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Exam 1: Introduction to Taxation

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Question 51

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Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?

A) Nonrecognition of gain allowed for involuntary conversions.
B) Net operating loss carryback and carryover provisions.
C) Carry over of excess charitable contributions.
D) Use of the installment method to recognize gain.
E) Carry over of excess capital losses.

F) None of the above
G) B) and E)

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Question 52

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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 53

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A lack of compliance in the payment of use taxes can be resolved by several means. In this regard, comment on the following: a.Registration of automobiles. b.Reporting of Internet purchases on state income tax returns.

A tax cut enacted by Congress that contains a sunset provision will make the tax cut temporary.

Pablo, a sole proprietor, sold stock held as an investment for a $40,000 long-term capital gain. Pablo's marginal tax rate is 33%. Loon Corporation, a C corporation, sold stock held as an investment for a $40,000 long-term capital gain. Loon's marginal tax rate is 35%. What tax rates are applicable to these capital gains?

Using the choices provided below, show the justification for each provision of the tax law listed. -More rapid expensing for tax purposes of the costs of installing pollution control devices.

Using the choices provided below, show the justification for each provision of the tax law listed. -A Federal deduction for state and local sales taxes paid.

The tax law allows an income tax deduction (or a credit) for foreign income taxes. Explain why.

Using the choices provided below, show the justification for each provision of the tax law listed. -Tax brackets are increased for inflation.

Bjorn owns a 60% interest in an S corporation that earned $150,000 in 2016. He also owns 60% of the stock in a C corporation that earned $150,000 during the year. The S corporation distributed $30,000 to Bjorn and the C corporation paid dividends of $30,000 to Bjorn. How much income must Bjorn report from these businesses?

Taxes not imposed by the Federal government include:

Due to the population change, the Goose Creek School District has decided to close one of its high schools. Since it has no further need of the property, the school is listed for sale. The two bids it receives are as follows: The United Methodist Church would use the property to establish a sectarian middle school. Planet, a well-known car dealership, would revamp the property and operate it as a branch location. If you were a member of the School District board, what factors would you consider in evaluating the two bids?

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

In 2014, Deborah became 65 years old. In 2015 she added a swimming pool, and in 2016 she converted the residence to rental property and moved into an assisted living facility. Since 2013, Deborah's ad valorem property taxes have decreased once and increased twice. Explain.

The tax law contains various provisions that encourage home ownership. a.On what basis can this objective be justified? b.Are there any negative considerations? Explain.

State income taxes generally can be characterized by:

Lucinda is a 60% shareholder in Rhea Corporation, a calendar year S corporation. During the year, Rhea Corporation had gross income of $550,000 and operating expenses of $380,000. In addition, the corporation sold land that had been held for investment purposes for a short-term capital gain of $30,000. During the year, Rhea Corporation distributed $50,000 to Lucinda. With respect to this information, which of the following statements is correct?

There is a Federal excise tax on hotel occupancy.

Mona inherits her mother's personal residence, which she converts to a furnished rental house. These changes should affect the amount of ad valorem property taxes levied on the properties.

The principal objective of the FUTA tax is to provide some measure of retirement security.