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

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Question 71

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. -Mitigation of the annual accounting period concept

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

M) C) and H)
N) D) and I)

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Question 72

Multiple Choice

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Allowing a domestic production activities deduction for certain manufacturing income can be justified:

A) As mitigating the effect of the annual accounting period concept.
B) As promoting administrative feasibility.
C) By economic considerations.
D) Based on the wherewithal to pay concept.
E) None of the above.

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

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Question 73

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

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

Using the choices provided below, show the justification for each provision of the tax law listed. -A tax credit for amounts spent to furnish care for children while the parent is at work.

Match the statements that relate to each other. Note: Some choices may be used more than once. -Fraud and statute of limitations

Even if property tax rates are not changed, the amount of ad valorem taxes imposed on realty may not remain the same.

No state has offered an income tax amnesty program more than once.

The Federal excise tax on cigarettes is an example of a proportional tax.

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.

Match the statements that relate to each other. Note: Some choices may be used more than once or not at all. -"Pay­as­you­go" (paygo)

A characteristic of FUTA is that:

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

Several years ago, Logan purchased extra grazing land for his ranch at a cost of $240,000. In 2014, the land is condemned by the state for development as a highway maintenance depot. Under the condemnation award, Logan receives $600,000 for the land. Within the same year, he replaces the property with other grazing land. What is Logan's tax situation if the replacement land cost: a. $210,000? b. $360,000? c. $630,000? d. Why?

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

Because the law is complicated, most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

Using the choices provided below, show the justification for each provision of the tax law listed. -Contributions to charitable organizations are deductible.

Using the choices provided below, show the justification for each provision of the tax law listed. -A small business corporation can elect to avoid the corporate income tax.

Logan dies with an estate worth $20 million. Under his will, $10 million passes to his wife while $10 million goes to his church. What is Logan's Federal estate tax result?

In preparing an income tax return, the use of a client's estimates is not permitted.