Question 1

During any month in which both the failure to file penalty and the failure to pay penalty apply, the failure to file penalty is increased by the amount of the failure to pay penalty.

Accepted Answer

A) True 
 B)False

Question 2

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.

Accepted Answer

A) True 
 B)False

Question 3

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 4

To mitigate the effect of the annual accounting period concept, the tax law permits the carryforward to other years of the excess charitable contributions of a particular year.

Accepted Answer

A) True 
 B)False

Question 5

An inheritance tax is a tax on a decedent's right to pass property at death.

Accepted Answer

A) True 
 B)False

Question 6

Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.

Accepted Answer

A) True 
 B)False

Question 7

A characteristic of the fraud penalties is:

Accepted Answer

A)   When negligence and civil fraud apply to a deficiency, the negligence penalty predominates.
B)   Criminal fraud can result in a fine and a prison sentence.
C)   The criminal fraud penalty is 75% of the deficiency attributable to the fraud.
D)   The IRS has the same burden of proof in the case of criminal fraud than with civil fraud.
E)   None of these.F) A) and B)
G) D) and E)

Question 8

Currently, the tax base for the Social Security component of the FICA is not limited to a dollar amount.

Accepted Answer

A) True 
 B)False

Question 9

The AICPA Statements on Standards for Tax Services are:

Accepted Answer

A)   Enforceable.
B)   Educational.
C)   Out-of-date.
D)   There is no such item.E) A) and D)
F) C) and D)

Question 10

The majority of IRS audits are handled by correspondence.

Accepted Answer

A) True 
 B)False

Question 11

"Bracket creep" will not exist if there is only a single flat) tax rate for the income tax.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following taxes is only paid by the employer?

Accepted Answer

A)   FICA
B)   FUTA
C)   Social Security tax
D)   Medicare taxE) A) and B)
F) None of the above

Question 13

To lessen, or eliminate, the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

The proposed flat tax:

Accepted Answer

A)   Would increase the number of deductions available to individuals
B)   Would not require individuals to file returns.
C)   Would tax the increment in value as goods move through the production and manufacturing stages to the marketplace.
D)   Is a type of consumption tax.
E)   None of these.F) None of the above
G) B) and E)

Question 17

Morgan inherits her father's personal residence including all of the furnishings. She plans to add a swimming pool and sauna to the property and rent it as a furnished house. What are some of the ad valorem property tax issues Morgan can anticipate?

Accepted Answer

The real estate taxes probably will incr...

Question 18

Which, if any, of the following taxes are proportional rather than progressive) ?

Accepted Answer

A)   State general sales tax
B)   Federal individual income tax
C)   Federal estate tax
D)   Federal gift tax
E)   All of theseF) A) and B)
G) A) and C)

Question 19

The value added tax VAT) has not had wide acceptance in the international community.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)   Political considerations.
B)   Economic and social considerations.
C)   Promoting administrative feasibility.
D)   Encouragement of small business.
E)   None of these.F) B) and E)
G) C) and E)

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

To lessen, or eliminate, the effect of multiple taxation, a taxpayer who is subject to both foreign and U.S. income taxes on the same income is allowed either a deduction or a credit for the foreign tax paid.

Correct AnswerverifiedShow Answer

Currently, the tax base for the Social Security component of the FICA is not limited to a dollar amount.

Correct AnswerverifiedShow Answer

"Bracket creep" will not exist if there is only a single flat) tax rate for the income tax.

Correct AnswerverifiedShow Answer

An inheritance tax is a tax on a decedent's right to pass property at death.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

The value added tax VAT) has not had wide acceptance in the international community.

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

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

Correct AnswerverifiedShow Answer

The majority of IRS audits are handled by correspondence.

Correct AnswerverifiedShow Answer

During any month in which both the failure to file penalty and the failure to pay penalty apply, the failure to file penalty is increased by the amount of the failure to pay penalty.

Correct AnswerverifiedShow Answer

Which, if any, of the following taxes are proportional rather than progressive) ?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Unlike FICA, FUTA requires that employers comply with state as well as Federal rules.

Correct AnswerverifiedShow Answer

Morgan inherits her father's personal residence including all of the furnishings. She plans to add a swimming pool and sauna to the property and rent it as a furnished house. What are some of the ad valorem property tax issues Morgan can anticipate?

Correct AnswerverifiedThe real estate taxes probably will incr...View AnswerShow Answer

Which of the following taxes is only paid by the employer?

Correct AnswerverifiedShow Answer

The AICPA Statements on Standards for Tax Services 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 carryforward to other years of the excess charitable contributions of a particular year.

Correct AnswerverifiedShow Answer

A characteristic of the fraud penalties is:

Correct AnswerverifiedShow Answer

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The real estate taxes probably will incr...
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