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

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 -Use tax

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 -Tax on transfers at death (inheritance type)

The annual exclusion,currently $14,000,is available for gift and estate tax purposes.

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

For the negligence penalty to apply,the underpayment must be caused by intentional disregard of rules and regulations without intent to defraud.

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 d.​Both a. and b. -Tax brackets are increased for inflation.

Can a taxpayer start the 3-year statute of limitations on additional assessments by the IRS by filing his income tax return early (i.e.,before the due date)? Can the period be shortened by filing late (i.e.,after the due date)?

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

Burt and Lisa are married and live in a common law state.Burt wants to make gifts to their four children in 2017.What is the maximum amount of the annual exclusion they will be allowed for these gifts?

A use tax is imposed by:

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?

In late June 2017,Art is audited by the state and a large deficiency is assessed.In November of the same year,his Federal income tax return is audited by the IRS.What has probably happened?

Both economic and social considerations can be used to justify:

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 d.​Both a. and b. -A Federal deduction for state and local income taxes paid.

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.

A VAT (value added tax):

The amount of a taxpayer's itemized deductions will increase the chance of being audited by the IRS.

In 2015,Deborah became 65 years old.In 2016 she added a swimming pool,and in 2017 she converted the residence to rental property and moved into an assisted living facility.Since 2014,Deborah's ad valorem property taxes have decreased once and increased twice.Explain.

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

Melinda has been referred to you by one of your clients.In the past,she has prepared her own income tax returns,but she has become overwhelmed by the increased complexity of the tax law.Consequently,Melinda wants you to prepare her return for calendar year 2017.In reviewing her 2016 return,you note that she has claimed as a deduction the entire cost of a business building that should have been capitalized and depreciated.What course of action should you follow?