Question 1

A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state that levies no such taxes.

Accepted Answer

A) True 
 B)False

Question 2

A VAT (value added tax) :

Accepted Answer

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) C) and D)
G) None of the above

Question 3

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all.
-Tax on transfers at death (inheritance type)

Accepted Answer

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 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 K)
N) C) and H)

Question 4

Match the statements that relate to each other.Note: Some choices may be used more than once.
-Early filing and statute of limitations (deficiency situations)

Accepted Answer

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 officeG) Conducted at taxpayer's officeH) 6 yearsI) 45-day grace period allowed to IRSJ) No statute of limitations (period remains open) K) 75% of underpaymentL) No correct match providedM) E) and H)
N) F) and K)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  A resident dies and leaves his farm to his church.
B)  A large property owner issues a conservation easement as to some of her land.
C)  A tax holiday issued 10 years ago has expired.
D)  A bankrupt motel is acquired by the Red Cross and is to be used to provide housing for homeless persons.
E)  None of these.F) B) and D)
G) C) and E)

Question 7

Virtually all state income tax returns contain checkoff boxes for donations to various causes.On what grounds has this procedure been criticized?

Accepted Answer

In many cases the procedure is overused ...

Question 8

In late June 2014,Art is audited by the state and a large deficiency is assessed.In November of the same year,his Federal income tax return is audited by the IRS.What has probably happened?

Accepted Answer

The IRS has been not...

Question 9

Under state amnesty programs,all delinquent and unpaid income taxes are forgiven.

Accepted Answer

A) True 
 B)False

Question 10

Indicate which,if any,statement is incorrect.State income taxes:

Accepted Answer

A)  Can piggyback to the Federal version.
B)  Cannot apply to visiting nonresidents.
C)  Can decouple from the Federal version.
D)  Can provide occasional amnesty programs.
E)  None of these.F) B) and C)
G) C) and D)

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Not all of the states that impose a general sales tax also have a use tax.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

A characteristic of the fraud penalties is:

Accepted Answer

A)  When negligence and civil fraud apply to a deficiency,the negligence penalty predominates.
B)  Criminal fraud can result in a fine and a prison sentence.
C)  The criminal fraud penalty is 75% of the deficiency attributable to the fraud.
D)  The IRS has the same burden of proof in the case of criminal fraud than with civil fraud.
E)  None of these.F) A) and C)
G) C) and D)

Question 15

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

Accepted Answer

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 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) A) and E)

Question 16

Match the statements that relate to each other.Note: Some choices may be used more than once.
-Office audit

Accepted Answer

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 officeG) Conducted at taxpayer's officeH) 6 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 B)
N) F) and L)

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

Using the choices provided below,show the justification for each provision of the tax law listed.
-A deduction for certain income from manufacturing activities.

Accepted Answer

A)  Economic considerations
B)  Social considerations
C)  Equity considerationsD) A) and B)
E) B) and C)

Question 19

Provisions in the tax law that promote energy conservation and more use of alternative (non-fossil) fuels can be justified by:

Accepted Answer

A)  Political considerations.
B)  Economic and social considerations.
C)  Promoting administrative feasibility.
D)  Encouragement of small business.
E)  None of these.F) A) and E)
G) A) and C)

Question 20

In 2012,Deborah became 65 years old.In 2013 she added a swimming pool,and in 2014 she converted the residence to rental property and moved into an assisted living facility.Since 2011,Deborah's ad valorem property taxes have decreased once and increased twice.Explain.

Accepted Answer

The decrease probably came in ...

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

Using the choices provided below,show the justification for each provision of the tax law listed. -A deduction for certain income from manufacturing activities.

Correct AnswerverifiedShow Answer

Match the statements that relate to each other.Note: Some choices may be used more than once. -Office audit

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Provisions in the tax law that promote energy conservation and more use of alternative (non-fossil) fuels can be justified by:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In 2012,Deborah became 65 years old.In 2013 she added a swimming pool,and in 2014 she converted the residence to rental property and moved into an assisted living facility.Since 2011,Deborah's ad valorem property taxes have decreased once and increased twice.Explain.

Correct AnswerverifiedThe decrease probably came in ...View AnswerShow Answer

Indicate which,if any,statement is incorrect.State income taxes:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A VAT (value added tax) :

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all. -Tax on transfers at death (inheritance type)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Not all of the states that impose a general sales tax also have a use tax.

Correct AnswerverifiedShow Answer

Under state amnesty programs,all delinquent and unpaid income taxes are forgiven.

Correct AnswerverifiedShow Answer

A characteristic of the fraud penalties is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In late June 2014,Art is audited by the state and a large deficiency is assessed.In November of the same year,his Federal income tax return is audited by the IRS.What has probably happened?

Correct AnswerverifiedThe IRS has been not...View AnswerShow Answer

Match the statements that relate to each other.Note: Some choices may be used more than once. -Early filing and statute of limitations (deficiency situations)

Correct AnswerverifiedShow Answer

A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state that levies no such taxes.

Correct AnswerverifiedShow Answer

Virtually all state income tax returns contain checkoff boxes for donations to various causes.On what grounds has this procedure been criticized?

Correct AnswerverifiedIn many cases the procedure is overused ...View AnswerShow Answer

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The decrease probably came in ...
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The IRS has been not...
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In many cases the procedure is overused ...
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