Question 1

If a tax deficiency is attributable to fraud, the negligence penalty will not be imposed.

Accepted Answer

A) True 
 B)False  True

Question 2

Indicate which, if any, statement is incorrect. State income taxes:

Accepted Answer

A)  Can piggyback to the Federal version. 
B)  Cannot apply to visiting nonresidents. 
C)  Can decouple from the Federal version. 
D)  Can provide occasional amnesty programs. 
E)  None of these. 
A)  Can piggyback to the Federal version. 
B)  Cannot apply to visiting nonresidents. 
C)  Can decouple from the Federal version. 
D)  Can provide occasional amnesty programs. 
E)  None of these. B

Question 3

The tax law provides various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. These provisions can be justified on both economic and equity grounds.

Accepted Answer

A) True 
 B)False  False

Question 4

Can a taxpayer start the three-year statute of limitations on additional assessments by the IRS by filing his income tax return early (i.e., before the due date)? Can the period be shortened by filing late (i.e., after the due date)?

Accepted Answer

The answer is no in both cases

Question 5

A characteristic of the fraud penalties is:

Accepted Answer

A)  When negligence and civil fraud apply to a deficiency, the negligence penalty predominates. 
B)  When criminal fraud can result in a fine and a prison sentence. 
C)  When the criminal fraud penalty is 75% of the deficiency attributable to the fraud. 
D)  When the IRS has the same burden of proof in the case of criminal fraud as with civil fraud. 
E)  None of these. 
A)  When negligence and civil fraud apply to a deficiency, the negligence penalty predominates. 
B)  When criminal fraud can result in a fine and a prison sentence. 
C)  When the criminal fraud penalty is 75% of the deficiency attributable to the fraud. 
D)  When the IRS has the same burden of proof in the case of criminal fraud as with civil fraud. 
E)  None of these.

Question 6

Using the following choices, show the justification for each provision of the tax law listed.
-Contributions to charitable organizations are deductible.

Accepted Answer

A) Economic considerations 
B) Social considerations 
C) Equity considerations 
D) Both a. and b. 
A) Economic considerations 
B) Social considerations 
C) Equity considerations 
D) Both a. and b.

Question 7

Ultimately, most taxes are paid by individuals. Explain what this means in terms of income and payroll taxes paid by a corporation.

Accepted Answer

A corporation pays many types of taxes,

Question 8

Using the following choices, show the justification for each provision of the tax law listed.
-A deduction for interest on student loans.

Accepted Answer

A) Economic considerations 
B) Social considerations 
C) Equity considerations 
D) Both a. and b. 
A) Economic considerations 
B) Social considerations 
C) Equity considerations 
D) Both a. and b.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Under Clint's will, all of his property passes to either the Lutheran Church or to his wife. No Federal estate tax will be due on Clint's death in 2019.

Accepted Answer

A) True 
 B)False

Question 11

To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.

Accepted Answer

A) True 
 B)False

Question 12

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
-Use tax

Accepted Answer

A) Deferral of gains from involuntary conversions 
B) Carryforward of net operating losses 
C) "No change" is a possible result 
D) State income tax applied to a visiting nonresident 
E) IRS special agent
F)Undoing the "piggyback" result
G)Ideal budget goal as to new tax legislation
H)Every state that has a general sales tax has one
I)Imposed by all states and the Federal government
J)Imposed by some states but not the Federal government
K)Imposed only by the Federal government
L)No correct match provided 
A) Deferral of gains from involuntary conversions 
B) Carryforward of net operating losses 
C) "No change" is a possible result 
D) State income tax applied to a visiting nonresident 
E) IRS special agent
F)Undoing the "piggyback" result
G)Ideal budget goal as to new tax legislation
H)Every state that has a general sales tax has one
I)Imposed by all states and the Federal government
J)Imposed by some states but not the Federal government
K)Imposed only by the Federal government
L)No correct match provided

Question 13

The principal objective of the FUTA tax is to provide some measure of retirement security.

