Question 1

Mona inherits her mother's personal residence, which she converts to a furnished rental house. These changes should affect the amount of ad valorem property taxes levied on the properties.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Two months after the burglary of his personal residence, Eric is audited by the IRS. Among the items taken in the burglary was a shoe box containing approximately $50,000 in cash. Eric is the owner and operator of a cash-and- carry liquor store. Eric wonders why he was audited. Can you help explain?

Accepted Answer

Although Eric's audit by the IRS could b...

Question 4

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
-Decoupling

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 J)
N) D) and I)

Question 5

In preparing an income tax return, the use of a client's estimates is not permitted.

Accepted Answer

A) True 
 B)False

Question 6

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 7

States impose either a state income tax or a general sales tax, but not both types of taxes.

Accepted Answer

A) True 
 B)False

Question 8

An excise tax is often used to try to influence behavior.

Accepted Answer

A) True 
 B)False

Question 9

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
-"Pay as you go" (paygo)

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 E)
N) F) and L)

Question 10

Match the statements that relate to each other. Note: Some choices may be used more than once.
-No return and statute 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) A) and E)
N) E) and I)

Question 11

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

Accepted Answer

A)   State general sales tax
B)   Federal individual income tax
C)   Federal estate tax
D)   Federal gift tax
E)   All of theseF) B) and C)
G) B) and E)

Question 12

A characteristic of FUTA is that:

Accepted Answer

A)   It is imposed on both employer and employee.
B)   It is imposed solely on the employee.
C)   Compliance requires following guidelines issued by both state and Federal regulatory authorities.
D)   It is applicable to spouses of employees but not to any children under age 18.
E)   None of these.F) A) and E)
G) C) and E)

Question 13

The United States (either Federal, state, or local)  does not impose:

Accepted Answer

A)   Franchise taxes.
B)   Severance taxes.
C)   Occupational fees.
D)   Custom duties.
E)   Export duties.F) B) and E)
G) A) and B)

Question 14

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 15

If an income tax return is not filed by a taxpayer, there is no statute of limitations on assessments of tax by the IRS.

Accepted Answer

A) True 
 B)False

Question 16

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?

Accepted Answer

Although Brayden has avoided t...

Question 17

Social considerations can be used to justify:

Accepted Answer

A)   Allowance of a credit for child care expenses.
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)   Allowing a Federal income tax deduction for state and local sales taxes.
E)   None of these.F) A) and B)
G) None of the above

Question 18

Allowing a tax credit for certain solar energy property can be justified:

Accepted Answer

A)   As helping small businesses.
B)   As promoting administrative feasibility.
C)   As promoting a government policy to use alternative energy sources.
D)   Based on the wherewithal to pay concept.
E)   None of these.F) B) and C)
G) C) and D)

Question 19

During any month in which both the failure to file penalty and the failure to pay penalty apply, the failure to file penalty is increased by the amount of the failure to pay penalty.

Accepted Answer

A) True 
 B)False

Question 20

Taxes levied by all states include:

Accepted Answer

A)   Tobacco excise tax.
B)   Individual income tax.
C)   Inheritance tax.
D)   General sales tax.
E)   None of these.F) A) and E)
G) D) and E)

Exam 1: Understanding and Working With the Federal Tax Law

If an income tax return is not filed by a taxpayer, there is no statute of limitations on assessments of tax by the IRS.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedAlthough Brayden has avoided t...View AnswerShow Answer

A characteristic of FUTA is that:

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Allowing a tax credit for certain solar energy property can be justified:

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

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Taxes levied by all states include:

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The United States (either Federal, state, or local) does not impose:

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An excise tax is often used to try to influence behavior.

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Match the statements that relate to each other. Note: Some choices may be used more than once. -No return and statute limitations

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In preparing an income tax return, the use of a client's estimates is not permitted.

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States impose either a state income tax or a general sales tax, but not both types of taxes.

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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

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

Correct AnswerverifiedShow Answer

Social considerations can be used to justify:

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Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -"Pay as you go" (paygo)

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Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Decoupling

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

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Correct AnswerverifiedAlthough Eric's audit by the IRS could b...View AnswerShow Answer

Mona inherits her mother's personal residence, which she converts to a furnished rental house. These changes should affect the amount of ad valorem property taxes levied on the properties.

Correct AnswerverifiedShow Answer

During any month in which both the failure to file penalty and the failure to pay penalty apply, the failure to file penalty is increased by the amount of the failure to pay penalty.

Correct AnswerverifiedShow Answer

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Although Brayden has avoided t...
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Although Eric's audit by the IRS could b...
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