Question 1

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

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) D) and E)
N) H) and K)

Question 2

David files his tax return 45 days after the due date. Along with the return, David remits a check for $40,000. which is the balance of the tax owed. Disregarding the interest element, David's total failure to file and to pay penalties are:

Accepted Answer

A)   $400.
B)   $3,600.
C)   $4,000.
D)   $4,400.
E)   None of these.F) C) and E)
G) All of the above

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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?

Accepted Answer

The rent charged by Paige is not "arms l...

Question 5

Using the following choices, show the justification for each provision of the tax law listed.
-A Federal deduction for state and local sales taxes paid.

Accepted Answer

A)  Economic considerations
B)  Social considerations
C)  Equity considerations
D)  Both a. and b.E) B) and C)
F) A) and D)

Question 6

Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

Accepted Answer

A)   Nonrecognition of gain allowed for involuntary conversions.
B)   Net operating loss carryover provisions.
C)   Carryover of excess charitable contributions.
D)   Use of the installment method to recognize gain.
E)   Carryover of excess capital losses.F) A) and E)
G) A) and C)

Question 7

In terms of revenue neutrality, comment on a tax cut enacted by Congress that:
a. Contains revenue offsets.
b. Includes a sunset provision.

Accepted Answer

a. Ideally, to achieve revenue neutralit...

Question 8

There is a Federal excise tax on hotel occupancy.

Accepted Answer

A) True 
 B)False

Question 9

Because the law is complicated, most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

Accepted Answer

A) True 
 B)False

Question 10

An office audit by the IRS takes place at the office of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 11

State and local governments are sometimes forced to find ways to generate additional revenue. Comment on the pros and cons of the following procedures:
a. Decouple what would be part of the piggyback format of the state income tax.
b. Tax amnesty provisions.
c. Internet shaming.

Accepted Answer

a. The decoupling process is easily acco...

Question 12

Stealth taxes have the effect of generating additional taxes from all taxpayers.

Accepted Answer

A) True 
 B)False

Question 13

Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty?

Accepted Answer

A)   Taxpayer compliance is greater for personal use property than for business use property.
B)   The tax on automobiles sometimes considers the age of the vehicle.
C)   Most states impose a tax on intangibles.
D)   The tax on intangibles generates considerable revenue since it is difficult for taxpayers to avoid.
E)   None of these.F) D) and E)
G) C) and D)

Question 14

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

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) D) and H)
N) A) and H)

Question 15

Your client, Connie, won $12,000 in a football office pool. She sees no reason to include it in her income for several reasons. First, the amount won will not be reported to the IRS. Second, as an average income employee, she is unlikely to be audited by the IRS. Third, she feels that she has probably lost this much in other past office pools. How do you respond?

Accepted Answer

As a practitioner, you cannot play the a...

Question 16

Property can be transferred within the family group by gift or at death. One motivation for preferring the gift approach is:

Accepted Answer

A)   To take advantage of the higher unified transfer tax credit available under the gift tax.
B)   To avoid a future decline in value of the property transferred.
C)   To take advantage of the per donee annual exclusion.
D)   To shift income to higher bracket donees.
E)   None of these.F) A) and E)
G) B) and D)

Question 17

The Federal excise tax on cigarettes is an example of a proportional tax.

Accepted Answer

A) True 
 B)False

Question 18

One of the motivations for making a gift is to save on income taxes.

Accepted Answer

A) True 
 B)False

Question 19

A CPA firm in California sends many of its less complex tax returns to be prepared by a group of accountants in
India. If certain procedures are followed, this outsourcing of tax return preparation is proper.

Accepted Answer

A) True 
 B)False

Question 20

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
-Discriminant Index Function (DIF)

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) C) and H)
N) B) and L)

Exam 1: Understanding and Working With the Federal Tax Law

Because the law is complicated, most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

Correct Answer
verified

An office audit by the IRS takes place at the office of the taxpayer.

Correct Answer
verified

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

Correct Answer
verified

There is a Federal excise tax on hotel occupancy.

Correct Answer
verified

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?