Accepted Answer

A) True 
 B)False

Question 14

What is the difference between an inheritance tax and an estate tax? Who imposes these taxes?

Accepted Answer

An inheritance tax is a tax on the right

Question 15

Using the following choices, show the justification for each provision of the tax law listed.
-Tax credits available for the purchase of a vehicle that uses alternative (nonfossil) fuels.

Accepted Answer

A) Economic considerations 
B) Social considerations 
C) Equity considerations 
D) Both a. and b. 
A) Economic considerations 
B) Social considerations 
C) Equity considerations 
D) Both a. and b.

Question 16

Tracy has just been audited and the IRS agent has issued an RAR that assesses a large deficiency. Since Tracy disagrees with the result, her next step is to go to court. Do you agree?

Accepted Answer

Tracy might save herself time and expens

Question 17

Under state amnesty programs, all delinquent and unpaid income taxes are forgiven.

Accepted Answer

A) True 
 B)False

Question 18

The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the Federal income tax on corporations.

Accepted Answer

A) True 
 B)False

Question 19

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
-Tax fraud suspected

Accepted Answer

A) Deferral of gains from involuntary conversions 
B) Carryforward of net operating losses 
C) "No change" is a possible result 
D) State income tax applied to a visiting nonresident 
E) IRS special agent
F)Undoing the "piggyback" result
G)Ideal budget goal as to new tax legislation
H)Every state that has a general sales tax has one
I)Imposed by all states and the Federal government
J)Imposed by some states but not the Federal government
K)Imposed only by the Federal government
L)No correct match provided 
A) Deferral of gains from involuntary conversions 
B) Carryforward of net operating losses 
C) "No change" is a possible result 
D) State income tax applied to a visiting nonresident 
E) IRS special agent
F)Undoing the "piggyback" result
G)Ideal budget goal as to new tax legislation
H)Every state that has a general sales tax has one
I)Imposed by all states and the Federal government
J)Imposed by some states but not the Federal government
K)Imposed only by the Federal government
L)No correct match provided

Question 20

Like the Federal counterpart, the amount of the state excise taxes on gasoline varies from state to state.

Accepted Answer

A) True 
 B)False

Exam 1: Understanding and Working With the Federal Tax Law

If a tax deficiency is attributable to fraud, the negligence penalty will not be imposed.

Indicate which, if any, statement is incorrect. State income taxes:

The tax law provides various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. These provisions can be justified on both economic and equity grounds.

Can a taxpayer start the three-year statute of limitations on additional assessments by the IRS by filing his income tax return early (i.e., before the due date)? Can the period be shortened by filing late (i.e., after the due date)?

A characteristic of the fraud penalties is:

Using the following choices, show the justification for each provision of the tax law listed. -Contributions to charitable organizations are deductible.

Ultimately, most taxes are paid by individuals. Explain what this means in terms of income and payroll taxes paid by a corporation.

Using the following choices, show the justification for each provision of the tax law listed. -A deduction for interest on student loans.

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

Under Clint's will, all of his property passes to either the Lutheran Church or to his wife. No Federal estate tax will be due on Clint's death in 2019.

To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Use tax

The principal objective of the FUTA tax is to provide some measure of retirement security.

What is the difference between an inheritance tax and an estate tax? Who imposes these taxes?

Using the following choices, show the justification for each provision of the tax law listed. -Tax credits available for the purchase of a vehicle that uses alternative (nonfossil) fuels.

Tracy has just been audited and the IRS agent has issued an RAR that assesses a large deficiency. Since Tracy disagrees with the result, her next step is to go to court. Do you agree?

Under state amnesty programs, all delinquent and unpaid income taxes are forgiven.

The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the Federal income tax on corporations.

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Tax fraud suspected

Like the Federal counterpart, the amount of the state excise taxes on gasoline varies from state to state.

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

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