2016 tax return, filed on the April 15, 2017 due date. She omits $30,000 of income, but the error was not fraudulent. When does the statute of limitations for examining her tax return expire?

Limited liability companies may elect to be taxed as corporations.

Rocky and Charlie form RC Partnership as equal partners. Rocky contributes $100,000 into RC while Charlie contributes real estate with a cost and fair market value of $100,000. During the current year, RC earned net income of $600,000. The partnership distributes $200,000 to each partner. The amount that Rocky should report on his individual tax return is

Explain how returns are selected for audit.

A presidential candidate proposes replacing the income tax with a national sales tax. The sales tax would have a flat rate. Describe the impact of this change in terms of tax structure and equity.

A tax bill introduced in the House of Representatives is then

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