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

Using the choices provided below,show the justification for each provision of the tax law listed. -A deduction for qualified tuition paid to obtain higher education.

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

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.

In terms of revenue neutrality,comment on a tax cut enacted by Congress that: a.contains revenue offsets. b.includes a sunset provision.

Sales made by mail order are not exempt from the application of a general sales (or use)tax.

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

Julius,a married taxpayer,makes gifts to each of his six children.A maximum of twelve annual exclusions could be allowed as to these gifts.

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

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?

What is the difference between an inheritance tax and an estate tax? Who imposes these taxes?

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all. -Mitigation of the annual accounting period concept

Due to the population change,the Goose Creek School District has decided to close one of its high schools.Since it has no further need of the property,the school is listed for sale.The two bids it receives are as follows: United Methodist Church $1,700,000 Planet Motors 1,600,000 The United Methodist Church would use the property to establish a sectarian middle school.Planet,a well-known car dealership,would revamp the property and operate it as a branch location. If you were a member of the School District board,what factors would you consider in evaluating the two bids?

The proposed flat tax:

To lessen,or eliminate,the effect of multiple taxation,a taxpayer who is subject to both foreign and U.S.income taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.

If more IRS audits are producing a greater number of no change results,this indicates increased compliance on the part of taxpayers.

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

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.

Which,if any,of the following transactions will decrease a taxing jurisdiction's ad valorem tax revenue imposed on real estate?

A CPA firm in California sends many of its less complex tax returns to be prepared by a group of accountants in India.If certain procedures are followed,this outsourcing of tax return preparation is proper.

With regard to state income taxes,explain what is meant by the "jock tax"?