Question 1

In terms of probability, which of the following taxpayers would be least likely to be audited by the IRS?

Accepted Answer

A) Taxpayer owns and operates a check-cashing service. 
B) Taxpayer is an employed electrician. 
C) Taxpayer just received a $3 million personal injury award as a result of a lawsuit. 
D) Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino. 
E) Taxpayer has been audited several times before. 
A) Taxpayer owns and operates a check-cashing service. 
B) Taxpayer is an employed electrician. 
C) Taxpayer just received a $3 million personal injury award as a result of a lawsuit. 
D) Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino. 
E) Taxpayer has been audited several times before.

Question 2

A lack of compliance in the payment of use taxes can be resolved by several means.In this regard, comment on the following:

Accepted Answer

The answer of A lack of compliance in the payment...

Question 3

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.

Accepted Answer

A) True 
 B)False

Question 4

The formula for the Federal income tax on corporations is the same as that applicable to individuals.

Accepted Answer

A) True 
 B)False

Question 5

Which, if any, of the following statements best describes the history of the Federal income tax?

Accepted Answer

A) It existed during the Civil War. 
B) The Federal income tax on corporations was held by the U.S.Supreme Court to be contrary to the U.S.Constitution. 
C) The Federal income tax on individuals was held by the U.S.Supreme Court to be allowable under the U.S.Constitution. 
D) Both the Federal income tax on individuals and on corporations was held by the U.S.Supreme Court to be contrary to the U.S.Constitution. 
E) None of the above. 
A) It existed during the Civil War. 
B) The Federal income tax on corporations was held by the U.S.Supreme Court to be contrary to the U.S.Constitution. 
C) The Federal income tax on individuals was held by the U.S.Supreme Court to be allowable under the U.S.Constitution. 
D) Both the Federal income tax on individuals and on corporations was held by the U.S.Supreme Court to be contrary to the U.S.Constitution. 
E) None of the above.

Question 6

The states that impose a general sales tax also have a use tax.

Accepted Answer

A) True 
 B)False

Question 7

A landlord leases property upon which the tenant makes improvements.The improvements are significant and are not made in lieu of rent.At the end of the lease, the value of the improvements are not income to the landlord.This rule is an example of:

Accepted Answer

A) A clear reflection of income result. 
B) The tax benefit rule. 
C) The arm's length concept. 
D) The wherewithal to pay concept. 
E) None of the above. 
A) A clear reflection of income result. 
B) The tax benefit rule. 
C) The arm's length concept. 
D) The wherewithal to pay concept. 
E) None of the above.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

For Federal income tax purposes, there never has been a general amnesty period.

Accepted Answer

A) True 
 B)False

Question 10

Several years ago, Lucas purchased extra grazing land for his ranch at a cost of $120,000.In 2012, the land is condemned by the state for development as a highway maintenance depot.Under the condemnation award, Lucas receives $300,000 for the land.Within the same year, he replaces the property with other grazing land.What is Lucas's tax situation if the replacement land cost:

Accepted Answer

The answer of Several years ago, Lucas purchased extra grazing...

Question 11

The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.

Accepted Answer

A) True 
 B)False

Question 12

In 2010, Deborah became 65 years old.In 2011 she added a swimming pool, and in 2012 she converted the residence to rental property and moved into an assisted living facility.Since 2009, Deborah's ad valorem property taxes have decreased once and increased twice.Explain.

Accepted Answer

The decrease probably came in

Question 13

Under state amnesty programs, all delinquent and unpaid income taxes are forgiven.

Accepted Answer

A) True 
 B)False

Question 14

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

Question 15

A characteristic of FUTA is that:

Accepted Answer

A) It is imposed on both employer and employee. 
B) It is imposed solely on the employee. 
C) Compliance requires following guidelines issued by both state and Federal regulatory authorities. 
D) It is applicable to spouses of employees but not to any children under age 18. 
E) None of the above. 
A) It is imposed on both employer and employee. 
B) It is imposed solely on the employee. 
C) Compliance requires following guidelines issued by both state and Federal regulatory authorities. 
D) It is applicable to spouses of employees but not to any children under age 18. 
E) None of the above.

Question 16

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

Accepted Answer

A) True 
 B)False

Question 17

On his 2012 income tax return, Logan omitted income and overstated deductions to the extent that his income tax was understated by $400,000.Disregarding any interest element, what is Logan's penalty if the understatement was due to:

Accepted Answer

The answer of On his 2012 income tax return, Logan...

Question 18

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

Accepted Answer

The pay-as-you-go system is present in t

Question 19

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

Accepted Answer

A) Franchise taxes. 
B) Severance taxes. 
C) Occupational fees. 
D) Export duties. 
E) Customs duties. 
A) Franchise taxes. 
B) Severance taxes. 
C) Occupational fees. 
D) Export duties. 
E) Customs duties.

Question 20

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

Accepted Answer

A) True 
 B)False

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

In terms of probability, which of the following taxpayers would be least likely to be audited by the IRS?

A lack of compliance in the payment of use taxes can be resolved by several means.In this regard, comment on the following:

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.

The formula for the Federal income tax on corporations is the same as that applicable to individuals.

Which, if any, of the following statements best describes the history of the Federal income tax?

The states that impose a general sales tax also have a use tax.

A landlord leases property upon which the tenant makes improvements.The improvements are significant and are not made in lieu of rent.At the end of the lease, the value of the improvements are not income to the landlord.This rule is an example of:

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

For Federal income tax purposes, there never has been a general amnesty period.

The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.

In 2010, Deborah became 65 years old.In 2011 she added a swimming pool, and in 2012 she converted the residence to rental property and moved into an assisted living facility.Since 2009, Deborah's ad valorem property taxes have decreased once and increased twice.Explain.

Under state amnesty programs, all delinquent and unpaid income taxes are forgiven.

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

A characteristic of FUTA is that:

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

On his 2012 income tax return, Logan omitted income and overstated deductions to the extent that his income tax was understated by $400,000.Disregarding any interest element, what is Logan's penalty if the understatement was due to:

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

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

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

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-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Alternative Minimum Tax

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

Income Taxation of Trusts and Estates

Filters