Question 1

For state income tax purposes, a majority of states allow a deduction for Federal income taxes.

Accepted Answer

A) True 
 B)False  False

Question 2

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 3

The tax law allows, under certain conditions, deferral of gain recognition for involuntary conversions.

Accepted Answer

The answer of The tax law allows, under certain conditions,...

Question 4

The Federal excise tax on cigarettes is an example of a proportional tax.

Accepted Answer

A) True 
 B)False

Question 5

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.

Accepted Answer

A) True 
 B)False  True

Question 6

Property can be transferred within the family group by gift or at death.One motivation for preferring the gift approach is:

Accepted Answer

A)  To take advantage of the higher unified transfer tax credit available under the gift tax.
B)  To avoid a future decline in value of the property transferred.
C)  To take advantage of the per donee annual exclusion.
D)  To shift income to higher bracket donees.
E)  None of the above.F) C) and E)
G) B) and C)

Question 7

Because the law is complicated, most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

Accepted Answer

A) True 
 B)False

Question 8

If a "special agent" becomes involved in the audit of a return, this indicates that the IRS suspects that fraud is involved.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  Economy.
B)  Certainty.
C)  Convenience.
D)  Simplicity.
E)  Equality.F) B) and C)
G) None of the above

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

The IRS agent auditing the return will not issue an RAR if the taxpayer owes no additional taxes.

Accepted Answer

A) True 
 B)False

Question 12

Using the choices provided below, show the justification for each provision of the tax law listed.Note: In some cases, more than one answer is appropriate.

Accepted Answer

A)   
B)   
C)    Tax credits available for home improvements that conserve energy.D) B) and C)
E) All of the above

Question 13

The tax law provides various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.These provisions can be justified on both economic and social grounds.

Accepted Answer

A) True 
 B)False

Question 14

The pay-as-you-go feature of the Federal income tax on individuals conforms to Adam Smith's canon of certainty.

Accepted Answer

A) True 
 B)False

Question 15

Sales made by mail order are not exempt from the application of a general sales (or use) tax.

Accepted Answer

A) True 
 B)False

Question 16

The tax law contains various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.On what grounds can these provisions be justified?

Accepted Answer

Social and economic considerat...

Question 17

The U.S.(either Federal, state, or local)  does not impose:

Accepted Answer

A)  Franchise taxes.
B)  Severance taxes.
C)  Occupational fees.
D)  Export duties.
E)  Customs duties.F) C) and D)
G) A) and B)

Question 18

The tax law allows an income tax deduction for state and local income taxes.Explain why.

Accepted Answer

The deduction for state and lo...

Question 19

Burt and Lisa are married and live in a common law state.Burt wants to make gifts to their five children in 2012.What is the maximum amount of the annual exclusion they will be allowed for these gifts?

Accepted Answer

A)  $130,000.
B)  $65,000.
C)  $26,000.
D)  $13,000.
E)  None of the above.F) None of the above
G) A) and B)

Question 20

Taxes levied by both states and the Federal government include:

Accepted Answer

A)  General sales tax.
B)  Custom duties.
C)  Car rental tax.
D)  Franchise tax.
E)  None of the above.F) None of the above
G) All of the above E

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

For state income tax purposes, a majority of states allow a deduction for Federal income taxes.

Correct AnswerverifiedFalse

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

The tax law allows, under certain conditions, deferral of gain recognition for involuntary conversions.

Correct AnswerverifiedShow Answer

The Federal excise tax on cigarettes is an example of a proportional tax.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedTrue

Property can be transferred within the family group by gift or at death.One motivation for preferring the gift approach is:

Correct AnswerverifiedShow Answer

Because the law is complicated, most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

Correct AnswerverifiedShow Answer

If a "special agent" becomes involved in the audit of a return, this indicates that the IRS suspects that fraud is involved.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The IRS agent auditing the return will not issue an RAR if the taxpayer owes no additional taxes.

Correct AnswerverifiedShow Answer

Using the choices provided below, show the justification for each provision of the tax law listed.Note: In some cases, more than one answer is appropriate.

Correct AnswerverifiedShow Answer

The tax law provides various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.These provisions can be justified on both economic and social grounds.

Correct AnswerverifiedShow Answer

The pay-as-you-go feature of the Federal income tax on individuals conforms to Adam Smith's canon of certainty.

Correct AnswerverifiedShow Answer

Sales made by mail order are not exempt from the application of a general sales (or use) tax.

Correct AnswerverifiedShow Answer

The tax law contains various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.On what grounds can these provisions be justified?

Correct AnswerverifiedSocial and economic considerat...View AnswerShow Answer

The U.S.(either Federal, state, or local) does not impose:

Correct AnswerverifiedShow Answer

The tax law allows an income tax deduction for state and local income taxes.Explain why.

Correct AnswerverifiedThe deduction for state and lo...View AnswerShow Answer

Burt and Lisa are married and live in a common law state.Burt wants to make gifts to their five children in 2012.What is the maximum amount of the annual exclusion they will be allowed for these gifts?

Correct AnswerverifiedShow Answer

Taxes levied by both states and the Federal government include:

Correct AnswerverifiedE

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Social and economic considerat...
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The deduction for state and lo...
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