Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

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) G) and J)
N) G) and I)

Question 3

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) C) and D)

Question 4

"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) None of the above

Question 5

Match the statements that relate to each other.Note: Some choices may be used more than once.
-Late filing and statute limitations (deficiency situations)

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 G)
N) D) and G)

Question 6

Before proposing that the state's sales tax be expanded to include food, a legislator should ask whether:

Accepted Answer

A)  The state tax agency will allow this expansion.
B)  A majority of his constituents agree.
C)  Grocery stores will be able to collect the tax.
D)  The state's constitution allows for this tax.E) A) and C)
F) A) and B)

Question 7

Taxes not imposed by the Federal government include:

Accepted Answer

A)  Tobacco excise tax.
B)  Customs duties (tariffs on imports) .
C)  Tax on rental cars.
D)  Gas guzzler tax.
E)  None of these.F) A) and D)
G) C) and D)

Question 8

In 2019, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000.José has not made a taxable gift.

Accepted Answer

A) True 
 B)False

Question 9

Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.The 20% negligence penalty will apply to $25,000.

Accepted Answer

A) True 
 B)False

Question 10

Which, if any, of the following transactions will increase a taxing jurisdiction's revenue from the ad valorem tax imposed on real estate?

Accepted Answer

A)  A resident dies and leaves his farm to his church.
B)  A large property owner issues a conservation easement as to some of her land.
C)  A tax holiday issued 10 years ago has expired.
D)  A bankrupt motel is acquired by the Red Cross and is to be used to provide housing for homeless persons.
E)  None of these.F) B) and C)
G) C) and D)

Question 11

Using the following choices, 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.
-Tax credits for home improvements that conserve energy.

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) C) and F)
N) D) and I)

Question 12

Which, if any, of the following statements best describes the history of the Federal income tax?

Accepted Answer

A)  It did not exist during the Civil War.
B)  The Federal income tax on corporations was held by the U.S.Supreme Court to be allowable under the U.S. Constitution.
C)  The Federal income tax on individuals was held by the U.S.Supreme Court to be allowable under the U.S. Constitution.
D)  Both the Federal income tax on individuals and on corporations was held by the U.S.Supreme Court to be contrary to the U.S.Constitution.
E)  None of these.F) A) and C)
G) D) and E)

Question 13

Using the following choices, 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.
-Tax on transfers at death (inheritance type)

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) C) and G)
N) B) and C)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Two persons who live in the same state but in different counties may not be subject to the same general sales tax rate.

Accepted Answer

A) True 
 B)False

Question 16

Using the following choices, 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.
-Decoupling

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) E) and G)
N) C) and D)

Question 17

Taxes levied by all states include:

Accepted Answer

A)  Tobacco excise tax.
B)  Individual income tax.
C)  Inheritance tax.
D)  General sales tax.
E)  None of these.F) B) and D)
G) B) and E)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Using the following choices, 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.
-Mitigation of the annual accounting period concept

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) D) and E)
N) D) and I)

Question 20

A rationale for the installment sale method tax rule is:

Accepted Answer

A)  Ability to pay.
B)  Equity and fairness.
C)  Simplicity.
D)  Revenue neutrality.E) C) and D)
F) B) and D)

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

Which, if any, of the following statements best describes the history of the Federal income tax?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Using the following choices, 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. -Decoupling

Correct AnswerverifiedShow Answer

Using the following choices, 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. -Tax on transfers at death (inheritance type)

Correct AnswerverifiedShow Answer

A rationale for the installment sale method tax rule is:

Correct AnswerverifiedShow Answer

Match the statements that relate to each other.Note: Some choices may be used more than once. -Late filing and statute limitations (deficiency situations)

Correct AnswerverifiedShow Answer

Which, if any, of the following transactions will increase a taxing jurisdiction's revenue from the ad valorem tax imposed on real estate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Taxes not imposed by the Federal government include:

Correct AnswerverifiedShow Answer

Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.The 20% negligence penalty will apply to $25,000.

Correct AnswerverifiedShow Answer

Using the following choices, 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. -Tax credits for home improvements that conserve energy.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Two persons who live in the same state but in different counties may not be subject to the same general sales tax rate.

Correct AnswerverifiedShow Answer

"Bracket creep" is avoided by:

Correct AnswerverifiedShow Answer

A characteristic of FUTA is that:

Correct AnswerverifiedShow Answer

In 2019, José, a widower, sells land (fair market value of $100,000) to his daughter, Linda, for $50,000.José has not made a taxable gift.

Correct AnswerverifiedShow Answer

Taxes levied by all states include:

Correct AnswerverifiedShow Answer

Using the following choices, 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. -Mitigation of the annual accounting period concept

Correct AnswerverifiedShow Answer

Before proposing that the state's sales tax be expanded to include food, a legislator should ask whether:

Correct AnswerverifiedShow Answer

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