Correct Answer
verified
The rent charged by Paige is not "arms l...
View Answer

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Discriminant Index Function (DIF)

Correct Answer
verified

Stealth taxes have the effect of generating additional taxes from all taxpayers.

Correct Answer
verified

Correct Answer
verified
As a practitioner, you cannot play the a...
View Answer

A CPA firm in California sends many of its less complex tax returns to be prepared by a group of accountants in India. If certain procedures are followed, this outsourcing of tax return preparation is proper.

Correct Answer
verified

David files his tax return 45 days after the due date. Along with the return, David remits a check for $40,000. which is the balance of the tax owed. Disregarding the interest element, David's total failure to file and to pay penalties are:

Correct Answer
verified

The Federal excise tax on cigarettes is an example of a proportional tax.

Correct Answer
verified

One of the motivations for making a gift is to save on income taxes.

Correct Answer
verified

Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

Correct Answer
verified

In terms of revenue neutrality, comment on a tax cut enacted by Congress that: a. Contains revenue offsets. b. Includes a sunset provision.

Correct Answer
verified
a. Ideally, to achieve revenue neutralit...
View Answer

Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty?

Correct Answer
verified

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

Correct Answer
verified

Using the following choices, show the justification for each provision of the tax law listed. -A Federal deduction for state and local sales taxes paid.

Correct Answer
verified

State and local governments are sometimes forced to find ways to generate additional revenue. Comment on the pros and cons of the following procedures: a. Decouple what would be part of the piggyback format of the state income tax. b. Tax amnesty provisions. c. Internet shaming.

Correct Answer
verified
a. The decoupling process is easily acco...
View Answer

Property can be transferred within the family group by gift or at death. One motivation for preferring the gift approach is:

Correct Answer
verified

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

Correct Answer
verified

Exam 1: Understanding and Working With the Federal Tax Law

Because the law is complicated, most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

Correct AnswerverifiedShow Answer

An office audit by the IRS takes place at the office of the taxpayer.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

There is a Federal excise tax on hotel occupancy.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedThe rent charged by Paige is not "arms l...View AnswerShow Answer

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Discriminant Index Function (DIF)

Correct AnswerverifiedShow Answer

Stealth taxes have the effect of generating additional taxes from all taxpayers.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedAs a practitioner, you cannot play the a...View AnswerShow Answer

A CPA firm in California sends many of its less complex tax returns to be prepared by a group of accountants in India. If certain procedures are followed, this outsourcing of tax return preparation is proper.

Correct AnswerverifiedShow Answer

David files his tax return 45 days after the due date. Along with the return, David remits a check for $40,000. which is the balance of the tax owed. Disregarding the interest element, David's total failure to file and to pay penalties are:

Correct AnswerverifiedShow Answer

The Federal excise tax on cigarettes is an example of a proportional tax.

Correct AnswerverifiedShow Answer

One of the motivations for making a gift is to save on income taxes.

Correct AnswerverifiedShow Answer

Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

Correct AnswerverifiedShow Answer

In terms of revenue neutrality, comment on a tax cut enacted by Congress that: a. Contains revenue offsets. b. Includes a sunset provision.

Correct Answerverifieda. Ideally, to achieve revenue neutralit...View AnswerShow Answer

Which, if any, of the following is a typical characteristic of an ad valorem tax on personalty?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Using the following choices, show the justification for each provision of the tax law listed. -A Federal deduction for state and local sales taxes paid.

Correct AnswerverifiedShow Answer

State and local governments are sometimes forced to find ways to generate additional revenue. Comment on the pros and cons of the following procedures: a. Decouple what would be part of the piggyback format of the state income tax. b. Tax amnesty provisions. c. Internet shaming.

Correct Answerverifieda. The decoupling process is easily acco...View AnswerShow Answer

Property can be transferred within the family group by gift or at death. One motivation for preferring the gift approach is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The rent charged by Paige is not "arms l...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
As a practitioner, you cannot play the a...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. Ideally, to achieve revenue neutralit...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. The decoupling process is easily acco...
View Answer

Correct Answer
verified

Correct Answer
verified