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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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The ad valorem tax on personal use personalty is more often avoided by taxpayers than the ad valorem tax on business use personalty.

A) True
B) False

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Question 82

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State and local governments are sometimes forced to find ways to generate additional revenue.Comment on the pros and cons of the following procedures: a.Decouple what would be part of the piggyback format of the state income tax. b.Tax amnesty provisions. c.Internet shaming.

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Question 83

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

Your client,Connie,won $12,000 in a football office pool.She sees no reason to include it in her income for several reasons.First,the amount won will not be reported to the IRS.Second,as an average income employee,she is unlikely to be audited by the IRS.Third,she feels that she has probably lost this much in other past office pools.How do you respond?

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

A characteristic of FUTA is that:

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?

Not all of the states that impose a general sales tax also have a use tax.

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

Match the statements that relate to each other. Note: Some choices may be used more than once. a.3 years from date return is filed b.3 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 office g.Conducted at taxpayer's office h.6 years i.45-day grace period allowed to IRS j.No statute of limitations (period remains open) k.75% of underpayment l.No correct match provided -Interest due on refund

Which,if any,of the following provisions of the tax law cannot be justified as promoting administrative feasibility (simplifying the task of the IRS) ?

The IRS is required to redetermine the interest rate on underpayments and overpayments once a year.

Under the usual state inheritance tax,two heirs,a cousin and a son of the deceased,would not be taxed at the same rate.

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the U.S.

Virtually all state income tax returns contain checkoff boxes for donations to various causes.On what grounds has this procedure been criticized?

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. a.Deferral of gains from involuntary conversions b.Carryback and carryforward of net operating losses c."No change" is one possible result d.State income tax applied to visiting nonresident e.IRS special agent f.Undoing the "piggyback" result g.Ideal budget goal as to new tax legislation h.Every state that has a general sales tax has one i.Imposed by all states and the Federal government j.Imposed by some states but not the Federal government k.Imposed only by the Federal government l.No correct match provided -Export taxes

A safe and easy way for a taxpayer to avoid local and state sales taxes is to make the purchase in a state that levies no such taxes.

Paige is the sole shareholder of Citron Corporation.During the year,Paige leases a building to Citron for a monthly rental of $80,000.If the fair rental value of the building is $60,000,what are the income tax consequences to the parties involved?

The first income tax on individuals (after the ratification of the Sixteenth Amendment to the Constitution) levied tax rates from a low of 2% to a high of 6%.

Using the choices provided below, 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. -A Federal deduction for state and local sales taxes paid.