Question 1

Before proposing that the state's sales tax be expanded to include food, a legislator should ask whether:

Accepted Answer

A)  the state tax agency will allow this expansion. 
B)  a majority of his constituents agree. 
C)  grocery stores will be able to collect the tax. 
D)  the state's constitution allows for this tax. 
A)  the state tax agency will allow this expansion. 
B)  a majority of his constituents agree. 
C)  grocery stores will be able to collect the tax. 
D)  the state's constitution allows for this tax.

Question 2

Match the statements that relate to each other. Note: Some choices may be used more than once.
-More than 25% gross income omission 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 3

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
-Revenue Agent's Report (RAR)

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 4

Characteristics of the "Fair Tax" (i.e., national sales tax) include which, if any, of the following:

Accepted Answer

A)  Abolition of the Federal individual (but not the corporate) income tax. 
B)  Abolition of all Federal income taxes but retention of payroll taxes (including the self-employment tax). 
C)  Abolition of all Federal income taxes and payroll taxes but retention of the Federal estate and gift taxes. 
D)  Abolition of all Federal income and payroll taxes as well as the Federal estate and gift taxes. 
E)  None of these. 
A)  Abolition of the Federal individual (but not the corporate) income tax. 
B)  Abolition of all Federal income taxes but retention of payroll taxes (including the self-employment tax). 
C)  Abolition of all Federal income taxes and payroll taxes but retention of the Federal estate and gift taxes. 
D)  Abolition of all Federal income and payroll taxes as well as the Federal estate and gift taxes. 
E)  None of these.

Question 5

In connection with facilitating the function of the IRS in the administration of the tax laws, comment on the utility of the following:
a. An increase in the amount of the standard deduction.
b. Dollar and percentage limitations on the deduction of personal casualty losses in Federally- declared disaster areas.
c. Availability of interest and penalties for taxpayer noncompliance.

Accepted Answer

a. An increase in the amount of the stan

Question 6

Using the choices provided below, show the justification for each provision of the tax law listed.
-A deduction for certain expenses (interest and taxes) incident to home ownership.

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 7

Provisions in the tax law that promote energy conservation and more use of alternative (non-fossil) fuels can be justified by:

Accepted Answer

A)  Political considerations. 
B)  Economic and social considerations. 
C)  Promoting administrative feasibility. 
D)  Encouragement of small business. 
E)  None of these. 
A)  Political considerations. 
B)  Economic and social considerations. 
C)  Promoting administrative feasibility. 
D)  Encouragement of small business. 
E)  None of these.

Question 8

There is a Federal excise tax on hotel occupancy.

Accepted Answer

A) True 
 B)False

Question 9

Match the statements that relate to each other. Note: Some choices may be used more than once.
-No return and statute 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 10

Sally's neighbor often brags that his employer often pays him in cash "off the books" to save him taxes. Sally is tired of hearing this and contacts the IRS to report the neighbor. If this tip results in taxes collected by the IRS, Sally will likely receive an award of a portion of the tax and penalties collected.

Accepted Answer

A) True 
 B)False

Question 11

In late June 2018, Art is audited by the state and a large deficiency is assessed. In November of the same year, his Federal income tax return is audited by the IRS. What has probably happened?

Accepted Answer

The IRS has been not

Question 12

Some states use their state income tax return as a means of collecting unpaid sales and use taxes.

Accepted Answer

A) True 
 B)False

Question 13

Even though a client refuses to correct an error on a past return, it may be possible for a practitioner to continue to prepare returns for the client.

Accepted Answer

A) True 
 B)False

Question 14

Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty?

Accepted Answer

A)  Taxpayer compliance is greater for personal use property than for business use property. 
B)  The tax on automobiles sometimes considers the age of the vehicle. 
C)  Most states impose a tax on intangibles. 
D)  The tax on intangibles generates considerable revenue since it is difficult for taxpayers to avoid. 
E)  None of these. 
A)  Taxpayer compliance is greater for personal use property than for business use property. 
B)  The tax on automobiles sometimes considers the age of the vehicle. 
C)  Most states impose a tax on intangibles. 
D)  The tax on intangibles generates considerable revenue since it is difficult for taxpayers to avoid. 
E)  None of these.

Question 15

A calendar year taxpayer files his 2017 Federal income tax return on March 4, 2018. The return reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2018. The refund need not include interest.

Accepted Answer

A) True 
 B)False

Question 16

The value added tax (VAT) has not had wide acceptance in the international community.

Accepted Answer

A) True 
 B)False

Question 17

As it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize gain in the year the installment sale occurs.

Accepted Answer

A) True 
 B)False

Question 18

The tax law contains various provisions that encourage home ownership.
a. On what basis can this objective be justified?
b. Are there any negative considerations? Explain.

Accepted Answer

a. Home ownership can be justified on ec

Question 19

Various tax provisions encourage the creation of certain types of retirement plans. Such provisions can be justified on both economic and social grounds.

Accepted Answer

A) True 
 B)False

Question 20

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

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

Before proposing that the state's sales tax be expanded to include food, a legislator should ask whether:

Match the statements that relate to each other. Note: Some choices may be used more than once. -More than 25% gross income omission and statute of limitations

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Revenue Agent's Report (RAR)

Characteristics of the "Fair Tax" (i.e., national sales tax) include which, if any, of the following:

Using the choices provided below, show the justification for each provision of the tax law listed. -A deduction for certain expenses (interest and taxes) incident to home ownership.

Provisions in the tax law that promote energy conservation and more use of alternative (non-fossil) fuels can be justified by:

There is a Federal excise tax on hotel occupancy.

Match the statements that relate to each other. Note: Some choices may be used more than once. -No return and statute limitations

In late June 2018, Art is audited by the state and a large deficiency is assessed. In November of the same year, his Federal income tax return is audited by the IRS. What has probably happened?

Some states use their state income tax return as a means of collecting unpaid sales and use taxes.

Even though a client refuses to correct an error on a past return, it may be possible for a practitioner to continue to prepare returns for the client.

Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty?

A calendar year taxpayer files his 2017 Federal income tax return on March 4, 2018. The return reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2018. The refund need not include interest.

The value added tax (VAT) has not had wide acceptance in the international community.

As it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize gain in the year the installment sale occurs.

The tax law contains various provisions that encourage home ownership. a. On what basis can this objective be justified? b. Are there any negative considerations? Explain.

Various tax provisions encourage the creation of certain types of retirement plans. Such provisions can be justified on both economic and social grounds.

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

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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