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Exam 1: Introduction to Taxation

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Question 51

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

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In many cases, the procedure is overused...

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Question 52

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Using the choices provided below, 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 interest on student loans.

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Question 53

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

An excise tax is often used to try to influence behavior.

In the current year, Azul Corporation, a calendar year C corporation, received a dividend of $30,000 from Naranja Corporation.Azul owns 25% of the Naranja Corporation stock.Assuming it is not subject to the taxable income limitation, Azul's dividends received deduction is $19,500.

Social considerations can be used to justify:

Using the choices provided below, 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.

A characteristic of FICA is that:

Which, if any, of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS) ?

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the United States.

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:

Using the choices provided below, 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 income taxes paid.

In terms of revenue neutrality, comment on a tax cut enacted by Congress that: a.Contains revenue offsets. b.Includes a sunset provision.

Taxes not imposed by the Federal government include:

The United States (either Federal, state, or local) does not impose:

Burt and Lisa are married and live in a common law state.Burt wants to make gifts to their four children in 2019. What is the maximum amount of the annual exclusion they will be allowed for these gifts?

In 1988, Roy leased real estate to Drab Corporation for 20 years.Drab Corporation made significant capital improvements to the property.In 2007, Drab decided not to renew the lease and vacated the property.At that time, the value of the improvements was $800,000.Roy sells the real estate in 2019 for $1,200,000 of which $900,000 is attributable to the improvements.When is Roy taxed on the improvements made by Drab Corporation?

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.

What is the difference between an inheritance tax and an estate tax? Who imposes these taxes?

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