Question 1

Property transferred to the decedent's spouse is exempt from the estate tax because of the estate tax marital deduction provision.

Accepted Answer

A) True 
 B)False

Question 2

The marginal tax rate is useful in tax planning because it measures the tax effect of a proposed transaction.

Accepted Answer

A) True 
 B)False

Question 3

What is an important aspect of a limited liability partnership?

Accepted Answer

A)  It is the same as a limited partnership where the general partner has unlimited liability. 
B)  A partner has unlimited liability arising from his or her own acts of negligence or misconduct or similar acts of any person under his or her direct supervision, but does not have unlimited liability in other matters. 
C)  All partners have limited liability regarding all partnership activities. 
D)  All partners have unlimited liability. 
A)  It is the same as a limited partnership where the general partner has unlimited liability. 
B)  A partner has unlimited liability arising from his or her own acts of negligence or misconduct or similar acts of any person under his or her direct supervision, but does not have unlimited liability in other matters. 
C)  All partners have limited liability regarding all partnership activities. 
D)  All partners have unlimited liability.

Question 4

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?

Accepted Answer

Tax savings of expenditures: (

Question 5

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?

Accepted Answer

A)  $0 
B)  $250,000 
C)  $500,000 
D)  None of the above. 
A)  $0 
B)  $250,000 
C)  $500,000 
D)  None of the above.

Question 6

The federal income tax is the dominant form of taxation by the federal government.

Accepted Answer

A) True 
 B)False

Question 7

The unified transfer tax system, comprised of the gift and estate taxes, is based upon the total property transfers an individual makes during lifetime and at death.

Accepted Answer

A) True 
 B)False

Question 8

What are the correct monthly rates for calculating failure to file and failure to pay penalties?

Accepted Answer

A)  $$\begin{array} { | l | l | } 
\hline \text { Failure to file } & \text { Failure to pay } \
\hline 5.0 \% & 5.0 \% \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Failure to file } & \text { Failure to pay } \
\hline 0.5 \% & 0.5 \% \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Failure to file } & \text { Failure to pay } \
\hline 5.0 \% & 0.5 \% \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Failure to file } & \text { Failure to pay } \
\hline 0.5 \% & 5.0 \% \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | } 
\hline \text { Failure to file } & \text { Failure to pay } \
\hline 5.0 \% & 5.0 \% \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Failure to file } & \text { Failure to pay } \
\hline 0.5 \% & 0.5 \% \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Failure to file } & \text { Failure to pay } \
\hline 5.0 \% & 0.5 \% \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Failure to file } & \text { Failure to pay } \
\hline 0.5 \% & 5.0 \% \
\hline
\end{array}$$

Question 9

The IRS must pay interest on

Accepted Answer

A)  all tax refunds. 
B)  tax refunds paid later than 30 days after the due date. 
C)  tax refunds paid later than 45 days after the due date. 
D)  The IRS never pays interest on tax refunds. 
A)  all tax refunds. 
B)  tax refunds paid later than 30 days after the due date. 
C)  tax refunds paid later than 45 days after the due date. 
D)  The IRS never pays interest on tax refunds.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

A progressive tax rate structure is one where the rate of tax increases as the tax base increases.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not an advantage of a limited liability company (LLC)?

Accepted Answer

A)  limited liability for all members of a LLC 
B)  ability to choose between taxation as a partnership or corporation 
C)  default tax treatment as a corporation, unless otherwise elected 
D)  All of the above are advantages of an LLC. 
A)  limited liability for all members of a LLC 
B)  ability to choose between taxation as a partnership or corporation 
C)  default tax treatment as a corporation, unless otherwise elected 
D)  All of the above are advantages of an LLC.

Question 13

Regressive tax rates decrease as the tax base increases.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)  $3,520. 
B)  $4,000. 
C)  $4,480. 
D)  $11,520. 
A)  $3,520. 
B)  $4,000. 
C)  $4,480. 
D)  $11,520.

Question 15

Horizontal equity means that

Accepted Answer

A)  taxpayers with the same amount of income should pay the same amount of tax. 
B)  taxpayers with larger amounts of income should pay more tax than taxpayers with lower amounts of income. 
C)  all taxpayers should pay the same tax. 
D)  none of the above. 
A)  taxpayers with the same amount of income should pay the same amount of tax. 
B)  taxpayers with larger amounts of income should pay more tax than taxpayers with lower amounts of income. 
C)  all taxpayers should pay the same tax. 
D)  none of the above.

Question 16

In 2016, an estate is not taxable unless the sum of the taxable estate and taxable gifts made after 1976 exceeds

Accepted Answer

A)  $2,125,800. 
B)  $5,450,000. 
C)  $5,000,000. 
D)  $5,430,000. 
A)  $2,125,800. 
B)  $5,450,000. 
C)  $5,000,000. 
D)  $5,430,000.

Question 17

Alan files his 2016 tax return on April 1, 2017, shortly before the April 15 due date. His return contains no misstatements or omissions of income. The statute of limitations for changes to the return expires

Accepted Answer

A)  April 1, 2020. 
B)  April 15, 2020. 
C)  April 15, 2019. 
D)  The statute of limitations never expires. 
A)  April 1, 2020. 
B)  April 15, 2020. 
C)  April 15, 2019. 
D)  The statute of limitations never expires.

Question 18

Gifts between spouses are generally exempt from transfer taxes.

Accepted Answer

A) True 
 B)False

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

List the steps in the legislative process for major tax reform.

Accepted Answer

1. Treasury studies are prepared on need

Exam 16: an Introduction to Taxation

Property transferred to the decedent's spouse is exempt from the estate tax because of the estate tax marital deduction provision.

The marginal tax rate is useful in tax planning because it measures the tax effect of a proposed transaction.

What is an important aspect of a limited liability partnership?

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?

The federal income tax is the dominant form of taxation by the federal government.

The unified transfer tax system, comprised of the gift and estate taxes, is based upon the total property transfers an individual makes during lifetime and at death.

What are the correct monthly rates for calculating failure to file and failure to pay penalties?

The IRS must pay interest on

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

A progressive tax rate structure is one where the rate of tax increases as the tax base increases.

Which of the following is not an advantage of a limited liability company (LLC)?

Regressive tax rates decrease as the tax base increases.

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

Horizontal equity means that

In 2016, an estate is not taxable unless the sum of the taxable estate and taxable gifts made after 1976 exceeds

Alan files his 2016 tax return on April 1, 2017, shortly before the April 15 due date. His return contains no misstatements or omissions of income. The statute of limitations for changes to the return expires

Gifts between spouses are generally exempt from transfer taxes.

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.

List the steps in the legislative process for major tax reform.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, Cost Recovery, Amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Section 1231 and Recapture

Special Tax Computation Methods, Tax Credits, and Payment of Tax

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