Question 1

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 one possible result 
D) State income tax applied to 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 one possible result 
D) State income tax applied to 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

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 3

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

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 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 6

Match the statements that relate to each other. Note: Some choices may be used more than once.
-Late filing and statute limitations (deficiency situations)

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 7

On occasion, Congress has to enact legislation that clarifies the tax law in order to change a result reached by the U.S. Supreme Court.

Accepted Answer

A) True 
 B)False

Question 8

Your client, Connie, won $12,000 in a football office pool. She sees no reason to include it in her income for several reasons. First, the amount won will not be reported to the IRS. Second, as an average income employee, she is unlikely to be audited by the IRS. Third, she feels that she has probably lost this much in other past office pools. How do you respond?

Accepted Answer

As a practitioner, you cannot play the a

Question 9

Stealth taxes have the effect of generating additional taxes from all taxpayers.

Accepted Answer

A) True 
 B)False

Question 10

Property can be transferred within the family group by gift or at death. One motivation for preferring the gift approach is:

Accepted Answer

A)  To take advantage of the higher unified transfer tax credit available under the gift tax. 
B)  To avoid a future decline in value of the property transferred. 
C)  To take advantage of the per donee annual exclusion. 
D)  To shift income to higher bracket donees. 
E)  None of these. 
A)  To take advantage of the higher unified transfer tax credit available under the gift tax. 
B)  To avoid a future decline in value of the property transferred. 
C)  To take advantage of the per donee annual exclusion. 
D)  To shift income to higher bracket donees. 
E)  None of these.

Question 11

Paige is the sole shareholder of Citron Corporation. During the year, Paige leases a building to Citron for a monthly rental of $80,000. If the fair rental value of the building is $60,000, what are the income tax consequences to the parties involved?

Accepted Answer

The rent charged by Paige is not "arms l

Question 12

"Bracket creep" will not exist if there is only a single (flat) tax rate for the income tax.

Accepted Answer

A) True 
 B)False

Question 13

Melinda has been referred to you by one of your clients. In the past, she has prepared her own income tax returns, but she has become overwhelmed by the increased complexity of the tax law. Consequently, Melinda wants you to prepare her return for calendar year 2018. In reviewing her 2017 return, you note that she has claimed as a deduction the entire cost of a business building that should have been capitalized and depreciated. What course of action should you follow?

Accepted Answer

You should recommend to Melinda that an

Question 14

A use tax is imposed by:

Accepted Answer

A)  The Federal government and all states. 
B)  The Federal government and a majority of the states. 
C)  All states and not the Federal government. 
D)  Most of the states and not the Federal government. 
E)  None of these. 
A)  The Federal government and all states. 
B)  The Federal government and a majority of the states. 
C)  All states and not the Federal government. 
D)  Most of the states and not the Federal government. 
E)  None of these.

Question 15

Using the choices provided below, 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 16

Using the choices provided below, show the justification for each provision of the tax law listed.
-Tax credits for home improvements that conserve energy.

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 17

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

Accepted Answer

A) True 
 B)False

Question 18

One of the major reasons for the enactment of the Federal estate tax was to prevent large amounts of wealth from being accumulated within the family unit.

Accepted Answer

A) True 
 B)False

Question 19

A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state that levies no such taxes.

Accepted Answer

A) True 
 B)False

Question 20

The AICPA Statements on Standards for Tax Services are:

Accepted Answer

A)  Enforceable. 
B)  Educational. 
C)  Out-of-date. 
D)  There is no such item. 
A)  Enforceable. 
B)  Educational. 
C)  Out-of-date. 
D)  There is no such item.

Exam 1: An Introduction to Taxation and Understanding 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. -Use tax

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

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

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?

Match the statements that relate to each other. Note: Some choices may be used more than once. -Late filing and statute limitations (deficiency situations)

On occasion, Congress has to enact legislation that clarifies the tax law in order to change a result reached by the U.S. Supreme Court.

Stealth taxes have the effect of generating additional taxes from all taxpayers.

Property can be transferred within the family group by gift or at death. One motivation for preferring the gift approach is:

Paige is the sole shareholder of Citron Corporation. During the year, Paige leases a building to Citron for a monthly rental of $80,000. If the fair rental value of the building is $60,000, what are the income tax consequences to the parties involved?

"Bracket creep" will not exist if there is only a single (flat) tax rate for the income tax.

A use tax is imposed by:

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

Using the choices provided below, show the justification for each provision of the tax law listed. -Tax credits for home improvements that conserve energy.

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

One of the major reasons for the enactment of the Federal estate tax was to prevent large amounts of wealth from being accumulated within the family unit.

A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state that levies no such taxes.

The AICPA Statements on Standards for Tax Services are:

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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