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

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Question 81

True/False

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The pay­as­you­go feature of the Federal income tax on individuals conforms to Adam Smith's canon of certainty.

A) True
B) False

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Question 82

Multiple Choice

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Match the statements that relate to each other.Note: Some choices may be used more than once. -No return and statute limitations

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

M) I) and K)
N) A) and B)

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Question 83

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The civil fraud penalty can entail large fines and possible incarceration.

Morgan inherits her father's personal residence including all of the furnishings.She plans to add a swimming pool and sauna to the property and rent it as a furnished house.What are some of the ad valorem property tax problems Morgan can anticipate?

Logan dies with an estate worth $20 million.Under his will,$10 million passes to his wife while $10 million goes to his church.What is Logan's Federal estate tax result?

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

The amount of a taxpayer's itemized deductions will increase the chance of being audited by the IRS.

For the tax year 2014,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?

Taylor,a widow,makes cash gifts to her five married children (including their spouses)and to her seven grandchildren.What is the maximum amount Taylor can give for calendar year 2014 without using her unified transfer tax credit?

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

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

Tracy has just been audited and the IRS agent has issued an RAR that assesses a large deficiency.Since Tracy disagrees with the result,her next step is to go to court.Do you agree?

Which,if any,of the following statements best describes the history of the Federal income tax?

A parent employs his twin daughters,age 17,in his sole proprietorship.The daughters are not subject to FICA coverage.

Rick,the sole proprietor of an adult entertainment club,is audited by the IRS.On the third day of the field audit,the regular IRS agent is accompanied by a special agent.Should Rick be concerned by this new development? Explain.

There is a Federal excise tax on hotel occupancy.

Federal excise taxes that are no longer imposed include:

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

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

A characteristic of FICA is that: