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. -"Pay-as-you-go" (paygo)

The U.S. (either Federal, state, or local) does not impose:

In 2018, 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.

Indicate which, if any, statement is incorrect. State income taxes:

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 or not at all. -Revenue neutrality

David files his tax return 45 days after the due date. Along with the return, David remits a check for $40,000 which is the balance of the tax owed. Disregarding the interest element, David's total failure to file and to pay penalties are:

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

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

The principal objective of the FUTA tax is to provide some measure of retirement security.

To lessen, or eliminate, the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.

A rationale for the installment method tax rule is:

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

Taxes not imposed by the Federal government include:

A VAT (value added tax):

Because the law is complicated, most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

Due to the population change, the Goose Creek School District has decided to close one of its high schools. Since it has no further need of the property, the school is listed for sale. The two bids it receives are as follows: The United Methodist Church would use the property to establish a sectarian middle school. Planet, a well-known car dealership, would revamp the property and operate it as a branch location. If you were a member of the School District board, what factors would you consider in evaluating the two bids?

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.

States impose either a state income tax or a general sales tax, but not both types of taxes.

Which, if any, of the following statements best describes the history of the Federal income tax?