Question 1

Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.

Accepted Answer

A) True 
 B)False

Question 2

How do the net operating loss provisions in the tax law mitigate the effect of the annual accounting concept?

Accepted Answer

Without the allowance of a loss carryfor

Question 3

A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.

Accepted Answer

A) True 
 B)False

Question 4

Congress reacts to judicial decisions that interpret the tax law in different ways. When it approves of a decision, Congress may act to amend the Code to incorporate the holding. When it disapproves, Congress may amend the Code to nullify its effect. Give an example of each one of these congressional reactions.

Accepted Answer

Congress approved of the judicial conclu

Question 5

Match the statements that relate to each other. Note: Some choices may be used more than once.
-Interest due on refund

Accepted Answer

A) Three years from date return is filed 
B) Three years from due date of return 
C) 20% of underpayment 
D) 5% per month (25% limit) 
E) 0.5% per month (25% limit)
F)Conducted at IRS office
G)Conducted at taxpayer's office
H)Six years
I)45-day grace period allowed to IRS
J)No statute of limitations (period remains open)
K)75% of underpayment
L)No correct match provided 
A) Three years from date return is filed 
B) Three years from due date of return 
C) 20% of underpayment 
D) 5% per month (25% limit) 
E) 0.5% per month (25% limit)
F)Conducted at IRS office
G)Conducted at taxpayer's office
H)Six years
I)45-day grace period allowed to IRS
J)No statute of limitations (period remains open)
K)75% of underpayment
L)No correct match provided

Question 6

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
-Employee temporarily working in another state for two months

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 7

Not all of the states that impose a general sales tax also have a use tax.

Accepted Answer

A) True 
 B)False

Question 8

Federal excise taxes that are no longer imposed include:

Accepted Answer

A)  Tax on air travel. 
B)  Tax on wagering. 
C)  Tax on the manufacture of sporting equipment. 
D)  Tax on alcohol. 
E)  None of these. 
A)  Tax on air travel. 
B)  Tax on wagering. 
C)  Tax on the manufacture of sporting equipment. 
D)  Tax on alcohol. 
E)  None of these.

Question 9

Virtually all state income tax returns contain checkoff boxes for donations to various causes. On what grounds has this procedure been criticized?

Accepted Answer

In many cases, the procedure is overused

Question 10

Even though a client refuses to correct an error on a past return, it may be possible for a practitioner to continue to prepare returns for the client.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Both economic and social considerations can be used to justify:

Accepted Answer

A)  Favorable tax treatment for accident and health plans provided for employees and financed by employers. 
B)  Disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g., fines, penalties, illegal kickbacks, bribes to government officials). 
C)  Various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. 
D)  Allowance of a deduction for state and local income taxes paid. 
E)  None of these. 
A)  Favorable tax treatment for accident and health plans provided for employees and financed by employers. 
B)  Disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g., fines, penalties, illegal kickbacks, bribes to government officials). 
C)  Various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. 
D)  Allowance of a deduction for state and local income taxes paid. 
E)  None of these.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is a characteristic of the audit process?

Accepted Answer

A)  Most taxpayer audits involve "special" agents. 
B)  Self-employed taxpayers are less likely to be selected for audit than employed taxpayers. 
C)  Less important issues are handled by means of a correspondence audit. 
D)  If a taxpayer disagrees with the IRS auditor's finding, the only resort is to the courts. 
E)  None of these. 
A)  Most taxpayer audits involve "special" agents. 
B)  Self-employed taxpayers are less likely to be selected for audit than employed taxpayers. 
C)  Less important issues are handled by means of a correspondence audit. 
D)  If a taxpayer disagrees with the IRS auditor's finding, the only resort is to the courts. 
E)  None of these.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Match the statements that relate to each other. Note: Some choices may be used more than once.
-Office audit

Accepted Answer

A) Three years from date return is filed 
B) Three years from due date of return 
C) 20% of underpayment 
D) 5% per month (25% limit) 
E) 0.5% per month (25% limit)
F)Conducted at IRS office
G)Conducted at taxpayer's office
H)Six years
I)45-day grace period allowed to IRS
J)No statute of limitations (period remains open)
K)75% of underpayment
L)No correct match provided 
A) Three years from date return is filed 
B) Three years from due date of return 
C) 20% of underpayment 
D) 5% per month (25% limit) 
E) 0.5% per month (25% limit)
F)Conducted at IRS office
G)Conducted at taxpayer's office
H)Six years
I)45-day grace period allowed to IRS
J)No statute of limitations (period remains open)
K)75% of underpayment
L)No correct match provided

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

"Bracket creep" is avoided by:

Accepted Answer

A)  Using sunset provisions. 
B)  Providing special tax rules for small businesses. 
C)  The statute of limitations. 
D)  Adjusting the rate brackets for inflation annually. 
A)  Using sunset provisions. 
B)  Providing special tax rules for small businesses. 
C)  The statute of limitations. 
D)  Adjusting the rate brackets for inflation annually.

Question 19

For Federal income tax purposes, there never has been a general amnesty period.

Accepted Answer

A) True 
 B)False

Question 20

State income taxes generally can be characterized by:

Accepted Answer

A)  The same date for filing as the Federal income tax. 
B)  No provision for withholding procedures. 
C)  Allowance of a deduction for Federal income taxes paid. 
D)  Applying only to individuals but not to corporations. 
E)  None of these. 
A)  The same date for filing as the Federal income tax. 
B)  No provision for withholding procedures. 
C)  Allowance of a deduction for Federal income taxes paid. 
D)  Applying only to individuals but not to corporations. 
E)  None of these.

Exam 1: Understanding and Working With the Federal Tax Law

Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.

How do the net operating loss provisions in the tax law mitigate the effect of the annual accounting concept?

A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.

Match the statements that relate to each other. Note: Some choices may be used more than once. -Interest due on refund

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Employee temporarily working in another state for two months

Not all of the states that impose a general sales tax also have a use tax.

Federal excise taxes that are no longer imposed include:

Virtually all state income tax returns contain checkoff boxes for donations to various causes. On what grounds has this procedure been criticized?

Even though a client refuses to correct an error on a past return, it may be possible for a practitioner to continue to prepare returns for the client.

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

Both economic and social considerations can be used to justify:

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

Which of the following is a characteristic of the audit process?

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

Match the statements that relate to each other. Note: Some choices may be used more than once. -Office audit

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

"Bracket creep" is avoided by:

For Federal income tax purposes, there never has been a general amnesty period.

State income taxes generally can be characterized by:

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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