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Exam 1: Understanding and Working With the Federal Tax Law

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Question 91

Multiple Choice

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Taxes levied by both states and the Federal government include:

A) General sales tax.
B) Customs duties.
C) Hotel occupancy tax.
D) Franchise tax.
E) None of these.

F) C) and D)
G) A) and C)

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Question 92

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Julius, a married taxpayer, makes gifts to each of his six children. A maximum of twelve annual exclusions could be allowed as to these gifts.

A) True
B) False

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Question 93

Multiple Choice

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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. -Revenue Agent's Report (RAR)

The proposed flat tax:

Using the following choices, show the justification for each provision of the tax law listed. -A deduction for certain expenses (interest and taxes) incident to home ownership.

The IRS agent auditing the return will issue an RAR even if the taxpayer owes no additional taxes.

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:

Ultimately, most taxes are paid by individuals.

When a state decouples from a Federal tax provision, it means that this provision will not apply for state income tax purposes.

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

On his 2019 income tax return, Andrew omitted income and overstated deductions to the extent that his income tax was understated by $500,000. Disregarding any interest element, what is Andrew's penalty if the understatement was due to: a. Negligence. b. Civil fraud. c. Criminal fraud.

What might cause an individual to owe income taxes in more than one state?

Jane is the tax director for Tangent Software Corporation. She is unsure whether Tangent is required to charge sales tax when software is provided to customers in State X via the "cloud." This indicates that the sales tax does not meet the principle of:

Taylor, a widow, makes cash gifts to her five married children (including their spouses) and to her seven grandchildren. What is the maximum amount Taylor can give for calendar year 2019 without using her unified transfer tax credit?

The quote engraved on the IRS building in Washington, DC, at the entrance states:

To mitigate the effect of the annual accounting period concept, the tax law permits the carryforward of excess charitable contributions of a particular year to other years.

The majority of IRS audits are handled by correspondence.

A state income tax can be imposed on nonresident taxpayers who earn income within the state on an itinerant basis.

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

Currently, the tax base for the Social Security component of the FICA is not limited to a dollar amount.