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

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Question 21

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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. 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 -Revenue Agent's Report (RAR)

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Question 22

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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 2016 without using her unified transfer tax credit?

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$238,000.$14,000 (an...

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Question 23

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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 -Failure to file penalty

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

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 -Fraud and statute of limitations

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

Like the Federal counterpart,the amount of the state excise taxes on gasoline varies from state to state.

In terms of probability,which of the following taxpayers would be least likely to be audited by the IRS?

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

A CPA firm in California sends many of its less complex tax returns to be prepared by a group of accountants in India.If certain procedures are followed,this outsourcing of tax return preparation is proper.

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.

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 -No return and statute limitations

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 -"Pay-as-you-go" (paygo)

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 -Tax on transfers at death (inheritance type)

State income taxes generally can be characterized by:

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 -Tax credits for home improvements that conserve energy.

Provisions in the tax law that promote energy conservation and more use of alternative (non-fossil) fuels can be justified by:

In cases of doubt,courts have held that tax relief provisions should be broadly construed in favor of taxpayers.

A provision in the law that compels accrual basis taxpayers to pay a tax on prepaid income in the year received and not when earned is consistent with generally accepted accounting principles.

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