Question 1

A calendar year taxpayer files his 2018 Federal income tax return on March 4, 2019. The return reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2019. The refund need not include interest.

Accepted Answer

A) True 
 B)False

Question 2

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.

Accepted Answer

Yes, he should. Special agents rarely ap...

Question 3

Sally's neighbor often brags that his employer often pays him in cash "off the books" to save him taxes. Sally is tired of hearing this and contacts the IRS to report the neighbor. If this tip results in taxes collected by the IRS, Sally will likely receive an award of a portion of the tax and penalties collected.

Accepted Answer

A) True 
 B)False

Question 4

Before proposing that the state's sales tax be expanded to include food, a legislator should ask whether:

Accepted Answer

A)   The state tax agency will allow this expansion.
B)   A majority of his constituents agree.
C)   Grocery stores will be able to collect the tax.
D)   The state's constitution allows for this tax.E) C) and D)
F) B) and D)

Question 5

For individual taxpayers, the interest rate for income tax refunds (overpayments) is the same as that applicable to assessments (underpayments).

Accepted Answer

A) True 
 B)False

Question 6

In terms of Adam Smith's canons of taxation, how does the Federal income tax fare as far as economy is concerned?

Accepted Answer

Economy is present only if the...

Question 7

Match the statements that relate to each other. Note: Some choices may be used more than once.
-Fraud and statute of limitations

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) A) and H)
N) A) and L)

Question 8

Using the following choices, show the justification for each provision of the tax law listed.
-A bribe to the local sheriff, although business related, is not deductible.

Accepted Answer

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

Question 9

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

Question 10

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

Accepted Answer

None. After a marital deductio...

Question 11

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

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) G) and J)
N) A) and B)

Question 12

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Which of the following taxes is paid only by the employer?

Accepted Answer

A)   FICA
B)   FUTA
C)   Social Security tax
D)   Medicare taxE) None of the above
F) A) and B)

Question 15

In connection with facilitating the function of the IRS in the administration of the tax laws, comment on the utility of the following:
a. An increase in the amount of the standard deduction.
b. Dollar and percentage limitations on the deduction of personal casualty losses in Federally declared disaster areas.
c. Availability of interest and penalties for taxpayer noncompliance.

Accepted Answer

a. An increase in the amount of the stan...

Question 16

The tax law contains various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. On what grounds can these provisions be justified?

Accepted Answer

Social and economic considerat...

Question 17

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

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 D)
N) G) and I)

Question 18

In 2019, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José has not made a taxable gift.

Accepted Answer

A) True 
 B)False

Question 19

For the negligence penalty to apply, the underpayment must be caused by intentional disregard of rules and regulations without intent to defraud.

Accepted Answer

A) True 
 B)False

Question 20

The objective of pay-as-you-go (paygo) is to improve administrative feasibility.

Accepted Answer

A) True 
 B)False

Exam 1: Understanding and Working With the Federal Tax Law

Correct Answer
verified
a. An increase in the amount of the stan...
View Answer

In 2019, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José has not made a taxable gift.

Correct Answer
verified

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 Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Match the statements that relate to each other. Note: Some choices may be used more than once. -Fraud and statute of limitations

Correct Answer
verified

Before proposing that the state's sales tax be expanded to include food, a legislator should ask whether:

Correct Answer
verified

Using the following choices, show the justification for each provision of the tax law listed. -A bribe to the local sheriff, although business related, is not deductible.

Correct Answer
verified

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

Correct Answer
verified

For individual taxpayers, the interest rate for income tax refunds (overpayments) is the same as that applicable to assessments (underpayments).

Correct Answer
verified

For the negligence penalty to apply, the underpayment must be caused by intentional disregard of rules and regulations without intent to defraud.

Correct Answer
verified

Which of the following taxes is paid only by the employer?

Correct Answer
verified

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.

Correct Answer
verified
Yes, he should. Special agents rarely ap...
View Answer

Correct Answer
verified

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

Correct Answer
verified
None. After a marital deductio...
View Answer

In terms of Adam Smith's canons of taxation, how does the Federal income tax fare as far as economy is concerned?

Correct Answer
verified
Economy is present only if the...
View Answer

A calendar year taxpayer files his 2018 Federal income tax return on March 4, 2019. The return reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2019. The refund need not include interest.

Correct Answer
verified

The objective of pay-as-you-go (paygo) is to improve administrative feasibility.

Correct Answer
verified

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

Correct Answer
verified

The tax law contains various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. On what grounds can these provisions be justified?

Correct Answer
verified
Social and economic considerat...
View Answer

Exam 1: Understanding and Working With the Federal Tax Law

Correct Answerverifieda. An increase in the amount of the stan...View AnswerShow Answer

In 2019, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000. José has not made a taxable gift.

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Match the statements that relate to each other. Note: Some choices may be used more than once. -Fraud and statute of limitations

Correct AnswerverifiedShow Answer

Before proposing that the state's sales tax be expanded to include food, a legislator should ask whether:

Correct AnswerverifiedShow Answer

Using the following choices, show the justification for each provision of the tax law listed. -A bribe to the local sheriff, although business related, is not deductible.

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

For individual taxpayers, the interest rate for income tax refunds (overpayments) is the same as that applicable to assessments (underpayments).

Correct AnswerverifiedShow Answer

For the negligence penalty to apply, the underpayment must be caused by intentional disregard of rules and regulations without intent to defraud.

Correct AnswerverifiedShow Answer

Which of the following taxes is paid only by the employer?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedYes, he should. Special agents rarely ap...View AnswerShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedNone. After a marital deductio...View AnswerShow Answer

In terms of Adam Smith's canons of taxation, how does the Federal income tax fare as far as economy is concerned?

Correct AnswerverifiedEconomy is present only if the...View AnswerShow Answer

A calendar year taxpayer files his 2018 Federal income tax return on March 4, 2019. The return reflects an overpayment of $6,000, and the taxpayer requests a refund of this amount. The refund is paid on May 16, 2019. The refund need not include interest.

Correct AnswerverifiedShow Answer

The objective of pay-as-you-go (paygo) is to improve administrative feasibility.

Correct AnswerverifiedShow Answer

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

Correct AnswerverifiedShow Answer

The tax law contains various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education. On what grounds can these provisions be justified?

Correct AnswerverifiedSocial and economic considerat...View AnswerShow Answer

Correct Answer
verified
a. An increase in the amount of the stan...
View Answer

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Correct Answer
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Correct Answer
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Yes, he should. Special agents rarely ap...
View Answer

Correct Answer
verified

Correct Answer
verified
None. After a marital deductio...
View Answer

Correct Answer
verified
Economy is present only if the...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified
Social and economic considerat...
View Answer