Question 1

Although the law is complicated,most individual taxpayers are able to complete their Federal income tax returns without outside assistance.

Accepted Answer

A) True 
 B)False

Question 2

States impose either a state income tax or a general sales tax,but not both types of taxes.

Accepted Answer

A) True 
 B)False

Question 3

The proposed flat tax:

Accepted Answer

A)   Would eliminate the income tax.
B)   Would simplify the income tax.
C)   Would tax the increment in value as goods move through the production and manufacturing stages to the marketplace.
D)   Is a tax on consumption.
E)   None of the above.F) D) and E)
G) A) and B)

Question 4

Regarding proper ethical guidelines,which (if any) of the following is correct?

Accepted Answer

A)   The use of client estimates in preparing a return is not acceptable.
B)   Under no circumstances should a question on a tax return be left unanswered.
C)   If a client has made a mistake in a prior year's return and refuses to correct it, you should withdraw from the engagement.
D)   If the exact amount of a deduction is not certain so as to increase the appearance of greater certainty.
E)   None of the above.F) B) and C)
G) A) and C)

Question 5

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 6

Under what conditions is it permissible,from an ethical standpoint,for a CPA firm to outsource tax return preparation to a third party?

Accepted Answer

First,the clients' confidentia...

Question 7

Without obtaining an extension,Lisa files her income tax return 45 days after the due date.With her return,she pays an additional tax of $40,000.Disregarding any interest element,what is Lisa's penalty for failure to pay and to file?

Accepted Answer

$7,500.Disregarding ...

Question 8

Social considerations can be used to justify:

Accepted Answer

A)   Allowing a Federal income tax deduction for state and local sales taxes.
B)   Allowing excess capital losses to be carried over to other years.
C)   Allowing accelerated amortization for the cost of installing pollution control facilities.
D)   Allowance of a credit for child care expenses.
E)   None of the above.F) B) and D)
G) All of the above

Question 9

On transfers by death,the Federal government relies on an estate tax,while states use only an inheritance tax.

Accepted Answer

A) True 
 B)False

Question 10

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 11

For the negligence penalty to apply,the underpayment must be caused by intentional disregard of rules and regulations with intent to defraud.

Accepted Answer

A) True 
 B)False

Question 12

When Congress enacts a tax cut that is phased in over a period of years,revenue neutrality is achieved.

Accepted Answer

A) True 
 B)False

Question 13

To mitigate the effect of the annual accounting period concept,the tax law permits the carryback and carryforward to other years of the net operating loss of a particular year.

Accepted Answer

A) True 
 B)False

Question 14

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 the above.F) All of the above
G) A) and C)

Question 15

Taxes levied by all states include:

Accepted Answer

A)   Liquor excise tax.
B)   Individual income tax.
C)   Inheritance tax.
D)   General sales tax.
E)   None of the above.F) A) and C)
G) C) and D)

Question 16

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)?

Accepted Answer

The answer is no in both cases...

Question 17

Scott files his tax return 65 days after the due date.Along with the return,Scott remits a check for $50,000 which is the balance of the tax owed.Disregarding the interest element,Scott's total failure to file and to pay penalties are:

Accepted Answer

A)   $750.
B)   $6,000.
C)   $7,500.
D)   $8,250.
E)   None of the above.F) A) and E)
G) All of the above

Question 18

In 2009,Deborah became 65 years old.In 2010 she added a swimming pool,and in 2011 she converted the residence to rental property and moved into an assisted living facility.Since 2008,Deborah's ad valorem property taxes have decreased once and increased twice.Explain.

Accepted Answer

The decrease probably came in ...

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Characteristics of the "Fair Tax" (i.e.,national sales tax) include which,if any,of the following:

Accepted Answer

A)   Abolition of the Federal individual (but not the corporate)  income tax.
B)   Abolition of all Federal income taxes but retention of payroll taxes (including the self-employment tax) .
C)   Abolition of all Federal income taxes and payroll taxes but retention of the Federal estate and gift taxes.
D)   Abolition of all Federal income and payroll taxes as well as the Federal estate and gift taxes.
E)   None of the above.F) C) and D)
G) A) and B)

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

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

Under what conditions is it permissible,from an ethical standpoint,for a CPA firm to outsource tax return preparation to a third party?

Correct AnswerverifiedFirst,the clients' confidentia...View AnswerShow Answer

For the negligence penalty to apply,the underpayment must be caused by intentional disregard of rules and regulations with intent to defraud.

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

In 2009,Deborah became 65 years old.In 2010 she added a swimming pool,and in 2011 she converted the residence to rental property and moved into an assisted living facility.Since 2008,Deborah's ad valorem property taxes have decreased once and increased twice.Explain.

Correct AnswerverifiedThe decrease probably came in ...View AnswerShow Answer

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)?

Correct AnswerverifiedThe answer is no in both cases...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Without obtaining an extension,Lisa files her income tax return 45 days after the due date.With her return,she pays an additional tax of $40,000.Disregarding any interest element,what is Lisa's penalty for failure to pay and to file?

Correct Answerverified$7,500.Disregarding ...View AnswerShow Answer

When Congress enacts a tax cut that is phased in over a period of years,revenue neutrality is achieved.

Correct AnswerverifiedShow Answer

Social considerations can be used to justify:

Correct AnswerverifiedShow Answer

Scott files his tax return 65 days after the due date.Along with the return,Scott remits a check for $50,000 which is the balance of the tax owed.Disregarding the interest element,Scott's total failure to file and to pay penalties are:

Correct AnswerverifiedShow Answer

The proposed flat tax:

Correct AnswerverifiedShow Answer

To mitigate the effect of the annual accounting period concept,the tax law permits the carryback and carryforward to other years of the net operating loss of a particular year.

Correct AnswerverifiedShow Answer

Regarding proper ethical guidelines,which (if any) of the following is correct?

Correct AnswerverifiedShow Answer

On transfers by death,the Federal government relies on an estate tax,while states use only an inheritance tax.

Correct AnswerverifiedShow Answer

States impose either a state income tax or a general sales tax,but not both types of taxes.

Correct AnswerverifiedShow Answer

Taxes levied by all states include:

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

Characteristics of the "Fair Tax" (i.e.,national sales tax) include which,if any,of the following:

Correct AnswerverifiedShow Answer

Although the law is complicated,most individual taxpayers are able to complete their Federal income tax returns without outside assistance.

Correct AnswerverifiedShow Answer

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First,the clients' confidentia...
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The decrease probably came in ...
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The answer is no in both cases...
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$7,500.Disregarding ...
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