Question 1

A fixture will be subject to the ad valorem tax on personalty rather than the ad valorem tax on realty.

Accepted Answer

A) True 
 B)False

Question 2

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
-Import taxes (customs duties)

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) B) and D)
N) A) and B)

Question 3

In terms of probability, which of the following taxpayers would be least likely to be audited by the IRS?

Accepted Answer

A)   Taxpayer owns and operates a check-cashing service.
B)   Taxpayer is an employed electrician.
C)   Taxpayer just received a $3 million personal injury award as a result of a lawsuit.
D)   Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino.
E)   Taxpayer has been audited several times before.F) B) and E)
G) A) and D)

Question 4

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

Accepted Answer

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

Question 5

Using the following choices, show the justification for each provision of the tax law listed.
-A deduction for contributions by an employee to certain retirement plans.

Accepted Answer

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

Question 6

Without obtaining an extension, Pam files her income tax return 55 days after the due date. With her return, she pays an additional tax of $60,000. Disregarding any interest element, what is Pam's penalty for failure to pay and to file?

Accepted Answer

$6,000. Disregarding the interest elemen...

Question 7

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) C) and D)
G) A) and B)

Question 8

If fraud is involved, there is no time limit on the assessment of a deficiency by the IRS.

Accepted Answer

A) True 
 B)False

Question 9

Bracket creep will not exist if there is only a single (flat) tax rate for the income tax.

Accepted Answer

A) True 
 B)False

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

Under what conditions is it permissible, from an ethical standpoint, for a CPA firm to outsource tax return preparation to a third party?

Accepted Answer

First, the clients' confidenti...

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

The deduction (or a credit) fo...

Question 15

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the United States.

Accepted Answer

A) True 
 B)False

Question 16

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

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) J) and L)
N) B) and F)

Question 17

One of the major reasons for the enactment of the Federal estate tax was to prevent large amounts of wealth from being accumulated within a family unit.

Accepted Answer

A) True 
 B)False

Question 18

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

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 K)
N) B) and J)

Question 19

Using the following choices, show the justification for each provision of the tax law listed.
-A small business corporation can elect to avoid the corporate income tax.

Accepted Answer

A)  Economic considerations
B)  Social considerations
C)  Equity considerations
D)  Both a. and b.E) B) and D)
F) None of the above

Question 20

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

Accepted Answer

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, not in the year earned.
C)   Annual adjustments for indexation increases the amount of the standard deduction allowed.
D)   Personal casualty losses in Federally declared disaster areas must exceed 10% of AGI to be deductible.
E)   A deduction is allowed for charitable contributions.F) B) and D)
G) A) and B)

Exam 1: Understanding and Working With the Federal Tax Law

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

Correct AnswerverifiedThe deduction (or a credit) fo...View AnswerShow Answer

In terms of probability, which of the following taxpayers would be least likely to be audited by the IRS?

Correct AnswerverifiedShow Answer

Bracket creep will not exist if there is only a single (flat) tax rate for the income tax.

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

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

Correct AnswerverifiedShow Answer

Using the following choices, show the justification for each provision of the tax law listed. -A small business corporation can elect to avoid the corporate income tax.

Correct AnswerverifiedShow Answer

One of the major reasons for the enactment of the Federal estate tax was to prevent large amounts of wealth from being accumulated within a family unit.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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

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

Correct AnswerverifiedShow Answer

A fixture will be subject to the ad valorem tax on personalty rather than the ad valorem tax on realty.

Correct AnswerverifiedShow Answer

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Import taxes (customs duties)

Correct AnswerverifiedShow Answer

Without obtaining an extension, Pam files her income tax return 55 days after the due date. With her return, she pays an additional tax of $60,000. Disregarding any interest element, what is Pam's penalty for failure to pay and to file?

Correct Answerverified$6,000. Disregarding the interest elemen...View AnswerShow Answer

Using the following choices, show the justification for each provision of the tax law listed. -A deduction for contributions by an employee to certain retirement plans.

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 income taxes paid.

Correct AnswerverifiedShow Answer

If fraud is involved, there is no time limit on the assessment of a deficiency by the IRS.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the United States.

Correct AnswerverifiedShow Answer

Under what conditions is it permissible, from an ethical standpoint, for a CPA firm to outsource tax return preparation to a third party?

Correct AnswerverifiedFirst, the clients' confidenti...View AnswerShow Answer

Correct Answer
verified
The deduction (or a credit) fo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
$6,000. Disregarding the interest elemen...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
First, the clients' confidenti...
View Answer