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

Mona inherits her mother's personal residence,which she converts to a furnished rent house.These changes should affect the amount of ad valorem property taxes levied on the properties.

Using the choices provided below,show the justification for each provision of the tax law listed. -More rapid expensing for tax purposes of the costs of installing pollution control devices.

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.

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all. -Excise tax on tobacco

Which of the following is a characteristic of the audit process?

Brayden files his Federal income tax return by April 15,but does not pay the tax.Although he expects to pay interest on the large amount of tax he still owes,he feels that the timely filing has avoided any penalties.Is Brayden's assumption correct?

State and local governments are sometimes forced to find ways to generate additional revenue.Comment on the pros and cons of the following procedures: a.Decouple what would be part of the piggyback format of the state income tax. b.Tax amnesty provisions. c.Internet shaming.

In terms of Adam Smith's canons of taxation,how does the Federal income tax fare as far as economy is concerned?

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?

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

Two persons who live in the same state but in different counties may not be subject to the same general sales tax rate.

The Federal income tax is based on a pay­as­you­go system and has become a "mass tax." Explain this statement.

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. c.Availability of interest and penalties for taxpayer noncompliance.

Your client,Connie,won $12,000 in a football office pool.She sees no reason to include it in her income for several reasons.First,the amount won will not be reported to the IRS.Second,as an average income employee,she is unlikely to be audited by the IRS.Third,she feels that she has probably lost this much in other past office pools.How do you respond?

When interest is charged on a deficiency,any part of a month counts as a full month.

The Federal excise tax on cigarettes is an example of a proportional tax.

Taxes levied by all states include:

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all. -Jock tax

Congress reacts to judicial decisions that interpret the tax law in different ways.When it approves of a decision,Congress may act to amend the Code to incorporate the holding.When it disapproves,Congress may amend the Code to nullify its effect.Give an example of each one of these congressional reactions.

Match the statements that relate to each other.Note: Some choices may be used more than once. -Interest due on refund