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

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Question 101

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

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 and not in the year earned.
C) Annual adjustments for indexation increases the amount of the standard deduction allowed.
D) Casualty losses must exceed 10% of AGI to be deductible.
E) A deduction is allowed for charitable contributions.

F) B) and E)
G) C) and D)

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Question 102

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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.

A) True
B) False

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Question 103

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A use tax is imposed by:

What is the difference between an inheritance tax and an estate tax? Who imposes these taxes?

For the negligence penalty to apply,the underpayment must be caused by intentional disregard of rules and regulations without intent to defraud.

Both economic and social considerations can be used to justify:

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 -A Federal deduction for state and local income taxes paid.

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 -Import taxes (customs duties)

What are the pros and cons of the following state and local tax provisions? a.An ad valorem property tax holiday made available to a manufacturing plant that is relocating. b.Hotel occupancy tax and a rental car surcharge. c.A back-to-school sales tax holiday.

On his 2016 income tax return,Andrew omitted income and overstated deductions to the extent that his income tax was understated by $500,000.Disregarding any interest element,what is Andrew's penalty if the understatement was due to: a.Negligence. b.Civil fraud. c.Criminal fraud.

The Federal estate and gift taxes are examples of progressive taxes.

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

Characteristics of the "Fair Tax" (i.e. ,national sales tax) include which,if any,of the following:

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 -A small business corporation can elect to avoid the corporate income tax.