Question 1

The value added tax (VAT) has not had wide acceptance in the international community.

Accepted Answer

A) True 
 B)False

Question 2

In preparing an income tax return, the use of a client's estimates is not permitted.

Accepted Answer

A) True 
 B)False

Question 3

The ad valorem tax on personal use personalty is more often avoided by taxpayers than the ad valorem tax on business use personalty.

Accepted Answer

A) True 
 B)False

Question 4

Using the following choices, show the justification for each provision of the tax law listed.
a. Economic considerations 
b. Social considerations
c. Equity considerations 
d. Both a. and b.
-Tax brackets are increased for inflation.

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) A) and E)
N) B) and G)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 2019.

Accepted Answer

A) True 
 B)False

Question 7

For omissions from gross income in excess of 25% of that reported, there is no statute of limitations on additional income tax assessments by the IRS.

Accepted Answer

A) True 
 B)False

Question 8

Indicate which, if any, statement is incorrect.State income taxes:

Accepted Answer

A)  Can piggyback to the Federal version.
B)  Cannot apply to visiting nonresidents.
C)  Can decouple from the Federal version.
D)  Can provide occasional amnesty programs.
E)  None of these.F) B) and D)
G) B) and C)

Question 9

Using the following choices, show the justification for each provision of the tax law listed.
a. Economic considerations 
b. Social considerations
c. Equity considerations 
d. Both a. and b.
-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) H) and J)
N) G) and K)

Question 10

The quote engraved on the IRS building in Washington, DC, at the entrance states:

Accepted Answer

A)  Nothing is certain, except death and taxes.
B)  Taxes are what we pay for civilized society.
C)  Everyone welcome.
D)  Taxes are the most difficult thing in the world to understand.
E)  None of these.F) All of the above
G) None of the above

Question 11

A characteristic of the fraud penalties is:

Accepted Answer

A)  When negligence and civil fraud apply to a deficiency, the negligence penalty predominates.
B)  When criminal fraud can result in a fine and a prison sentence.
C)  When the criminal fraud penalty is 75% of the deficiency attributable to the fraud.
D)  When the IRS has the same burden of proof in the case of criminal fraud as with civil fraud.
E)  None of these.F) D) and E)
G) C) and E)

Question 12

Which, if any, is not one of Adam Smith's canons (principles)  of taxation?

Accepted Answer

A)  Economy in collection
B)  Certainty
C)  Convenience of payment
D)  Simplicity
E)  EqualityF) C) and E)
G) A) and B)

Question 13

The civil fraud penalty can entail large fines and possible incarceration.

Accepted Answer

A) True 
 B)False

Question 14

Regarding proper ethical accounting guidelines, which, if any, of the following is correct?

Accepted Answer

A)  The use of client estimates in preparing a return may be acceptable.
B)  Under no circumstances should a question on a tax return be left unanswered.
C)  If a client has made a mistake in a prior year's return and refuses to correct it, the accountant should withdraw from the engagement.
D)  If the exact amount of a deduction is not certain so as to increase the appearance of greater certainty.
E)  None of these.F) A) and C)
G) All of the above

Question 15

Match the statements that relate to each other.Note: Some choices may be used more than once.
-Early filing and statute of limitations (deficiency situations)

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) B) and D)
N) F) and K)

Question 16

The first income tax on individuals (after the ratification of the Sixteenth Amendment to the Constitution) levied tax rates from a low of 2% to a high of 6%.

Accepted Answer

A) True 
 B)False

Question 17

Property can be transferred within the family group by gift or at death.One motivation for preferring the gift approach is:

Accepted Answer

A)  To take advantage of the higher unified transfer tax credit available under the gift tax.
B)  To avoid a future decline in value of the property transferred.
C)  To take advantage of the per donee annual exclusion.
D)  To shift income to higher bracket donees.
E)  None of these.F) C) and E)
G) C) and D)

Question 18

Using the following choices, show the justification for each provision of the tax law listed.
a. Economic considerations 
b. Social considerations
c. Equity considerations 
d. Both a. and b.
-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) G) and J)
N) A) and H)

Question 19

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

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) G) and H)
N) E) and I)

Question 20

Jane is the tax director for Tangent Software Corporation.She is unsure whether Tangent is required to charge sales tax when software is provided to customers in State X via the "cloud." This indicates that the sales tax does not meet the principle of:

Accepted Answer

A)  Equity.
B)  Certainty.
C)  Neutrality.
D)  Economic growth and efficiency.E) A) and B)
F) C) and D)

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

Using the following choices, show the justification for each provision of the tax law listed. a. Economic considerations b. Social considerations c. Equity considerations d. Both a. and b. -Excise tax on tobacco

Correct AnswerverifiedShow Answer

Property can be transferred within the family group by gift or at death.One motivation for preferring the gift approach is:

Correct AnswerverifiedShow 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 2019.

Correct AnswerverifiedShow Answer

Using the following choices, show the justification for each provision of the tax law listed. a. Economic considerations b. Social considerations c. Equity considerations d. Both a. and b. -Revenue neutrality

Correct AnswerverifiedShow Answer

The ad valorem tax on personal use personalty is more often avoided by taxpayers than the ad valorem tax on business use personalty.

Correct AnswerverifiedShow Answer

Regarding proper ethical accounting guidelines, which, if any, of the following is correct?

Correct AnswerverifiedShow Answer

The quote engraved on the IRS building in Washington, DC, at the entrance states:

Correct AnswerverifiedShow Answer

In preparing an income tax return, the use of a client's estimates is not permitted.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For omissions from gross income in excess of 25% of that reported, there is no statute of limitations on additional income tax assessments by the IRS.

Correct AnswerverifiedShow Answer

The first income tax on individuals (after the ratification of the Sixteenth Amendment to the Constitution) levied tax rates from a low of 2% to a high of 6%.

Correct AnswerverifiedShow Answer

Match the statements that relate to each other.Note: Some choices may be used more than once. -Early filing and statute of limitations (deficiency situations)

Correct AnswerverifiedShow Answer

Jane is the tax director for Tangent Software Corporation.She is unsure whether Tangent is required to charge sales tax when software is provided to customers in State X via the "cloud." This indicates that the sales tax does not meet the principle of:

Correct AnswerverifiedShow Answer

Using the following choices, show the justification for each provision of the tax law listed. a. Economic considerations b. Social considerations c. Equity considerations d. Both a. and b. -Tax brackets are increased for inflation.

Correct AnswerverifiedShow Answer

A characteristic of the fraud penalties is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The civil fraud penalty can entail large fines and possible incarceration.

Correct AnswerverifiedShow Answer

The value added tax (VAT) has not had wide acceptance in the international community.

Correct AnswerverifiedShow Answer

Indicate which, if any, statement is incorrect.State income taxes:

Correct AnswerverifiedShow Answer

Which, if any, is not one of Adam Smith's canons (principles) of taxation?

Correct AnswerverifiedShow Answer

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