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Exam 1: Introduction to Taxation

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Question 31

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In 2016, Deborah became 65 years old.In 2017 she added a swimming pool, and in 2018 she converted the residence to rental property and moved into an assisted living facility.Since 2015, Deborah's ad valorem property taxes have decreased once and increased twice.Explain.

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The decrease probably came in 2016 when ...

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Question 32

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The formula for the Federal income tax on corporations is the same as that applicable to individuals.

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Question 33

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Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.

A state income tax can be imposed on nonresident taxpayers who earn income within the state on an itinerant basis.

Not all of the states that impose a general sales tax also have a use tax.

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

A rationale for the installment method tax rule is:

Virtually all state income tax returns contain checkoff boxes for donations to various causes.On what grounds has this procedure been criticized?

Some states use their state income tax return as a means of collecting unpaid sales and use taxes.

On transfers by death, the Federal government relies on an estate tax, while states impose an estate tax, an inheritance tax, both taxes, or neither tax.

How do the net operating loss provisions in the tax law mitigate the effect of the annual accounting concept?

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.

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

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:

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

The tax law provides various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.These provisions can be justified on both economic and equity grounds.

A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.

Provisions in the tax law that promote energy conservation and more use of alternative non-fossil) fuels can be justified by:

Which, if any, of the following taxes are proportional rather than progressive) ?

Two years ago, State Y enacted a new income tax credit for college prep materials.The credit is available to individuals and is equal to 40 percent of the cost of the items.The credit may not exceed $50 in any year.The State Y Director of Finance has discovered this year that the amount of credit claimed is far higher than expected.Which principle of good tax policy might not have been considered in designing this tax which caused the original cost estimate to be too low?