Question 1

What might cause an individual to owe income taxes in more than one state?

Accepted Answer

Working in more than...

Question 2

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 3

A provision in the law that compels accrual basis taxpayers to pay a tax on prepaid income in the year received and
not when earned is consistent with generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False  True

Question 5

When interest is charged on a deficiency, any part of a month counts as a full month.

Accepted Answer

A) True 
 B)False

Question 6

Social considerations can be used to justify:

Accepted Answer

A)   Allowance of a credit for child care expenses.
B)   Allowing excess capital losses to be carried over to other years.
C)   Allowing accelerated amortization for the cost of installing pollution control facilities.
D)   Allowing a Federal income tax deduction for state and local sales taxes.
E)   None of these.F) A) and B)
G) C) and E) A

Question 7

In cases of doubt, courts have held that tax relief provisions should be broadly construed in favor of taxpayers.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)   A tax holiday is granted to an out-of-state business that is searching for a new factory site.
B)   An abandoned church is converted to a restaurant.
C)   A public school is razed and turned into a city park.
D)   A local university sells a dormitory that will be converted for use as an apartment building.
E)   None of these.F) All of the above
G) B) and D)

Question 11

Currently, the Federal corporate income tax is less progressive than the individual income tax.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Allowing a tax credit for certain solar energy property can be justified:

Accepted Answer

A)   As helping small businesses.
B)   As promoting administrative feasibility.
C)   As promoting a government policy to use alternative energy sources.
D)   Based on the wherewithal to pay concept.
E)   None of these.F) A) and B)
G) A) and C)

Question 14

Mona inherits her mother's personal residence, which she converts to a furnished rental house. These changes should affect the amount of ad valorem property taxes levied on the properties.

Accepted Answer

A) True 
 B)False

Question 15

Tax functions that accounting and finance professionals may assist clients with include all but the following:

Accepted Answer

A)   Tax compliance.
B)   Tax planning.
C)   Cash management to ensure timely payment of taxes.
D)   Tax evasion.E) None of the above
F) B) and D)

Question 16

Ultimately, most taxes are paid by individuals.

Accepted Answer

A) True 
 B)False

Question 17

If more IRS audits are producing a greater number of no change results, this indicates increased compliance on the part of taxpayers.

Accepted Answer

A) True 
 B)False

Question 18

Jason's business warehouse is destroyed by fire. As the insurance proceeds exceed the basis of the property, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized due to the application of the wherewithal to pay concept.

Accepted Answer

A) True 
 B)False

Question 19

The annual exclusion, currently $15,000, is available for gift and estate tax purposes.

Accepted Answer

A) True 
 B)False  False

Question 20

The tax law allows an income tax deduction or a credit) for foreign income taxes. Explain why.

Accepted Answer

The deduction or a credit) for...

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

What might cause an individual to owe income taxes in more than one state?

Correct AnswerverifiedWorking in more than...View AnswerShow 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

A provision in the law that compels accrual basis taxpayers to pay a tax on prepaid income in the year received and not when earned is consistent with generally accepted accounting principles.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedTrue

When interest is charged on a deficiency, any part of a month counts as a full month.

Correct AnswerverifiedShow Answer

Social considerations can be used to justify:

Correct AnswerverifiedA

In cases of doubt, courts have held that tax relief provisions should be broadly construed in favor of taxpayers.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Currently, the Federal corporate income tax is less progressive than the individual income tax.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Allowing a tax credit for certain solar energy property can be justified:

Correct AnswerverifiedShow Answer

Mona inherits her mother's personal residence, which she converts to a furnished rental house. These changes should affect the amount of ad valorem property taxes levied on the properties.

Correct AnswerverifiedShow Answer

Tax functions that accounting and finance professionals may assist clients with include all but the following:

Correct AnswerverifiedShow Answer

Ultimately, most taxes are paid by individuals.

Correct AnswerverifiedShow Answer

If more IRS audits are producing a greater number of no change results, this indicates increased compliance on the part of taxpayers.

Correct AnswerverifiedShow Answer

Jason's business warehouse is destroyed by fire. As the insurance proceeds exceed the basis of the property, a gain results. If Jason shortly reinvests the proceeds in a new warehouse, no gain is recognized due to the application of the wherewithal to pay concept.

Correct AnswerverifiedShow Answer

The annual exclusion, currently $15,000, is available for gift and estate tax purposes.

Correct AnswerverifiedFalse

The tax law allows an income tax deduction or a credit) for foreign income taxes. Explain why.

Correct AnswerverifiedThe deduction or a credit) for...View AnswerShow Answer

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The deduction or a credit) for...
View Answer