Question 1

The value added tax (VAT) has not had wide acceptance in the international community.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

Working in more than one state

Question 3

Ultimately, most taxes are paid by individuals.

Accepted Answer

A) True 
 B)False

Question 4

On his 2019 income tax return, Andrew omitted income and overstated deductions to the extent that his income tax was understated by $500,000. Disregarding any interest element, what is Andrew's penalty if the understatement was due to:
a. Negligence.
b. Civil fraud.
c. Criminal fraud.

Accepted Answer

a. $100,000 (20% × $500,000).

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not made in lieu of rent. At the end of the lease, the value of the improvements are not income to the landlord. This rule is an example of:

Accepted Answer

A)  A clear reflection of income result. 
B)  The tax benefit rule. 
C)  The arm's length concept. 
D)  The wherewithal to pay concept. 
E)  None of these. 
A)  A clear reflection of income result. 
B)  The tax benefit rule. 
C)  The arm's length concept. 
D)  The wherewithal to pay concept. 
E)  None of these.

Question 7

Taylor, a widow, makes cash gifts to her five married children (including their spouses) and to her seven grandchildren. What is the maximum amount Taylor can give for calendar year 2019 without using her unified transfer tax credit?

Accepted Answer

$255,000 [$15,000 (a

Question 8

The FICA tax (Medicare component) on wages is progressive since the tax due increases as wages increase.

Accepted Answer

A) True 
 B)False

Question 9

The quote engraved on the IRS building in Washington, DC, at the entrance states:

Accepted Answer

A)  Nothing is certain, except death and taxes. 
B)  Taxes are what we pay for civilized society. 
C)  Everyone welcome. 
D)  Taxes are the most difficult thing in the world to understand. 
E)  None of these. 
A)  Nothing is certain, except death and taxes. 
B)  Taxes are what we pay for civilized society. 
C)  Everyone welcome. 
D)  Taxes are the most difficult thing in the world to understand. 
E)  None of these.

Question 10

The proposed flat tax:

Accepted Answer

A)  Would increase the number of deductions available to individuals 
B)  Would not require individuals to file returns. 
C)  Would tax the increment in value as goods move through the production and manufacturing stages to the marketplace. 
D)  Is a type of consumption tax. 
E)  None of these. 
A)  Would increase the number of deductions available to individuals 
B)  Would not require individuals to file returns. 
C)  Would tax the increment in value as goods move through the production and manufacturing stages to the marketplace. 
D)  Is a type of consumption tax. 
E)  None of these.

Question 11

Taxes levied by both states and the Federal government include:

Accepted Answer

A)  General sales tax. 
B)  Customs duties. 
C)  Hotel occupancy tax. 
D)  Franchise tax. 
E)  None of these. 
A)  General sales tax. 
B)  Customs duties. 
C)  Hotel occupancy tax. 
D)  Franchise tax. 
E)  None of these.

Question 12

The majority of IRS audits are handled by correspondence.

Accepted Answer

A) True 
 B)False

Question 13

To mitigate the effect of the annual accounting period concept, the tax law permits the carryforward of excess charitable contributions of a particular year to other years.

Accepted Answer

A) True 
 B)False

Question 14

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
-Revenue Agent's Report (RAR)

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 15

Currently, the tax base for the Social Security component of the FICA is not limited to a dollar amount.

Accepted Answer

A) True 
 B)False

Question 16

The IRS agent auditing the return will issue an RAR even if the taxpayer owes no additional taxes.

Accepted Answer

A) True 
 B)False

Question 17

Using the following choices, show the justification for each provision of the tax law listed.
-A deduction for certain expenses (interest and taxes) incident to home ownership.

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 18

A state income tax can be imposed on nonresident taxpayers who earn income within the state on an itinerant basis.

Accepted Answer

A) True 
 B)False

Question 19

Jane is the tax director for Tangent Software Corporation. She is unsure whether Tangent is required to charge sales tax when software is provided to customers in State X via the "cloud." This indicates that the sales tax does not meet the principle of:

Accepted Answer

A)  Equity. 
B)  Certainty. 
C)  Neutrality. 
D)  Economic growth and efficiency. 
A)  Equity. 
B)  Certainty. 
C)  Neutrality. 
D)  Economic growth and efficiency.

Question 20

Julius, a married taxpayer, makes gifts to each of his six children. A maximum of twelve annual exclusions could be allowed as to these gifts.

Accepted Answer

A) True 
 B)False

Exam 1: Understanding and Working With the Federal Tax Law

The value added tax (VAT) has not had wide acceptance in the international community.

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

Ultimately, most taxes are paid by individuals.

On his 2019 income tax return, Andrew omitted income and overstated deductions to the extent that his income tax was understated by $500,000. Disregarding any interest element, what is Andrew's penalty if the understatement was due to: a. Negligence. b. Civil fraud. c. Criminal fraud.

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

A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not made in lieu of rent. At the end of the lease, the value of the improvements are not income to the landlord. This rule is an example of:

Taylor, a widow, makes cash gifts to her five married children (including their spouses) and to her seven grandchildren. What is the maximum amount Taylor can give for calendar year 2019 without using her unified transfer tax credit?

The FICA tax (Medicare component) on wages is progressive since the tax due increases as wages increase.

The quote engraved on the IRS building in Washington, DC, at the entrance states:

The proposed flat tax:

Taxes levied by both states and the Federal government include:

The majority of IRS audits are handled by correspondence.

To mitigate the effect of the annual accounting period concept, the tax law permits the carryforward of excess charitable contributions of a particular year to other years.

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Revenue Agent's Report (RAR)

Currently, the tax base for the Social Security component of the FICA is not limited to a dollar amount.

The IRS agent auditing the return will issue an RAR even if the taxpayer owes no additional taxes.

Using the following choices, show the justification for each provision of the tax law listed. -A deduction for certain expenses (interest and taxes) incident to home ownership.

A state income tax can be imposed on nonresident taxpayers who earn income within the state on an itinerant basis.

Jane is the tax director for Tangent Software Corporation. She is unsure whether Tangent is required to charge sales tax when software is provided to customers in State X via the "cloud." This indicates that the sales tax does not meet the principle of:

Julius, a married taxpayer, makes gifts to each of his six children. A maximum of twelve annual exclusions could be allowed as to these gifts.

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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