Question 1

A landlord leases property upon which the tenant makes improvements.The improvements are significant and are not made in lieu of rent.At the end of the lease, the value of the improvements are not income to the landlord.This rule is an example of:

Accepted Answer

A)  A clear reflection of income result.
B)  The tax benefit rule.
C)  The arm's length concept.
D)  The wherewithal to pay concept.
E)  None of the above.F) A) and B)
G) B) and D)

Question 2

Currently, the Federal income tax is more progressive than it ever has been in the past.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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 inconsistent with generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 5

Compare civil fraud with criminal fraud with regard to the following:

Accepted Answer

The answer of Compare civil fraud with criminal fraud with...

Question 6

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 7

Using the choices provided below, show the justification for each provision of the tax law listed.Note: In some cases, more than one answer is appropriate.

Accepted Answer

A)   
B)   
C)    A deduction for contributions by an employee to certain retirement plans.D) None of the above
E) A) and B)

Question 8

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 9

Using the choices provided below, show the justification for each provision of the tax law listed.Note: In some cases, more than one answer is appropriate.

Accepted Answer

A)   
B)   
C)    A deduction for certain expenses (interest and taxes)  incident to home ownership.D) All of the above
E) B) and C)

Question 10

In preparing a tax return, all questions on the return must be answered.

Accepted Answer

A) True 
 B)False

Question 11

A characteristic of FUTA is that:

Accepted Answer

A)  It is imposed on both employer and employee.
B)  It is imposed solely on the employee.
C)  Compliance requires following guidelines issued by both state and Federal regulatory authorities.
D)  It is applicable to spouses of employees but not to any children under age 18.
E)  None of the above.F) B) and E)
G) A) and B)

Question 12

In early July 2012, Gavin is audited by the IRS and a large deficiency is assessed.In October of the same year, his income tax return for the state is audited.What has probably happened?

Accepted Answer

The state has been n...

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Under Clint's will, all of his property passes to either the Lutheran Church or to his wife.No Federal estate tax will be due on Clint's death in 2012.

Accepted Answer

A) True 
 B)False

Question 15

On occasion, Congress has to enact legislation that clarifies the tax law in order to change a result reached by the U.S.Supreme Court.

Accepted Answer

A) True 
 B)False

Question 16

There is no Federal excise tax on hotel occupancy.

Accepted Answer

A) True 
 B)False

Question 17

Using the choices provided below, show the justification for each provision of the tax law listed.Note: In some cases, more than one answer is appropriate.

Accepted Answer

A)   
B)   
C)    Tax credits available for the purchase of a vehicle that uses alternative (non-fossil)  fuels.D) All of the above
E) B) and C)

Question 18

Two months after the burglary of his personal residence, Eric is audited by the IRS.Among the items taken in the burglary was a shoe box containing approximately $50,000 in cash.Eric is the owner and operator of a cash-and-carry liquor store.Eric wonders why he was audited.Can you help explain?

Accepted Answer

Although Eric's audit by the IRS could b...

Question 19

Two persons who live in the same state but in different counties may not be subject to the same general sales tax rate.

Accepted Answer

A) True 
 B)False

Question 20

The objective of pay-as-you-go (paygo) is to achieve revenue neutrality.

Accepted Answer

A) True 
 B)False

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

Compare civil fraud with criminal fraud with regard to the following:

Correct AnswerverifiedShow Answer

The objective of pay-as-you-go (paygo) is to achieve revenue neutrality.

Correct AnswerverifiedShow Answer

Using the choices provided below, show the justification for each provision of the tax law listed.Note: In some cases, more than one answer is appropriate.

Correct AnswerverifiedShow Answer

On occasion, Congress has to enact legislation that clarifies the tax law in order to change a result reached by the U.S.Supreme Court.

Correct AnswerverifiedShow Answer

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

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 inconsistent with generally accepted accounting principles.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Two months after the burglary of his personal residence, Eric is audited by the IRS.Among the items taken in the burglary was a shoe box containing approximately $50,000 in cash.Eric is the owner and operator of a cash-and-carry liquor store.Eric wonders why he was audited.Can you help explain?

Correct AnswerverifiedAlthough Eric's audit by the IRS could b...View AnswerShow Answer

A landlord leases property upon which the tenant makes improvements.The improvements are significant and are not made in lieu of rent.At the end of the lease, the value of the improvements are not income to the landlord.This rule is an example of:

Correct AnswerverifiedShow 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

Two persons who live in the same state but in different counties may not be subject to the same general sales tax rate.

Correct AnswerverifiedShow Answer

Currently, the Federal income tax is more progressive than it ever has been in the past.

Correct AnswerverifiedShow Answer

Using the choices provided below, show the justification for each provision of the tax law listed.Note: In some cases, more than one answer is appropriate.

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

There is no Federal excise tax on hotel occupancy.

Correct AnswerverifiedShow Answer

In early July 2012, Gavin is audited by the IRS and a large deficiency is assessed.In October of the same year, his income tax return for the state is audited.What has probably happened?

Correct AnswerverifiedThe state has been n...View AnswerShow Answer

Under Clint's will, all of his property passes to either the Lutheran Church or to his wife.No Federal estate tax will be due on Clint's death in 2012.

Correct AnswerverifiedShow Answer

In preparing a tax return, all questions on the return must be answered.

Correct AnswerverifiedShow Answer

Using the choices provided below, show the justification for each provision of the tax law listed.Note: In some cases, more than one answer is appropriate.

Correct AnswerverifiedShow Answer

A characteristic of FUTA is that:

Correct AnswerverifiedShow Answer

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Although Eric's audit by the IRS could b...
View Answer

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The state has been n...
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