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

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Question 21

Multiple Choice

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A VAT (value added tax) :

A) Is regressive in its effect.
B) Has not proved popular outside of the U.S.
C) Is not a tax on consumption.
D) Is used exclusively by third world (less developed) countries.
E) None of these.

F) A) and B)
G) B) and E)

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Question 22

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The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.

A) True
B) False

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Question 23

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For the tax year 2015,Noah reported gross income of $300,000 on his timely filed Federal income tax return. a.Presuming the general rule applies,when does the statute of limitations on assessments normally expire? b.Suppose Noah inadvertently omitted gross income of $76,000.When does the statute of limitations on assessments expire? c.Suppose the omission was deliberate and not inadvertent.When does the statute of limitations on assessments expire?

With regard to state income taxes,explain what is meant by the "jock tax"?

A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.

Match the statements that relate to each other.Note: Some choices may be used more than once. a.3 years from date return is filed b.3 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 office g.Conducted at taxpayer's office h.6 years i.45-day grace period allowed to IRS j.No statute of limitations (period remains open) k.75% of underpayment l.No correct match provided -No return and statute limitations

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all. a.Deferral of gains from involuntary conversions b.Carryback and carryforward of net operating losses c."No change" is one possible result d.State income tax applied to visiting nonresident e.IRS special agent f.Undoing the "piggyback" result g.Ideal budget goal as to new tax legislation h.Every state that has a general sales tax has one i.Imposed by all states and the Federal government j.Imposed by some states but not the Federal government k.Imposed only by the Federal government l.No correct match provided -Use tax

Even if property tax rates are not changed,the amount of ad valorem taxes imposed on realty may not remain the same.

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

Which,if any,of the following transactions will decrease a taxing jurisdiction's ad valorem tax revenue imposed on real estate?

A lack of compliance in the payment of use taxes can be resolved by several means.In this regard,comment on the following: a.Registration of automobiles. b.Reporting of Internet purchases on state income tax returns.

Match the statements that relate to each other.Note: Some choices may be used more than once. a.3 years from date return is filed b.3 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 office g.Conducted at taxpayer's office h.6 years i.45-day grace period allowed to IRS j.No statute of limitations (period remains open) k.75% of underpayment l.No correct match provided -Interest due on refund

Taxes levied by both states and the Federal government include:

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

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all. a.Deferral of gains from involuntary conversions b.Carryback and carryforward of net operating losses c."No change" is one possible result d.State income tax applied to visiting nonresident e.IRS special agent f.Undoing the "piggyback" result g.Ideal budget goal as to new tax legislation h.Every state that has a general sales tax has one i.Imposed by all states and the Federal government j.Imposed by some states but not the Federal government k.Imposed only by the Federal government l.No correct match provided -Mitigation of the annual accounting period concept

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.

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.

If a "special agent" becomes involved in the audit of a return,this indicates that the IRS suspects that fraud is involved.

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all. a.Deferral of gains from involuntary conversions b.Carryback and carryforward of net operating losses c."No change" is one possible result d.State income tax applied to visiting nonresident e.IRS special agent f.Undoing the "piggyback" result g.Ideal budget goal as to new tax legislation h.Every state that has a general sales tax has one i.Imposed by all states and the Federal government j.Imposed by some states but not the Federal government k.Imposed only by the Federal government l.No correct match provided -Decoupling

Congress reacts to judicial decisions that interpret the tax law in different ways.When it approves of a decision,Congress may act to amend the Code to incorporate the holding.When it disapproves,Congress may amend the Code to nullify its effect.Give an example of each one of these congressional reactions.