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

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Question 81

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On transfers by death,the Federal government relies on an estate tax,while states impose an estate tax,an inheritance tax,both taxes,or neither tax.

A) True
B) False

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Question 82

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In preparing a tax return,all questions on the return must be answered.

A) True
B) False

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Question 83

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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.

Timothy recently converted a warehouse into apartment lofts,which he is renting to single professionals.In making the conversion,he emphasized improvements that were portable in nature.Thus,the sprinkler system,heating and cooling units,and room dividers are all removable from the building.In terms of ad valorem property taxes,what was Timothy trying to accomplish?

Can a taxpayer start the 3-year statute of limitations on additional assessments by the IRS by filing his income tax return early (i.e.,before the due date)? Can the period be shortened by filing late (i.e.,after the due date)?

For the negligence penalty to apply,the underpayment must be caused by intentional disregard of rules and regulations without intent to defraud.

The tax law allows,under certain conditions,deferral of gain recognition for involuntary conversions. a. What is the justification for this relief measure? b. What happens if the proceeds are not entirely reinvested?

In connection with facilitating the function of the IRS in the administration of the tax laws,comment on the utility of the following: a. An increase in the amount of the standard deduction. b. Dollar and percentage limitations on the deduction of personal casualty losses. c. Availability of interest and penalties for taxpayer noncompliance.

Briana lives in one state and works in the adjoining state.Both states tax the income she earns from her job.Does Briana have any relief from this apparent double taxation of the same income?

A parent employs his twin daughters,age 18,in his sole proprietorship.The daughters are not subject to FICA coverage.

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

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

Which,if any,of the following is a typical characteristic of an ad valorem tax on personalty?

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

As a matter of administrative convenience,the IRS would prefer to have Congress increase (rather than decrease)the amount of the standard deduction allowed to individual taxpayers.