Question 1

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all.
-Use tax

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryback and carryforward of net operating losses
C)  "No change" is one possible result
D)  State income tax applied to 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) I) and L)

Question 2

If the tax deficiency is attributable to fraud,the negligence penalty will not be imposed.

Accepted Answer

A) True 
 B)False

Question 3

The FICA tax (Medicare component)on wages is progressive since the tax due increases as wages increase.

Accepted Answer

A) True 
 B)False

Question 4

A characteristic of FUTA is that:

Accepted Answer

A)  It is imposed on both employer and employee.
B)  It is imposed solely on the employee.
C)  Compliance requires following guidelines issued by both state and Federal regulatory authorities.
D)  It is applicable to spouses of employees but not to any children under age 18.
E)  None of these.F) A) and C)
G) A) and D)

Question 5

Match the statements that relate to each other.Note: Some choices may be used more than once or not at all.
-Wherewithal to pay concept

Accepted Answer

A)  Deferral of gains from involuntary conversions
B)  Carryback and carryforward of net operating losses
C)  "No change" is one possible result
D)  State income tax applied to 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) B) and K)

Question 6

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

Accepted Answer

A)  Economy
B)  Certainty
C)  Convenience
D)  Simplicity
E)  EqualityF) B) and D)
G) A) and C)

Question 7

Taxes levied by both states and the Federal government include:

Accepted Answer

A)  General sales tax.
B)  Custom duties.
C)  Hotel occupancy tax.
D)  Franchise tax.
E)  None of these.F) C) and D)
G) A) and E)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The principal objective of the FUTA tax is to provide some measure of retirement security.

Accepted Answer

A) True 
 B)False

Question 10

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:

Accepted Answer

A)  A clear reflection of income result.
B)  The tax benefit rule.
C)  The arm's length concept.
D)  The wherewithal to pay concept.
E)  None of these.F) B) and E)
G) All of the above

Question 11

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

Accepted Answer

A)  3 years from date return is filed
B)  3 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) 6 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) A) and B)

Question 12

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 13

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

Accepted Answer

A) True 
 B)False

Question 14

In terms of probability,which of the following taxpayers would be least likely to be audited by the IRS?

Accepted Answer

A)  Taxpayer owns and operates a check-cashing service.
B)  Taxpayer is an employed electrician.
C)  Taxpayer just received a $3 million personal injury award as a result of a lawsuit.
D)  Taxpayer just won a $1 million slot machine jackpot at a Las Vegas casino.
E)  Taxpayer has been audited several times before.F) A) and D)
G) A) and B)

Question 15

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 and not applying to corporations.
E)  None of these.F) A) and D)
G) None of the above

Question 16

Like the Federal counterpart,the amount of the state excise taxes on gasoline varies from state to state.

Accepted Answer

A) True 
 B)False

Question 17

Currently,the Federal income tax is less progressive than it ever has been in the past.

Accepted Answer

A) True 
 B)False

Question 18

Allowing a domestic production activities deduction for certain manufacturing income can be justified:

Accepted Answer

A)  As mitigating the effect of the annual accounting period concept.
B)  As promoting administrative feasibility.
C)  By economic considerations.
D)  Based on the wherewithal to pay concept.
E)  None of these.F) B) and D)
G) C) and D)

Question 19

During any month in which both the failure to file penalty and the failure to pay penalty apply,the failure to file penalty is increased by the amount of the failure to pay penalty.

Accepted Answer

A) True 
 B)False

Question 20

Using the choices provided below,show the justification for each provision of the tax law listed.
-A bribe to the local sheriff,although business related,is not deductible.

Accepted Answer

A)  Economic considerations
B)  Social considerations
C)  Equity considerationsD) None of the above
E) All of the above

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

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

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Match the statements that relate to each other.Note: Some choices may be used more than once or not at all. -Use tax

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State income taxes generally can be characterized by:

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The principal objective of the FUTA tax is to provide some measure of retirement security.

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Match the statements that relate to each other.Note: Some choices may be used more than once or not at all. -Wherewithal to pay concept

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

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Allowing a domestic production activities deduction for certain manufacturing income can be justified:

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If the tax deficiency is attributable to fraud,the negligence penalty will not be imposed.

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Like the Federal counterpart,the amount of the state excise taxes on gasoline varies from state to state.

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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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In terms of probability,which of the following taxpayers would be least likely to be audited by the IRS?

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Currently,the Federal income tax is less progressive than it ever has been in the past.

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A fixture will be subject to the ad valorem tax on personalty rather than the ad valorem tax on realty.

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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:

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A characteristic of FUTA is that:

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

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The FICA tax (Medicare component)on wages is progressive since the tax due increases as wages increase.

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During any month in which both the failure to file penalty and the failure to pay penalty apply,the failure to file penalty is increased by the amount of the failure to pay penalty.

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Taxes levied by both states and the Federal government include:

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Using the choices provided below,show the justification for each provision of the tax law listed. -A bribe to the local sheriff,although business related,is not deductible.

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