Question 1

For Federal income tax purposes, there never has been a general amnesty period.

Accepted Answer

A) True 
 B)False

Question 2

David files his tax return 45 days after the due date.Along with the return, David remits a check for $40,000.which is the balance of the tax owed.Disregarding the interest element, David's total failure to file and to pay penalties are:

Accepted Answer

A)  $400.
B)  $3,600.
C)  $4,000.
D)  $4,400.
E)  None of these.F) A) and B)
G) A) and C)

Question 3

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.
-Wherewithal to pay concept

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 F)
N) G) and H)

Question 4

Match the statements that relate to each other.Note: Some choices may be used more than once.
-Office 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) F) and L)
N) A) and F)

Question 5

The ratification of the Sixteenth Amendment to the U.S.Constitution was necessary to validate the Federal income tax on corporations.

Accepted Answer

A) True 
 B)False

Question 6

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.
-A deduction for contributions by an employee to certain retirement plans.

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 I)
N) B) and C)

Question 7

To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S.income taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.

Accepted Answer

A) True 
 B)False

Question 8

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 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.
-A Federal deduction for state and local sales taxes paid.

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) E) and H)
N) C) and I)

Question 10

Both economic and social considerations can be used to justify:

Accepted Answer

A)  Favorable tax treatment for accident and health plans provided for employees and financed by employers.
B)  Disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g., fines, penalties, illegal kickbacks, bribes to government officials) .
C)  Various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.
D)  Allowance of a deduction for state and local income taxes paid.
E)  None of these.F) B) and C)
G) A) and E)

Question 11

Even though a client refuses to correct an error on a past return, it may be possible for a practitioner to continue to prepare returns for the client.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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.
-A small business corporation can elect to avoid the corporate income tax.

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 C)
N) B) and G)

Question 14

If a taxpayer files early (i.e., before the due date of the return), the statute of limitations on assessments begins on the date the return is filed.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Ultimately, most taxes are paid by individuals.

Accepted Answer

A) True 
 B)False

Question 17

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.
-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) A) and D)
N) A) and F)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

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.
-More rapid expensing for tax purposes of the costs of installing pollution control devices.

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 C)
N) F) and J)

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

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

Correct AnswerverifiedShow Answer

To lessen or eliminate the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S.income taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.

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

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. -A Federal deduction for state and local sales taxes paid.

Correct AnswerverifiedShow Answer

If a taxpayer files early (i.e., before the due date of the return), the statute of limitations on assessments begins on the date the return is filed.

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

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. -More rapid expensing for tax purposes of the costs of installing pollution control devices.

Correct AnswerverifiedShow Answer

Ultimately, most taxes are paid by individuals.

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. -Wherewithal to pay concept

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. -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. Economic considerations b. Social considerations c. Equity considerations d. Both a. and b. -A small business corporation can elect to avoid the corporate income tax.

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

Both economic and social considerations can be used to justify:

Correct AnswerverifiedShow Answer

The ratification of the Sixteenth Amendment to the U.S.Constitution was necessary to validate the Federal income tax on corporations.

Correct AnswerverifiedShow Answer

For Federal income tax purposes, there never has been a general amnesty period.

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. -Export taxes

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

Even though a client refuses to correct an error on a past return, it may be possible for a practitioner to continue to prepare returns for the client.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

David files his tax return 45 days after the due date.Along with the return, David remits a check for $40,000.which is the balance of the tax owed.Disregarding the interest element, David's total failure to file and to pay penalties are:

Correct AnswerverifiedShow Answer

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