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

Allowing a domestic production activities deduction for certain manufacturing income can be justified:

A Federal excise tax is no longer imposed on admission to theaters.

Burt and Lisa are married and live in a common law state.Burt wants to make gifts to their four children in 2016.What is the maximum amount of the annual exclusion they will be allowed for these gifts?

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

There is a Federal excise tax on hotel occupancy.

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

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

In an office audit,the audit by the IRS takes place at the office of the taxpayer.

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?

Using the choices provided below, show the justification for each provision of the tax law listed. a.Economic considerations b.Social considerations c.Equity considerations -A Federal deduction for state and local sales taxes paid.

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

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all. a.Deferral of gains from involuntary conversions b.Carryback and 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 -Jock tax

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?

The ratification of the Sixteenth Amendment to the U.S.Constitution was necessary to validate the Federal income tax on corporations.

Federal excise taxes that are no longer imposed include:

Using the choices provided below, show the justification for each provision of the tax law listed. a.Economic considerations b.Social considerations c.Equity considerations -A deduction for qualified tuition paid to obtain higher education.

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

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.

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

The tax law allows,under certain conditions,deferral of gain recognition for involuntary conversions. a.What is the justification for this relief measure? b.What happens if the proceeds are not entirely reinvested?