Question 1

Canceling a scheduled sales tax holiday has proven to be an easy way to generate more state and local revenue.

Accepted Answer

A) True 
 B)False

Question 2

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

Question 3

Unlike the Federal counterpart,the state excise taxes on gasoline do vary from state to state.

Accepted Answer

A) True 
 B)False

Question 4

Federal excise taxes that are no longer imposed include:

Accepted Answer

A) Tax on air travel. 
B) Tax on wagering. 
C) Tax on the manufacture of sporting equipment. 
D) Tax on the manufacture of automobiles that have poor gas mileage ratings. 
E) None of the above. 
A) Tax on air travel. 
B) Tax on wagering. 
C) Tax on the manufacture of sporting equipment. 
D) Tax on the manufacture of automobiles that have poor gas mileage ratings. 
E) None of the above.

Question 5

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 2010.In reviewing her 2009 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?

Accepted Answer

You should recommend to Melinda that an

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Which,if any,of the following taxes are proportional (rather than progressive)?

Accepted Answer

A) Federal corporate income tax. 
B) Federal gift tax. 
C) Federal estate tax. 
D) Federal employment taxes (i.e. ,FICA,FUT
A) . 
E) All of the above. 
A) Federal corporate income tax. 
B) Federal gift tax. 
C) Federal estate tax. 
D) Federal employment taxes (i.e. ,FICA,FUT
A) . 
E) All of the above.

Question 8

Although the law is complicated,most individual taxpayers are able to complete their Federal income tax returns without outside assistance.

Accepted Answer

A) True 
 B)False

Question 9

The tax law allows,under certain conditions,deferral of gain recognition for involuntary conversions.

Accepted Answer

The answer of The tax law allows,under certain conditions,deferral of...

Question 10

A characteristic of the fraud penalties is:

Accepted Answer

A) Civil fraud can result in a fine and a prison sentence. 
B) When negligence and civil fraud apply to a deficiency,the civil fraud penalty predominates. 
C) The criminal fraud penalty is 75% of the deficiency attributable to the fraud. 
D) The IRS has the same burden of proof in the case of criminal fraud than with civil fraud. 
E) None of the above. 
A) Civil fraud can result in a fine and a prison sentence. 
B) When negligence and civil fraud apply to a deficiency,the civil fraud penalty predominates. 
C) The criminal fraud penalty is 75% of the deficiency attributable to the fraud. 
D) The IRS has the same burden of proof in the case of criminal fraud than with civil fraud. 
E) None of the above.

Question 11

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

Question 12

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 13

One of the motivations for making a gift is to save on income taxes.

Accepted Answer

A) True 
 B)False

Question 14

Social considerations can be used to justify:

Accepted Answer

A) Allowing a Federal income tax deduction for state and local sales taxes. 
B) Allowing excess capital losses to be carried over to other years. 
C) Allowing accelerated amortization for the cost of installing pollution control facilities. 
D) Allowance of a credit for child care expenses. 
E) None of the above. 
A) Allowing a Federal income tax deduction for state and local sales taxes. 
B) Allowing excess capital losses to be carried over to other years. 
C) Allowing accelerated amortization for the cost of installing pollution control facilities. 
D) Allowance of a credit for child care expenses. 
E) None of the above.

Question 15

Sales made by mail order are exempt from the application of a general sales (or use)tax.

Accepted Answer

A) True 
 B)False

Question 16

Both economic and social considerations can be used to justify:

Accepted Answer

A) Various tax credits,deductions,and exclusions that are designed to encourage taxpayers to obtain additional education. 
B) Disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g. ,fines,penalties,illegal kickbacks,bribes to government officials). 
C) Favorable tax treatment for accident and health plans provided for employees and financed by employers. 
D) Allowance of a deduction for state and local income taxes paid. 
E) None of the above. 
A) Various tax credits,deductions,and exclusions that are designed to encourage taxpayers to obtain additional education. 
B) Disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g. ,fines,penalties,illegal kickbacks,bribes to government officials). 
C) Favorable tax treatment for accident and health plans provided for employees and financed by employers. 
D) Allowance of a deduction for state and local income taxes paid. 
E) None of the above.

Question 17

In preparing a tax return,all questions on the return must be answered.

Accepted Answer

A) True 
 B)False

Question 18

Currently,the tax base for the Medicare component of the FICA is limited to a dollar amount.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

If equality is measured by abi

Question 20

Amy is the sole shareholder of Garnet Corporation.During the year,Amy leases a building to Garnet for a monthly rental of $40,000.If the fair rental value of the building is $30,000,what are the income tax consequences to the parties involved?

Accepted Answer

The rent charged by Amy is not "arms len

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

Canceling a scheduled sales tax holiday has proven to be an easy way to generate more state and local revenue.

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

Unlike the Federal counterpart,the state excise taxes on gasoline do vary from state to state.

Federal excise taxes that are no longer imposed include:

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

Which,if any,of the following taxes are proportional (rather than progressive)?

Although the law is complicated,most individual taxpayers are able to complete their Federal income tax returns without outside assistance.

The tax law allows,under certain conditions,deferral of gain recognition for involuntary conversions.

A characteristic of the fraud penalties is:

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:

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

One of the motivations for making a gift is to save on income taxes.

Social considerations can be used to justify:

Sales made by mail order are exempt from the application of a general sales (or use)tax.

Both economic and social considerations can be used to justify:

In preparing a tax return,all questions on the return must be answered.

Currently,the tax base for the Medicare component of the FICA is limited to a dollar amount.

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

Amy is the sole shareholder of Garnet Corporation.During the year,Amy leases a building to Garnet for a monthly rental of $40,000.If the fair rental value of the building is $30,000,what are the income tax consequences to the parties involved?

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

Part 1--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

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

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

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

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

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters