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Exam 1: Introduction to Taxation

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Question 21

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Taxes levied by all states include:

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

F) C) and D)
G) All of the above

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Question 22

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The value added tax (VAT) has not had wide acceptance in the international community.

A) True
B) False

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Question 23

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When Congress enacts a tax cut that is phased in over a period of years, revenue neutrality is achieved.

Currently, the Federal corporate income tax is less progressive than the individual income tax.

A characteristic of FUTA is that:

The Federal income tax is based on a pay-as-you-go system and has become a "mass tax." Explain this statement.

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 bribe to the local sheriff, although business related, is not deductible.

Various tax provisions encourage the creation of certain types of retirement plans.Such provisions can be justified on both economic and social grounds.

When a state decouples from a Federal tax provision, it means that this provision will not apply for state income tax purposes.

The tax law contains various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.On what grounds can these provisions be justified?

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

Ultimately, most taxes are paid by individuals.Explain what this means in terms of income and payroll taxes paid by a corporation.

As a matter of administrative convenience, the IRS would prefer to have Congress decrease (rather than increase) the amount of the standard deduction allowed to individual taxpayers.

The tax law allows, under certain conditions, deferral of gain recognition for involuntary conversions. a.By recognizing that the taxpayer's relative economic situation has not changed and that he or she lacks the wherewithal to pay a tax, any recognition of realized a.What is the justification for this relief measure? b.What happens if the proceeds are not entirely reinvested?

The formula for the Federal income tax on corporations is the same as that applicable to individuals.

An inheritance tax is a tax on a decedent's right to pass property at death.

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

Paige is the sole shareholder of Citron Corporation.During the year, she leases a building to Citron for a monthly rental of $80,000.If the fair rental value of the building is $60,000, what are the income tax consequences to the parties involved?

Ultimately, most taxes are paid by individuals.

A fixture will be subject to the ad valorem tax on personalty rather than the ad valorem tax on realty.