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

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Question 51

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If an income tax return is not filed by a taxpayer, there is no statute of limitations on assessments of tax by the IRS.

A) True
B) False

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Question 52

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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 inconsistent with generally accepted accounting principles.

A) True
B) False

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Question 53

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

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

If a taxpayer files early (i.e., before the due date of the return), the statute of limitations on assessments begins on the date the return is due.

State income taxes generally can be characterized by:

Even though a client refuses to correct an error on a past return, it may be possible for a practitioner to continue to prepare returns for the client.

Which, if any, is not one of Adam Smith's canons of taxation?

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

Using the choices provided below, show the justification for each provision of the tax law listed.Note: In some cases, more than one answer is appropriate. Tax credits available for home improvements that conserve energy.

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

Noah dies in 2012 with an estate worth $12 million.Under his will, $6 million passes to his wife while $6 million goes to his church.What is Noah's Federal estate tax result?

The IRS agent auditing the return will not issue an RAR if the taxpayer owes no additional taxes.

The amount of a taxpayer's itemized deductions will increase the chance of being audited by the IRS.

Briana lives in one state and works in the adjoining state.Both states tax the income she earns from her job.Does Briana have any relief from this apparent double taxation of the same income?

Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income tax on individuals.

Taxes levied by all states include:

The proposed flat tax:

When interest is charged on a deficiency, any part of a month counts as a full month.

Upon audit by the IRS, Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.The 20% negligence penalty will apply to $40,000.