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. -Excise tax on tobacco

Burt and Lisa are married and live in a common law state. Burt wants to make gifts to their four children in 2018. What is the maximum amount of the annual exclusion they will be allowed for these gifts?

If fraud is involved, there is no time limit on the assessment of a deficiency by the IRS.

In 2016, Deborah became 65 years old. In 2017 she added a swimming pool, and in 2018 she converted the residence to rental property and moved into an assisted living facility. Since 2015, Deborah's ad valorem property taxes have decreased once and increased twice. Explain.

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

Using the choices provided below, show the justification for each provision of the tax law listed. -Tax brackets are increased for inflation.

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

Which, if any, of the following taxes are proportional (rather than progressive)?

During any month in which both the failure to file penalty and the failure to pay penalty apply, the failure to file penalty is increased by the amount of the failure to pay penalty.

Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not remain the same.

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

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

The pay-as-you-go feature of the Federal income tax on individuals conforms to Adam Smith's canon (principle) of certainty.

Under the usual state inheritance tax, two heirs, a cousin and a son of the deceased, would not be taxed at the same rate.

State and local governments are sometimes forced to find ways to generate additional revenue. Comment on the pros and cons of the following procedures: a. Decouple what would be part of the piggyback format of the state income tax. b. Tax amnesty provisions. c. Internet shaming.

When Congress enacts a tax cut that is phased in over a period of years, revenue neutrality is achieved.

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Employee temporarily working in another state for two months

Using the choices provided below, show the justification for each provision of the tax law listed. -A Federal deduction for state and local income taxes paid.

The tax law allows an income tax deduction (or a credit) for foreign income taxes. Explain why.

For omissions from gross income in excess of 25% of that reported, there is no statute of limitations on additional income tax assessments by the IRS.