Question 1

The Federal estate and gift taxes are examples of progressive taxes.

Accepted Answer

A) True 
 B)False

Question 2

Not all of the states that impose a general sales tax also have a use tax.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

Accepted Answer

A)  Nonrecognition of gain allowed for involuntary conversions. 
B)  Net operating loss carryover provisions. 
C)  Carry over of excess charitable contributions. 
D)  Use of the installment method to recognize gain. 
E)  Carry over of excess capital losses. 
A)  Nonrecognition of gain allowed for involuntary conversions. 
B)  Net operating loss carryover provisions. 
C)  Carry over of excess charitable contributions. 
D)  Use of the installment method to recognize gain. 
E)  Carry over of excess capital losses.

Question 5

No state has offered an income tax amnesty program more than once.

Accepted Answer

A) True 
 B)False

Question 6

Allowing a tax credit for certain solar energy property can be justified:

Accepted Answer

A)  As helping small businesses. 
B)  As promoting administrative feasibility. 
C)  As promoting a government policy to use alternative energy sources. 
D)  Based on the wherewithal to pay concept. 
E)  None of these. 
A)  As helping small businesses. 
B)  As promoting administrative feasibility. 
C)  As promoting a government policy to use alternative energy sources. 
D)  Based on the wherewithal to pay concept. 
E)  None of these.

Question 7

Regarding proper ethical guidelines, which (if any) of the following is correct?

Accepted Answer

A)  The use of client estimates in preparing a return may be acceptable. 
B)  Under no circumstances should a question on a tax return be left unanswered. 
C)  If a client has made a mistake in a prior year's return and refuses to correct it, you should withdraw from the engagement. 
D)  If the exact amount of a deduction is not certain (e.g., around mid-$600s), it should be recorded as an odd amount (i.e., $649) so as to increase the appearance of greater certainty. 
E)  None of these. 
A)  The use of client estimates in preparing a return may be acceptable. 
B)  Under no circumstances should a question on a tax return be left unanswered. 
C)  If a client has made a mistake in a prior year's return and refuses to correct it, you should withdraw from the engagement. 
D)  If the exact amount of a deduction is not certain (e.g., around mid-$600s), it should be recorded as an odd amount (i.e., $649) so as to increase the appearance of greater certainty. 
E)  None of these.

Question 8

Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income tax on individuals.

Accepted Answer

A) True 
 B)False

Question 9

Social considerations can be used to justify:

Accepted Answer

A)  Allowance of a credit for child care expenses. 
B)  Allowing excess capital losses to be carried over to other years. 
C)  Allowing accelerated amortization for the cost of installing pollution control facilities. 
D)  Allowing a Federal income tax deduction for state and local sales taxes. 
E)  None of these. 
A)  Allowance of a credit for child care expenses. 
B)  Allowing excess capital losses to be carried over to other years. 
C)  Allowing accelerated amortization for the cost of installing pollution control facilities. 
D)  Allowing a Federal income tax deduction for state and local sales taxes. 
E)  None of these.

Question 10

If a "special agent" becomes involved in the audit of a return, this indicates that the IRS suspects that fraud is involved.

Accepted Answer

A) True 
 B)False

Question 11

Tracy has just been audited and the IRS agent has issued an RAR that assesses a large deficiency. Since Tracy disagrees with the result, her next step is to go to court. Do you agree?

Accepted Answer

Tracy might save herself time and expens

Question 12

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
-Mitigation of the annual accounting period concept

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 13

Both economic and social considerations can be used to justify:

Accepted Answer

A)  Favorable tax treatment for accident and health plans provided for employees and financed by employers. 
B)  Disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g., fines, penalties, illegal kickbacks, bribes to government officials). 
C)  Various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. 
D)  Allowance of a deduction for state and local income taxes paid. 
E)  None of these. 
A)  Favorable tax treatment for accident and health plans provided for employees and financed by employers. 
B)  Disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g., fines, penalties, illegal kickbacks, bribes to government officials). 
C)  Various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. 
D)  Allowance of a deduction for state and local income taxes paid. 
E)  None of these.

Question 14

The tax law contains various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. On what grounds can these provisions be justified?

Accepted Answer

Social and economic considerat

Question 15

What is the difference between an inheritance tax and an estate tax? Who imposes these taxes?

Accepted Answer

An inheritance tax is a tax on the right

Question 16

Congressman Smith wants to impose a new tax on sugar drinks. Analyze this proposal against the principles of equity, simplicity and neutrality.

Accepted Answer

Equity - The tax is regressive in that i

Question 17

Sales made by mail order are not exempt from the application of a general sales (or use) tax.

Accepted Answer

A) True 
 B)False

Question 18

Currently, the Federal corporate income tax is less progressive than the individual income tax.

Accepted Answer

A) True 
 B)False

Question 19

State income taxes generally can be characterized by:

Accepted Answer

A)  The same date for filing as the Federal income tax. 
B)  No provision for withholding procedures. 
C)  Allowance of a deduction for Federal income taxes paid. 
D)  Applying only to individuals and not applying to corporations. 
E)  None of these. 
A)  The same date for filing as the Federal income tax. 
B)  No provision for withholding procedures. 
C)  Allowance of a deduction for Federal income taxes paid. 
D)  Applying only to individuals and not applying to corporations. 
E)  None of these.

Question 20

In preparing a tax return, all questions on the return must be answered.

Accepted Answer

A) True 
 B)False

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

The Federal estate and gift taxes are examples of progressive taxes.

Not all of the states that impose a general sales tax also have a use tax.

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

Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

No state has offered an income tax amnesty program more than once.

Allowing a tax credit for certain solar energy property can be justified:

Regarding proper ethical guidelines, which (if any) of the following is correct?

Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income tax on individuals.

Social considerations can be used to justify:

If a "special agent" becomes involved in the audit of a return, this indicates that the IRS suspects that fraud is involved.

Tracy has just been audited and the IRS agent has issued an RAR that assesses a large deficiency. Since Tracy disagrees with the result, her next step is to go to court. Do you agree?

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Mitigation of the annual accounting period concept

Both economic and social considerations can be used to justify:

The tax law contains various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. On what grounds can these provisions be justified?

What is the difference between an inheritance tax and an estate tax? Who imposes these taxes?

Congressman Smith wants to impose a new tax on sugar drinks. Analyze this proposal against the principles of equity, simplicity and neutrality.

Sales made by mail order are not exempt from the application of a general sales (or use) tax.

Currently, the Federal corporate income tax is less progressive than the individual income tax.

State income taxes generally can be characterized by:

In preparing a tax return, all questions on the return must be answered.

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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