Question 1

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

Accepted Answer

A)   Most taxpayer audits involve "special" agents.
B)   Self-employed taxpayers are less likely to be selected for audit than employed taxpayers.
C)   Less important issues are handled by means of a correspondence audit.
D)   If a taxpayer disagrees with the IRS auditor's finding, the only resort is to the courts.
E)   None of these.F) B) and E)
G) A) and E)

Question 2

A use tax is imposed by:

Accepted Answer

A)   The Federal government and all states.
B)   The Federal government and a majority of the states.
C)   All states and not the Federal government.
D)   Most of the states and not the Federal government.
E)   None of these.F) C) and D)
G) B) and E)

Question 3

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.

Accepted Answer

A) True 
 B)False

Question 4

Even though a client refuses to correct an error on a past return, it may be possible for a practitioner to continue to prepare returns for the client.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Tracy has just been audited and the IRS agent has issued an RAR that assesses a large deficiency. Since Tracy disagrees with the result, her next step is to go to court. Do you agree?

Accepted Answer

Tracy might save herself time and expens...

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The civil fraud penalty can entail large fines and possible incarceration.

Accepted Answer

A) True 
 B)False

Question 9

On occasion, Congress has to enact legislation that clarifies the tax law in order to change a result reached by the
U.S. Supreme Court.

Accepted Answer

A) True 
 B)False

Question 10

For individual taxpayers, the interest rate for income tax refunds overpayments) is the same as that applicable to assessments underpayments).

Accepted Answer

A) True 
 B)False

Question 11

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the U.S.

Accepted Answer

A) True 
 B)False

Question 12

Under what conditions is it permissible, from an ethical standpoint, for a CPA firm to outsource tax return preparation to a third party?

Accepted Answer

First, the clients' confidenti...

Question 13

Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income tax on individuals.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

As it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize gain in the year the installment sale occurs.

Accepted Answer

A) True 
 B)False

Question 16

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 alcohol.
E)   None of these.F) None of the above
G) A) and B)

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty?

Accepted Answer

A)   Taxpayer compliance is greater for personal use property than for business use property.
B)   The tax on automobiles sometimes considers the age of the vehicle.
C)   Most states impose a tax on intangibles.
D)   The tax on intangibles generates considerable revenue since it is difficult for taxpayers to avoid.
E)   None of these.F) A) and C)
G) D) and E)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

A calendar year taxpayer files his 2017 Federal income tax return on March 4, 2018. The return reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2018. The refund need not include interest.

Accepted Answer

A) True 
 B)False

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

On occasion, Congress has to enact legislation that clarifies the tax law in order to change a result reached by the U.S. Supreme Court.

Correct AnswerverifiedShow Answer

For individual taxpayers, the interest rate for income tax refunds overpayments) is the same as that applicable to assessments underpayments).

Correct AnswerverifiedShow Answer

A calendar year taxpayer files his 2017 Federal income tax return on March 4, 2018. The return reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2018. The refund need not include interest.

Correct AnswerverifiedShow Answer

Tracy has just been audited and the IRS agent has issued an RAR that assesses a large deficiency. Since Tracy disagrees with the result, her next step is to go to court. Do you agree?

Correct AnswerverifiedTracy might save herself time and expens...View AnswerShow Answer

Under what conditions is it permissible, from an ethical standpoint, for a CPA firm to outsource tax return preparation to a third party?

Correct AnswerverifiedFirst, the clients' confidenti...View AnswerShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the U.S.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

The civil fraud penalty can entail large fines and possible incarceration.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income tax on individuals.

Correct AnswerverifiedShow Answer

Even though a client refuses to correct an error on a past return, it may be possible for a practitioner to continue to prepare returns for the client.

Correct AnswerverifiedShow Answer

Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Federal excise taxes that are no longer imposed include:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As it is consistent with the wherewithal to pay concept, the tax law requires a seller to recognize gain in the year the installment sale occurs.

Correct AnswerverifiedShow Answer

A use tax is imposed by:

Correct AnswerverifiedShow Answer

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Tracy might save herself time and expens...
View Answer

Correct Answer
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First, the clients' confidenti...
View Answer

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