Question 1

Using the following choices, 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.
-Additional depreciation deduction allowed for the year the asset is acquired.

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryforward of net operating losses
C)  "No change" is a possible result
D)  State income tax applied to a visiting nonresident
E)  IRS special agentF) Undoing the "piggyback" resultG) Ideal budget goal as to new tax legislationH) Every state that has a general sales tax has oneI) Imposed by all states and the Federal governmentJ) Imposed by some states but not the Federal governmentK) Imposed only by the Federal governmentL) No correct match providedM) G) and L)
N) A) and G)

Question 2

Using the following choices, 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 fraud suspected

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryforward of net operating losses
C)  "No change" is a possible result
D)  State income tax applied to a visiting nonresident
E)  IRS special agentF) Undoing the "piggyback" resultG) Ideal budget goal as to new tax legislationH) Every state that has a general sales tax has oneI) Imposed by all states and the Federal governmentJ) Imposed by some states but not the Federal governmentK) Imposed only by the Federal governmentL) No correct match providedM) A) and G)
N) C) and L)

Question 3

To mitigate the effect of the annual accounting period concept, the tax law permits the carryforward of excess charitable contributions of a particular year to other years.

Accepted Answer

A) True 
 B)False

Question 4

In cases of doubt, courts have held that tax relief provisions should be broadly construed in favor of taxpayers.

Accepted Answer

A) True 
 B)False

Question 5

Tax functions that accounting and finance professionals may assist clients with include all but the following:

Accepted Answer

A)  Tax compliance.
B)  Tax planning.
C)  Cash management to ensure timely payment of taxes.
D)  Tax evasion.E) A) and B)
F) None of the above

Question 6

For state income tax purposes, a majority of states allow a deduction for Federal income taxes.

Accepted Answer

A) True 
 B)False

Question 7

The proposed flat tax:

Accepted Answer

A)  Would increase the number of deductions available to individuals
B)  Would not require individuals to file returns.
C)  Would tax the increment in value as goods move through the production and manufacturing stages to the marketplace.
D)  Is a type of consumption tax.
E)  None of these.F) A) and B)
G) A) and C)

Question 8

Using the following choices, 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.
-Use tax

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryforward of net operating losses
C)  "No change" is a possible result
D)  State income tax applied to a visiting nonresident
E)  IRS special agentF) Undoing the "piggyback" resultG) Ideal budget goal as to new tax legislationH) Every state that has a general sales tax has oneI) Imposed by all states and the Federal governmentJ) Imposed by some states but not the Federal governmentK) Imposed only by the Federal governmentL) No correct match providedM) A) and F)
N) D) and K)

Question 9

Which, if any, of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS) ?

Accepted Answer

A)  Penalties are imposed for failure to file a return or pay a tax on time.
B)  Prepaid income is taxed in the year received, not in the year earned.
C)  Annual adjustments for indexation increases the amount of the standard deduction allowed.
D)  Personal casualty losses in Federally declared disaster areas must exceed 10% of AGI to be deductible.
E)  A deduction is allowed for charitable contributions.F) B) and C)
G) A) and E)

Question 10

Using the following choices, 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 deduction for interest on student loans.

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryforward of net operating losses
C)  "No change" is a possible result
D)  State income tax applied to a visiting nonresident
E)  IRS special agentF) Undoing the "piggyback" resultG) Ideal budget goal as to new tax legislationH) Every state that has a general sales tax has oneI) Imposed by all states and the Federal governmentJ) Imposed by some states but not the Federal governmentK) Imposed only by the Federal governmentL) No correct match providedM) J) and L)
N) D) and H)

Question 11

The IRS agent auditing the return will issue an RAR even if the taxpayer owes no additional taxes.

Accepted Answer

A) True 
 B)False

Question 12

Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.

Accepted Answer

A) True 
 B)False

Question 13

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) A) and C)
G) A) and D)

Question 14

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.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Using the following choices, 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 deduction for certain expenses (interest and taxes)  incident to home ownership.

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryforward of net operating losses
C)  "No change" is a possible result
D)  State income tax applied to a visiting nonresident
E)  IRS special agentF) Undoing the "piggyback" resultG) Ideal budget goal as to new tax legislationH) Every state that has a general sales tax has oneI) Imposed by all states and the Federal governmentJ) Imposed by some states but not the Federal governmentK) Imposed only by the Federal governmentL) No correct match providedM) B) and H)
N) B) and E)

Question 17

A calendar year taxpayer files his 2018 Federal income tax return on March 4, 2019.The return reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount.The refund is paid on May 16, 2019.The refund need not include interest.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

A major advantage of a flat tax type of income tax is its simplicity.

Accepted Answer

A) True 
 B)False

Question 20

Match the statements that relate to each other.Note: Some choices may be used more than once.
-More than 25% gross income omission and statute of limitations

Accepted Answer

A)  Three years from date return is filed
B)  Three years from due date of return
C)  20% of underpayment
D)  5% per month (25% limit) 
E)  0.5% per month (25% limit) F) Conducted at IRS officeG) Conducted at taxpayer's officeH) Six yearsI) 45-day grace period allowed to IRSJ) No statute of limitations (period remains open) K) 75% of underpaymentL) No correct match providedM) C) and I)
N) J) and K)

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

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.

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Tax functions that accounting and finance professionals may assist clients with include all but the following:

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A calendar year taxpayer files his 2018 Federal income tax return on March 4, 2019.The return reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount.The refund is paid on May 16, 2019.The refund need not include interest.

Correct AnswerverifiedShow Answer

Using the following choices, 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. -Additional depreciation deduction allowed for the year the asset is acquired.

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

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Using the following choices, 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 deduction for interest on student loans.

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

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Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.

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Using the following choices, 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 fraud suspected

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Using the following choices, 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. -Use tax

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Match the statements that relate to each other.Note: Some choices may be used more than once. -More than 25% gross income omission and statute of limitations

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In cases of doubt, courts have held that tax relief provisions should be broadly construed in favor of taxpayers.

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The IRS agent auditing the return will issue an RAR even if the taxpayer owes no additional taxes.

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

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Using the following choices, 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 deduction for certain expenses (interest and taxes) incident to home ownership.

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For state income tax purposes, a majority of states allow a deduction for Federal income taxes.

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The proposed flat tax:

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To mitigate the effect of the annual accounting period concept, the tax law permits the carryforward of excess charitable contributions of a particular year to other years.

Correct AnswerverifiedShow Answer

Which, if any, of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS) ?

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A major advantage of a flat tax type of income tax is its simplicity.

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