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

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 -Negligence penalty

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 -Tax credits available for the purchase of a vehicle that uses alternative (non-fossil)fuels.

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 contributions by an employee to certain retirement plans.

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 -Field audit

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.

One of the major reasons for the enactment of the Federal estate tax was to prevent large amounts of wealth from being accumulated within the family unit.

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

The Federal income tax is based on a pay-as-you-go system and has become a "mass tax." Explain this statement.

A lack of compliance in the payment of use taxes can be resolved by several means.In this regard,comment on the following: a.Registration of automobiles. b.Reporting of Internet purchases on state income tax returns.

Upon audit by the IRS,Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.The 20% negligence penalty will apply to $25,000.

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

How do the net operating loss provisions in the tax law mitigate the effect of the annual accounting concept?

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

A state income tax can be imposed on nonresident taxpayers who earn income within the state on an itinerant basis.

For state income tax purposes,a majority of states allow a deduction for Federal income taxes.

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 certain income from manufacturing activities.

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 certain expenses (interest and taxes)incident to home ownership.

Taxes not imposed by the Federal government include:

On transfers by death,the Federal government relies on an estate tax,while states impose an estate tax,an inheritance tax,both taxes,or neither tax.

A parent employs his twin daughters,age 17,in his sole proprietorship.The daughters are not subject to FICA coverage.