Exam 1: An Introduction to Taxation and Understanding the Federal Tax Law

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The amount of a taxpayer's itemized deductions will increase the chance of being audited by the IRS.

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True

Social considerations can be used to justify:

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A

The annual exclusion, currently $15,000, is available for gift and estate tax purposes.

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False

The tax law allows an income tax deduction or a credit) for foreign income taxes. Explain why.

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In cases of doubt, courts have held that tax relief provisions should be broadly construed in favor of taxpayers.

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When a state decouples from a Federal tax provision, it means that this provision will not apply for state income tax purposes.

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A parent employs his twin daughters, age 17, in his sole proprietorship. The daughters are not subject to FICA coverage.

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Mona inherits her mother's personal residence, which she converts to a furnished rental house. These changes should affect the amount of ad valorem property taxes levied on the properties.

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Sales made by mail order are not exempt from the application of a general sales or use) tax.

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When interest is charged on a deficiency, any part of a month counts as a full month.

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Which, if any, of the following transactions will decrease a taxing jurisdiction's ad valorem tax revenue imposed on real estate?

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Ultimately, most taxes are paid by individuals.

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Allowing a tax credit for certain solar energy property can be justified:

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Jason's business warehouse is destroyed by fire. As the insurance proceeds exceed the basis of the property, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized due to the application of the wherewithal to pay concept.

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Currently, the Federal corporate income tax is less progressive than the individual income tax.

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What might cause an individual to owe income taxes in more than one state?

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Tax functions that accounting and finance professionals may assist clients with include all but the following:

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The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.

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A provision in the law that compels accrual basis taxpayers to pay a tax on prepaid income in the year received and not when earned is consistent with generally accepted accounting principles.

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If more IRS audits are producing a greater number of no change results, this indicates increased compliance on the part of taxpayers.

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