Question 1

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

Accepted Answer

A) True 
 B)False  False

Question 2

The tax law allows, under certain conditions, deferral of gain recognition for involuntary conversions.
a. What is the justification for this relief measure?
b. What happens if the proceeds are not entirely reinvested?

Accepted Answer

a. By recognizing that the taxpayer's relative economic situation has not changed and that he or she lacks the wherewithal to pay a tax, any recognition of realized
gain is deferred.
b. If the proceeds from an involuntary conversion are not fully reinvested in property that is similar or related in service or use, recognized gain results. Such recognized gain cannot exceed realized gain and will be limited to the amount of the proceeds not reinvested. Recognition is based on the notion that the taxpayer now has the wherewithal to pay the tax that results.

Question 3

The civil fraud penalty can entail large fines and possible incarceration.

Accepted Answer

A) True 
 B)False  False

Question 4

An inheritance tax is a tax on a decedent's right to pass property at death.

Accepted Answer

A) True 
 B)False

Question 5

Briana lives in one state and works in the adjoining state. Both states tax the income she earns from her job. Does Briana have any relief from this apparent double taxation of the same income?

Accepted Answer

Most states allow their residents some f

Question 6

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 the above. 
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 the above.

Question 7

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 8

A major advantage of a flat tax type of income tax is its simplicity.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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) 3 years from date return is filed 
B) 3 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)6 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) 3 years from date return is filed 
B) 3 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)6 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 11

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 12

Using the choices provided below, show the justification for each provision of the tax law listed.
-A tax credit for amounts spent to furnish care for children while the parent is at work.

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 13

The formula for the Federal income tax on corporations is the same as that applicable to individuals.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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 16

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 17

In terms of revenue neutrality, comment on a tax cut enacted by Congress that:
a. contains revenue offsets.
b. includes a sunset provision.

Accepted Answer

a. Ideally, to achieve revenue neutralit

Question 18

What are the pros and cons of the following state and local tax provisions?
a. An ad valorem property tax holiday made available to a manufacturing plant that is relocating.
b. Hotel occupancy tax and a rental car surcharge.
c. A back-to-school sales tax holiday.

Accepted Answer

a. Such a holiday is designed to attract

Question 19

Using the choices provided below, show the justification for each provision of the tax law listed.
-Additional depreciation deduction allowed for the year the asset is acquired.

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 20

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.

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

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

The tax law allows, under certain conditions, deferral of gain recognition for involuntary conversions. a. What is the justification for this relief measure? b. What happens if the proceeds are not entirely reinvested?

The civil fraud penalty can entail large fines and possible incarceration.

An inheritance tax is a tax on a decedent's right to pass property at death.

Briana lives in one state and works in the adjoining state. Both states tax the income she earns from her job. Does Briana have any relief from this apparent double taxation of the same income?

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

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

A major advantage of a flat tax type of income tax is its simplicity.

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

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

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

Using the choices provided below, show the justification for each provision of the tax law listed. -A tax credit for amounts spent to furnish care for children while the parent is at work.

The formula for the Federal income tax on corporations is the same as that applicable to individuals.

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

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

In terms of revenue neutrality, comment on a tax cut enacted by Congress that: a. contains revenue offsets. b. includes a sunset provision.

What are the pros and cons of the following state and local tax provisions? a. An ad valorem property tax holiday made available to a manufacturing plant that is relocating. b. Hotel occupancy tax and a rental car surcharge. c. A back-to-school sales tax holiday.

Using the choices provided below, show the justification for each provision of the tax law listed. -Additional depreciation deduction allowed for the year the asset is acquired.

Federal excise taxes that are no longer imposed include:

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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