Question 1

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

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 2

Before proposing that the state's sales tax be expanded to include food, a legislator should ask whether:

Accepted Answer

A)  The state tax agency will allow this expansion. 
B)  A majority of his constituents agree. 
C)  Grocery stores will be able to collect the tax. 
D)  The state's constitution allows for this tax. 
A)  The state tax agency will allow this expansion. 
B)  A majority of his constituents agree. 
C)  Grocery stores will be able to collect the tax. 
D)  The state's constitution allows for this tax.

Question 3

Rick, the sole proprietor of an adult entertainment club, is audited by the IRS. On the third day of the field audit, the regular IRS agent is accompanied by a special agent. Should Rick be concerned by this new development? Explain.

Accepted Answer

Yes, he should. Special agents rarely ap

Question 4

The objective of pay-as-you-go (paygo) is to improve administrative feasibility.

Accepted Answer

A) True 
 B)False

Question 5

In connection with facilitating the function of the IRS in the administration of the tax laws, comment on the utility of the following:
a. An increase in the amount of the standard deduction.
b. Dollar and percentage limitations on the deduction of personal casualty losses in Federally declared disaster areas.
c. Availability of interest and penalties for taxpayer noncompliance.

Accepted Answer

a. An increase in the amount of the stan

Question 6

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

Accepted Answer

A)  A tax holiday is granted to an out-of-state business that is searching for a new factory site. 
B)  An abandoned church is converted to a restaurant. 
C)  A public school is razed and turned into a city park. 
D)  A local university sells a dormitory that will be converted for use as an apartment building. 
E)  None of these. 
A)  A tax holiday is granted to an out-of-state business that is searching for a new factory site. 
B)  An abandoned church is converted to a restaurant. 
C)  A public school is razed and turned into a city park. 
D)  A local university sells a dormitory that will be converted for use as an apartment building. 
E)  None of these.

Question 7

In terms of Adam Smith's canons of taxation, how does the Federal income tax fare as far as economy is concerned?

Accepted Answer

Economy is present only if the

Question 8

A calendar year taxpayer files his 2018 Federal income tax return on March 4, 2019. The return reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2019. The refund need not include interest.

Accepted Answer

A) True 
 B)False

Question 9

Match the statements that relate to each other. Note: Some choices may be used more than once.
-Fraud and statute of limitations

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 10

For the negligence penalty to apply, the underpayment must be caused by intentional disregard of rules and regulations without intent to defraud.

Accepted Answer

A) True 
 B)False

Question 11

The tax law contains various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. On what grounds can these provisions be justified?

Accepted Answer

Social and economic considerat

Question 12

Logan dies with an estate worth $20 million. Under his will, $10 million passes to his wife and $10 million goes to his church. What is Logan's Federal estate tax result?

Accepted Answer

None. After a marital deductio

Question 13

Using the following choices, show the justification for each provision of the tax law listed.
-A bribe to the local sheriff, although business related, is not 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 14

Sally's neighbor often brags that his employer often pays him in cash "off the books" to save him taxes. Sally is tired of hearing this and contacts the IRS to report the neighbor. If this tip results in taxes collected by the IRS, Sally will likely receive an award of a portion of the tax and penalties collected.

Accepted Answer

A) True 
 B)False

Question 15

For individual taxpayers, the interest rate for income tax refunds (overpayments) is the same as that applicable to assessments (underpayments).

Accepted Answer

A) True 
 B)False

Question 16

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

Accepted Answer

A) True 
 B)False

Question 17

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

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 18

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.

Accepted Answer

A) True 
 B)False

Question 19

In 2019, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José has not made a taxable gift.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following taxes is paid only by the employer?

Accepted Answer

A)  FICA 
B)  FUTA 
C)  Social Security tax 
D)  Medicare tax 
A)  FICA 
B)  FUTA 
C)  Social Security tax 
D)  Medicare tax

Exam 1: Understanding and Working With the Federal Tax Law

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

Before proposing that the state's sales tax be expanded to include food, a legislator should ask whether:

Rick, the sole proprietor of an adult entertainment club, is audited by the IRS. On the third day of the field audit, the regular IRS agent is accompanied by a special agent. Should Rick be concerned by this new development? Explain.

The objective of pay-as-you-go (paygo) is to improve administrative feasibility.

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

In terms of Adam Smith's canons of taxation, how does the Federal income tax fare as far as economy is concerned?

A calendar year taxpayer files his 2018 Federal income tax return on March 4, 2019. The return reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2019. The refund need not include interest.

Match the statements that relate to each other. Note: Some choices may be used more than once. -Fraud and statute of limitations

For the negligence penalty to apply, the underpayment must be caused by intentional disregard of rules and regulations without intent to defraud.

The tax law contains various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. On what grounds can these provisions be justified?

Logan dies with an estate worth $20 million. Under his will, $10 million passes to his wife and $10 million goes to his church. What is Logan's Federal estate tax result?

Using the following choices, show the justification for each provision of the tax law listed. -A bribe to the local sheriff, although business related, is not deductible.

For individual taxpayers, the interest rate for income tax refunds (overpayments) is the same as that applicable to assessments (underpayments).

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

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

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.

In 2019, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José has not made a taxable gift.

Which of the following taxes is paid only by the employer?

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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