Question 1

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 2

State income taxes generally can be characterized by:

Accepted Answer

A)   The same date for filing as the Federal income tax.
B)   No provision for withholding procedures.
C)   Allowance of a deduction for Federal income taxes paid.
D)   Applying only to individuals but not to corporations.
E)   None of these.F) B) and D)
G) A) and E)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

"Bracket creep" is avoided by:

Accepted Answer

A)   Using sunset provisions.
B)   Providing special tax rules for small businesses.
C)   The statute of limitations.
D)   Adjusting the rate brackets for inflation annually.E) A) and B)
F) B) and C)

Question 7

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

Question 8

The annual exclusion, currently $15,000, is available for gift and estate tax purposes.

Accepted Answer

A) True 
 B)False

Question 9

Federal excise taxes that are no longer imposed include:

Accepted Answer

A)   Tax on air travel.
B)   Tax on wagering.
C)   Tax on the manufacture of sporting equipment.
D)   Tax on alcohol.
E)   None of these.F) A) and B)
G) None of the above

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

In cases of doubt, courts have held that tax relief provisions should be broadly construed in favor of taxpayers.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a characteristic of the audit process?

Accepted Answer

A)   Most taxpayer audits involve "special" agents.
B)   Self-employed taxpayers are less likely to be selected for audit than employed taxpayers.
C)   Less important issues are handled by means of a correspondence audit.
D)   If a taxpayer disagrees with the IRS auditor's finding, the only resort is to the courts.
E)   None of these.F) B) and C)
G) D) and E)

Question 13

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 14

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all.
-Employee temporarily working in another state for two months

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) I) and K)
N) K) and L)

Question 15

Congress reacts to judicial decisions that interpret the tax law in different ways. When it approves of a decision, Congress may act to amend the Code to incorporate the holding. When it disapproves, Congress may amend the Code to nullify its effect. Give an example of each one of these congressional reactions.

Accepted Answer

Congress approved of the judicial conclu...

Question 16

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

Accepted Answer

Without the allowance of a loss carryfor...

Question 17

Match the statements that relate to each other. Note: Some choices may be used more than once.
-Interest due on refund

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) E) and K)
N) B) and E)

Question 18

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

Accepted Answer

In many cases, the procedure is overused...

Question 19

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) A) and H)
N) H) and I)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 1: Understanding and Working With the Federal Tax Law

Which of the following is a characteristic of the audit process?

Correct Answer
verified

Correct Answer
verified
Congress approved of the judicial conclu...
View Answer

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

Correct Answer
verified

The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.

Correct Answer
verified

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

Correct Answer
verified

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 Answer
verified

Both economic and social considerations can be used to justify:

Correct Answer
verified

State income taxes generally can be characterized by:

Correct Answer
verified

In cases of doubt, courts have held that tax relief provisions should be broadly construed in favor of taxpayers.

Correct Answer
verified

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Employee temporarily working in another state for two months

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified
Without the allowance of a loss carryfor...
View Answer

Match the statements that relate to each other. Note: Some choices may be used more than once. -Interest due on refund

Correct Answer
verified

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

Correct Answer
verified
In many cases, the procedure is overused...
View Answer

The annual exclusion, currently $15,000, is available for gift and estate tax purposes.

Correct Answer
verified

"Bracket creep" is avoided by:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Federal excise taxes that are no longer imposed include:

Correct Answer
verified

Exam 1: Understanding and Working With the Federal Tax Law

Which of the following is a characteristic of the audit process?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedCongress approved of the judicial conclu...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The Federal income tax on individuals generates more revenue than 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

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

Both economic and social considerations can be used to justify:

Correct AnswerverifiedShow Answer

State income taxes generally can be characterized by:

Correct AnswerverifiedShow Answer

In cases of doubt, courts have held that tax relief provisions should be broadly construed in favor of taxpayers.

Correct AnswerverifiedShow Answer

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -Employee temporarily working in another state for two months

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedWithout the allowance of a loss carryfor...View AnswerShow Answer

Match the statements that relate to each other. Note: Some choices may be used more than once. -Interest due on refund

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedIn many cases, the procedure is overused...View AnswerShow Answer

The annual exclusion, currently $15,000, is available for gift and estate tax purposes.

Correct AnswerverifiedShow Answer

"Bracket creep" is avoided by:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Federal excise taxes that are no longer imposed include:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Congress approved of the judicial conclu...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Without the allowance of a loss carryfor...
View Answer

Correct Answer
verified

Correct Answer
verified
In many cases, the procedure is overused...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified